<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
TELEX COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3669 13-3521030
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
9600 ALDRICH AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN A. PALLESCHI, ESQ.
TELEX COMMUNICATIONS, INC.
9600 ALDRICH AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420
(612) 887-5542
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
ANDREW L. SOMMER
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this
Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM OFFERING AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Subordinated
Notes due 2007.............. $125,000,000 100% $125,000,000 $37,879.00
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY , 1997
PROSPECTUS
TELEX COMMUNICATIONS, INC.
OFFER TO EXCHANGE
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007,
SERIES A FOR ANY AND ALL EXISTING NOTES (AS DEFINED BELOW)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM, NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
Telex Communications, Inc., a Delaware corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus (this "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal") to exchange up to $125,000,000
aggregate principal amount of its 10 1/2% Senior Subordinated Notes due 2007,
Series A (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act") pursuant to a Registration Statement
of which this Prospectus is a part, for a like principal amount of its issued
and outstanding 10 1/2% Senior Subordinated Notes due 2007 (the "Existing
Notes"). The New Notes and the Existing Notes, as the case may be, are referred
to herein as the "Notes". The Existing Notes were originally issued and sold in
a transaction that was exempt from registration under the Securities Act (the
"Offering") and resold to certain qualified institutional buyers in reliance on,
and subject to the restrictions imposed pursuant to, Rule 144A under the
Securities Act ("Rule 144A"). The terms of the New Notes are identical in all
material respects to the terms of the Existing Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the New Notes will have
been registered under the Securities Act, and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act.
Interest on each New Note issued pursuant to the Exchange Offer will accrue
from the last interest payment date on which interest was paid on the Existing
Notes surrendered in exchange therefor or, if no interest has been paid, from
the original date of issuance of the Existing Notes.
Interest on the Notes will be payable semi-annually on May 1 and November 1
of each year, commencing on November 1, 1997. The Notes will mature on May 1,
2007. Except as described below, the Company may not redeem the Notes prior to
May 1, 2002. On or after such date, the Company may redeem the Notes, in whole
or in part, at any time at the redemption prices set forth herein together with
accrued and unpaid interest, if any, to the date of redemption. In addition, at
any time and from time to time on or prior to May 1, 2000, the Company may
redeem up to 33 1/3% of the original aggregate principal amount of the Notes
with the Net Cash Proceeds (as defined) of one or more Public Equity Offerings
(as defined) at a redemption price equal to 110.5% of the principal amount to be
redeemed, together with accrued and unpaid interest, if any, to the date of
redemption, provided that at least 66 2/3% of the original aggregate principal
amount of the Notes remains outstanding after each such redemption. The Notes
will not be subject to any sinking fund requirement. Upon the occurrence of a
Change of Control (as defined), (i) the Company will have the option prior to
May 1, 2002, to redeem the Notes, in whole, at a redemption price equal to 100%
of the principal amount thereof plus the Applicable Premium (as defined),
together with accrued and unpaid interest, if any, to the date of redemption,
and (ii) if the Company does not redeem the Notes, or if such Change of Control
occurs on or after May 1, 2002, the Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
See "Description of Notes."
The Notes will be unsecured and will be subordinated in right of payment to
all existing and future Senior Indebtedness (as defined) of the Company and will
be effectively subordinated to all obligations of the subsidiaries of the
Company. The Notes will rank pari passu with any future Senior Subordinated
Indebtedness (as defined) of the Company and will rank senior to all other
Subordinated Indebtedness (as defined) of the Company. The Notes will be
unconditionally guaranteed on an unsecured, senior subordinated basis by each
Subsidiary (as defined) of the Company (other than Foreign Subsidiaries (as
defined) and Unrestricted Subsidiaries (as defined)) that is a Significant
Subsidiary (as defined) created or acquired after the Issue Date (as defined).
The Indenture (as defined) permits the Company to incur additional indebtedness,
including Senior Indebtedness, subject to certain limitations. As of March 31,
1997, on a pro forma basis after giving effect to the Transactions (as defined),
the Company would have had outstanding $246.9 million (exclusive of unused
commitments) in aggregate amount of Senior Indebtedness (all of which is
secured) and no Senior Subordinated Indebtedness other than the indebtedness
represented by the Notes. See "Description of Notes -- Ranking."
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes tendered. The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1997, unless extended by the Company (such date as it may be so
extended, the "Expiration Date"). The date of acceptance for exchange of the
Existing Notes (the "Exchange Date") will be the first business day following
the Expiration Date, upon surrender of the Existing Notes. Existing Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date; otherwise such tenders are irrevocable. New Notes to be
issued in exchange for properly tendered Existing Notes will be delivered
through the facilities of The Depository Trust Company by the Exchange Agent (as
defined) promptly after the acceptance thereof.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[ADD ART.]
2
<PAGE> 4
The Existing Notes were originally issued and sold in a transaction that
was exempt from registration under the Securities Act (the "Offering") and
resold to certain qualified institutional buyers in reliance on, and subject to
the restrictions imposed pursuant to, Rule 144A under the Securities Act ("Rule
144A"). Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") as set forth in no-action letters issued to third
parties (including Exxon Capital Holdings Corporation (available May 13, 1988),
Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications
Corporation (available May 14, 1993) and Shearman & Sterling (available July 2,
1993)), the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for the Existing Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder which is
(i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Existing Notes directly from
the Company or (iii) a broker-dealer who acquired Existing Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that (a) such New Notes are acquired in the ordinary course of such holder's
business, (b) at the time of the commencement of the Exchange Offer such holder
has no arrangement or understanding with any person to participate in a
distribution of the New Notes and (c) such holder is not engaged in, and does
not intend to engage in, a distribution of the New Notes. Holders of the
Existing Notes which, at the time of the commencement of the Exchange Offer, are
engaged in, intend to engage in, or have an arrangement to engage in, a
distribution of the New Notes may not rely on the applicable interpretations of
the Staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction. In addition, since the Commission has not considered the
Exchange Offer in the context of a no-action letter and, there can be no
assurance that the Staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each holder
of Existing Notes that desires to participate in the Exchange Offer will be
required to make certain representations described in "The Exchange
Offer -- Terms of the Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer in exchange for Existing Notes, where such Existing Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act and that it has not entered into
any arrangement or understanding with the Company or an affiliate of the Company
to distribute the New Notes in connection with any resale of such New Notes. A
broker-dealer that acquired Existing Notes in a transaction other than as part
of its market-making activities or other trading activities will not be able to
participate in the Exchange Offer. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Existing Notes where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. Any holder that
cannot rely upon such interpretations by the Staff of the Commission as set
forth in such no-action letters must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. See "The Exchange Offer" and "Plan of Distribution."
The New Notes will be represented by one or more Global Securities (as
defined) registered in the name of a nominee of The Depository Trust Company, as
Depositary. Beneficial interest in the Global Securities will be shown on, and
transfers will be effected only through, records maintained by the Depositary
and its participants. See "Description of New Notes -- Book-Entry, Delivery and
Form."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. Moreover, to
the extent that Existing Notes are tendered and accepted in the Exchange Offer,
a holder's ability to sell
3
<PAGE> 5
untendered, and tendered but unaccepted, Existing Notes could be adversely
affected. See "Risk Factors -- Lack of Established Market for the Existing
Notes."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses of the Exchange Offer. No dealer manager
is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE, NOR WILL THE COMPANY ACCEPT SURRENDER
FOR EXCHANGE FROM HOLDERS OF EXISTING NOTES, IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
------------------------
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term includes any amendments thereto, the "Registration Statement") on Form S-4
under the Securities Act, with respect to the New Notes offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information included in the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other document referred to herein or therein
and filed as an exhibit to the Registration Statement are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the New Notes, reference is hereby
made to the Registration Statement and the exhibits and schedules thereto.
The Company is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, the Company has agreed to file
with the Commission and provide to the holders of the Notes annual reports and
the information, documents and other reports that are specified in Sections 13
and 15(d) of the Exchange Act. Reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Suite 1400, Northwestern
Atrium Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can also be obtained at prescribed rates by writing to
the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549 and such material is contained on the worldwide web site maintained
by the Commission at http://www.sec.gov.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, risk factors and financial
statements, including the related notes, appearing elsewhere in this Prospectus.
Unless otherwise indicated herein or the context otherwise requires, references
to (i) "Holdings" shall mean Telex Communications Group, Inc., a Delaware
corporation and the corporate parent of the Company and (ii) the "Company" or
"Telex" shall mean Telex Communications, Inc., a Delaware corporation, and its
subsidiaries and includes, as the context may require, predecessor companies.
Unless otherwise indicated, all references to fiscal years in this Prospectus
are to the fiscal years ending on March 31 of each year (e.g., Fiscal 1997
refers to the fiscal year ended March 31, 1997). In addition, all references in
this Prospectus to shares and per share data relating to Holdings have been
adjusted to reflect a 20-for-1 stock split of the Common Stock of Holdings, par
value $.0005 per share ("Holdings Common Stock"), effective as of June 25, 1997.
Capitalized terms used herein are defined in this Summary or elsewhere in this
Prospectus. Telex(R), Hy-Gain(R), Road King(R), MagnaByte(R), Audiocom(R),
Caramate(R), ProStar(R), ClassMate(R), SoundMate(R) and Adaptive Compression(R)
are registered trademarks of the Company and Voice Commander(TM), ADAM(TM),
Firefly(TM), Ear-Mike(TM), Sound Advantage(TM), RTS(TM), Posi-Phase(TM),
Acapella(TM), SoftWear(TM), Copyette(TM), ACC Series(TM), and 6120 Series(TM)
are trademarks of the Company.
THE COMPANY
COMPANY OVERVIEW
Telex is a leader in the design, manufacture and marketing of sophisticated
audio, wireless and multimedia communications equipment to commercial,
professional and industrial customers. Telex meets the needs of a diverse
customer base by offering a broad product line that includes advanced intercom
systems, wired and wireless microphones, headphones, headsets, hearing aids,
radio frequency ("RF") transmission devices, LCD projectors and antennas. Some
of the Company's products are very visible -- such as the coaches'
communications systems used by all thirty National Football League
teams -- while other products perform behind the scenes, such as the Telex(R)
RTS(TM) Digital Matrix Intercom broadcast production equipment used by all major
television networks to produce shows such as the network news programs as well
as major events such as the Olympics and the Super Bowl. 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.
Under the leadership of John L. Hale, who joined Telex as Chairman,
President and Chief Executive Officer in October 1991, the Company has
reorganized its business from a manufacturing orientation to a market
orientation by creating four strategic business units that are organized around
the end markets in which the Company's products are sold. As part of this
reorganization, the Company realigned its manufacturing to directly serve the
specific requirements of its strategic business units, re-coordinated its
product development to bring products to market more quickly and bolstered its
product development efforts to focus on technologies where the Company felt it
had opportunities to achieve strong sales and high margins. From Fiscal 1992,
the first year of operations under the current management team, to Fiscal 1997,
the Company's net sales and EBITDA have increased from $112.1 million to $170.9
million and from $19.3 million to $40.0 million, respectively, representing
compound annual growth rates of 8.8% and 15.7%, respectively.
The Company serves its customers through four strategic business units,
which are:
Professional Sound and Entertainment Group (34.5% of Fiscal 1997 net
sales). The Professional Sound and Entertainment Group provides 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 other professional and school sports teams; wired and
wireless microphones used in the education, sports, broadcast, music and
religious markets; and high-speed tape duplicators used primarily by houses of
worship and training programs.
5
<PAGE> 7
Multimedia/Audio Communications Group (36.2% of Fiscal 1997 net
sales). The Multi-media/Audio Communications Group 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 U.S. Robotics. 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.
RF/Communications Group (14.8% of Fiscal 1997 net sales). The
RF/Communications Group offers a broad line of acoustic accessories and antennas
for various communications needs and applications. The Company markets its
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
RF/Communications Group also produces audio products for the Library of
Congress' talking book program.
Hearing Instruments Group (14.5% of Fiscal 1997 net sales). The Hearing
Instruments Group markets 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.
COMPETITIVE STRENGTHS
The Company believes that the following competitive strengths have
contributed significantly to its historical growth and operating profitability
and serve as a foundation for continued future growth:
Brand Name Recognition and Reputation for Quality. The Company markets
quality products under a number of well respected brand names that are highly
recognized in their respective markets. These products include Telex(R)headsets,
microphones and hearing aids; RTS(TM) intercom systems; Hy-Gain(R) antenna
products; Road King(R) CB microphones; Firefly(TM) LCD projectors; and the
Adaptive Compression(R) circuitry incorporated in hearing aid products. The
Company believes its reputation for superior quality and value gives it the
ability to quickly and effectively introduce new products to its end markets.
Product Development Expertise. The Company has established a reputation
for product development expertise based on the Company's experience in the
application of: (i) acoustic transducer technology incorporated in many audio
and sound communication products such as headsets, headphones, microphones and
hearing aids; (ii) RF wireless communications technology used throughout the
Company's commercial lines as well as in its various wireless microphone,
antenna, intercom and assistive listening devices product lines; and (iii)
electromechanical engineering required in the manufacture of audio tape
duplication products and talking book players. This product development
expertise has been a contributing factor in enabling the Company to derive
approximately 45.1% of its sales in Fiscal 1997 from new and enhanced products
developed within the last five years.
Shared Product Technologies and Platforms. Many of the Company's products
utilize similar technologies and platforms derived from the Company's expertise
in acoustic transducer technology, RF wireless communications technology and
electromechanical engineering. The Company's ability to effectively serve its
numerous end markets is facilitated by these similar technologies and platforms,
as well as its cost-effective, vertically integrated manufacturing, allowing the
Company to leverage its product development, manufacturing and marketing across
a wide variety of applications and end markets. The Company believes that this
ability to leverage its core strengths across multiple end markets gives it a
distinct competitive advantage by enabling it to establish and maintain strong
market positions for its products.
6
<PAGE> 8
Flexible Cost-Effective Manufacturing. The Company's vertically integrated
manufacturing processes and well-educated non-union workforce enable it to
respond quickly and cost-effectively to changing markets and customer
requirements. The Company believes that its average U.S. direct labor wage rate
is significantly below the U.S. average. In addition, the Company has recently
opened a manufacturing facility in Mexico and begun to shift labor intensive
manufacturing to this facility, thereby further increasing manufacturing and
operating efficiencies.
Extensive Distribution Network. The Company maintains distribution
relationships with over 10,000 distributors, dealers, manufacturers'
representatives and hearing aid dispensers in the United States and
internationally. The Company believes that it is the largest vendor in many of
its product markets and that its size enables it to command strong sales support
from its distribution network. Due to its extensive and supportive distribution
network, along with the Company's strong product introduction capabilities, the
Company believes it has the ability to quickly and effectively introduce new
products to worldwide markets.
Proven and Incentivized Management Team. The Company's senior management
team, led by Mr. Hale, has an average of 23 years of experience in the
communications equipment industry and has extensive technical, marketing and
management experience in the industry. Under the current senior management team,
the Company has experienced significant growth in revenues and EBITDA and strong
productivity improvement due to its focus on production efficiencies and
continuous productivity improvements throughout its entire organization.
Reflecting this focus, the Company's revenue per employee has grown from
approximately $85,000 in Fiscal 1994 to approximately $116,000 in Fiscal 1997.
The management of the Company currently owns approximately 20% of the fully
diluted equity of Holdings (giving effect to the Rollover Options, but without
giving effect to any of the options which were granted to management under a new
option plan adopted by the Company on the Recapitalization Closing Date). See
"Management -- 1997 Stock Option Plan."
BUSINESS STRATEGY
The Company's strategy is to further increase revenues and improve
operating margins by (i) continuing to focus on the introduction of new
products, (ii) increasing operating efficiencies, (iii) expanding its
international presence and (iv) pursuing strategic acquisitions.
Introduce New Products. The Company has implemented a number of strategic
initiatives to identify new market opportunities and to facilitate the timely
introduction of new and enhanced products. For example, the Company has formed
certain product development groups, such as the Acoustics Group, which leverages
its experience in the design and manufacture of headsets used in a variety of
markets such as aviation, education and professional audio equipment. In
addition, the Company has expanded its marketing efforts to sell computer audio
microphones, headsets and headphones to the computer and modem manufacturers and
computer-user markets and expects to offer more products to these markets in the
future. Management believes that this increased focus on product development
initiatives will enable the Company to design new products that address
developing markets and offer advantages over existing products in terms of
features, quality, reliability and cost. In connection with these initiatives,
the Company has also increased its investment in engineering and technology from
$5.0 million in Fiscal 1992 to $7.6 million in Fiscal 1997 and plans to continue
increasing such investments in the future. This increased investment in
engineering and technology has enabled the Company to implement programs in
several core technologies such as digital signal processing, wireless
communications, application specific integrated circuit design and active noise
reduction and to design new products that address developing markets and offer
advantages over existing products in terms of features, quality, reliability and
cost.
Increase Operating Efficiencies. Management believes opportunities exist
to further reduce the Company's manufacturing costs and to increase its
operating efficiencies. For example, the Company opened a new manufacturing
facility in Mexico in June 1996 to which it has begun to shift labor intensive
manufacturing, such as the manufacture of microphones, cable assemblies and
subassemblies. Management plans to continue this shift in the future by
transferring the manufacture of a number of its other higher volume products to
the Mexico facility. In addition, the Company is in the process of implementing
a $6.4 million capital expenditure
7
<PAGE> 9
project, expected to be completed in Fiscal 1998, to replace and upgrade its
computer information systems. Management estimates that these measures will
result in cost savings of approximately $4.0 million in Fiscal 1998.
Expand International Presence. The Company currently has 195 international
distributors and over 1,000 international dealers in nearly 70 countries. In
Fiscal 1997, international sales represented approximately 23.6% of net sales.
It is the Company's goal to significantly increase its percentage of
international revenue by upgrading its existing distribution channels, adding
new distributors in Asia, Australia and Eastern Europe and continuing its recent
initiative to design and manufacture new products that better meet international
standards and requirements. Towards this goal, in July 1996, the Company hired a
new vice president of international operations and recently opened additional
international sales offices (i) in Amsterdam and Paris to provide improved
support of, and to upgrade the quality of, the existing distribution channels to
the Company's established Western European markets, and (ii) in Prague to open
new distribution channels to the emerging Eastern European markets.
Pursue Strategic Acquisitions. Many of the industries in which the Company
competes are highly fragmented, which management believes present acquisition
opportunities. Subject to market conditions and the availability of financing,
the Company plans to pursue acquisition opportunities that complement and expand
its core businesses or that enable the Company to enter related or complementary
markets. Management believes that it can leverage the Company's superior
manufacturing, distribution and administrative capabilities to generate
significant incremental revenue and cash flow through strategic acquisitions.
Since 1989, the Company has successfully integrated five business acquisitions
into its existing operations.
THE TRANSACTIONS
On May 6, 1997, (the "Recapitalization Closing Date"), the Company
completed a recapitalization (the "Recapitalization") pursuant to an Agreement
(the "Recapitalization Agreement") among the Company, Greenwich II, LLC ("GII"),
a Delaware limited liability company formed by Greenwich Street Capital
Partners, L.P. ("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 the Company) 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 the Company (such
shares, the "Rollover Shares") and certain options to acquire additional shares
of Holdings Common Stock (the "Rollover Options" and, together with the Rollover
Shares, the "Management Equity Rollover"), with an aggregate value of
approximately $21.2 million (approximately 20% of the fully diluted equity of
Holdings, giving effect to the Rollover Options) were retained by such managers.
In connection with the Recapitalization, the Company completed (i) a tender
offer (the "Tender Offer") to repurchase all of the $100.0 million aggregate
outstanding principal amount of the 12% Senior Notes due 2004 of the Company
(the "Telex Notes") and (ii) a solicitation (the "Solicitation") of consents
with respect to certain amendments to the Indenture pursuant to which the Telex
Notes were issued. The Recapitalization, the financing thereof (including the
Offering), the Tender Offer and the payment of the related fees and expenses are
herein referred to as the "Transactions." See "The Recapitalization" and
"Interests of Certain Persons."
The Transactions were financed by (i) (a) $108.4 million of new capital
(the "GST Equity Investment") provided as equity to the Company and (b) the
$21.2 million Management Equity Rollover, (ii) a $140.0 million senior secured
credit facility (the "Senior Secured Credit Facility"), 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"), of which
$7.3 million would have been drawn down on the Recapitalization Closing Date had
all of the related fees and expenses been paid on such date (and of which $5.2
million was drawn down as of June 30, 1997), (iii) $125.0 million of Existing
Notes pursuant to the Offering, and (iv) $36.5 million of available cash of the
Company. Immediately after giving effect to the foregoing, the
8
<PAGE> 10
Company's unused availability under the Revolving Credit Facility would have
been approximately $11.8 million (subject to borrowing base availability). See
"Capitalization" and "Description of Senior Secured Credit Facility."
The following table sets forth the sources and uses of funds for the
Transactions. See "The Recapitalization."
<TABLE>
<CAPTION>
SOURCES (DOLLARS IN MILLIONS)
----------------------------------------------------------- ---------------------
<S> <C>
Senior Secured Credit Facility:
Revolving Credit Facility(a)............................. $ 7.3
Term Loan Facility(b).................................... 115.0
The Notes.................................................. 125.0
GST Equity Investment(c)................................... 108.4
Management Equity Rollover................................. 21.2
Closing Cash............................................... 36.5
------
Total Sources.................................... $ 413.4
======
Uses:
Purchase of Holdings Common Stock.......................... $ 253.9
Management Equity Rollover................................. 21.2
Telex Notes................................................ 100.0
Tender Offer Premium and Consent Fee(d).................... 18.3
Fees and Expenses.......................................... 20.0
------
Total Uses....................................... $ 413.4
======
</TABLE>
- ---------------
(a) In addition to amounts outstanding under the Revolving Credit Facility in
connection with the Recapitalization, $5.9 million of letters of credit were
issued under the Revolving Credit Facility on the Recapitalization Closing
Date.
(b) The Term Loan Facility consists of a Tranche A Term Loan Facility in the
aggregate principal amount of $50.0 million, which matures in 2002 and
requires quarterly principal payments by the Company until maturity, and a
Tranche B Term Loan Facility in the aggregate principal amount of $65.0
million, which matures in 2004 and requires quarterly principal payments by
the Company until maturity.
(c) Represents $83.2 million of equity of GST purchased by GSCP and certain
co-investors and $25.2 million of proceeds associated with the issuance of
the Deferred Pay Subordinated Debentures due 2009 (the "GST Subordinated
Debentures"), all of which was contributed by GST to the Company as common
equity in connection with the Transactions. See "The
Recapitalization -- Capitalization of GST."
(d) Includes the accrued interest that was paid on the Telex Notes on the
Recapitalization Closing Date.
USE OF PROCEEDS OF THE OFFERING
The Company will not receive any proceeds from the Exchange Offer. As
described above under "The Transactions", the net proceeds from the Offering,
together with other sources of financing were used to (i) repurchase the Telex
Notes, (ii) pay the Tender Offer premium and consent fee of $18.3 million,
including accrued interest on the Telex Notes, (iii) pay $253.9 million of
Recapitalization Consideration and (iv) pay approximately $20.0 million of
transaction fees and expenses.
OWNERSHIP
GSCP is a private direct equity investment fund organized in 1994 to
provide long-term capital for and make acquisitions in companies in a variety of
industries. GSCP invests in management buyouts, leveraged acquisitions,
international investment opportunities and minority investments. GSCP's
significant portfolio
9
<PAGE> 11
investments include EV International, Inc., Marcus Cable Company, L.P., Rifkin
Acquisition Partners, L.L.L.P., Mercury Radio Communications, L.P., Seguros
Comercial America, S.A. de C.V and Telegroup, Inc. GSCP and its co-investors are
the owners, indirectly, of 80% of the fully diluted equity of Holdings (giving
effect to the Rollover Options), with the balance of such equity owned by
certain members of management of the Company.
THE EXCHANGE OFFERING
Registration Agreement..... The Existing Notes were issued on May 6, 1997 to
Chase Securities Inc., Morgan Stanley & Co.
Incorporated and Smith Barney Inc. (collectively,
the "Initial Purchasers"). The Initial Purchasers
resold the Existing Notes to certain qualified
institutional buyers in reliance on, and subject to
the restrictions imposed pursuant to, Rule 144A of
the Securities Act. In connection therewith, the
Company and the Initial Purchasers entered into the
Exchange and Registration Rights Agreement, dated
as of May 6, 1997 (the "Exchange and Registration
Rights Agreement"), providing, among other things,
for the Exchange Offer. See "The Exchange Offer."
The Exchange Offer......... New Notes are being offered in exchange for an
equal principal amount of Existing Notes. As of the
date hereof, $125,000,000 aggregate principal
amount of Existing Notes is outstanding. Existing
Notes may be tendered only in integral multiples of
$1,000.
Resale of New Notes........ Based on interpretations by the Staff of the
Commission as set forth in no-action letters issued
to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan
Stanley & Co. Incorporated (available June 5,
1991), K-III Communications Corporation (available
May 14, 1993) and Shearman & Sterling (available
July 2, 1993)), the Company believes that the New
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred
by any holder thereof (other than any such holder
that is a broker-dealer or an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that (i) such New
Notes are acquired in the ordinary course of
business, (ii) at the time of the commencement of
the Exchange Offer such holder has no arrangement
or understanding with any person to participate in
a distribution of the New Notes and (iii) such
holder is not engaged in, and does not intend to
engage in, a distribution of the New Notes. By
tendering Existing Notes in exchange for New Notes,
each holder will represent to the Company that: (i)
it is not such an affiliate of the Company, (ii)
any New Notes to be received by it will be acquired
in the ordinary course of business and (iii) at the
time of the commencement of the Exchange Offer it
had no arrangement or understanding with any person
to participate in a distribution of the New Notes
and, if such holder is not a broker-dealer, it is
not engaged in, and does not intend to engage in, a
distribution of New Notes. If a holder of Existing
Notes is unable to make the foregoing
representations, such holder may not rely on such
interpretations by the Staff of the Commission as
set forth in such no-action letters, and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any secondary resale transaction.
10
<PAGE> 12
Each broker-dealer that receives New Notes for its
own account pursuant to the Exchange Offer in
exchange for Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a
result of market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act and that it has not entered into any
arrangement or understanding with the Company or an
affiliate of the Company to distribute the New
Notes in connection with any resale of such New
Notes. A broker-dealer that acquired Existing Notes
in a transaction other than as part of its
market-making activities or other trading
activities will not be able to participate in the
Exchange Offer. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection
with resales of New Notes where such Existing Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Company has agreed that, starting
on the Expiration Date, and ending on the close of
business 90 days after the Expiration Date, it will
make this Prospectus available to any participating
broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for
sale or register the New Notes prior to offering or
selling such New Notes. The Company has agreed,
pursuant to the Registration Agreement and subject
to certain specified limitations therein, to
register or qualify the New Notes for offer or sale
under the securities or "blue sky" laws of such
jurisdictions as may be necessary to permit the
holders of New Notes to trade the New Notes without
any material restrictions or limitations under the
securities laws of the several states of the United
States.
Consequences of Failure to
Exchange Existing
Notes.................... Upon consummation of the Exchange Offer, subject to
certain limited exceptions, holders of Existing
Notes who do not exchange their Existing Notes for
New Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be
able to offer or sell their Existing Notes, unless
such Existing Notes are subsequently registered
under the Securities Act (which, subject to certain
limited exceptions, the Company will have no
obligation to do), except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. See "The Exchange Offer -- Terms of the
Exchange Offer" and "-- Consequences of Failure to
Exchange."
Expiration Date............ 5:00 p.m., New York City time, on ,
1997 (30 calendar days following the commencement
of the Exchange Offer), unless the Exchange Offer
is extended, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended.
Interest on the New
Notes...................... The New Notes will accrue interest at a rate of
10 1/2% per annum from May 6, 1997, the issue date
of the Existing Notes. Interest on the New Notes is
payable on May 1 and November 1 of each year,
commencing on November 1, 1997.
11
<PAGE> 13
Conditions to the Exchange
Offer.................... The Exchange Offer is not conditioned upon any
minimum principal amount of Existing Notes being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange
Offer -- Conditions." Except for the requirements
of applicable federal and state securities laws,
there are no federal or state regulatory
requirements to be complied with or obtained by the
Company in connection with the Exchange Offer.
Procedures for Tendering
Existing Notes........... Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with any other required documentation to the
Exchange Agent (as defined herein) at the address
set forth herein and effect a tender of Existing
Notes pursuant to the procedures for book-entry
transfer as provided for herein. See "The Exchange
Offer -- Procedures for Tendering" and "-- Book
Entry Transfer."
Guaranteed Delivery
Procedures............... Holders of Existing Notes who wish to tender their
Existing Notes and who cannot deliver their
Existing Notes and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Existing
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Existing Notes may be withdrawn to any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. To withdraw a tender of Existing
Notes, a written or facsimile transmission notice
of withdrawal must be received by the Exchange
Agent at its address set forth herein under "The
Exchange Offer -- Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Existing
Notes and Delivery of New
Notes.................... Subject to certain conditions, any and all Existing
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date will be accepted for exchange.
The New Notes issued pursuant to the Exchange Offer
will be delivered promptly following the Expiration
Date. See "The Exchange Offer -- Terms of the
Exchange Offer."
Certain U.S. Tax
Consequences............. The exchange of Existing Notes for New Notes should
not constitute a taxable exchange for U.S. federal
income tax purposes. See "Certain Federal Income
Tax Considerations."
Exchange Agent/Trustee..... Manufacturers and Traders Trust Company is serving
as exchange agent (the "Exchange Agent" and the
"Trustee") in connection with the Exchange Offer.
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Agreement will be borne by the
Company. See "The Exchange Offer -- Fees and
Expenses."
12
<PAGE> 14
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer. The net proceeds from the Offering,
together with certain other sources of financing
were used to (i) repurchase the Telex Notes, (ii)
pay the Tender Offer premium and consent fee of
$18.3 million, including accrued interest on the
Telex Notes, (iii) pay $253.9 million of
Recapitalization Consideration and (iv) pay
approximately $20.0 million of transaction fees and
expenses. See "Use of Proceeds."
SUMMARY OF TERMS OF NEW NOTES
The Exchange Offer relates to the exchange of up to $125,000,000 aggregate
principal amount of Existing Notes for an equal aggregate principal amount of
New Notes. New Notes will be entitled to the benefits of the same Indenture (as
defined therein) that governs the Existing Notes and will govern the New Notes.
The form and terms of the New Notes are identical in all material respects to
the form and terms of the Existing Notes, except that the New Notes will have
been registered under the Securities Act, and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act. See
"Description of Notes."
Maturity................... May 1, 2007.
Interest Payment Dates..... May 1 and November 1 of each year, commencing
November 1, 1997.
Sinking Fund............... None.
Optional Redemption........ Except as described below, the Company may not
redeem the Notes prior to May 1, 2002. On or after
such date, the Company may redeem the Notes, in
whole or in part, at the redemption prices set
forth herein together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time and from time to time on or
prior to May 1, 2000, the Company may redeem up to
33 1/3% of the original aggregate principal amount
of the Notes with the Net Cash Proceeds (as
defined) of one or more Public Equity Offerings (as
defined) at a redemption price equal to 110.5% of
the principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the date of
redemption, provided that at least 66 2/3% of the
original aggregate principal amount of the Notes
remains outstanding after each such redemption. See
"Description of Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control (as
defined), (i) the Company will have the option,
prior to May 1, 2002, to redeem the Notes, in
whole, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable
Premium (as defined), together with accrued and
unpaid interest, if any, to the date of redemption,
and (ii) if the Company does not redeem the Notes,
or if such Change of Control occurs on or after May
1, 2002, the Company will be required to make an
offer to repurchase the Notes at a price equal to
101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes -- Change of
Control."
Subsidiary Guarantees...... The Notes will be unconditionally guaranteed on an
unsecured, senior subordinated basis by each
Subsidiary (as defined) of the Company (other than
Foreign Subsidiaries (as defined) and Unrestricted
Subsidiaries (as defined)) that is a Significant
Subsidiary (as defined) created or acquired after
the Issue Date (as defined). See "Description of
Notes -- Note Guarantees."
13
<PAGE> 15
Ranking.................... The Notes will be unsecured and will be
subordinated in right of payment to all existing
and future Senior Indebtedness (as defined) of the
Company and will be effectively subordinated to all
obligations of the subsidiaries of the Company. The
Notes will rank pari passu with any future Senior
Subordinated Indebtedness (as defined) of the
Company and will rank senior to all other
Subordinated Indebtedness (as defined) of the
Company. The Indenture (as defined) permits the
Company to incur additional indebtedness, including
Senior Indebtedness, subject to certain
limitations. As of March 31, 1997, on a pro forma
basis after giving effect to the Transactions, the
Company had outstanding $246.9 million (exclusive
of unused commitments) in aggregate amount of
Senior Indebtedness (all of which is secured) and
no Senior Subordinated Indebtedness other than the
indebtedness represented by the Existing Notes. See
"Description of Notes -- Ranking."
Restrictive Covenants...... The indenture under which the Notes will be issued
(the "Indenture") will limit: (i) the incurrence of
additional indebtedness by the Company and its
Restricted Subsidiaries (as defined); (ii) the
layering of indebtedness; (iii) the payment of
dividends on, and redemption of, capital stock of
the Company and its Restricted Subsidiaries and the
redemption of certain subordinated obligations of
the Company and its Restricted Subsidiaries; (iv)
investments; (v) sales of assets and Restricted
Subsidiary stock; (vi) certain transactions with
affiliates; (vii) the sale or issuance of preferred
stock of Restricted Subsidiaries; (viii) the
creation and existence of liens; (ix) the types of
businesses that the Company and its Restricted
Subsidiaries may operate; and (x) consolidations,
mergers and transfers of all or substantially all
of the Company's assets. The Indenture will also
prohibit certain restrictions on distributions from
Restricted Subsidiaries. However, all of these
limitations and prohibitions are subject to a
number of important qualifications and exceptions.
See "Description of Notes -- Certain Covenants" and
"Description of Notes -- Merger and Consolidation."
RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" for risks involved with an investment in
the Notes, including: (i) Substantial Leverage and Debt Service Obligations;
(ii) Subordination of Notes; (iii) Restrictive Financing Covenants; (iv) Change
of Control; (v)Fraudulent Transfer Considerations; (vi) Risks Relating to the
Company's Strategy; (vii) Patents, Trademarks and Licenses; (viii) Impact of
Significant Competition; (ix) Control of the Company; (x) Relationship with the
Library of Congress; (xi) Environmental Matters; (xii) Income Tax Audit; (xiii)
Reliance on Single Source Suppliers; (xiv) Dependence on Key Personnel; and (xv)
Absence of Public Market; Restrictions on Transfer.
14
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary financial data of the Company for
each of the five fiscal years during the period ended March 31, 1997. The
summary financial data set forth below with respect to fiscal years ended March
31, 1995, 1996 and 1997, are derived from the consolidated financial statements
included elsewhere in this Prospectus, which have been audited by Ernst & Young
LLP, independent auditors. The summary financial data with respect to the fiscal
years ended March 31, 1993 and 1994 are derived from the consolidated financial
statements of the Company that are not included in this Prospectus. The pro
forma financial data have been derived from the Unaudited Pro Forma Consolidated
Financial Information and the related notes thereto included elsewhere in this
Prospectus. The pro forma information does not purport to represent what the
Company's results would have actually been if the Transactions had occurred on
the dates indicated nor does such information purport to project the results of
the Company for any future period. The summary financial data below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Consolidated
Financial Information," "Selected Historical and Pro Forma Financial
Information" and the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, PRO
------------------------------------------------------ FORMA
1993 1994 1995 1996 1997 1997(g)
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $122,827 $132,389 $141,572 $145,348 $170,881 $170,881
Gross profit..................... 45,055 47,148 52,024 55,228 71,257 71,257
Engineering and development...... 4,357 5,378 6,138 6,756 7,645 7,645
Marketing........................ 15,251 15,080 15,865 16,678 18,628 18,628
General and administrative....... 6,385 7,477 7,545 7,510 8,917 18,248
Other operating expenses(a)...... 4,558 4,308 6,286 3,385 1,648 1,648
Special charges(b)............... -- -- -- 13,785 -- --
Operating profit................. 14,504 14,905 16,190 7,114 34,419 25,088
Interest expense................. 11,079 10,120 12,490 12,517 12,513 24,988
Net income (loss)................ 3,257 3,914 68(c) (4,104) 14,325 148
OTHER FINANCIAL DATA:
EBITDA(d)........................ $ 22,412 $ 23,035 $ 25,134 $ 30,036 $ 40,045 $ 30,714
EBITDA margin(e)................. 18.2% 17.4% 17.8% 20.7% 23.4% 18.0%
Adjusted EBITDA(f)............... $ 22,412 $ 23,035 $ 27,260 $ 32,631 $ 41,197 $ 36,907
Adjusted EBITDA margin(e)........ 18.2% 17.4% 19.3% 22.5% 24.1% 21.6%
Depreciation and amortization.... $ 7,908 $ 8,130 $ 8,944 $ 9,577 $ 5,626 $ 5,626
Capital expenditures............. $ 2,697 $ 4,377 $ 3,596 $ 3,320 $ 8,685 $ 8,685
Cash interest expense............ $ 23,601
Ratio of EBITDA to cash interest
expense........................ 1.3x
Ratio of Adjusted EBITDA to cash
interest expense............... 1.6x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................ $ 35,742 $ --
Working capital.......................................................... 64,123 20,235
Total assets............................................................. 140,816 134,765
Total debt............................................................... 100,000 246,897
Shareholder's equity (deficit)........................................... 6,256 (144,192)
</TABLE>
See Notes to Summary Historical and Pro Forma Financial Information
15
<PAGE> 17
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) Other operating expenses consist of corporate charges and amortization of
goodwill and other intangibles.
(b) Special charges for Fiscal 1996 consist primarily of write-offs associated
with the Company's adoption of Statement of Financial Accounting Standards
(SFAS) No. 121 "Accounting for Impairment of Long Lived Assets and Assets to
be Disposed Of" in the fourth quarter of Fiscal 1996 ($13,345,000) -- all of
which was non-cash, a loss associated with the closing of a manufacturing
facility ($239,000) and the accrual of severance benefit payable to
employees at such facility ($201,000). Excluding these charges, historical
operating profit and net income for Fiscal 1996 would have been $20,899,000
and $7,329,000, respectively. For further discussion, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Fiscal 1996 compared to Fiscal 1995" and Notes 1 and 2 to the
Consolidated Financial Statements included elsewhere herein.
(c) Net income for Fiscal 1995 includes an extraordinary loss of $3,239,000
associated with the early retirement of debt. See Note 6 to the Consolidated
Financial Statements of the Company included elsewhere herein.
(d) "EBITDA," as presented, represents earnings before interest expense, other
income, income taxes, depreciation and amortization and $13,345,000 of the
special charge described in Note (b) above in Fiscal 1996. 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 expense, other income, income taxes,
depreciation and amortization and $13,345,000 of the special charges
described in Note (b) above in Fiscal 1996, each of which can significantly
affect the Company's results of operations and liquidity and should be
considered in evaluating the Company's financial performance. EBITDA is not
intended to represent and should not be considered more meaningful than, or
an alternative to, measures of operating performance as determined in
accordance with generally accepted accounting principles.
(e) EBITDA margin and Adjusted EBITDA margin represent EBITDA and Adjusted
EBITDA as percentages of net sales.
(f) Adjusted EBITDA represents EBITDA, as described in Note (d) above, adjusted
for (i) management fees to be charged to the Company by GSCP plus a non-cash
compensation charge related to a new option program plus an estimate of
certain management bonuses which will be incurred by the Company under the
new incentive program; (ii) management's estimate of cost savings which
would have been realized had the level of savings being achieved in March
1997 from the relocation of certain manufacturing operations to the Mexico
facility in Fiscal 1997 been achieved throughout Fiscal 1996 and Fiscal
1997; (iii) management's estimate of cost savings which would have been
realized had the closing of the Company's facility in Le Sueur, Minnesota
occurred at the beginning of Fiscal 1996; (iv) certain charges taken in the
fourth quarter of Fiscal 1996 associated with the closing of the Le Sueur
facility deemed by management to be non-recurring; and (v) a charge taken in
the first nine months of Fiscal 1995 related to the incremental
non-recurring effect of a payment made in connection with the termination of
the management consulting agreement, as shown below (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------- PRO FORMA
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
EBITDA (excluding Pro Forma adjustments)...... $22,412 $23,035 $25,134 $30,036 $40,045 $40,045
Pro Forma adjustments......................... -- -- -- -- -- (9,331)
Non-cash compensation charge related to a new
option program included in Pro Forma
Adjustments................................. 5,041
Relocation to Mexico.......................... -- -- -- 1,450 966 966
Cost savings related to Le Sueur closing...... -- -- -- 705 186 186
Non-recurring costs related to Le Sueur
closing..................................... -- -- -- 440 -- --
Termination of consulting agreement(*)........ -- -- 2,126 -- -- --
------- ------- ------- ------- ------- -------
Adjusted EBITDA............................... $22,412 $23,035 $27,260 $32,631 $41,197 $36,907
======= ======= ======= ======= ======= =======
</TABLE>
16
<PAGE> 18
- ---------------
(*) The Company terminated a management consulting agreement by making a
one-time payment in Fiscal 1995. Annual payments of $579,000 and
$600,000 in Fiscal 1993 and 1994 were made under the management
consulting agreement. These expense amounts have not been accounted for
in the computation of Adjusted EBITDA. The adjustment of $2,126,000 in
the table above represents the difference between the full annual
amount of approximately $624,000 which would have been paid by the
Company in that year had the agreement not been terminated and the
total of the one-time payment made in Fiscal 1995 of $2,650,000 and the
partial payment made under the consulting agreement in Fiscal 1995 of
$100,000.
In addition, the Company is currently in the process of changing to a new
management information system, which is expected to be implemented in
Fiscal 1998. Management's estimate of the incremental savings the Company
would have realized had such management information system changes been
completed at the beginning of Fiscal 1997 is $686,000. Had this amount been
included in the calculation of Adjusted EBITDA, Pro Forma Adjusted EBITDA
for Fiscal 1997 would have been $37,593,000 Adjusted 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) The pro forma statement of operations data for the fiscal year ended March
31, 1997, gives effect to the Transactions as though each had occurred as of
April 1, 1996. The pro forma balance sheet data as of March 31, 1997 give
effect to the Transactions as though each had occurred as of March 31, 1997.
The pro forma data do not purport to be indicative of the Company's
financial condition or the results that would have actually been obtained
had such transactions been consummated as of the assumed dates and for the
periods presented, nor are they indicative of the Company's results of the
operations or financial condition for any future period or date.
17
<PAGE> 19
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Existing Notes for New Notes, holders of Existing Notes should
consider carefully the following factors, which are generally applicable to the
Existing Notes and the New Notes.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
As a result of the Transactions, the Company is highly leveraged, with
indebtedness that is substantial in relation to its shareholder's equity. After
giving pro forma effect to the Transactions, the Company's aggregate outstanding
indebtedness would have been $246.9 million as of March 31, 1997 and the
Company's shareholder's equity (deficit) would have been $(144.2) million as of
the same date. The Senior Secured Credit Facility and the Indenture will permit
the Company to incur or guarantee certain additional indebtedness, subject to
certain limitations. See "Selected Historical and Pro Forma Financial
Information" and "Description of Senior Secured Credit Facility."
The Company's high degree of leverage could have important consequences,
including, but not limited to, the following: (i) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired in
the future; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) the Company is substantially more leveraged than certain of its
competitors, which might place the Company at a competitive disadvantage; (iv)
the Company may be hindered in its ability to adjust rapidly to changing market
conditions; and (v) the Company's substantial degree of leverage could make it
more vulnerable in the event of a downturn in general economic conditions or its
business.
The Company's ability to repay or to refinance its obligations with respect
to its indebtedness will depend on its financial and operating performance,
which, in turn, is subject to prevailing economic and competitive conditions and
to certain financial, business and other factors, many of which are beyond the
Company's control. These factors could include operating difficulties, increased
operating costs, product prices, the response of competitors, regulatory
developments, and delays in implementing strategic projects. The Company's
ability to meet its debt service and other obligations may depend in significant
part on the extent to which the Company can implement successfully its business
strategy. There can be no assurance that the Company will be able to implement
its strategy fully or that the anticipated results of its strategy will be
realized. See "Business -- Business Strategy."
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, or seek to obtain additional equity capital,
or to restructure its debt. There can be no assurance that the Company's cash
flow and capital resources will be sufficient for payment of principal of and
interest on its indebtedness in the future, or that any such alternative
measures would be successful or would permit the Company to meet its scheduled
debt service obligations. In addition, because the Company's obligations under
the Senior Secured Credit Facility will bear interest at floating rates, an
increase in interest rates could adversely affect, among other things, the
Company's ability to meet its debt service obligations.
SUBORDINATION OF NOTES
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Indebtedness (as defined) of the
Company, including all amounts owing or guaranteed under the Senior Secured
Credit Facility. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company,
assets of the Company will be available to pay obligations on the Notes only
after all Senior Indebtedness of the Company has been paid in full, and there
can be no assurance that there will be sufficient assets to pay amounts due on
any or all of the Notes. See "Description of Notes -- Ranking."
18
<PAGE> 20
The Indenture will permit the Company to incur or have outstanding certain
secured indebtedness, including indebtedness under the Senior Secured Credit
Facility, which is secured by pledges of all the capital stock of the Company
and each direct or indirect domestic subsidiary of the Company formed in the
future and 65% of the capital stock of each direct or indirect international
subsidiary of the Company and security interests in, or liens on, substantially
all other tangible and intangible assets located in the United States of the
Company and its domestic subsidiaries. Accordingly, if an event of default
occurs under the Senior Secured Credit Facility, the lenders thereunder will
have a prior right to the assets of the Company and such subsidiaries, and may
foreclose upon such collateral to the exclusion of the holders of the Notes,
notwithstanding the existence of an event of default with respect thereto. In
such event, such assets would first be used to repay in full amounts outstanding
under the Senior Secured Credit Facility, resulting in all or a portion of the
Company's assets and such subsidiaries' assets being unavailable to satisfy the
claims of the holders of the Notes and other unsecured indebtedness.
RESTRICTIVE FINANCING COVENANTS
The Senior Secured Credit Facility and the Indenture contain a number of
significant covenants that will restrict the operations of the Company and its
subsidiaries. Under the Senior Secured Credit Facility, the Company is required
to comply with specified financial ratios and tests, including minimum fixed
charge coverage ratios, maximum leverage ratios and minimum EBITDA requirements.
There can be no assurance that the Company will be able to comply with such
covenants or restrictions in the future. The Company's ability to comply with
such covenants and other restrictions may be affected by events beyond its
control, including prevailing economic, financial and industry conditions. The
breach of any such covenants or restrictions could result in a default under the
Senior Secured Credit Facility that would permit the lenders thereto to declare
all amounts outstanding thereunder to be immediately due and payable, together
with accrued and unpaid interest, and the commitments of the lenders under the
Revolving Credit Facility to make further extensions of credit thereunder could
be terminated.
The Indenture contains a number of significant covenants that limit the
discretion of the Company's management with respect to certain business matters.
These covenants place significant restrictions on, among other things, the
ability of the Company to incur additional indebtedness, incur liens, make
investments, pay dividends or make certain other restricted payments, consummate
certain asset sales, consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
assets of the Company. See "Description of Notes -- Certain Covenants." The
Indenture also provides that the failure by the Company or its subsidiaries to
pay when due, upon acceleration, $5.0 million or more of other indebtedness
(including indebtedness under the Senior Credit Facility) will result in an
event of default under the Indenture. See "Description of Notes -- Defaults." In
addition, the GST Subordinated Debentures contain covenants relating to the
Company are substantially identical to the covenants in the Indenture.
CHANGE OF CONTROL
The occurrence of certain of the events that would constitute a Change of
Control (as defined) may result in a default, or otherwise require repayment of
indebtedness, under both the Notes and the Senior Secured Credit Facility. In
addition, the Senior Secured Credit Facility prohibits the repayment of
indebtedness of the Notes by the Company in such an event, unless and until such
time as the indebtedness under the Senior Secured Credit Facility is repaid in
full. The Company's failure to make such repayments in such instances would
result in a default under both the Notes and the Senior Secured Credit Facility.
The inability to repay the indebtedness under the Senior Secured Credit
Facility, if accelerated, would also constitute an event of default under the
Indenture, which could have materially adverse consequences to the Company and
to the holders of the Notes. Future indebtedness of the Company may also contain
restrictions or repayment requirements with respect to certain events or
transactions that could constitute a Change of Control. In the event of a Change
of Control, there can be no assurance that the Company would have sufficient
assets to satisfy all of its obligations under the Notes or the Senior Secured
Credit Facility. See "Description of Notes -- Change of Control."
19
<PAGE> 21
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence of indebtedness by the Company, such as the Notes, may be
subject to review under federal bankruptcy law or relevant state fraudulent
conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of
unpaid creditors of the Company. Under these laws, if, in a bankruptcy or
reorganization case or a lawsuit by or on behalf of unpaid creditors of the
Company, a court were to find that, at the time the Company incurred
indebtedness, including indebtedness under the Notes, (i) the Company incurred
such indebtedness with the intent of hindering, delaying or defrauding current
or future creditors or (ii) (a) the Company received less than reasonably
equivalent value or fair consideration for incurring such indebtedness and (b)
the Company (1) was insolvent or was rendered insolvent by reason of any of the
Transactions, (2) was engaged, or about to engage, in a business or transaction
for which its assets constituted unreasonably small capital, (3) intended to
incur, or believed that it would incur, debts beyond its ability to pay as such
debts matured (as all of the foregoing terms are defined in or interpreted under
the relevant fraudulent transfer or conveyance statutes) or (4) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment the judgment is
unsatisfied), then such court could avoid or subordinate the amounts owing under
the Notes to presently existing and future indebtedness of the Company and take
other actions detrimental to the holders of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, the Company would be considered insolvent
if, at the time it incurred the indebtedness, either (i) the sum of its debts
(including contingent liabilities) is greater than its assets, at a fair
valuation, or (ii) the present fair saleable value of its assets is less than
the amount required to pay the probable liability on its total existing debts
and liabilities (including contingent liabilities) as they become absolute and
matured. There can be no assurance as to what standards a court would use to
determine whether the Company was solvent at the relevant time, or whether,
whatever standard was used, the Notes would not be avoided or further
subordinated on another of the grounds set forth above. In rendering their
opinions in connection with the initial borrowings, counsel for the Company and
counsel for the lenders will not express any opinion as to the applicability of
federal or state fraudulent transfer and conveyance laws.
The Company believes that at the time the indebtedness constituting the
Notes will be incurred initially by the Company, the Company (i) will be (a)
neither insolvent nor rendered insolvent thereby, (b) in possession of
sufficient capital to run its businesses effectively and (c) incurring debts
within its ability to pay as the same mature or become due and (ii) will have
sufficient assets to satisfy any probable money judgment against it in any
pending action. In reaching the foregoing conclusions, the Company has relied
upon its analyses of internal cash flow projections and estimated values of
assets and liabilities of the Company. There can be no assurance, however, that
a court passing on such questions would reach the same conclusions.
RISKS RELATING TO THE COMPANY'S STRATEGY
There can be no assurance as to the extent, if at all, that the Company's
strategy will be successful. The success of new product introductions is
dependent on several factors, including proper new product selection, timely
completion and introduction of new product designs, quality of new products and
market acceptance. It also may require substantial expenditures. There can be no
assurances that constraints on the Company's financial resources will not
adversely affect its ability to develop and market new products. In addition,
although the Company attempts to determine the specific needs of new markets,
there can be no assurance that the identified markets will in fact materialize
or that the Company's future products designed for these markets will gain
substantial market acceptance. See "Business -- Business Strategy."
The Company's efforts to increase international sales may be adversely
affected by, among other things, changes in foreign import restrictions and
regulations, taxes, currency exchange rates, currency and monetary transfer
restrictions and regulations and economic and political changes in the foreign
nations to which the Company's products are exported. Although the Company's
international operations have generally been profitable in the past, there can
be no assurance that one or more of these factors will not have a material
20
<PAGE> 22
adverse effect on the Company's financial position or results of operations in
the future. In addition, the Company has not registered its significant
trademarks in all foreign jurisdictions in which it does business and there can
be no assurance that attempts at registration in such foreign jurisdictions
would be successful.
The Senior Secured Credit Facility limits the Company's ability to make
acquisitions and to incur indebtedness in connection with acquisitions. In
addition, any acquisitions that the Company may make would involve risks,
including the successful integration and management of acquired technology,
operations and personnel. The integration of acquired businesses may also lead
to the loss of key employees of the acquired companies and diversion of
management attention from ongoing business concerns. There can be no assurance
that any acquisition will be made, that the Company will be able to obtain
additional financing needed to finance such transactions and, if any
acquisitions are so made or formed, that they will be successful.
PATENTS, TRADEMARKS AND LICENSES
The Company relies on a combination of copyright, trademark and patent laws
to protect its intellectual property rights, and to a significant degree, on
trade secrets, confidentiality procedures and contractual provisions, which may
afford more limited legal protections. In addition, the laws of some foreign
jurisdictions may provide less protection than the laws of the United States for
the Company's proprietary rights.
Many of the Company's products are sold under the Telex(R) trademark.
Memorex Telex Corporation ("MT") has granted the Company the right to use the
Telex(R) trademark pursuant to a perpetual royalty-free license. On October 15,
1996, MT filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code. While the Company's ability to enforce such license could be
adversely affected by such filing, the Company does not believe that its rights
under such license will be materially impaired by such filing. The Company
believes, however, that if its rights to such trademark were determined to be
impaired or unenforceable, there would be a material adverse effect on the
Company's business. See "Business -- Patents, Trademarks and Licenses."
IMPACT OF SIGNIFICANT COMPETITION
Although most of the Company's current competitors are smaller than the
Company, as the Company develops new products and enters new markets it may
encounter new competitors, and other manufacturers and suppliers who currently
do not offer competing products may enter the markets in which the Company
currently operates. Such new competitors may be larger, offer broader product
lines and have substantially greater financial and other resources than the
Company. Such competition could negatively affect pricing and gross margins.
Although the Company has historically competed successfully in its various
markets, there can be no assurance that it will be able to continue to do so or
that the Company will be able to compete successfully in new markets. See
"Business -- Competition."
CONTROL OF THE COMPANY
Upon the occurrence of the Recapitalization, G-II, which is a wholly owned
subsidiary of GSCP and certain coinvestors, became the owner of approximately
80% of the issued and outstanding common stock of Holdings on a fully diluted
basis (giving effect to the Rollover Options), which in turn owns all of the
common stock of the Company. Accordingly, GSCP controls the Company and has the
power to elect all of the Company's directors, appoint new management and
approve any action requiring the approval of the holders of the Company's common
stock, including adopting amendments to the Company's certificate of
incorporation and approving mergers or sales of substantially all of the
Company's assets. GSCP is an affiliate of Travelers Group Inc., which wholly
owns the general partner of GSCP's general partner. From time to time, GSCP
considers possible combinations or dispositions of its portfolio companies as a
means of optimizing investment value. See "Management" and "Ownership of Capital
Stock."
On February 10, 1997, a wholly owned subsidiary of GSCP acquired EV
International, Inc. ("EVI"). EVI manufactures and markets a comprehensive range
of products worldwide for professional audio systems, including microphones,
mixing consoles, signal processors, amplifiers and loud speakers. The Company
and EVI do not currently have a business relationship, and although it is
possible that they, together with GSCP,
21
<PAGE> 23
may explore building such a relationship or combining their businesses, there
are no current plans or other arrangements to do so.
RELATIONSHIP WITH THE LIBRARY OF CONGRESS
The Company has provided talking book players to the Library of Congress
for over 20 years and has historically generated a substantial portion of its
revenue from sales to the Library of Congress. During Fiscal 1997, approximately
9.5% of the Company's net sales were derived from a contract with the Library of
Congress for the provision of talking book tape players. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company expects to ship the last installment of talking book tape players under
its current contract with the Library of Congress in Fiscal 1998. While the
Company believes that the Library of Congress will award additional contracts to
purchase tape players based on the talking book technology for the foreseeable
future, there can be no assurance that this will be the case. In addition, the
Library of Congress' contract provides for termination of the contract at its
convenience. As a result, the Company's sales could be adversely affected by
changes in the Library of Congress' policy. The Library of Congress' contract
also has complex, legally mandated accounting and other procedural requirements,
violations of which could result in prospective suspension or debarment from
federal contracts as well as other sanctions. See "Business -- Strategic
Business Units -- RF/Communications Group."
ENVIRONMENTAL MATTERS
The past and present business operations of the Company and the past and
present ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment and
the handling and disposition of wastes (including hazardous wastes) or otherwise
relating to protection of the environment. No assurance can be given, however,
that additional environmental issues relating to presently known matters or
identified sites or to other matters or sites will not require additional,
currently unanticipated investigation, assessment or expenditures. See
"Business -- Environmental Matters."
INCOME TAX AUDIT
The Internal Revenue Service (the "IRS") has conducted an audit of Holdings
and its subsidiaries with respect to taxable years 1990, 1991 and 1992. The IRS
has proposed adjustments that would, if sustained, increase the tax liabilities
of the Company. The largest proposed adjustment relates to the Company's
amortization of certain intangible assets. The Company had previously received a
settlement offer from the IRS with respect to the amortization of its
intangibles, which the Company did not accept. Currently it is not possible to
predict whether the Company will reach a settlement with the IRS that is
acceptable to the Company with respect to the Company's amortization of the
intangible assets or certain other proposed adjustments, or whether the Company
would prevail in any subsequent administrative or judicial proceedings with the
IRS. The Company believes that the accounting under Statement of Financial
Accounting Standards No. 109 resulting from any adjustment imposed by the IRS
relating to the intangible assets would not likely result in a material
adjustment to current earnings, because it would be recorded principally as an
adjustment to goodwill. The IRS is also currently conducting an audit of
Holdings and its subsidiaries with respect to taxable years 1993, 1994 and 1995.
RELIANCE ON SINGLE SOURCE SUPPLIERS
The Company's manufacturing operations primarily consist of assembly of
components and subassemblies that it manufactures or purchases from a variety of
sources. Although most components and subassemblies that the Company uses are
obtained, or are reasonably available, from numerous sources, certain of its
products and components (including components used in hearing aids) are
currently obtained only from single suppliers. The Company currently purchases
such components on a purchase order basis. The Company has to date experienced
only minor interruptions in the supply of these components, none of which has
adversely affected its operations in a material way. However, an interruption in
supply from any of the
22
<PAGE> 24
Company's single source suppliers in the future could result in the Company's
inability to deliver products on a timely basis, which in turn could adversely
affect its operations. See "Business -- Suppliers."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part on the Company's senior
management and its ability to attract and retain other highly qualified
management personnel. There can be no assurance that the Company will be
successful in hiring or retaining key personnel. The Company has entered into
employment agreements with certain of its senior managers in connection with the
Transactions. See "Management -- Employment Agreements."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because the Company
anticipates that most holders of the Existing Notes will elect to exchange such
Existing Notes for New Notes due to the absence of restrictions on the resale of
New Notes under the Securities Act, the Company anticipates that the liquidity
of the market for any Existing Notes remaining after the consummation of the
Exchange Offer may be substantially limited. The New Notes are new securities
for which there presently is no established market. Although the Initial
Purchasers have informed the Company that they currently intend to make a market
in the New Notes, the Initial Purchasers are not obligated to do so and any such
market making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the New
Notes. The Company does not intend to apply for listing of the New Notes on any
securities exchange or for quotation of the New Notes through the National
Association of Securities Dealers Automated Quotation System. See "Transfer
Restrictions" and "Plan of Distribution."
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market or by declines in the
market for similar securities. Such declines may adversely affect such liquidity
and trading markets independent of the financial performance of, and prospects
for, the Company.
USE OF PROCEEDS
There will be no cash proceeds payable to the Company from the issuance of
the New Notes pursuant to the Exchange Offer. The proceeds of the Offering,
together with the GST Equity Investment, approximately $122.3 million of the
aggregate proceeds under the Senior Secured Credit Facility and the cash and
cash equivalents of the Company as of immediately prior to the Effective Time
("Closing Cash"), were used to (i) repurchase the Telex Notes, (ii) pay the
Tender Offer premium and consent fee of $18.3 million, including accrued
interest on the Telex Notes, (iii) pay approximately $253.9 million of
Recapitalization Consideration and (iv) pay approximately $20.0 million of
transaction fees and expenses.
23
<PAGE> 25
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 on a historical basis and on a pro forma basis after giving
effect to the Transactions. This table should be read in conjunction with "Use
of Proceeds," "Unaudited Pro Forma Consolidated Financial Information,"
"Selected Historical and Pro Forma Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
HISTORICAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................. $ 35,742 $ --
======== ========
Long-term debt (including current portion):
Telex Notes...................................... 100,000 --
Revolving Credit Facility(a)..................... -- 6,897
Term Loan Facility(b)............................ -- 115,000
The Notes........................................ -- 125,000
-------- --------
Total long-term debt........................ 100,000 246,897
Total common shareholder's equity (deficit)........... 6,256 (144,192)
-------- --------
Total capitalization.................................. $106,256 $ 102,705
======== ========
</TABLE>
- ---------------
(a) Borrowings of up to $25.0 million under the Revolving Credit Facility are
available for working capital and general corporate purposes, including up
to $10.0 million for letters of credit. On a pro forma basis after giving
effect to the Transactions, the issuance of letters of credit (totaling $2.9
million) and subject to borrowing base limitations, the Company's unused
availability under the Revolving Credit Facility on March 31, 1997 would
have totaled $15.2 million had all the related fees and expenses been paid
as of such date. See "Description of Senior Secured Credit Facility."
(b) The Term Loan Facility consists of the Tranche A Term Loan Facility and the
Tranche B Term Loan Facility. The Tranche A Term Loan Facility matures in
2002, and requires quarterly principal payments by the Company until
maturity. The Tranche B Term Loan Facility matures in 2004, and requires
quarterly principal payments by the Company until maturity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Use of Proceeds" and
"Description of Senior Secured Credit Facility."
24
<PAGE> 26
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet of the Company
as of March 31, 1997 and the Unaudited Pro Forma Consolidated Statements of
Operations of the Company for the year ended March 31, 1997 have been prepared
to reflect the consummation of the Transactions. The Unaudited Pro Forma
Consolidated Balance Sheet has been prepared as if such Transactions occurred on
March 31, 1997 and the Unaudited Pro Forma Consolidated Statements of Operations
have been prepared as if such Transactions occurred as of April 1, 1996. The Pro
Forma Consolidated Financial Information is unaudited and not necessarily
indicative of the results that would have actually occurred if the Transactions
had been consummated on such dates, or results which may be obtained in the
future. The pro forma adjustments, as described in the Notes to the Consolidated
Balance Sheet and the Notes to the Unaudited Pro Forma Consolidated Statements
of Operations, are based on available information and upon certain assumptions
that the Company believes are reasonable. The Pro Forma Consolidated Financial
Information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes thereto, included elsewhere in this Prospectus.
The pro forma financial data have been derived by the application of pro
forma adjustments to the Company's historical consolidated financial statements
for the periods noted. The Transactions have been accounted for as a
recapitalization which will have no impact on the historical basis of assets and
liabilities. The pro forma financial data reflects the fact that (i) there were
no dissenting shareholders to the Transactions and (ii) all of the Telex Notes
were repurchased in the Tender Offer.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 35,742 $ (35,742)(a) $ --
Accounts and notes receivable, net............................... 29,459 29,459
Inventories...................................................... 23,495 23,495
Deferred tax asset............................................... 2,813 2,813
Other............................................................ 1,525 1,525
-------- --------- ---------
Total current assets............................................... 93,034 (35,742) 57,292
Property, plant and equipment, net................................. 20,867 20,867
Deferred income taxes.............................................. 3,990 21,499(b) 25,489
Deferred financing costs........................................... 2,525 (2,525)(c) 10,717
(10,717)(d)
Intangible assets, net............................................. 20,400 20,400
-------- --------- ---------
Total assets.............................................. $140,816 $ (6,051) $ 134,765
======== ========= =========
Current liabilities:
Accounts payable................................................. $ 12,224 $ 12,224
Revolving Credit Facility........................................ 6,897(e) 6,897
Current portion of Term Loan Facility............................ 3,750(f) 3,750
Other accrued expenses........................................... 16,687 (2,500)(a) 14,187
-------- --------- ---------
Total current liabilities................................. 28,911 8,147 37,058
Telex Notes........................................................ 100,000 (100,000)(g) --
Term Loan Facility................................................. 111,250(f) 111,250
The Notes.......................................................... 125,000(h) 125,000
Pension accrual and other.......................................... 5,649 5,649
-------- --------- ---------
Total liabilities......................................... 134,560 144,397 278,957
Stockholder's equity (deficit)..................................... 6,256 (150,448)(i) (144,192)
-------- --------- ---------
Total liabilities and shareholder's equity (deficit)...... $140,816 $ (6,051) $ 134,765
======== ========= =========
</TABLE>
25
<PAGE> 27
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) The net decrease in cash of $35,742,000 reflects the following (in
thousands):
<TABLE>
<S> <C>
Sources:
Senior Secured Credit Facility:
Revolving Credit Facility............................................... $ 6,897
Term Loan Facility...................................................... 115,000
The Notes................................................................. 125,000
GST Equity Investment..................................................... 108,353(*)
Management Equity Rollover................................................ 21,242
--------
$376,492
Uses:
Purchase of Holdings Common Stock and equivalents......................... $253,899
Management Equity Rollover................................................ 21,242
Telex Notes............................................................... 100,000
Tender Offer premium and consent fee...................................... 14,593
Accrued interest on Telex Notes........................................... 2,500
Deferred financing costs.................................................. 10,717
Fees and expenses associated with the Transactions........................ 9,283
--------
$412,234
--------
Net decrease in cash...................................................... $ 35,742
========
</TABLE>
- ---------------
(*) Represents $83,178,000 of equity of GST purchased by GSCP and certain
co-investors and $25,175,000 of proceeds associated with GST's
issuance of the GST Subordinated Debentures, all of which were
contributed as equity to the Company in connection with the
Transactions.
(b) Reflects deferred tax benefit related to tax deductible expenses reflected
in Note (i) and compensation expense of $35,003,000 recognized for tax
purposes related to the exercise of certain stock options and a change in
vesting terms of the Rollover Options at an effective rate of 39%.
(c) Reflects the write-off of deferred financing costs of $2,525,000 related to
the Telex Notes redeemed in the Tender Offer.
(d) Reflects deferred financing costs of $10,717,000 associated with the
Offering.
(e) The Company entered into a $25,000,000 Revolving Credit Facility for working
capital and general corporate purposes. On a pro forma basis after giving
effect to the Transactions, the issuance of letters of credit (totaling
$2,900,000) and subject to borrowing base limitations, at March 31, 1997,
the Company would have drawn down $6,897,000 under the Revolving Credit
Facility had the related fees and expenses been paid, the Company's unused
availability under the Revolving Credit Facility would have been
$15,203,000. See "Description of Senior Secured Credit Facility."
(f) Represents borrowings under the Term Loan Facility.
(g) Reflects the redemption of the Telex Notes.
(h) Represents gross proceeds of $125,000,000 from the sale of the Existing
Notes.
(i) The pro forma adjustment to Shareholder's equity (deficit) reflects the
following (in thousands):
<TABLE>
<S> <C>
Convert stock and stock equivalents to cash...................................... $(253,899)
GST Equity Investment............................................................ 108,353
Tender Offer premium and consent fee............................................. (14,593)
Write-off of deferred financing costs associated with historical debt............ (2,525)
Fees and expenses associated with the Transactions............................... (9,283)
Tax effect of (i) Tender Offer premium and consent fee, (ii) the write-off of the 21,499
unamortized deferred financing costs related to the Notes, (iii) the
compensation expense associated with the exercise of options and change in
vesting terms of the Rollover Options and (iv) certain fees and expenses.......
---------
$(150,448)
=========
</TABLE>
26
<PAGE> 28
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
Net sales............................................... $ 170,881 $ -- $ 170,881
Cost of goods sold...................................... 99,624 99,624
-------- -------- --------
71,257 71,257
Operating expenses:
Engineering and development........................... 7,645 7,645
Marketing............................................. 18,628 18,628
General and administrative............................ 8,917 9,331(b) 18,248
Amortization of goodwill and other intangibles........ 1,648 1,648
-------- -------- --------
36,838 9,331 46,169
-------- -------- --------
Operating profit........................................ 34,419 (9,331) 25,088
Interest expense........................................ (12,513) (12,475)(c) (24,988)
Other income............................................ 1,671 (1,435)(d) 236
-------- -------- --------
Income before taxes..................................... 23,577 (23,241)(e) 336
Provision for income taxes.............................. 9,252 (9,064) 188
-------- -------- --------
Net income............................................ $ 14,325 $(14,177) $ 148
======== ======== ========
Other data:
EBITDA(f)............................................. $ 40,045 $ 30,714
EBITDA margin(g)...................................... 23.4% 18.0%
Adjusted EBITDA(h).................................... $ 41,197 $ 36,907
Adjusted EBITDA margin(g)............................. 24.1% 21.6%
</TABLE>
27
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) The pro forma adjustments exclude (i) the write-off of $2,525,000 of
deferred financing costs associated with the historical debt being retired, (ii)
the $14,593,000 of the Tender Offer premium and consent fee, (iii) $9,283,000 of
estimated transaction fees and expenses incurred in connection with the
Transactions and (iv) $7,410,000 of a non-cash compensation charge in connection
with the change in vesting terms of the Rollover Options. Such amounts described
in Note (i) to the Unaudited Pro Forma Consolidated Balance Sheet represent
items which the Company anticipates will be recorded in the consolidated
statement of operations for the period including the Transactions.
(b) Reflects management fees to be charged to the Company by GSCP, an
estimate of management bonuses which will be incurred by the Company under its
new incentive program and non-cash compensation changes that will be incurred by
the Company related to a new option plan adopted by the Company on the
Recapitalization Closing Date, see "Management -- 1997 Stock Option Plan" (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1997
----------
<S> <C>
Management fee charged to the Company..................................... $1,720
Estimated costs under management incentive program........................ 280
Non-cash compensation charge under a new option program................... 5,041
Cash compensation bonus program........................................... 2,290
------
Additional selling, general and administrative expenses......... $9,331
======
</TABLE>
(c) Reflects net incremental interest expense associated with the issuance
of the following securities and transactions (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1997
----------
<S> <C>
Elimination of interest on the Telex Notes.............................. $(11,967)
Elimination of amortization of deferred financing costs related to the
Telex Notes........................................................... (359)
Interest expense with respect to the Senior Secured Credit Facility and
the Notes at a weighted average interest rate of 9.49%................ 23,433
Amortization expense for deferred financing costs related to the
Transactions.......................................................... 1,368
--------
Total incremental interest.................................... $ 12,475
========
</TABLE>
A 0.5% increase or decrease in the assumed weighted average interest rate
on the Senior Secured Credit Facility would change pro forma interest expense by
$609,000 for the year ended March 31, 1997.
(d) Reflects historical interest income that would have not have been
earned by the Company in the year shown had the existing cash been used to
finance the Transactions.
(e) Reflects the pro forma income tax provision (benefit) associated with
pro forma adjustments at an assumed tax rate of 39%. No tax benefit for book
purposes has been provided for the tax compensation expense, resulting from the
exercise of management options, as the tax benefit is recorded directly in
equity.
(f) EBITDA, as presented, 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 expense, 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.
28
<PAGE> 30
(g) EBITDA margin and Adjusted EBITDA margin represent EBITDA and Adjusted
EBITDA as percentages of net sales.
(h) Adjusted EBITDA represents EBITDA, as described in (d) above, adjusted
for (i) management fees to be charged to the Company by GSCP plus a non-cash
compensation charge related to a new option program, plus an estimate of certain
management bonuses which will be incurred by the Company under the new incentive
program; (ii) management's estimate of cost savings which would have been
realized had the level of savings being achieved in March 1997 from the
relocation of certain manufacturing operations to the Mexico facility in Fiscal
1997 been achieved throughout Fiscal 1996 and Fiscal 1997; (iii) management's
estimate of cost savings which would have been realized had the closing of the
Company's facility in Le Sueur, Minnesota occurred at the beginning of Fiscal
1996; and (iv) certain charges taken in the fourth quarter of Fiscal 1996
associated with the closing of the Le Sueur facility deemed by management to be
non-recurring, as shown below (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31,
-------------------
PRO
FORMA
1997 1997
------- -------
<S> <C> <C>
EBITDA (excluding Pro Forma adjustments)......................... $40,045 $40,045
Pro Forma adjustments............................................ -- (9,331)
Non-cash compensation charge related to a new option program
included in Pro Forma Adjustments.............................. -- 5,041
Relocation to Mexico............................................. 966 966
Cost savings related to Le Sueur closing......................... 186 186
------- -------
Adjusted EBITDA.................................................. $41,197 $36,907
======= =======
</TABLE>
In addition, the Company is currently in the process of changing to a new
management information system, which is expected to be implemented in Fiscal
1998. Management's estimate of the incremental savings the Company would have
realized had such management information system changes been completed at the
beginning of Fiscal 1997 is $686,000. Had this amount been included in the
calculation of Adjusted EBITDA, Pro Forma Adjusted EBITDA for Fiscal 1997 would
have been $37,593,000. Adjusted 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.
29
<PAGE> 31
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth selected historical financial data of the
Company for each of the five fiscal years during the period ended March 31,
1997. The selected historical financial data set forth below with respect to
fiscal years ended March 31, 1995, 1996 and 1997, are derived from the
consolidated financial statements included elsewhere in this Prospectus, which
have been audited by Ernst & Young LLP, independent auditors. The selected
historical financial data with respect to the fiscal years ended March 31, 1993
and 1994 are derived from the consolidated financial statements of the Company
that are not included in this Prospectus. The pro forma financial data have been
derived from the Unaudited Pro Forma Consolidated Financial Information and the
related notes thereto included elsewhere in this Prospectus. The pro forma
information does not purport to represent what the Company's results would have
actually been if the Transactions had occurred on the dates indicated nor does
such information purport to project the results of the Company for any future
period. The summary financial data below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Consolidated Financial Information," "Selected
Historical and Pro Forma Financial Information" and the consolidated financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, PRO
------------------------------------------------------------ FORMA
1993 1994 1995 1996 1997 1997(i)
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $122,827 $132,389 $141,572 $145,348 $170,881 $170,881
Gross profit....................... 45,055 47,148 52,024 55,228 71,257 71,257
Engineering and development........ 4,357 5,378 6,138 6,756 7,645 7,645
Marketing.......................... 15,251 15,080 15,865 16,678 18,628 18,628
General and administrative......... 6,385 7,477 7,545 7,510 8,917 18,248
Other operating expenses(a)........ 4,558 4,308 6,286 3,385 1,648 1,648
Special charges(b)................. -- -- -- 13,785 -- --
Operating profit................... 14,504 14,905 16,190 7,114 34,419 25,088
Interest expense................... 11,079 10,120 12,490 12,517 12,513 24,988
Net income (loss).................. 3,257 3,914 68(c) (4,104) 14,325 148
OTHER FINANCIAL DATA:
EBITDA(d).......................... $ 22,412 $ 23,035 $ 25,134 $ 30,036 $ 40,045 $ 30,714
EBITDA margin(e)................... 18.2% 17.4% 17.8% 20.7% 23.4% 18.0%
Adjusted EBITDA(f)................. $ 22,412 $ 23,035 $ 27,260 $ 32,631 $ 41,197 $ 36,907
Adjusted EBITDA margin(e).......... 18.2% 17.4% 19.3% 22.5% 24.1% 21.6%
Depreciation and amortization...... $ 7,908 $ 8,130 $ 8,944 $ 9,577 $ 5,626 $ 5,626
Capital expenditures............... 2,697 4,377 3,596 3,320 8,685 8,685
Cash interest expense.............. 23,601
Ratio of EBITDA to cash interest
expense.......................... 1.3x
Ratio of Adjusted EBITDA to cash
interest expense................. 1.6x
Ratio of earnings to fixed
charges(g)....................... 1.4x 1.5x 1.3x --(h) 2.9x 1.0x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-----------------------
HISTORICAL PRO FORMA
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................................... $ 35,742 $ --
Working capital................................................................. 64,123 20,235
Total assets.................................................................... 140,816 134,765
Total debt...................................................................... 100,000 246,897
Shareholder's equity (deficit).................................................. 6,256 (144,192)
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Information
30
<PAGE> 32
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) Other operating expenses consist of corporate charges and amortization
of goodwill and other intangibles.
(b) Special charges for Fiscal 1996 consist primarily of write-offs
associated with the Company's adoption of Statement of Financial Accounting
Standards (SFAS) No. 121 "Accounting for Impairment of Long Lived Assets and
Assets to be Disposed Of " in the fourth quarter of Fiscal 1996 ($13,345,000)
all of which was non-cash, a loss associated with the closing of a manufacturing
facility ($239,000) and the accrual of severance benefit payable to employees at
such facility ($201,000). Excluding these charges, historical operating profit
and net income for Fiscal 1996 would have been $20,899,000 and $7,329,000,
respectively. For further discussion, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Fiscal 1996 compared to
Fiscal 1995" and Notes 1 and 2 to the Consolidated Financial Statements included
elsewhere herein.
(c) Net income for Fiscal 1995 includes an extraordinary loss of $3,239,000
associated with the early retirement of debt. See Note 6 to the Consolidated
Financial Statements of the Company included elsewhere herein.
(d) EBITDA, as presented, represents earnings before interest expense,
other income, income taxes, depreciation and amortization and $13,345,000 the
special charge as described in Note (b) above in Fiscal 1996. 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 expense, other income, income taxes, depreciation and amortization
and $13,345,000 of the special charge as described in Note (b) above in Fiscal
1996, each of which can significantly affect the Company's results of operations
and liquidity and should be considered in evaluating the Company's financial
performance. EBITDA is not intended to represent and should not be considered
more meaningful than, or an alternative to, measures of operating performance as
determined in accordance with generally accepted accounting principles.
(e) EBITDA margin and Adjusted EBITDA margin represent EBITDA and Adjusted
EBITDA as percentages of net sales.
(f) Adjusted EBITDA represents EBITDA, as described in Note (d) above,
adjusted for (i) management fees to be charged to the Company by GSCP, plus a
non-cash compensation charge related to a new option program plus an estimate of
certain management bonuses which will be incurred by the Company under the new
incentive program; (ii) management's estimate of cost savings which would have
been realized had the level of savings being achieved in March 1997 from the
relocation of certain manufacturing operations to the Mexico facility in Fiscal
1997 been achieved throughout Fiscal 1996 and Fiscal 1997; (iii) management's
estimate of cost savings which would have been realized had the closing of the
Company's facility in Le Sueur, Minnesota occurred at the beginning of Fiscal
1996; (iv) certain charges taken in the fourth quarter of Fiscal 1996 associated
with the closing of the Le Sueur facility deemed by management to be
non-recurring; and (v) a charge taken in the first nine months of Fiscal 1995
related to the incremental non-recurring effect of a payment made in connection
with the termination of the management consulting agreement, as shown below (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------- PRO FORMA
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
EBITDA (excluding Pro Forma
adjustments)........................... $22,412 $23,035 $25,134 $30,036 $40,045 $40,045
Pro Forma adjustments.................... -- -- -- -- -- (9,331)
Non-cash compensation charge related to a
new option program included in Pro
Forma Adjustments...................... 5,041
Relocation to Mexico..................... -- -- -- 1,450 966 966
Cost savings related to Le Sueur
closing................................ -- -- -- 705 186 186
Non-recurring costs related to Le Sueur
closing................................ -- -- -- 440 -- --
Termination of consulting agreement(*)... -- -- 2,126 -- -- --
------- ------- ------- ------- ------- -------
Adjusted EBITDA.......................... $22,412 $23,035 $27,260 $32,631 $41,197 $36,907
======= ======= ======= ======= ======= =======
</TABLE>
(*) The Company terminated a management consulting agreement by making a
one-time payment in Fiscal 1995. Annual payments of $579,000 and $600,000 in
Fiscal 1993 and 1994 were made under the management consulting
31
<PAGE> 33
agreement. These expense amounts have not been accounted for in the
computation of Adjusted EBITDA. The adjustment of $2,126,000 in the table
above represents the difference between the full annual amount of
approximately $624,000 which would have been paid by the Company in that
year had the agreement not been terminated and the total of the one-time
payment made in Fiscal 1995 of $2,650,000 and the partial payment made under
the consulting agreement in Fiscal 1995 of $100,000.
In addition, the Company is currently in the process of changing to a new
management information system, which is expected to be implemented in Fiscal
1998. Management's estimate of the incremental savings the Company would have
realized had such management information system changes been completed at the
beginning of Fiscal 1997 is $686,000. Had this amount been included in the
calculation of Adjusted EBITDA, Pro Forma Adjusted EBITDA for Fiscal 1997 would
have been $37,593,000. Adjusted 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) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges (excluding capitalized interest) by
fixed charges. Fixed charges for this purpose include interest expense,
capitalized interest, amortization of deferred financing costs and one third of
operating lease payments which are deemed to be representative of the interest
factor.
(h) Excluding the $13,785,000 special charges set forth in Note (b) above,
the ratio of earnings to fixed charges for Fiscal 1996 would have been 1.75.
Earnings for Fiscal 1996 were inadequate to cover fixed charges by $4,284,000.
(i) The pro forma statement of operations data for the fiscal year ended
March 31, 1997 gives effect to the Transactions as though each had occurred as
of April 1, 1996. The pro forma balance sheet data dated as of March 31, 1997
give effect to the Transactions as though each had occurred as of March 31,
1997. The pro forma data do not purport to be indicative of the Company's
financial condition or the results that would have actually been obtained had
such transactions been consummated as of the assumed dates and for the periods
presented, nor are they indicative of the Company's results of operations or
financial condition for any future period or date.
32
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations covers periods before completion of the Transactions. As a
result of the Transactions, the Company has entered into new financing
arrangements and has a different capital structure. Accordingly, the results of
operations for periods subsequent to the Recapitalization Closing Date are not
comparable to prior periods. See "The Recapitalization," "Capitalization" and
"Description of Senior Secured Credit Facility." For further discussion relating
to the impact that the Transactions may have had on the Company, see "Risk
Factors," "Selected Historical and Pro Forma Financial Information," "Pro Forma
Consolidated Financial Information," "The Recapitalization" and the Consolidated
Financial Statements and notes thereto included elsewhere in this Prospectus.
OVERVIEW
The Company is a wholly-owned subsidiary of Holdings. Holdings has no
operations and its principal asset is its investment in the Company. The Company
designs, manufactures and markets sophisticated audio, visual and multimedia
communications equipment for commercial, professional and industrial customers.
The Company offers a broad product line that includes advanced intercom systems,
wired and wireless microphones, headsets, multimedia presentation products,
audio cassette duplicators and hearing aids. The Company focuses on commercial,
professional and industrial markets.
The predecessor company of the Company 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
the Company in a leveraged transaction (the "1989 Transaction"). See "-- Fiscal
1995 Compared to Fiscal 1994."
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
121 "Accounting for Impairment of LongLived Assets and Assets to be Disposed Of"
in the fourth quarter of Fiscal 1996. During Fiscal 1996, several business
conditions changed for the Company including the discontinuance of a number of
product lines and the closing of one of the Company's manufacturing facilities
which was intended to provide the Company with a greater level of manufacturing
efficiency. These changing business conditions had a potential impact on the
realizability of virtually all of the Company's long-lived assets, including
property, plant, equipment, identifiable intangible assets, and the goodwill
that was allocable to these assets. Accordingly, the Company evaluated the
ongoing value of each of these asset categories which related to all of the
Company's operating segments. Assets were grouped and evaluated for impairment
at the lowest level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. Based on this
evaluation, the Company determined that assets to be held with a carrying value
of $18.4 million were impaired and wrote them down by $13.3 million to their
fair value. Fair value was generally based on estimated future cash flows
associated with each of the assets, discounted at a market rate of interest. As
a result of the reduced carrying amount of these assets, depreciation and
amortization expense was reduced by approximately $2.8 million in Fiscal 1997.
This charge resulted primarily from a change in the Company's accounting
policy for evaluating and measuring impairment. Under the Company's previous
accounting policy, each of the Company's operating segments' long-lived assets
to be held and used in the business were evaluated for impairment if the segment
was incurring operating losses or was expected to incur operating losses in the
future. Because of strong operating profit history and favorable prospects for
each segment, no impairment evaluation had been required in Fiscal 1995.
Considerable management judgment is necessary to estimate future discounted
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 assets down further.
The Company also plans to sell its manufacturing facility in LeSueur,
Minnesota and has recorded a loss of $0.2 million, representing the estimated
sales value, less the carrying value of the assets and related selling
33
<PAGE> 35
costs. The Company also accrued $0.2 million in Fiscal 1996 for severance
benefits payable to employees at the facility, substantially all of which was
paid in Fiscal 1997. See "Business -- Production and Facilities."
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, the Company's
net sales in thousands of dollars and statement of operations, expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net Sales:
Professional Sound and Entertainment............. $ 58,870 $ 52,637 $ 49,673
Multimedia/Audio Communications.................. 61,897 45,031 37,198
RF/Communications................................ 25,320 25,000 33,052
Hearing Instruments.............................. 24,794 22,680 21,649
-------- -------- --------
Total net sales.......................... $170,881 $145,348 $141,572
======== ======== ========
Net Sales:
Professional Sound and Entertainment............. 34.5% 36.2% 35.1%
Multimedia/Audio Communications.................. 36.2 31.0 26.3
RF/Communications................................ 14.8 17.2 23.3
Hearing Instruments.............................. 14.5 15.6 15.3
-------- -------- --------
Total net sales.......................... 100.0 100.0 100.0
Cost of sales...................................... 58.3 62.0 63.3
-------- -------- --------
Gross profit....................................... 41.7 38.0 36.7
Engineering and development........................ 4.5 4.6 4.4
Marketing.......................................... 10.9 11.5 11.2
General and administrative......................... 5.2 5.2 5.3
Amortization of goodwill and intangibles........... 1.0 2.3 2.5
Corporate charges.................................. -- -- 1.9
Special charges.................................... -- 9.5 --
-------- -------- --------
Total operating expense............................ 21.6 33.1 25.3
-------- -------- --------
Operating profit................................... 20.1 4.9 11.4
Interest expense................................... (7.3) (8.6) (8.8)
Other income....................................... 1.0 0.8 0.3
Income (loss) before income taxes.................. 13.8 (2.9) 2.9
Provision (benefit) for income taxes............... 5.4 (0.1) 0.6
-------- -------- --------
Income (loss) before extraordinary item............ 8.4 (2.8) 2.3
Extraordinary loss on early retirement of debt,
net of income taxes.............................. -- -- (2.3)
-------- -------- --------
Net income (loss).................................. 8.4% (2.8)% 0.1%
======== ======== ========
</TABLE>
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales increased $25.5 million (17.6%), due to increased shipments in
each of the four business segments.
Net sales of Professional Sound and Entertainment products increased $6.2
million (11.8%), primarily due to increased shipments of intercom systems,
partially offset by decreased unit sales of microphone
34
<PAGE> 36
products. The increased sales of intercom systems were in part due to continued
growth in sales of new products introduced in Fiscal 1996 and an increase in
broadcast equipment demand.
Net sales of Multimedia/Audio Communications products increased $16.9
million (37.5%), primarily as a result of increased shipments of computer audio,
LCD projection and aircraft communication products, partially offset by
decreased unit sales of slide projectors. The increase in sales volume of
computer audio and LCD projection products resulted from the continued growth of
computer audio and multimedia applications use. The aircraft communications
increase was favorably impacted by a stronger market in the aviation industry
and a change in the sales distribution channel compared to the same period in
Fiscal 1996.
Net sales of RF/Communications products increased $0.3 million (1.3%),
primarily due to increased shipments of talking book players to the Library of
Congress and wireless LAN antenna products, partially offset by reduced
shipments of military vehicular antennas. The increase in sales of talking book
players is the result of a higher unit volume and the selling price associated
with the current contract compared to the previous contract in Fiscal 1996.
Shipments of military vehicular antennas ended as the last shipments under the
remaining contract with the United States Department of Defense were made in the
fourth quarter of Fiscal 1996. The Company does not expect to ship these
products again in the foreseeable future.
Net sales of Hearing Instrument products increased $2.1 million (9.3%)
primarily due to increased shipments of hearing aid and auditory trainer
products.
Gross profit increased $16.0 million (29.0%) during Fiscal 1997. The impact
from the Company's adoption of and accounting for impairment of long-lived
assets in the fourth quarter of Fiscal 1996 increased gross profit in Fiscal
1997 by approximately $1.2 million due to lower levels of depreciation expense.
Gross margin increased 3.7 percentage points to 41.7%, compared to 38.0% in
Fiscal 1996. The gross margin increase was the result of higher margins in each
of the four business segments. The gross margin in the Professional Sound and
Entertainment segment increased slightly, primarily due to a favorable product
mix of higher margin intercom systems. The gross margin in the Multimedia/Audio
Communications segment improved, primarily due to higher margins in computer
audio, LCD projection and aircraft communications products. This increase
continued to be favorably impacted by lower production costs and productivity
improvements realized in the manufacturing processes. The gross margin in the
RF/Communications segment increased, primarily as a result of shipments under
the new talking book contract at higher prices. In addition, increased shipments
of higher margin commercial products and the absence of lower margin military
vehicular antenna shipments (as noted above) also contributed to the improved
gross margin for the RF/Communications business segment. The gross margin in the
Hearing Instruments segment increased, primarily as a result of higher selling
prices and decreased production costs of hearing aids.
During the first quarter of Fiscal 1997, the Company began initial
production at its manufacturing plant in Hermosillo, Sonora, Mexico and will be
seeking to improve its gross margins over the next several years by locating
additional portions of its manufacturing at such plant.
Operating expenses increased $2.5 million (7.3%). Total operating expenses
represented 21.6% of sales for Fiscal 1997, compared with 23.6% of sales for
Fiscal 1996. The impact from the Company's adoption of and accounting for
impairment of long-lived assets in the fourth quarter of Fiscal 1996 resulted in
decreased amortization expense for Fiscal 1997 of approximately $1.6 million.
Engineering expenses increased $0.9 million (13.2%), primarily due to increased
levels of outside services and project supplies incurred in order to accelerate
new product development. Marketing expenses increased by $2.0 million (11.7%),
due to increased commissions, warranty and sales support costs related to the
increased sales volume. General and administrative expenses increased $1.4
million (18.7%), primarily as a result of increased compensation expense and
costs associated with the Company's new computer information systems project.
Other income increased $0.6 million (49.3%), primarily as a result of
increases in interest income on higher average cash balances compared to the
same period in Fiscal 1996.
The Company's effective tax rate for Fiscal 1997 was 39.2%. The Fiscal 1996
effective tax rate was not meaningful, as the Company recorded a tax benefit of
only $0.2 million despite a net loss of $4.3 million due primarily to the
nondeductible nature of amortization and impairment write-offs of goodwill.
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FISCAL 1996 COMPARED TO FISCAL 1995
Net sales increased $3.8 million (2.7%), primarily due to increased
shipments and moderate price increases in the Professional Sound and
Entertainment, Multimedia/Audio Communications and Hearing Instrument segments,
partially offset by decreased shipments in the RF/Communications segment.
Net sales of Professional Sound and Entertainment products increased $3.0
million (6.0%), primarily due to increased shipments of intercom systems and
audio cassette duplication products. Microphone sales have increased due to the
introduction of new and improved wireless products and certain price increases.
Net sales of Multimedia/Audio Communications products increased $7.8
million (21.1%), primarily as a result of increased shipments of computer audio
and LCD projection products, partially offset by decreased unit sales of audio
headsets. The increase in sales volume of computer audio products resulted from
the continued growth of computer audio and multimedia applications use.
Net sales of RF/Communications products decreased $8.1 million (24.4%),
primarily as a result of reduced shipments of talking book players to the
Library of Congress and reduced shipments of military vehicular antennas. The
decrease in sales volume of talking book players is the result of (i) a contract
which expired in the fourth quarter of Fiscal 1995 to deliver certain players
which the Company does not anticipate will be purchased by the Library of
Congress in the future; (ii) the expiration of the then most-recent contract in
July 1995; and (iii) a delay in the award of the next contract by the Library of
Congress. On August 15, 1995, the Library of Congress awarded a single contract
to the Company for furnishing talking book players valued at approximately $11.8
million (subject to certain price adjustments for foreign currency fluctuations)
to be delivered over the next 12 months, with two options each for up to 100% of
the original order. The Company began shipping under this new contract during
September 1995. On October 12, 1995, the Company was notified by the General
Accounting Office ("GAO") that a disappointed bidder had filed a protest of the
contract award. On February 9, 1996, the GAO denied the protest. On March 29,
1996, the Library of Congress exercised the first of the two options under the
current contract valued at approximately $11.6 million (subject to certain price
adjustments for foreign currency fluctuations) to be delivered in Fiscal 1997.
The Company made the last shipments of military vehicular antennas under its
remaining United States Department of Defense contract in the fourth quarter of
Fiscal 1996 and does not expect to ship these products again. Sales under the
military vehicular antenna contract accounted for 3.3% of net sales for Fiscal
1996 compared to 3.4% for Fiscal 1995.
Net sales of Hearing Instrument products increased $1.0 million (4.8%), as
a result of increased shipments of hearing aids. The increase in hearing aid
shipments is primarily due to an overall increase in volume of the Company's "in
the ear" hearing aid business, slightly offset by decreased shipments of
auditory trainer products.
Gross profit increased $3.2 million (6.2%) and gross margin increased from
36.7% to 38.0%. The rate increase was the result of higher gross margins in the
Multimedia/Audio Communications, RF/Communications and Hearing Instrument
segments, partially offset by lower gross margins in the Professional Sound and
Entertainment segment, and the recording of an additional $0.5 million of
depreciation related to a shortening of lives of certain property, plant and
equipment. See Notes 1 and 2 to the Consolidated Financial Statements included
elsewhere herein. The gross margin in the Multimedia/Audio Communications
segment improved, primarily as a result of increased shipments of higher margin
computer audio products combined with lower production costs and productivity
improvements realized in manufacturing processes. The gross margin in the
Professional Sound and Entertainment segment decreased, primarily as a result of
higher than anticipated production costs for certain products and unfavorable
product mix. The gross margin in the RF/Communications segment increased,
primarily as a result of shipments under the new talking book contract at higher
prices. The gross margin in the Hearing Instruments segment increased, primarily
as a result of increased prices and decreased production costs.
Operating expenses (excluding special charges) decreased $1.5 million
(4.2%), primarily as a result of the one-time payment of $2.7 million made in
Fiscal 1995 in connection with the termination of a management consulting
agreement. Excluding the special charges recorded in Fiscal 1996, and excluding
all
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payments associated with a management consulting agreement in Fiscal 1995,
operating expenses represented 23.6% of net sales for Fiscal 1996, compared to
23.4% of net sales for Fiscal 1995. Engineering expenses increased $0.6 million
(10.1%), principally to accelerate new product development, and included
increases in personnel and training costs and related depreciation on new
capital equipment. Marketing expenses increased by $0.8 million (5.1%), due to
increased commissions, warranty and sales support costs related to the increased
sales volume. General and administrative expenses remained constant compared to
the prior year.
The Company recorded a tax benefit of only $0.2 million despite a net loss
before income taxes of $4.3 million due primarily to the non-deductible nature
of amortization and impairment write-offs of goodwill. The Fiscal 1995 effective
tax rate of 20% was lower than the federal statutory rate of 34% due primarily
to a reduction in deferred tax asset valuation reserves. The Company has a net
deferred tax asset of $7.1 million at March 31, 1996. The Company will be
required to generate approximately $18.0 million of future taxable income in
order to fully realize this net asset. The Company believes that it is probable
that it will generate sufficient levels of future taxable income to realize the
net asset, based on historical taxable income levels and continued strength of
its operations. As a result of these factors, the Company reduced its valuation
reserve on deferred tax assets from $2.6 million at March 31, 1995 to zero at
March 31, 1996. Approximately $1.0 million of this adjustment was recorded as a
reduction in goodwill. See Note 7 to the Consolidated Financial Statements of
the Company included elsewhere herein.
SEASONALITY OF BUSINESS
The Company's business is not considered seasonal. Revenues between
quarters of the fiscal year are relatively stable.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred substantial indebtedness in connection with the
Transactions. The Company's liquidity needs arise primarily from debt service on
indebtedness incurred in connection with the Transactions, working capital needs
and the funding of capital expenditures. On a pro forma basis, as of March 31,
1997, the Company would have had approximately $246.9 million of indebtedness
outstanding, consisting of $125.0 million under the Notes, $115.0 million under
the Term Loan Facility and $6.9 million under the Revolving Credit Facility.
Prior to the consummation of the Transactions, the Company had outstanding
indebtedness of approximately $100.0 million, all of which consisted of the
Telex Notes. See "Description of Notes" and "Description of Senior Secured
Credit Facility."
Principal and interest payments under the Senior Secured Credit Facility
and the Notes represent significant liquidity requirements for the Company.
Pursuant to the Term Loan Facility, the Company is required to make permanent
principal payments under (i) the Tranche A Term Loan Facility totaling $50.0
million, $3.5 million, $8.0 million, $8.0 million, $9.0 million, $13.0 million
and $8.5 million of which is payable in each of Fiscal 1998, 1999, 2000, 2001,
2002 and 2003, respectively, and (ii) the Tranche B Term Loan Facility totaling
$65.0 million, $0.3 million, $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 1998, 1999, 2000, 2001, 2002, 2003, 2004 and 2005, 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. Outstanding balances under the Senior Secured Credit Facility
will bear interest at floating rates based upon the interest rate option
selected by the Company; therefore, the Company's financial condition is and
will continue to be affected by changes in prevailing interest rates.
At March 31, 1997, the Company had cash and cash equivalents of $35.7
million compared to $23.0 million at March 31, 1996. The increase in cash and
cash equivalents relates principally to an increase in cash provided from
operations. As a result of increased sales volume, inventory turns improved to
4.4 for Fiscal 1997, up from 3.9 for Fiscal 1996. The ratio of current assets to
current liabilities increased slightly to 3.2 to 1 at March 31, 1997 compared to
2.9 to 1 at March 31, 1996, primarily due to increased cash balances as noted
above. The Company's consolidated indebtedness at March 31, 1997 was $100.0
million. Historically, the Company's principal source of funds has consisted of
cash generated from operating activities and its principal
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non-operating uses of cash have been for interest expense, repayments of
long-term debt, capital expenditures and certain repurchases of the Company's
securities. Net cash provided from operations in Fiscal 1997, 1996 and 1995
amounted to $21.4 million, $18.5 million, and $10.9 million, respectively. The
increase in Fiscal 1997 was primarily due to increased sales volume and gross
margins. The increase in Fiscal 1996 was primarily due to an increase in cash
provided from operations.
The Company's capital expenditures in Fiscal 1997 were $8.7 million
compared to $3.3 million in Fiscal 1996 and $3.6 million in Fiscal 1995. The
increase in Fiscal 1997 capital expenditures was anticipated, as the Company
began the implementation of a project in May 1996 to replace and upgrade the
Company's computer information systems. The Fiscal 1997 capital expenditures
directly associated with this project were approximately $4.6 million. In
addition, $1.0 million of capital expenditures were used to upgrade the
Company's wide area network (WAN) infrastructure and related client server
hardware, in part related to the new computer information systems project. The
Company anticipates that capital expenditures to complete this project in Fiscal
1998 will total approximately $1.8 million. The Company anticipates total
capital expenditures for Fiscal 1998 will be approximately $4.5 million. This
amount includes approximately $2.7 million that management estimates is required
for maintenance levels of capital expenditures.
The Company will rely mainly on internally generated funds and, to the
extent necessary, borrowings under the Revolving Credit Facility, to meet its
liquidity needs. At the Recapitalization Closing Date the Company had
approximately $14.1 million available to it under the Revolving Credit Facility,
subject to borrowing base limitations, net of $5.0 million drawn under the
Revolving Credit Facility on the Recapitalization Closing Date and $5.9 million
of letters of credit outstanding under the Revolving Credit Facility. Had the
Company paid all fees and expenses related to the Transactions on the
Recapitalization Closing Date, the Company would have had approximately $11.8
million available to it under the Revolving Credit Facility, subject to
borrowing base limitations. Amounts available under the Revolving Credit
Facility will be subject to borrowing base availability and may be used for
working capital and general corporate purposes, including letters of credit,
subject to certain limitations. See "Description of Senior Secured Credit
Facility."
Management believes that cash generated from operations, together with
amounts available under the Revolving Credit Facility, will be adequate to meet
its debt service and principal payment requirements, capital expenditure needs
and working capital requirements. However, no assurance can be given in this
regard and working capital requirements may change. The Company's future
operating performance and its ability to service its obligations under the Notes
and the Senior Secured Credit Facility will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control. See "Risk Factors -- Substantial Leverage and Debt
Service Obligations" and "Risk Factors -- Risk Relating to the Company's
Strategy."
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 maturities 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 March 31,
1997, the Company had no foreign exchange contracts outstanding.
ENVIRONMENTAL MATTERS
The Company is a party in a number of environmental enforcement matters and
related claims which have arisen in the ordinary course of business. The Company
believes that such matters and claims, if finally determined in a manner adverse
to the Company, whether considered separately or in the aggregate, would not
have a material adverse effect on the operating results or financial condition
of the Company. See "Business -- Environmental Matters."
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BUSINESS
GENERAL
Telex is a leader in the design, manufacture and marketing of sophisticated
audio, wireless and multimedia communications equipment to commercial,
professional and industrial customers. Telex meets the needs of a diverse
customer base by offering a broad product line that includes advanced intercom
systems, wired and wireless microphones, headphones, headsets, hearing aids, RF
transmission devices, LCD projectors and antennas. Some of the Company's
products are very visible -- such as the coaches' communications systems used by
all thirty National Football League teams -- while other products perform behind
the scenes, such as the Telex(R) RTS(TM) Digital Matrix Intercom broadcast
production equipment used by all major television networks to produce shows such
as the network news programs as well as major events such as the Olympics and
the Super Bowl. 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.
Under the leadership of John L. Hale, who joined Telex as Chairman,
President and Chief Executive Officer in October 1991, the Company has
reorganized its business from a manufacturing orientation to a market
orientation by creating four strategic business units that are organized around
the end markets in which the Company's products are sold. As part of this
reorganization, the Company realigned its manufacturing to directly serve the
specific requirements of its strategic business units, re-coordinated its
product development to bring products to market more quickly and bolstered its
product development efforts to focus on technologies where the Company felt it
had opportunities to achieve strong sales and high margins. From Fiscal 1992,
the first year of operations under the current management team, to Fiscal 1997,
the Company's net sales and EBITDA have increased from $112.1 million to $170.9
million and from $19.3 million to $40.0 million, respectively, representing
compound annual growth rates of 8.8% and 15.7%, respectively.
The Company serves its customers through four strategic business units,
which are:
Professional Sound and Entertainment Group. The Professional Sound and
Entertainment Group provides 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 other
professional and school sports teams; wired and wireless microphones used in the
education, sports, broadcast, music and religious markets; and high-speed tape
duplicators used primarily by houses of worship and training programs. The
Professional Sound and Entertainment Group had net sales of $58.9 million in
Fiscal 1997, which represented 34.5% of total net sales of the Company. See
"-- Strategic Business Units -- Professional Sound and Entertainment Group."
Multimedia/Audio Communications Group. The Multimedia/Audio Communications
Group 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 U.S. Robotics.
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. The
Multimedia/Audio Communications Group had net sales of $61.9 million in Fiscal
1997, which represented 36.2% of total net sales of the Company. See
"-- Strategic Business Units -- Multimedia/Audio Communications Group."
RF/Communications Group. The RF/Communications Group offers a broad line
of acoustic accessories and antennas for various communications needs and
applications. The Company markets its products to wireless local area network
providers, public safety and law enforcement groups (police, fire departments,
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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 RF/Communications Group also produces audio products for
the Library of Congress' talking book program. The RF/Communications Group had
net sales of $25.3 million in Fiscal 1997, which represented 14.8% of total net
sales of the Company. See "-- Strategic Business Units -- RF/Communications
Group."
Hearing Instruments Group. The Hearing Instruments Group markets 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 service 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. The Hearing Instruments Group had net sales of $24.8 million in
Fiscal 1997, which represented 14.5% of total net sales of the Company. See
"-- Strategic Business Units -- Hearing Instruments Group."
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.
COMPETITIVE STRENGTHS
The Company believes that the following competitive strengths have
contributed significantly to its historical growth and operating profitability
and serve as a foundation for continued future growth:
Brand Name Recognition and Reputation for Quality. The Company markets
quality products under a number of well respected brand names that are highly
recognized in their respective markets. These products include Telex(R)
headsets, microphones and hearing aids; RTS(TM) intercom systems; Hy-Gain(R)
antenna products; Road King(R) CB microphones; Firefly(TM) LCD projectors; and
the Adaptive Compression(R) circuitry incorporated in hearing aid products. The
Company believes its reputation for superior quality and value gives it the
ability to quickly and effectively introduce new products to its end markets.
Product Development Expertise. The Company has established a reputation
for product development expertise based on the Company's experience in the
application of: (i) acoustic transducer technology incorporated in many audio
and sound communication products such as headsets, headphones, microphones and
hearing aids; (ii) RF wireless communications technology used throughout the
Company's commercial lines as well as in its various wireless microphone,
antenna, intercom and assistive listening devices product lines; and (iii)
electromechanical engineering required in the manufacture of audio tape
duplication products and talking book players. This product development
expertise has been a contributing factor in enabling the Company to derive
approximately 45.1% of its sales in Fiscal 1997 from new and enhanced products
developed within the last five years.
Shared Product Technologies and Platforms. Many of the Company's products
utilize similar technologies and platforms derived from the Company's expertise
in acoustic transducer technology, RF wireless communications technology and
electromechanical engineering. The Company's ability to effectively serve its
numerous end markets is facilitated by these similar technologies and platforms,
as well as its cost-effective, vertically integrated manufacturing, allowing the
Company to leverage its product development, manufacturing and marketing across
a wide variety of applications and end markets. The Company believes that this
ability to leverage its core strengths across multiple end markets gives it a
distinct competitive advantage by enabling it to establish and maintain strong
market positions for its products.
Flexible Cost-Effective Manufacturing. The Company's vertically integrated
manufacturing processes and well-educated non-union workforce enable it to
respond quickly and cost-effectively to changing markets and customer
requirements. The Company believes that its average U.S. direct labor wage rate
is significantly below the U.S. average. In addition, the Company has recently
opened a manufacturing facility in Mexico and begun to shift labor intensive
manufacturing to this facility, thereby further increasing manufacturing and
operating efficiencies.
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Extensive Distribution Network. The Company maintains distribution
relationships with over 10,000 distributors, dealers, manufacturers'
representatives and hearing aid dispensers in the United States and
internationally. The Company believes that it is the largest vendor in many of
its product markets and that its size enables it to command strong sales support
from its distribution network. Due to its extensive and supportive distribution
network, along with the Company's strong product introduction capabilities, the
Company believes it has the ability to quickly and effectively introduce new
products to worldwide markets.
Proven and Incentivized Management Team. The Company's senior management
team, led by Mr. Hale, has an average of 23 years of experience in the
communications equipment industry and has extensive technical, marketing and
management experience in the industry. Under the current senior management team,
the Company has experienced significant growth in revenues and EBITDA and strong
productivity improvement due to its focus on production efficiencies and
continuous productivity improvements throughout its entire organization.
Reflecting this focus, the Company's revenue per employee has grown from
approximately $85,000 in Fiscal 1994 to approximately $116,000 in Fiscal 1997.
The management of the Company currently owns approximately 20% of the fully
diluted equity of Holdings (giving effect to the Rollover Options, but without
giving effect to any options granted to management under a new option plan
adopted by the Company on the Recapitalization Closing Date). See
"Management -- 1997 Stock Option Plan."
BUSINESS STRATEGY
The Company's strategy is to further increase revenues and improve
operating margins by (i) continuing to focus on the introduction of new
products, (ii) increasing operating efficiencies, (iii) expanding its
international presence and (iv) pursuing strategic acquisitions.
Introduce New Products. The Company has implemented a number of strategic
initiatives to identify new market opportunities and to facilitate the timely
introduction of new and enhanced products. For example, the Company has formed
certain product development groups, such as the Acoustics Group, which leverages
its experience in the design and manufacture of headsets used in a variety of
markets such as aviation, education and professional audio equipment. In
addition, the Company has expanded its marketing efforts to sell computer audio
microphones, headsets and headphones to the computer and modem manufacturers and
computer-user markets and expects to offer more products to these markets in the
future. Management believes that this increased focus on product development
initiatives will enable the Company to design new products that address
developing markets and offer advantages over existing products in terms of
features, quality, reliability and cost. In connection with these initiatives,
the Company has also increased its investment in engineering and technology from
$5.0 million in Fiscal 1992 to $7.6 million in Fiscal 1997 and plans to continue
increasing such investments in the future. This increased investment in
engineering and technology has enabled the Company to implement programs in
several core technologies such as digital signal processing, wireless
communications, application specific integrated circuit design and active noise
reduction and to design new products that address developing markets and offer
advantages over existing products in terms of features, quality, reliability and
cost.
Increase Operating Efficiencies. Management believes opportunities exist
to further reduce the Company's manufacturing costs and to increase its
operating efficiencies. For example, the Company opened a new manufacturing
facility in Mexico in June 1996 to which it has begun to shift labor intensive
manufacturing, such as the manufacture of microphones, cable assemblies and
subassemblies. Management plans to continue this shift in the future by
transferring the manufacture of a number of its other higher volume products to
the Mexico facility. In addition, the Company is in the process of implementing
a $6.4 million capital expenditure project, expected to be completed in Fiscal
1998, to replace and upgrade its computer information systems. Management
estimates that these measures will result in cost savings of approximately $4.0
million in Fiscal 1998.
Expand International Presence. The Company currently has 195 international
distributors and over 1,000 international dealers in nearly 70 countries. In
Fiscal 1997, international sales represented approximately 23.6% of net sales.
It is the Company's goal to significantly increase its percentage of
international revenue by
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upgrading its existing distribution channels, adding new distributors in Asia,
Australia and Eastern Europe and continuing its recent initiative to design and
manufacture new products that better meet international standards and
requirements. Towards this goal, in July 1996, the Company hired a new vice
president of international operations and recently opened additional
international sales offices (i) in Amsterdam and Paris to provide improved
support of, and to upgrade the quality of, the existing distribution channels to
the Company's established Western European markets, and (ii) in Prague to open
new distribution channels to the emerging Eastern European markets.
Pursue Strategic Acquisitions. Many of the industries in which the Company
competes are highly fragmented, which management believes present acquisition
opportunities. Subject to market conditions and the availability of financing,
the Company plans to pursue acquisition opportunities that complement and expand
its core businesses or that enable the Company to enter related or complementary
markets. Management believes that it can leverage the Company's superior
manufacturing, distribution and administrative capabilities to generate
significant incremental revenue and cash flow through strategic acquisitions.
Since 1989, the Company has successfully integrated five business acquisitions
into its existing operations.
MARKET GROWTH DRIVERS
The Company seeks to achieve revenue and earnings growth by identifying and
capitalizing on favorable trends in the markets it serves. The Company believes
that a number of current trends, principally driven by changing technologies and
demographic shifts in the Company's core markets, provide attractive
opportunities for growth.
Computer multimedia. The Company believes that the burgeoning demand for
computer multimedia products, from new applications in portable and desktop
computing, the Internet, computer integrated telephony and voice activated
command and control systems, will increase demand for the Company's computer
audio and multimedia products.
Wireless communications. There is an increasing demand for wireless
communication throughout the world, which is expanding in a number of areas from
cellular phones to a variety of voice and data communications applications. The
Company expects these developments to drive demand for the Company's headsets,
microphones, antennas and other RF transmitter and receiver products.
Television programming. The Company believes that in the United States and
throughout the world, there is increasing demand for additional programming and
channels, which is being driven by the desire for special interest or thematic
programming. As cable and satellite channels convert to digital technology, the
Company expects the number of channels offered to increase significantly,
driving sales in a number of the Company's microphone, headset and intercom
products.
Aging of America. As America's "baby-boom" generation ages, the 55-59 year
old age group is expected to grow more rapidly than the general population. This
is the age at which hearing problems typically develop. Accordingly, over the
next ten years, the hearing impaired population is expected to grow five times
faster than the general population, driving demand for Telex's hearing aid
products.
Increasing air travel. The Company believes that increasing demand for air
travel, airframe production and the improving profits of the airlines will drive
demand for Telex's aviation communications products.
STRATEGIC BUSINESS UNITS
PROFESSIONAL SOUND AND ENTERTAINMENT GROUP
The Professional Sound and Entertainment Group provides 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 other professional and school sports teams; wired and
wireless microphones used in the education, sports, broadcast, music and
religious markets; and high-speed tape duplicators used primarily by houses of
worship and training programs. The Professional Sound and Entertainment Group
targets three
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principal product groups: (i) broadcast communications systems, (ii) sound
reinforcement and (iii) tape duplication. The Professional Sound and
Entertainment Group had net sales of $58.9 million in Fiscal 1997, which
represented 34.5% of total net sales of the Company.
Broadcast Communications Systems. Telex 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) 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 ADAM(TM) 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.
Telex 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. The Company's
products are visible as the Telex name is displayed on the headsets of all of
the coaches in the NFL. In 1996, the Company began providing the NFL 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.
Telex believes that it introduced the first cost-effective wireless
microphones in 1978. Today, 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 hand-held, lapel microphone and guitar
options. Telex 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. These lines incorporate Telex'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 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 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.
Tape Duplication. Telex'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
audio cassette duplicators designed
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<PAGE> 45
for "in-cassette" copying of standard audio cassette tapes. This is in contrast
to the high volume music cassette duplication market, where bulk audio tape 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. Sony is the Company's only significant competitor
in this market. In the past three fiscal years, the tape duplication product
line has accounted for the following percentages of the Company's net sales:
Fiscal 1997 -- 10.2%; Fiscal 1996 -- 11.5%; and Fiscal 1995 -- 11.5%.
MULTIMEDIA/AUDIO COMMUNICATIONS GROUP
The Multimedia/Audio Communications Group 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 U.S. Robotics. 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. The Multimedia/Audio
Communications Group targets three principal product markets: (i) computer
audio, (ii) multimedia presentation/training and (iii) aviation communications.
The Multimedia/Audio Communications Group had net sales of $61.9 million in
Fiscal 1997, which represented 36.2% of total net sales of the Company.
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, 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 are generated from the sales of computer microphones for sound and
speech recognition. Many of the Company's microphones are also sold to modem
manufacturers, such as U.S. Robotics, who then package these microphones with
their modems, to ensure compatibility of the application to the end-user. In the
past three fiscal years, the computer audio microphone product line has
accounted for the following percentages of the Company's net sales: Fiscal
1997 -- 15.4%; Fiscal 1996 -- 11.5%; and Fiscal 1995 -- 6.9%.
Multimedia Presentation/Training. The Multimedia Presentation/Training
product group also 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 the corporate and
educational markets. The Company's LCD projector line also includes other
lightweight and boardroom data/video projectors.
The Company believes that it has been on the technological forefront in
projector design with several patented innovations. In designing its products,
the Company has focused on the needs of its end-users. For example, in June
1996, the Company developed a revolutionary portable projector, called the
Firefly(TM) LCD Notebook Projector(TM) (patent pending). The Company believes
that the Firefly(TM) serves a significant unmet demand in the marketplace: the
increasing need for portability by the corporate user, especially from outside
salespersons, field sales offices and consultants. The Firefly(TM), which fits
in a briefcase, is the industry's smallest projector but is equal in power to
standard-sized projectors.
The multimedia/audio communications product market is highly competitive.
Eastman Kodak is the major provider in the slide projector market (Eastman Kodak
is also the Company's largest customer of its
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<PAGE> 46
slide projectors). In the LCD projection market, In-Focus Systems, Sharp
Electronics and Proxima are the current market leaders.
Aviation Communications. 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.
RF/COMMUNICATIONS GROUP
The RF/Communications Group offers a broad line of acoustic accessories and
antennas for various communications needs and applications. The Company markets
its 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
RF/Communications Group also produces audio products for the Library of
Congress' talking book program. The RF/Communications Group targets three
principal product markets: (i) wireless LAN and PCS antennas, (ii) talking book
players and (iii) wireless communications. The Company has also historically
targeted the government and military antenna markets, but has recently made the
decision to exit these low margin markets and intends to focus its resources on
the high growth wireless LAN and PCS antenna markets. The RF/Communications
Group had net sales of $25.3 million in Fiscal 1997, which represented 14.8% of
total net sales of the Company.
Wireless LAN and PCS Antennas. At the end of 1994, 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 arenas. 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. Telex has been providing talking book players to the LOC
since 1969. While the revenue from this program in recent years has been
relatively stable, the program supplies a steady source of cash flow, which is
expected to increase as the Company shifts the manufacturing of certain
components or sub-assemblies for this product to its Mexico facility this year.
Telex plans to introduce a new cassette player that uses the talking book format
in the first quarter of Fiscal 1998 and intends to market the product
commercially. 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 its strengths
in acoustics and antenna design capabilities
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<PAGE> 47
developed over its 25 year history in the military antenna business. The Company
distributes its products through over 1,100 dealers.
Government and Military Antennas. Telex has been a leader in the
government and military antenna business since the 1960's over which period the
Company has gained significant expertise in the design and manufacture of
antennas. The Company has decided to exit this business, however, due to a
decrease in demand from the decline in government military spending, as well as
from low realizable margins associated with the bidding system of awarding
contracts. The Company delivered the last shipments of military vehicular
antennas under its remaining U.S. Department of Defense contract in the fourth
quarter of Fiscal 1996.
HEARING INSTRUMENTS GROUP
The Hearing Instruments Group markets 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 service 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. The
Hearing Instruments Group targets two principal product markets: (i) hearing
aids and (ii) wireless assistive listening devices. The Hearing Instruments
Group had net sales of $24.8 million in Fiscal 1997, which represented 14.5% of
total net sales of the Company.
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.
In its product development, Telex has addressed the needs of the hearing
impaired marketplace and developed the technology around these needs, focusing
on providing products based on strong technological features. 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, the Company 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 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,
the Company 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.
The Company distributes its hearing aids through 9,000 hearing instrument
dispensers, giving it excellent coverage throughout the United States. The
dispensers are serviced by approximately 16 regional sales managers.
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
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<PAGE> 48
service. Telex's principal focus is on the educational market, where many
schools use the Company's products, including a number of large city (such as
New York and Los Angeles) and county school systems.
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.
INTERNATIONAL OPERATIONS
The Company currently has 195 international distributors and over 1,000
international dealers in nearly 70 countries. In Fiscal 1997, international
sales represented approximately 23.6% of net sales. It is the Company's goal to
significantly increase its international sales as a percentage of total net
sales through a variety of methods, including the upgrading of the quality of
its existing distribution channels, the addition of new distributors in Asia,
Australia and Eastern Europe and the continuation of its recent initiative to
design and manufacture new products that better meet international standards and
requirements. Towards this goal, in July 1996, the Company hired a new vice
president of international operations and recently opened sales offices (i) in
Amsterdam and Paris to provide improved support of, and to upgrade the quality
of, the existing distribution channels to the Company's established Western
European markets, and (ii) in Prague to open new distribution channels to the
emerging Eastern European markets.
The Company had international sales of $40.4 million in Fiscal 1997, a
$10.6 million (35.6%) increase over Fiscal 1996. For the fiscal year ended March
31, 1997, the Company had European sales of $17.7 million, Canadian sales of
$5.2 million, and other foreign sales of $17.5 million. Substantially all of the
Company's international sales are transacted in United States dollars. The
Company's operating profit margin on export sales is comparable to that realized
on domestic sales.
PRODUCT ENGINEERING
The Company has a history of technological innovation and strong product
development. The Company believes its strong engineering team has enhanced its
position as an industry leader. In Fiscal 1997, approximately 45.1% of sales
were derived from new or enhanced products developed within the last five years.
The Company believes that it is one of the most active developers of new
products in the industry. Currently, the Company has over 48 new product
introductions planned or in progress. Recent new product innovations include the
world's smallest portable overhead projector, which is marketed under the
Firefly(TM) name. In addition to development of new products, over 11.0% of the
Company's current product development efforts are directed toward incremental
enhancements of existing products. In the future, the Company intends to both
enhance its existing products and to develop new products and expand the
Company's product offerings to new markets.
The Company has 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 in
terms of features, quality, reliability and costs.
In Fiscal 1997, Telex hired 6 additional members for its product
engineering team, increasing its staff to 80 engineers. The Company's product
engineering expenditures grew from $5.0 million in Fiscal 1992 to $7.6 million
in Fiscal 1997. Such expenditures are expected to remain at their current level
over the next two years.
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COMPETITION
The Company believes the principal competitive factors in each of its four
business segments are product reliability, product features, reputation,
distribution, customer service and support, ability to meet delivery schedules,
warranty terms and price. Many of the Company's current competitors are
generally smaller than the Company. The Company believes that the key factors
for the Company to maintain its position are its brand name recognition,
superior distribution network, 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.
PATENTS, TRADEMARKS AND LICENSES
The Company 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
owns several trademarks in the United States and various foreign countries,
including MagnaByte(R), Hy-Gain(R), Road King(R), Audiocom(R), Adaptive
Compression(R), ProStar(R), ClassMate(R), SoundMate(R) and Caramate(R).
Substantially all products sold by the Company are sold under the Telex(R)
trademark pursuant to a royalty-free license granted to the Company by MT. See
"Risk Factors -- Patents, Trademarks and Licenses."
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 approximately $49.2 million in Fiscal 1996 and $63.1 million in
Fiscal 1997.
The Company's five largest suppliers in Fiscal 1997 accounted for 33.7% of
the total supplies purchased by the Company. 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 operation. The Company's purchases from this supplier in Fiscal 1997
comprised 3.9% 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 15.2% of the total
cost of supplies purchased by the Company in Fiscal 1997. This increase reflects
the Company's decision to concentrate the sourcing of the components for some of
its audio products with this supplier, due to pricing considerations. This
percentage is expected to decrease in Fiscal 1998 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 15 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 purchased parts from this supplier, which constituted 9.6% of the total
cost of supplies purchased by the Company for Fiscal 1997. 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. See "Risk Factors -- Reliance on Single Source Suppliers."
BACKLOG
As is the case with other companies in Telex'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 March 31, 1997,
the
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Company had a backlog of approximately $31.2 million compared to $33.1 million
as of March 31, 1996. See "Risk Factors -- Relationship with the Library of
Congress."
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local and foreign
environmental laws and regulations including those governing the use, discharge
and disposal of hazardous substances in the ordinary course of its manufacturing
process. 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 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. 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.
As of March 31, 1997, the Company had accrued approximately $1.6 million
for anticipated costs to be incurred for the Lincoln, Nebraska cleanup
activities, of which approximately $1.3 million had been incurred by the Company
as of March 31, 1997. See Note 10 to the Consolidated Financial Statements of
the Company included elsewhere in this Prospectus.
Capital expenditures of the Company for environmental control facilities
are estimated to be approximately $15,000 per year, in addition to those costs
associated with the Lincoln, Nebraska clean-up 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, 1997, the Company employed 1,517 employees, of whom 1,259
were in manufacturing, 80 in engineering, 116 in sales and marketing and 62 in
general and administration. The Company's work force is not unionized.
Management considers its employee relations to be good.
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>
Blue Earth, Minnesota.......... Owned 150,000 Manufacturing
Lincoln, Nebraska.............. Owned 120,000 Manufacturing, Product
Development and Sales Office
Glencoe, Minnesota............. Owned 100,000 Manufacturing
Le Sueur, Minnesota(a)......... Owned 52,000 Manufacturing
</TABLE>
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<PAGE> 51
<TABLE>
<CAPTION>
SIZE
LOCATION OWNED/LEASED (SQUARE FEET) FACILITY TYPE
- ------------------------------- ------------ ------------- -------------------------------
<S> <C> <C> <C>
Bloomington, Minnesota......... Owned 50,000 Corporate Headquarters, Product
Development and Sales Office
Hermosillo, Sonora,
Mexico(b).................... Leased 32,500 Manufacturing
Rochester, Minnesota........... Owned 30,000 Manufacturing
Toronto, Canada................ Leased 4,000 Sales Office, Distribution
Burbank, California............ Leased 2,500 Sales Office
Singapore...................... Leased 2,300 Sales Office, Distribution and
Service
London, England................ Leased 200 Sales Office
Burnsville, Minnesota.......... Owned 14 acres Vacant land
</TABLE>
- ---------------
(a) The Company closed this facility in the second quarter of Fiscal 1997; all
manufacturing operations at this facility were transferred to the Company's
other facilities and to outside suppliers.
(b) Subject to a five-year lease, scheduled to expire in 2001 if the Company
does not exercise its renewal option.
At its Glencoe, Minnesota facility, the Company manufactures headsets,
intercoms, microphones, and many of the piece parts used in the manufacture and
assembly of the products produced at the Company's other manufacturing
facilities. The Blue Earth facility engages in electronic assembly and the
production of tape duplicators, intercoms, slide projectors, language labs and
tape players for the Library of Congress. Wireless microphones, intercoms and
antenna products are manufactured at the Company's facility in Lincoln,
Nebraska. At its Rochester, Minnesota facility, the Company manufactures hearing
aids and auditory trainers. The Company is currently manufacturing microphones,
cable assemblies and sub-assemblies at its Hermosillo, Sonora, Mexico facility.
The Company's recently opened sales offices in Amsterdam, Paris and Prague are
currently staffed by independent contractors.
Each of the Glencoe, Blue Earth and Lincoln facilities was designed to
employ approximately 500 people. Rochester can employ 250 people working one
shift and up to 500 with two or three shifts. The Company believes that
increases in manufacturing needs could be accommodated readily by the addition
of second or third shifts.
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.
LEGAL PROCEEDINGS
The Company is a defendant in a number of lawsuits that have arisen in the
ordinary course of business. The Company believes that such litigation,
considered separately or in the aggregate, will not have a material adverse
effect on the financial condition of the Company. The Company believes that the
ultimate resolution of the disputes will not have a material impact on its
financial position, but could be material to the net income of a particular
quarter (or year), if resolved unfavorably. Management believes that the
Company's products have proper agency approvals where required.
For a discussion of certain environmental matters, see "-- Environmental
Matters."
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and position of each of the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
John L. Hale*.............................. 56 Chairman of the Board of Directors (the
"Board"), President and Chief Executive
Officer
John T. Hislop*............................ 56 Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
John A. Palleschi*......................... 46 Vice President, Corporate Development,
General Counsel and Secretary
Joseph P. Winebarger....................... 48 Vice President, Engineering, Customer
Services and Information Systems
Dan M. Dantzler............................ 48 Vice President and President,
RF/Communications Group
Glen E. Cavanaugh.......................... 53 Vice President and President,
Multimedia/Audio Communications Group
Neil A. Levy............................... 49 Vice President and President, Hearing
Instruments Group
Daniel G. Wright........................... 51 Vice President and President, Professional
Sound and Entertainment Group
Lodwrick M. Cook........................... 69 Director
Alfred C. Eckert III....................... 49 Director
Nicholas E. Somers......................... 34 Director
</TABLE>
- ---------------
* Executive holds same position with Holdings
Mr. Hale joined the Company as Chairman of the Board, President and Chief
Executive Officer in 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 world-wide 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 joined the Company in May 1993 as Vice President, Chief
Financial Officer, Treasurer and Assistant Secretary. Prior to joining the
Company, 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 has been Vice President, Corporate Development, General
Counsel and Secretary of the Company since January 1995. Prior to January 1995,
Mr. Palleschi was Vice President, Administration, General Counsel and Secretary
of the Company and served in such capacity since June 1989. Prior to joining the
Company, 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.
51
<PAGE> 53
Mr. Winebarger has been Vice President responsible for Telex's Information
Systems since January 1995 and for Telex's Engineering Services, Le Sueur
manufacturing facility, Quality Assurance and Sales Administration operations
since April 1993. Prior to April 1993, Mr. Winebarger was Vice President,
Engineering of Telex and served in such capacity with Telex and Old TCI 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 General Manager of Telex's
RF/Communications Group since May 1994. Prior to May 1994, Mr. Dantzler was Vice
President and General Manager of 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 Telex. From
1983 to 1989, Mr. Dantzler served as General Manager of the Hy-Gain Division of
Old TCI 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 TCI and Hy-Gain.
Mr. Cavanaugh joined Telex in April 1993 as Vice President and President of
Telex's Multimedia/Audio Communications Group and was appointed president of the
Group in May 1994. Prior to joining 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. Levy has served as Vice President and President of the Hearing
Instruments Group since October 1992. Prior to joining Telex, Mr. Levy served as
Vice President and General Manager for Doubleday Book Shops from 1990 to 1991.
From 1987 to 1990 he was Executive Vice President for Eye Care Centers of
America, Inc. Prior to 1987, Mr. Levy held several executive positions with
Touche Ross and Company, Genesco, Inc. and Walden Books.
Mr. Wright joined Telex in May 1994 as Vice President and President of
Telex's Professional Sound and Entertainment Group. From September 1990 to July
1993, he served as President and Chief Executive Officer of Carlton
International Corporations' Abekas Video Systems and IMMIX operations. From
January 1988 to September 1990, Mr. Wright served as Vice President of Tektronix
Corporation and as President of Grass Valley Group, a wholly owned subsidiary of
Tektronix. From 1975 to 1988, Mr. Wright also served in various capacities with
Tektronix and Grass Valley ranging from Manufacturing Engineering Manager to
Executive Vice President.
Mr. Cook became a director of the Company on the Recapitalization Closing
Date. Mr. Cook began his career at Atlantic Richfield Company ("ARCO") in 1956
as an engineer trainee. He went on to hold various management positions,
becoming President and Chief Executive Officer in 1985 and Chairman of the Board
of Directors and Chief Executive Officer in 1986. He retired as Chief Executive
Officer in June 1994 and as ARCO's Chairman in 1995. Mr. Cook is a member of the
Board of Directors of ARCO, Castle & Cook, Inc. and Bank One Louisiana.
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 is a director of
Georgia Gulf Corporation and HBO & Company.
Mr. Somers became a director of the Company on the Recapitalization Closing
Date. Mr. Somers has been a Managing Director of GSCP since December 1993. Prior
to that, he worked at Morgan Stanley & Co. Incorporated in the Mergers &
Acquisitions and Corporate Finance Departments from June 1988 to June 1993.
52
<PAGE> 54
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 year ended March 31, 1997 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
------------------------------- ------------ ALL OTHER
FISCAL SALARY BONUS NUMBER OF COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(b) ($)(C) OPTIONS(d) ($)(e)
- ------------------------------------ ------ ------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John L. Hale........................ 1997 312,006 212,456 -- --
Chairman of the Board, 1996 297,115 175,407 160,000 --
President and Chief Executive 1995 286,000 175,000 -- 8,104
Officer
John T. Hislop...................... 1997 149,865 100,267 -- --
Vice President and Chief 1996 140,742 83,637 -- --
Financial Officer 1995 140,000 79,287 -- --
Glen E. Cavanaugh................... 1997 142,846 86,478
Vice President and President, 1996 133,237 72,385 -- --
Multimedia/Audio Communications 1995 130,000 64,878 -- 19,179
Group
Daniel G. Wright.................... 1997 144,348 77,783
Vice President and President, 1996 137,212 61,671 -- --
Professional Sound and 1995 116,427 76,064 150,000 31,103
Entertainment Group
John A. Palleschi................... 1997 129,536 87,843
Vice President, Corporate 1996 119,993 73,439 16,000 --
Development, General Counsel and 1995 115,000 67,950 -- --
Secretary
</TABLE>
- ---------------
(a) For Fiscal 1997, 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 represent bonuses under the Fiscal 1995, 1996 and 1997
management incentive plan. The plan is 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 are based upon
performance measured by established 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 plan are made within
30 days following the completion of the audit for the fiscal year in which
such compensation is earned. The plan provides for a bonus target of 50.0%
of base salary, although maximum awards can exceed such targets. The maximum
award for Fiscal 1997 or the named executive officers was 75.0% of base
salary for Fiscal 1997. 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."
(d) There were no grants made during Fiscal 1997 by the Company of Options to
purchase securities to the executives named in the Summary Compensation
Table above.
(e) All Other Compensation for Mr. Hale, Mr. Cavanaugh and Mr. Wright for each
applicable fiscal year consist of nonrecurring cash compensation received in
connection with the reimbursement of relocation expenses.
53
<PAGE> 55
STOCK OPTION GRANTS
There were no grants made during Fiscal 1997 of any options to purchase
securities to any of the executive officers named in the Summary Compensation
Table above.
STOCK OPTION EXERCISES
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 in Fiscal 1997 and options to acquire common
stock of Holdings held as of March 31, 1997. No stock appreciation rights have
been granted under any incentive plan.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
VALUE OPTIONS AT FISCAL FISCAL YEAR-END
NUMBER OF SHARES REALIZED YEAR-END EXERCISABLE/ EXERCISABLE/
NAME ACQUIRED ON EXERCISE ($)(A) UNEXERCISABLE(B) UNEXERCISABLE($)(B)
- --------------------- -------------------- --------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
John L. Hale......... 140,000 1,471,680 114,000/120,000 3,523,393/3,495,540
John T. Hislop....... -- -- 114,900/60,000 3,660,082/1,911,270
Glen E. Cavanaugh.... -- -- 40,000/40,000 1,274,180/1,274,180
Daniel G. Wright..... -- -- 35,000/70,000 1,091,283/2,182,565
John A. Palleschi.... -- -- 44,000/12,000 1,390,698/349,554
</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.
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"). See "The
Recapitalization -- Treatment of Options and Warrants" for treatment of options
outstanding on the Recapitalization Closing Date.
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.
54
<PAGE> 56
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.
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. Cavanaugh was
granted 8,240 shares, 8,340 shares and 5,540 shares under the Initial Option
Grant, the Performance Option Grant and the Super Performance Option Grant,
respectively, (iv) Mr. Wright was granted 6,360 shares, 6,840 shares and 5,260
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 $5.0 million, $2.5
million, $1.3 million, $0.4 million and $0.2 million in Fiscal 1998, 1999, 2000,
2001 and 2002, respectively. See the Unaudited Pro Forma Consolidated Financial
Information.
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 cash bonus plan whereby Messrs. Hale, Hislop, Cavanaugh, Wright and
Palleschi may receive an aggregate incentive award of up to $1.7 million, $0.4
million, $0.1 million, $0.1 million and $0.5 million, respectively, during the
first five years following the
55
<PAGE> 57
Recapitalization Closing Date, in each case if certain performance targets are
achieved. 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
$2.3 million, $0.4 million, $0.2 million, $0.1 million and $0.1 million, in
Fiscal 1998, 1999, 2000, 2001 and 2002, respectively. See the Unaudited Pro
Forma Consolidated Financial Information.
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 Messrs. Cavanaugh and Wright if their 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
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...................... $26,057 $34,742 $43,428 $52,114 $ 60,799
150,000...................... 31,682 42,242 52,803 63,364 73,924
175,000...................... 36,182 48,618 60,753 73,753 85,924
200,000...................... 40,680 54,992 69,303 83,613 97,924
225,000...................... 44,142 59,895 75,647 91,399 107,151
250,000...................... 44,142 59,895 75,647 91,399 107,151
300,000...................... 44,142 59,895 75,647 91,399 107,151
400,000...................... 44,142 59,895 75,647 91,399 107,151
500,000...................... 44,142 59,895 75,647 91,399 107,151
</TABLE>
The full years of credited service as of March 31, 1997 for the executive
officers named in the Summary Compensation Table above are as follows: Mr. Hale,
5; Mr. Hislop, 3; Mr. Cavanaugh, 3; Mr. Wright, 2; and Mr. Palleschi, 12. 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 $150,000 (as adjusted in future years to reflect
inflation); however, prior years' compensation taken into account may exceed
that amount. The examples of benefits
56
<PAGE> 58
payable in the above table are supplied for illustration only. Under the Pension
Plan the maximum annual benefits payable for 1996 are $120,000 in accordance
with Section 415(b)(1) of the Code unless the accrued benefit with respect to a
participant exceeded that amount as of December 31, 1982, in which case the
maximum annual benefit payable is $136,425.
EMPLOYMENT AGREEMENTS
John L. Hale, John T. Hislop and John A. Palleschi have each entered into
five-year employment agreements with GST 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 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.
57
<PAGE> 59
OWNERSHIP OF CAPITAL STOCK
The authorized common stock of the Company consists of 1,000 shares of
common stock, par value $.01 per share, of which 500 shares are issued and
outstanding on a fully diluted basis and all of which are owned by Holdings. The
authorized common stock of Holdings consists of 5,000,000 shares of common
stock, par value $.0005 per share, of which 3,038,300 shares are issued and
outstanding, after giving effect to the 20-for-1 stock split effected by the
Company effective as of June 25, 1997.
The following table sets forth the beneficial ownership of the limited
liability company interests of G-II.
<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, NY
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, NY
10013. The general partner of this person and the manager of this person,
GSCP, Inc., are both wholly owned subsidiaries of Travelers.
(d) The address for this person is c/o Rawlinson & Hunter, Woodbourne Hall, P.O.
Box 3162, Road Town Tortola, British Virgin Islands. This person is managed
by GSCP, Inc. and all the voting securities of this person are owned by the
general partner of GSCP, whose managing general partner is a wholly owned
subsidiary of Travelers.
(e) The address for this person is 1 Tower Square, Hartford, CT. 06183-2030. The
person is an indirect wholly owned subsidiary of Travelers.
THE RECAPITALIZATION
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, the Company 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 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 (approximately 20% of the fully diluted equity of Holdings, give effect
to the Rollover Options) were retained by certain members of management of the
Company. In connection with the Recapitalization, the Company completed (i) the
Tender Offer to repurchase all of the $100.0 million aggregate outstanding
principal amount of the Telex
58
<PAGE> 60
Notes and (ii) the Solicitation of consents with respect to certain amendments
to the Indenture pursuant to which the Telex 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 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 Effective Time, 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-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.
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INTEREST OF CERTAIN PERSONS
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 15, 1997, 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 OPTIONS PERCENT OF CLASS
NAME OF BENEFICIAL OWNER(a) BENEFICIALLY OWNED BENEFICIALLY OWNED(a) (FULLY DILUTED)
- ---------------------------------------- ------------------- --------------------- -----------------
<S> <C> <C> <C>
Greenwich II, LLC(b).................... 2,605,040 -- 78.2%
John L. Hale............................ 243,680 97,980 10.4%
John T. Hislop.......................... 17,480 49,060 2.0%
Glen E. Cavanaugh....................... 21,480 25,680 1.4%
Daniel G. Wright........................ 12,080 31,940 1.3%
John A. Palleschi....................... 48,880 23,080 2.2%
Lodwrick M. Cook........................ 0 0 0%
Alfred C. Eckert III(c)................. 0 0 0%
Nicholas E. Somers(c)................... 0 0 0%
All directors and officers as a group 427,880 257,120 20.8%
(11) persons(b)(c)....................
</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 II, LLC.
(c) Does not include any of the 2,605,040 shares of Holdings Common Stock
beneficially owned by Greenwich II LLC, which Mr. Eckert and Mr. Somers may
be deemed to beneficially own by virtue of their affiliation with GSCP. Mr.
Eckert and Mr. Somers disclaim any such beneficial ownership.
RELATED TRANSACTIONS
The Company has also engaged Greenwich Street Capital Partners, Inc.
("Greenwich"), the manager of GSCP, to provide it with certain business,
financial and managerial advisory services, including developing and
implementing corporate and business strategy and providing other consulting and
advisory services. In exchange for such services, the Company has agreed to pay
Greenwich an annual fee of $1.7 million, 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 tenth anniversary of
Recapitalization Closing Date and 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 addition, on the Recapitalization Closing Date, Greenwich received $2.5
million in fees for providing services relating to the structuring and
management of the Recapitalization and reimbursement for its reasonable
out-of-pocket costs and expenses relating to its provision of such services.
RELATIONSHIPS BETWEEN GSCP AND THE INITIAL PURCHASERS
GSCP and Smith Barney Inc. are both affiliated companies of Travelers Group
Inc. An affiliate of Chase Securities Inc. ("CSI") is a limited partner in GSCP.
Princes Gate Investors II, L.P. ("Princes Gate"), an
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investment fund affiliated with Morgan Stanley & Co. Incorporated, together with
certain affiliated investors, will be the owners of the GST Subordinated
Debentures.
DESCRIPTION OF SENIOR SECURED CREDIT FACILITY
General. The Company entered into the Senior Secured Credit Facility, on
the Recapitalization Closing Date with the banks, financial institutions and
other entities selected in the syndication effort (the "Lenders"), Chase, as
administrative agent, syndication agent and lender, and Morgan Stanley Senior
Funding, Inc., as documentation agent, and lender, which provides for the Term
Loan Facility of $115.0 million and the Revolving Credit Facility of $25.0
million, which includes a $10.0 million letter of credit facility. The following
is a summary of the principal terms of the credit agreement governing the Senior
Secured Credit Facility and related loan documents (the "Credit Documentation")
and is subject to and qualified in its entirety by reference to the Credit
Documentation, which is filed as an Exhibit to the Registration Statement of
which this Prospectus forms a part. Copies of the Credit Documentation are
available upon request from the Company.
Use of Facility. Upon consummation of the Recapitalization, the Company
had $115.0 million outstanding under the Term Loan Facility and would have had
$7.3 million outstanding under the Revolving Credit Facility had all related
fees and expenses been paid on such date. On such date, the Company also had
$5.9 million of letters of credit outstanding under the Revolving Credit
Facility. The remainder of the Revolving Credit Facility, $11.8 million, would
have been available (subject to borrowing base availability) to service the
working capital requirements of the Company and for its general corporate
purposes.
Security, Guarantees. The obligations of the Company under the Credit
Documentation are unconditionally guaranteed, jointly and severally, by each
domestic subsidiary of the Company and will also be guaranteed by each
subsequently acquired or organized direct and indirect domestic subsidiary of
the Company. The obligations under the Senior Secured Credit Facility and the
guarantees thereof are secured by a first priority security interest in
substantially all of the Company's tangible and intangible assets, including,
without limitation, intellectual property, owned U.S. real property, all of the
capital stock of the Company and each of its existing and subsequently acquired
or organized direct and indirect domestic subsidiaries, and 65% of the capital
stock of each of its existing and subsequently acquired or organized direct
foreign subsidiaries.
Borrowing Base. Loans under the Revolving Credit Facility are subject to
maintenance by the Company of a borrowing base (the "Borrowing Base"). At any
time, amounts borrowed under the Revolving Credit Facility may not exceed the
sum of 80% of the eligible accounts receivable and 50% of the eligible inventory
of the Company, provided that the portion of the borrowing base represented by
eligible inventory shall not be more than 50%. The borrowing base will be
computed at least monthly by the Company.
Amortization, Interest. The Tranche A Facility is repayable in consecutive
quarterly installments over five and one-half years and matures on November 6,
2002 and the Tranche B Facility is repayable in consecutive quarterly
installments over seven and one-half years and matures on November 6, 2004. The
Term Loan Facility initially bears interest at a rate per annum equal (at the
Company's option) to (i) an Alternate Base Rate (equal to the highest of (a)
Chase's prime rate, (b) the secondary market rate for certificates of deposit
plus 1% and (c) the federal funds effective rate plus 0.5% (the "ABR")) plus
1.50% (the "ABR Applicable Margin"), in the case of the Tranche A Term Loan
Facility, and, in the case of the Tranche B Term Loan Facility, 2.00% or (ii)
the Eurodollar Rate (the rate at which Eurodollar deposits for one, two, three
or six months (at the Company's option) are offered to Chase in the interbank
Eurodollar market) in the approximate amount of Chase's share of the relevant
loan (the "Eurodollar Rate") plus 2.50% (the "Eurodollar Applicable Margin"), in
the case of the Tranche A Term Loan Facility, and, in the case of the Tranche B
Term Loan Facility, 3.00%. The Revolving Credit Facility is available on a
revolving and matures on November 6, 2002. The Revolving Credit Facility
initially bears interest at a rate per annum equal (at the Company's option) to
(i) the ABR plus the ABR Applicable Margin or (ii) the Eurodollar Rate plus the
Eurodollar Applicable Margin.
Prepayments and Reduction of Commitments. The Senior Secured Credit
Facility permits the Company to prepay loans and to permanently reduce revolving
credit-commitments in minimum amounts equal to $1.0 million or a whole multiple
of $500,000 in excess thereof. In addition, the Company is required to make
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mandatory prepayments with (i) non-ordinary asset sale proceeds, (ii) equity and
debt 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. All such amounts shall be
applied, first, to the prepayment of the Term Loan Facility and, second, to the
permanent reduction of the Revolving Credit Facility (other than prepayments
with excess cash flow). The Revolving Credit Facility must be prepaid and, when
there are no loans outstanding under the Revolving Credit Facility, all
outstanding letters of credit must be cash collateralized to the extent
aggregate outstandings at any time exceed the lesser of the amount of the
Revolving Credit Facility or the Borrowing Base.
Fees. The Company has agreed to pay to the lenders the following fees: (i)
an annual administration fee of $100,000 for the first year, which will be paid
on the Recapitalization Closing Date, and $75,000 for each subsequent year,
which will be payable in advance of each subsequent anniversary of the
Recapitalization Closing Date prior to the maturity or early termination of the
Senior Secured Credit Facility and the payment in full of all amounts owing
thereunder and (ii) a commitment fee equal to 0.50% per annum, payable
quarterly, on the average daily unused portion of the Senior Secured Credit
Facility. The Company will also pay a commission on the face amount of all
outstanding letters of credit at a per annum rate equal to the Eurodollar
Applicable Margin under the Revolving Credit Facility then in effect plus a
fronting fee equal to 0.25% per annum, payable quarterly, on the face amount of
each letter of credit. In addition, the Company will be required to pay to the
issuing lender customary administrative, issuance, amendment, payment and
negotiation charges.
Covenants. The Senior Secured Credit Facility contains 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; merge, consolidate, liquidate or dissolve; lease
property; pay dividends or make distributions in respect of capital stock;
create liens on assets; enter into sale and leaseback transactions; make
investments, loans or advances (including in or to subsidiaries the current
assets of which are not included in the borrowing base calculation); make
optional payments and modifications of the Notes; change the business conducted
by the Company or its subsidiaries; make capital expenditures; engage in certain
transactions with affiliates; agree to negative pledge clauses; or cause changes
in its fiscal year. The Senior Secured Credit Facility also contains affirmative
covenants that require the Company (i) to provide certain information to Chase;
(ii) to continue its business and maintain its material rights and privileges;
(iii) to comply with laws and its material contractual obligations; (iv) to
maintain its property and adequate insurance; (v) to maintain certain books and
records; (vi) to allow the Lenders to inspect its property and books and conduct
field audits of its accounts receivable and inventory; and (vii) to agree to
grant security interests in after-acquired property.
The Company is also required to comply with specified financial covenants
and ratios, including (i) a minimum consolidated EBITDA requirement, (ii) a
maximum consolidated debt to consolidated EBITDA ratio, and (iii) a minimum
consolidated EBITDA to consolidated fixed charges ratio.
Events of Default. The Senior Secured Credit Facility contains customary
events of default, including defaults relating to non-payment, material breach
of a representation, warranty or covenant contained therein, cross-default and
acceleration, bankruptcy, certain ERISA events, material judgements, actual or
asserted invalidity of any guarantee or security document, subordination
provisions or security interest, and a change of control.
Expenses and Indemnification. Under the Senior Secured Credit Facility,
the Company has agreed to pay (i) all reasonable out-of-pocket expenses of Chase
and the Lenders associated with the preparation, execution, delivery, and
administration of the Credit Documentation and any amendment or waiver with
respect thereto (including the reasonable fees and disbursements and other
charges of counsel) and (ii) all out-of-pocket expenses of Chase and the Lenders
in connection with the enforcement thereof (including the reasonable fees and
disbursements and other charges of counsel). In addition, the Company will agree
to indemnify Chase, the Lenders and related parties against any loss, liability,
cost or expense incurred in respect of the financing or the use or the proposed
use of proceeds thereof, except for losses, liability, costs or expenses
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<PAGE> 64
resulting from the gross negligence or willful misconduct of the indemnified
party or any or its respective directors, officers, employees and agents.
THE EXCHANGE OFFER
The summary herein of certain provisions of the Exchange and Registration
Rights Agreement does not purport to be complete and reference is made to the
provisions of the Exchange and Registration Rights Agreement, which has been
filed as an exhibit to the Registration Statement and a copy of which is
available as set forth under the heading "Available Information."
TERMS OF THE EXCHANGE OFFER
General
In connection with the issuance of the Existing Notes pursuant to a
Purchase Agreement, dated as of April 29, 1997 between the Company and the
Initial Purchasers, the Initial Purchasers and their respective assignees became
entitled to the benefits of the Exchange and Registration Rights Agreement.
Under the Exchange and Registration Rights Agreement, the Company has
agreed (i) to file with the Commission within 60 days after May 6, 1997, the
date the Existing Notes were issued (the "Issue Date"), the Registration
Statement of which this Prospectus is a part with respect to a registered offer
to exchange the Existing Notes for the New Notes, (ii) to use its reasonable
best efforts to cause the Registration Statement to be declared effective under
the Securities Act within 150 days after the Issue Date and (iii) to use its
reasonable best efforts to consummate the Exchange Offer within 165 calendar
days after the Issue Date. The Company will keep the Exchange Offer open for not
less than 30 days after the date notice of the Exchange Offer is mailed to
holders of the Existing Notes. The Exchange Offer being made hereby, if
commenced and consummated within the time periods described in this paragraph,
will satisfy those requirements under the Exchange and Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, all Existing Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New Notes will be issued in exchange for an equal
principal amount of outstanding Existing Notes accepted in the Exchange Offer.
Existing Notes may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders as of , 1997. The Exchange Offer is not conditioned
upon any minimum principal amount of Existing Notes being tendered for exchange.
However, the obligation to accept Existing Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth herein under
"-- Conditions."
Existing Notes shall be deemed to have been accepted as validly tendered
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Existing Notes for the purposes of receiving the New Notes and delivering New
Notes to such holders.
Based on interpretations by the Staff of the Commission as set forth in
no-action letters issued to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)), the Company believes
that the New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is a broker-dealer or an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that (i) such New Notes are acquired in the ordinary course of business, (ii) at
the time of the commencement of the Exchange Offer such holder has no
arrangement or understanding with any person to participate in a distribution of
such New Notes and (iii) such holder is not engaged in, and does not intend to
engage in, a distribution of such New Notes. The Company has not sought, and
does not intend to seek, a no-action letter from the Commission with respect to
the effects of the Exchange Offer, and there can
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<PAGE> 65
be no assurance that the Staff would make a similar determination with respect
to the New Notes as it has in such no-action letters.
By tendering Existing Notes in exchange for New Notes and executing the
Letter of Transmittal, each holder will represent to the Company that: (i) it is
not an affiliate of the Company, (ii) any New Notes to be received by it will be
acquired in the ordinary course of business and (iii) at the time of the
commencement of the Exchange Offer it had no arrangement or understanding with
any person to participate in a distribution of the New Notes and, if such holder
is not a broker-dealer, it is not engaged in, and does not intend to engage in,
a distribution of New Notes. If a holder of Existing Notes is unable to make the
foregoing representations, such holder may not rely on the applicable
interpretations of the Staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes where such Existing Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act and
that it has not entered into any arrangement or understanding with the Company
or an affiliate of the Company to distribute the New Notes in connection with
any resale of such New Notes. See "Plan of Distribution."
Upon consummation of the Exchange Offer, subject to certain limited
exceptions, holders of Existing Notes who do not exchange their Existing Notes
for New Notes in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Existing Notes, unless such
Existing Notes are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws.
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean , 1997 (30 calendar days
following the commencement of the Exchange Offer), unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.
Notwithstanding any extension of the Exchange Offer, if the Exchange Offer is
not consummated by , 1997, the Company must pay liquidated damages
to each holder of Existing Notes in an amount equal to $0.192 per week per
$1,000 principal amount of the Existing Notes held by such holder until the
Exchange Offer is consummated.
To extend the Expiration Date, the Company will notify the Exchange Agent
of any extension by oral or written notice and will notify the holders of the
Existing Notes by means of a press release or other public announcement prior to
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Existing
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not
permit acceptance of Existing Notes not previously accepted if any of the
conditions set forth herein under "-- Conditions" shall have occurred and shall
not have been waived by the Company prior to the Expiration Date, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Existing Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of the Existing Notes of such
amendment.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligations to
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publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will accrue interest at the rate of 10 1/2% per annum from
the Issue Date of the Existing Notes. Interest on the New Notes are payable on
May 1 and November 1 of each year, commencing November 1, 1997.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(ii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OTHER REQUIRED DOCUMENTS
SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the
Exchange Agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Existing Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal. Any beneficial
owner whose Existing Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct such registered holder to
tender on his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the
Existing Notes tendered pursuant thereto is tendered for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing, and unless waived by the Company, evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Existing Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Existing Notes not
properly tendered or any Existing Notes which, if accepted, would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
absolute right to waive any irregularities or conditions of tender as to
particular Existing Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Existing Notes, nor
shall any
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of them incur any liability for failure to give such notification. Tenders of
Existing Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Existing Notes received by the Exchange Agent
that is not properly tendered and as to which the defects or irregularities have
not been cured or waived will be returned without cost to such holder by the
Exchange Agent, unless otherwise provided in the Letter of Transmittal, as soon
as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion, subject
to the provisions of the Indenture, (i) to purchase or make offers for any
Existing Notes that remains outstanding subsequent to the Expiration Date or, as
set forth under "-- Conditions", (ii) to terminate the Exchange Offer in
accordance with the terms of the Exchange and Registration Rights Agreement,
(iii) to redeem Existing Notes as a whole or in part at any time and from time
to time, as set forth under "Description of Notes -- Optional Redemption" and
(iv) to the extent permitted by applicable law, to purchase Existing Notes in
the open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Existing Notes properly tendered will be accepted promptly after the
Expiration Date, and the New Notes will be issued promptly after acceptance of
the Existing Notes. See "-- Conditions." For purposes of the Exchange Offer,
Existing Notes shall be deemed to have been accepted as validly tendered for
exchange when, as and if the Company has given oral or written notice thereof to
the Exchange Agent.
In all cases, issuance of New Notes for Existing Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of a Book-Entry Confirmation of such Existing
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Existing Notes are not accepted for any
reason set forth in the terms and conditions of the Exchange Offer, such
unaccepted or such nonexchanged Existing Notes will be credited to an account
maintained with such Book-Entry Transfer Facility as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Existing Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing Notes by causing the
Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, the Letter of
Transmittal or facsimile thereof with any required signature guarantees and any
other required documents must, in any case, be transmitted to and received by
the Exchange Agent at one of the addresses set forth below under "-- Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of
Existing Notes and the amount of Existing Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent and (iii) a Book-Entry Confirmation and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
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WITHDRAWAL OF TENDERS
Tenders of Existing Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility from which the Existing Notes was
tendered, identify the principal amount of the Existing Notes to be withdrawn,
and specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Existing Notes and otherwise comply
with the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notice will be determined by the
Company, whose determination shall be final and binding on all parties. Any
Existing Notes so withdrawn will be deemed not be have been validly tendered for
exchange for purposes of the Exchange Offer. Any Existing Notes which have been
tendered for exchange but which are not exchanged for any reason will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Existing Notes as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Existing Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering" and "-- Book-Entry Transfer" above at any time on or prior to the
Expiration Date.
CONDITIONS
The Company has no obligation to consummate the Exchange Offer if the New
Notes to be received by such holder or holders of Existing Notes in the Exchange
Offer, upon receipt, will not be tradable by such holder without restriction
under the Securities Act and the Exchange Act and without material restrictions
under the "blue sky" or securities laws of the several states of the United
States. All conditions to the Exchange Offer (with the exception of certain
necessary governmental approvals) must be satisfied or waived prior to the
Expiration Date.
EXCHANGE AGENT
Manufacturers Traders and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Mail: By Hand:
One M&T Plaza
7th Floor Telephone:
Buffalo, New York 14203 716 842-5602
Attention: Russell Whitley
Assistant Vice Facsimile:
President 716 842-4474
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Company.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Existing Notes, and in handling or forwarding tenders for
exchange.
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The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, New Notes or
Existing Notes for principal amounts not tendered or accepted for exchange are
to be registered or issued in the name of any person other than the registered
holder of the Existing Notes tendered, or if tendered Existing Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Existing Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Existing Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Existing Notes
under the Securities Act. To the extent that Existing Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Existing Notes could be adversely affected.
DESCRIPTION OF NOTES
GENERAL
The Existing Notes were issued, and the New Notes offered hereby will be
issued, under an Indenture, to be dated as of May 6, 1997 (the "Indenture"),
between the Company and Manufacturers and Traders Trust Company, as Trustee (the
"Trustee"), a copy of which is available upon request to the Company.
The following summary of certain provisions of the Indenture and the Notes
is a description of such provisions after giving effect to the consummation of
the Transactions. Such summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms to
be made a part thereof by the Trust Indenture Act of 1939, as amended ("TIA").
The Indenture is filed as an Exhibit to the Registration Statement of which this
Prospectus forms a part and is available, upon request, from the Company. The
term "Company" and the other capitalized terms defined in "-- Certain
Definitions" below are used in this "Description of Notes" as so defined.
Principal of, and premium, if any, and interest on, the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or agency
of the Company in the Borough of Manhattan, The City of New York (which
initially shall be the principal corporate trust office of the Trustee, at 50
Broadway, 7th Floor, New York, New York), except that, at the option of the
Company, payment of interest may be made by check mailed to the address of the
registered holders of the Notes as such address appears in the Note Register.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Indebtedness of the Company.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
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TERMS OF THE NOTES
The Notes will be limited to $125.0 million aggregate principal amount, and
will mature on May 1, 2007. Each Note will bear interest at a rate per annum
shown on the front cover of this Prospectus from the date of issuance, or from
the most recent date to which interest has been paid or provided for, payable
semiannually in cash to Holders of record at the close of business on the April
15 or October 15 immediately preceding the interest payment date on May 1 and
November 1 of each year, commencing November 1, 1997.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
and from time to time on and after May 1, 2002 and prior to maturity, upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
as a percentage of principal amount), plus accrued interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on May 1 of the years set forth
below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
-------------------------------------------------- ----------
<S> <C>
2002.............................................. 105.250%
2003.............................................. 103.500%
2004.............................................. 101.750%
2005 and thereafter............................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to May 1, 2000, the
Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings by the Company following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount thereof) of
110.5% plus accrued interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however,that at least 66 2/3%
of the original aggregate principal amount of the Notes must remain outstanding
after each such redemption.
At any time on or prior to May 1, 2002, the Notes may also be redeemed as a
whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days' prior notice (but in no event more
than 180 days after the occurrence of such Change of Control) mailed by first-
class mail to each Holder's registered address, at a redemption price equal to
100% of the principal amount thereof plus the Applicable Premium as of, and
accrued but unpaid interest, if any, to, the date of redemption (the "Redemption
Date") (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
In addition, as more fully described under "Change of Control," each Holder
will have the right to require the Company to repurchase all or any part of such
Holder's Notes following a Change of Control at a purchase price in cash equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase.
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
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<PAGE> 71
RANKING
The indebtedness evidenced by the Notes will be unsecured Senior
Subordinated Indebtedness of the Company, will be subordinated in right of
payment, as set forth in the Indenture, to the payment when due of all existing
and future Senior Indebtedness of the Company, including the Company's
obligations under the Senior Credit Facility, will rank pari passu in right of
payment with all existing and future Senior Subordinated Indebtedness of the
Company and will be senior in right of payment to all existing and future
Subordinated Obligations of the Company. The Notes will also be effectively
subordinated to any Secured Indebtedness of the Company and its Subsidiaries to
the extent of the value of the assets securing such Indebtedness. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "-- Defeasance" below is not subordinated
to any Senior Indebtedness or subject to the restrictions described herein.
At March 31, 1997, on a pro forma basis after giving effect to the
Transactions, the outstanding Senior Indebtedness of the Company would have been
approximately $120.0 million (exclusive of unused commitments), all of which
would have been Secured Indebtedness and no Senior Subordinated Indebtedness
(other than the indebtedness represented by the Notes). Although the Indenture
contains limitations on the amount of additional Indebtedness which the Company
may Incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness or
Secured Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness"
below.
Certain of the operations of the Company are conducted through its
Subsidiaries. Claims of creditors of such Subsidiaries, including trade
creditors, and claims of preferred shareholders (if any) of such Subsidiaries
will have priority with respect to the assets and earnings of such Subsidiaries
over the claims of creditors of the Company, including holders of the Notes. The
Notes, therefore, will be effectively subordinated to creditors (including trade
creditors) and preferred shareholders (if any) of Subsidiaries of the Company,
other than any such Subsidiary that may become a Note Guarantor in the future.
See "-- Note Guarantees" below. Although the Indenture limits the incurrence of
Indebtedness and preferred stock by certain of the Company's Subsidiaries, such
limitation is subject to a number of significant qualifications.
"Senior Indebtedness" means the following obligations, whether outstanding
on the date of the Indenture or thereafter issued, without duplication: (i) all
obligations consisting of Bank Indebtedness; and (ii) all obligations consisting
of the principal of and premium, if any, and accrued and unpaid interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, all other Indebtedness of the Company, unless, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that the obligations in respect of such
Indebtedness are not senior in right of payment to the Notes; provided, however,
that Senior Indebtedness shall not include (1) any obligation of the Company to
any Subsidiary, (2) any liability for Federal, state, foreign, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company (or Guarantee by the Company of any Indebtedness)
that is expressly subordinate in right of payment to any other Indebtedness of
the Company (or Guarantee by the Company of any Indebtedness) or (5) any Capital
Stock. If any Designated Senior Indebtedness is disallowed, avoided or
subordinated pursuant to the provisions of Section 548 of Title 11 of the United
States Code or any applicable state fraudulent conveyance law, such Designated
Senior Indebtedness nevertheless will constitute Senior Indebtedness.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is expressly
subordinate in right of payment to Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured, and Indebtedness that is not
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guaranteed by a particular Person is not deemed to be subordinate or junior to
Indebtedness that is so guaranteed merely because it is not so guaranteed.
The Company may not pay principal of, or premium (if any) or interest on,
the Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase, redeem or otherwise retire
any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness is not
paid when due in cash or Cash Equivalents or (ii) any other default on Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated
in accordance with its terms unless, in either case, (x) the default has been
cured or waived and any such acceleration has been rescinded in writing or (y)
such Senior Indebtedness has been paid in full in cash or Cash Equivalents.
However, the Company may pay the Notes without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of each Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing.
In addition, during the continuance of any default (other than a default
described in clause (i) or (ii) of the first sentence of the immediately
preceding paragraph) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of each Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because such Designated Senior Indebtedness has
been repaid in full or (iii) because the default giving rise to such Blockage
Notice is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of the immediately preceding paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period. However, if any Blockage Notice within such
360-day period is given by or on behalf of any holders of Designated Senior
Indebtedness other than Bank Indebtedness, a Representative of Bank Indebtedness
may give another Blockage Notice within such period. In no event, however, may
the total number of days during which any Payment Blockage Period or Periods is
in effect exceed 179 days in the aggregate during any 360 consecutive day
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, or in a bankruptcy, insolvency,
receivership or similar proceeding relating to the Company or its property, the
holders of Senior Indebtedness will be entitled to receive payment in full of
the Senior Indebtedness before the Noteholders are entitled to receive any
payment and until the Senior Indebtedness is paid in full, any payment or
distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of the Senior Indebtedness
as their interests may appear. If a distribution is made to Noteholders that due
to the subordination provisions should not have been made to them, such
Noteholders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of each Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the
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Noteholders, and trade creditors of the Company who are not holders of Senior
Indebtedness or of Senior Subordinated Indebtedness (including the Notes) may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the holders of Senior Subordinated Indebtedness. In addition, as
described above, the Notes will be effectively subordinated to the claims of
creditors of the Company's Subsidiaries.
NOTE GUARANTEES
After the Issue Date, the Company may cause any Restricted Subsidiary, and
will cause each newly acquired or created Domestic Subsidiary that is a
Significant Subsidiary (each, a "Note Guarantor"), to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Subsidiary will
guarantee (each, a "Note Guarantee") payment of the Notes. Each such Note
Guarantor as primary obligor and not merely as surety, will jointly and
severally, irrevocably and fully and unconditionally Guarantee, on a senior
subordinated basis, the performance and punctual payment when due, whether at
Stated Maturity, by acceleration or otherwise, of all obligations of the Company
under the Indenture and the Notes, whether for principal of or interest on the
Notes, expenses, indemnification or otherwise (all such obligations guaranteed
by such Note Guarantors being herein called the "Guaranteed Obligations"). Such
Note Guarantors will agree to pay, in addition to the amount stated above, any
and all expenses (including reasonable counsel fees and expenses) incurred by
the Trustee or the Holders in enforcing any rights under the Note Guarantees.
The obligations of each Note Guarantor will be limited to the maximum
amount, as will, after giving effect to all other contingent and fixed
liabilities of such Note Guarantor, result in the obligations of such Note
Guarantor under the Note Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
Each such Note Guarantee shall be a continuing Guarantee and shall (i)
remain in full force and effect until payment in full of the principal amount of
all outstanding Notes (whether by payment at maturity, purchase, redemption,
defeasance, retirement or other acquisition) and all other Guaranteed
Obligations then due and owing, unless earlier terminated as described below,
(ii) be binding upon such Note Guarantor and (iii) inure to the benefit of and
be enforceable by the Trustee, the Holders and their successors, transferees and
assigns.
The Indenture provides that, subject to the provisions described in the
next succeeding paragraph, no Note Guarantor may consolidate or merge with or
into (whether or not such Note Guarantor is the surviving Person) another Person
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than a Note Guarantor or the Company) assumes all the obligations of
such Note Guarantor under the Note Guarantee and the Indenture pursuant to a
supplemental indenture, in form reasonably satisfactory to the Trustee, and (ii)
if such merger or consolidation is with a Person other than the Company or a
Restricted Subsidiary, (x) immediately after such transaction, no Default or
Event of Default exists and (y) the Company will, at the time of such
transaction after giving pro forma effect thereto, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to paragraph (a) under "Certain
Covenants -- Limitation on Indebtedness."
Notwithstanding the preceding paragraph, concurrently with any sale or
disposition (by merger or otherwise) of any Note Guarantor in accordance with
the terms of the Indenture (including the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets") by the Company or a Restricted
Subsidiary to any Person that is not an Affiliate of the Company, such Note
Guarantor will automatically and unconditionally be released from all
obligations under its Note Guarantee; provided, however, that any such release
shall occur only to the extent that all obligations of such Note Guarantor
under, and all of its guarantees of, and all of its pledges of assets or other
security interests which secure, any Bank Indebtedness of the Company shall also
terminate upon such release, sale or transfer (other than with respect to any
such Indebtedness that is assumed by any Person that is not an Affiliate of the
Company).
In addition, any Note Guarantee of any Note Guarantor will be automatically
and unconditionally released and discharged upon the merger or consolidation of
such Note Guarantor with and into the Company or another Note Guarantor that is
the surviving Person in such merger or consolidation.
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CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided, however, that notwithstanding the occurrence of a Change of
Control, the Company shall not be obligated to purchase the Notes pursuant to
this covenant in the event that it has exercised its right to redeem all of the
Notes as described under "Optional Redemption":
(i) prior to the first public offering of Voting Stock of the Company,
either (x) Permitted Holders cease to be the "beneficial owner" or
"beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Company, or (y) Permitted Holders cease to be
entitled by voting power, contract or otherwise to elect or cause the
election of directors of the Company having a majority of the total voting
power of the Board of Directors, in each case, whether as a result of
issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company, any direct or indirect transfer
of securities by any Permitted Holder or otherwise (for purposes of this
clause (i) and clause (ii) below, Permitted Holders shall be deemed to
beneficially own any Voting Stock of an entity (the "specified entity" held
by any other entity (the "parent entity") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, a majority of the
Voting Stock of the parent entity);
(ii) following the first public offering of Voting Stock of the
Company, any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire within one year), directly or indirectly,
of more than 35% of the Voting Stock of the Company, provided that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the Voting
Stock of the Company than such other Person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control (unless the Company has exercised its right to redeem all the
Notes as described under "Optional Redemption"), the Company shall (i) repay in
full all Bank Indebtedness or offer to repay in full all Bank Indebtedness and
repay the Bank Indebtedness of each lender who has accepted such offer or (ii)
obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the Notes as provided for in the
immediately following paragraph.
Unless the Company has exercised its right to redeem all the Notes as
described under "Optional Redemption," the Company shall, within 30 days
following any Change of Control (or at the Company's option, prior to such
Change of Control but after the public announcement thereof), mail a notice to
each Holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred or will occur and that such Holder has (or upon such occurrence will
have) the right to require the Company to purchase such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date); (2) the circumstances and relevant facts and financial
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<PAGE> 75
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); (4) the instructions determined by the Company, consistent
with this covenant, that a Holder must follow in order to have its Notes
purchased; and (5) that, if such Offer is made prior to such Change of Control,
payment is conditioned on the occurrence of such Change of Control.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. The Company has no present plans to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or recapitalizations, that
would not constitute a Change of Control under the Indenture, but that could
increase the amount of indebtedness outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
Senior Credit Agreement. Future Senior Indebtedness of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
Holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. As described above
under "Optional Redemption," the Company also has the right to redeem the Notes
at specified prices, in whole but not in part, upon a Change of Control.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that
the Company and the Note Guarantors may Incur Indebtedness if on the date of the
Incurrence of such Indebtedness the Consolidated Coverage Ratio would be greater
than (i) 2.00:1.00, if such Indebtedness is Incurred on or prior to the second
anniversary of the Issue Date, and (ii) 2.25:1.00 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Senior Credit Facility in a
maximum principal amount not to exceed at any time
(A) an aggregate principal amount of $115.0 million under the Term
Loan Facility less the aggregate amount of all scheduled repayments of
principal, or mandatory prepayments of principal with Net Available Cash
from Asset Dispositions, applied to permanently reduce the Indebtedness
outstanding under the Term Loan Facility, plus (in the case of any
refinancing thereof) the aggregate amount of fees, underwriting
discounts, premiums and other costs and expenses incurred in connection
with such refinancing, and
(B) an aggregate principal amount outstanding at any time under the
Revolving Credit Facility not to exceed the greater of (x) $25.0 million
less the amount of all mandatory prepayments of principal with Net
Available Cash from Asset Dispositions, applied to permanently reduce
the
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commitments under the Revolving Credit Facility plus (in the case of any
refinancing thereof) the aggregate amount of fees, underwriting
discounts, premiums and other costs and expenses incurred in connection
with such refinancing, and (y) the Borrowing Base;
(ii) Indebtedness of Foreign Subsidiaries for working capital purposes
and any Guarantees in respect thereof, the aggregate principal amount of
which Indebtedness outstanding at any time does not exceed, as to all such
Foreign Subsidiaries, the greater of (the "Foreign Subsidiary Amount") (A)
$10.0 million and (B) an amount equal to 10% of Consolidated Tangible
Assets; provided, however, that the principal amount of such Indebtedness
may exceed the Foreign Subsidiary Amount by an amount not to exceed the
amount of debt permitted to be Incurred by clause (i)(B) as of such date
but the principal amount of Indebtedness permitted to be Incurred by clause
(i)(B) above shall be reduced by the amount by which such Indebtedness
exceeds the Foreign Subsidiary Amount;
(iii) Indebtedness (A) of the Company to any Restricted Subsidiary and
(B) of any Wholly Owned Subsidiary to the Company or any Restricted
Subsidiary; provided, however, that any subsequent issuance or transfer of
any Capital Stock or any other event that results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any other subsequent
transfer of any such Indebtedness (except to the Company or a Wholly Owned
Subsidiary) will be deemed, in each case, an Incurrence of Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(iv) Indebtedness represented by the Notes, any Indebtedness (other
than the Indebtedness described in clause (i), (ii) or (iii) above)
outstanding on the date of the Indenture and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iv) or
paragraph (a);
(v) Indebtedness of the Company or any Restricted Subsidiary to
finance or refinance the deferred purchase price of newly acquired property
of the Company and its Subsidiaries used in the ordinary course of business
of the Company and its Subsidiaries (provided such purchase money financing
is entered into within six months of the acquisition of such property), and
any Refinancing Indebtedness with respect thereto, in an amount (based on
the remaining balance of the obligations therefor on the books of the
Company and its Restricted Subsidiaries) which shall not exceed the greater
of (A) $7.0 million and (B) an amount equal to 7% of Consolidated Tangible
Assets in the aggregate at any one time outstanding;
(vi) Indebtedness of the Company or any Restricted Subsidiary (which
may comprise Bank Indebtedness) in an aggregate principal amount at any one
time outstanding not in excess of the greater of (A) $7.0 million and (B)
an amount equal to 7% of Consolidated Tangible Assets;
(vii) Indebtedness of the Company or any Restricted Subsidiary in the
form of Capitalized Lease Obligations or Attributable Debt, and any
Refinancing Indebtedness with respect thereto, in an aggregate amount not
in excess of the greater of (A) $7.0 million and (B) an amount equal to 7%
of Consolidated Tangible Assets at any one time outstanding; provided,
however, that all Indebtedness Incurred by one or more Restricted
Subsidiaries that are not Note Guarantors pursuant to clause (v) or (vi)
above or this clause (vii) shall not exceed the greater of (A) $7.0 million
and (B) an amount equal to 7% of Consolidated Tangible Assets in aggregate
principal amount at any one time outstanding;
(viii) Indebtedness represented by the Note Guarantees and Guarantees
of Indebtedness Incurred pursuant to clause (i) or (iii) above;
(ix) Guarantees (A) by any Note Guarantor of Senior Indebtedness, (B)
by the Company or any Note Guarantor of Guarantor Senior Indebtedness or
(C) by any Wholly Owned Subsidiary that is not a Note Guarantor of
Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor;
(x) Indebtedness (A) arising by reason of any Lien created or
permitted to exist in compliance with the covenant described under
"-- Limitations on Liens," including any Indebtedness of any Note Guarantor
arising by reason of any Lien granted by such Person to secure Senior
Indebtedness, or of the Company or any Note Guarantor arising by reason of
any Lien granted by such Person to secure Guarantor Senior Indebtedness, or
(B) of any Restricted Subsidiary that is not a Note Guarantor arising
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by reason of any Lien granted by such Person to secure Indebtedness of any
Restricted Subsidiary that is not a Note Guarantor;
(xi) Indebtedness of the Company or any Restricted Subsidiary arising
from the honoring of a check, draft or similar instrument of such Person
drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence;
(xii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities, or obligations in respect of
purchase price adjustments, in connection with the acquisition or
disposition of assets, including pursuant to the Recapitalization;
(xiii) Indebtedness in respect of (A) commercial letters of credit, or
other letters of credit or other similar instruments or obligations, issued
in connection with liabilities incurred in the ordinary course of business
(including those issued to governmental entities in connection with
self-insurance under applicable workers' compensation statutes), or (B)
surety, judgment, appeal, performance and other similar bonds, instruments
or obligations provided in the ordinary course of business;
(xiv) Indebtedness under Hedging Obligations; provided, however, that
such Hedging Obligations are entered into for bona fide hedging purposes of
the Company or any Restricted Subsidiary and are in the ordinary course of
business;
(xv) Indebtedness (A) of the Company consisting of Guarantees of up to
an aggregate principal amount of $4.0 million of borrowings by Management
Investors in connection with the purchase of Capital Stock of the Company,
Holdings or G-II by such Management Investors or (B) of the Company or any
Restricted Subsidiary consisting of guarantees in respect of loans or
advances made to officers or employees of Holdings, the Company or any
Restricted Subsidiary, or guarantees otherwise made on their behalf, (1) in
respect of travel, entertainment and moving-related expenses incurred in
the ordinary course of business, or (2) in the ordinary course of business
not exceeding $500,000 in the aggregate outstanding at any time;
(xvi) Indebtedness of any Restricted Subsidiary that is Indebtedness
of another Person assumed by such Restricted Subsidiary in connection with
its acquisition of assets from such Person (other than Indebtedness
Incurred in connection with, or in contemplation of, such acquisition) and
any Refinancing Indebtedness with respect thereto; provided, however, that
at the time of such acquisition of assets the Company shall have been able
to Incur at least an additional $1.00 of Indebtedness under paragraph (a)
above after giving effect to such acquisition; and
(xvii) Indebtedness of a Restricted Subsidiary issued and outstanding
on or prior to the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred (A) as consideration in, or
to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company or (B) otherwise in connection with, or in
contemplation of, such acquisition) and any Refinancing Indebtedness with
respect thereto; provided, however, that on the date of any such
acquisition the Company shall have been able to Incur at least $1.00 of
Indebtedness under paragraph (a) above after giving effect to such
acquisition.
(c) Notwithstanding the foregoing, the Company will not Incur any
Indebtedness pursuant to any provision of the foregoing paragraph (b) that
permits Refinancing Indebtedness in respect of Indebtedness constituting
Subordinated Obligations, if the proceeds of such Refinancing Indebtedness are
used, directly or indirectly, to refinance such Subordinated Obligations, unless
such Refinancing Indebtedness will be subordinated to the Notes to at least the
same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, (i) any other obligation of the obligor on such
Indebtedness arising under any Guarantee, Lien or letter of credit supporting
such Indebtedness shall be disregarded to the extent that such Guarantee, Lien
or letter of credit secures the principal amount of such Indebtedness; (ii) in
the event that Indebtedness meets the criteria of more than one
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of the types of Indebtedness described in paragraph (b) above, the Company, in
its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses; and (iii) the amount of Indebtedness issued at a price that is less
than the principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in accordance with GAAP.
(e) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred, in the case of term
debt, or first committed, in the case of revolving credit debt, provided that
(x) the Dollar-equivalent principal amount of any such Indebtedness outstanding
on the Issue Date shall be calculated based on the relevant currency exchange
rate in effect on the Issue Date and (y) if such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. The principal amount of any Indebtedness Incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
Limitation on Layering. The Company shall not incur any Indebtedness if
such Indebtedness is expressly subordinate in right of payment to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness. No Note Guarantor shall incur any Indebtedness if such
Indebtedness is expressly subordinate in right of payment to any Guarantor
Senior Indebtedness of such Note Guarantor unless such Indebtedness is Guarantor
Senior Subordinated Indebtedness of such Note Guarantor or is contractually
subordinated in right of payment to Guarantor Senior Subordinated Indebtedness
of such Note Guarantor. Unsecured Indebtedness is not deemed to be subordinate
or junior to Secured Indebtedness merely because it is unsecured, and
Indebtedness that is not guaranteed by a particular Person is not deemed to be
subordinate or junior to Indebtedness that is so guaranteed merely because it is
not so guaranteed.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or
pay any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except (x) dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and (y) dividends or distributions payable
to the Company or any Restricted Subsidiary (and, if the Restricted Subsidiary
making such dividend or distribution is not a Wholly Owned Subsidiary, to its
other shareholders on no more than a pro rata basis, measured by value), (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of the
Company held by Persons other than the Company or another Restricted Subsidiary,
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Obligations (other than the purchase, repurchase,
redemption or other acquisition of Subordinated Obligations in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment") if
at the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not incur at least an additional $1.00 of
Indebtedness under paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or
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(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Company's Board of Directors whose
determination shall be conclusive and evidenced by a resolution of the
Company's Board of Directors) declared or made subsequent to the date of
the Indenture would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the end of the most recent
fiscal quarter ending prior to the Issue Date to the end of the most
recent fiscal quarter ending prior to the date of such Restricted
Payment for which consolidated financial statements of the Company are
available (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company either
(x) as capital contributions to the Company after the Issue Date or (y)
from the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to a
Restricted Subsidiary of the Company), provided that in the event such
issuance or sale is to an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries for the benefit of
their employees, to the extent the purchase by such plan or trust is
financed by Indebtedness of such plan or trust for which the Company is
liable as Guarantor or otherwise, such aggregate amount of Net Cash
Proceeds shall be limited to the aggregate amount of principal payments
made by such plan or trust with respect to such Indebtedness;
(C) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than
by a Restricted Subsidiary of the Company) subsequent to the Issue Date,
of any Indebtedness of the Company or its Restricted Subsidiaries
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash, or other property
(other than Capital Stock), distributed by the Company upon such
conversion or exchange), plus the amount of any cash or other property
received by the Company or any Restricted Subsidiary upon such
conversion or exchange;
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) repayments of the principal
of loans or advances or other transfers of assets to the Company or any
Restricted Subsidiary from any Unrestricted Subsidiary or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investment"), not
to exceed in the case of any such Unrestricted Subsidiary the aggregate
amount of Investments (other than Permitted Investments) made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary
after the Issue Date; and
(E) in the case of disposition or repayment of any Investment
constituting a Restricted Payment (without duplication of any amount
deducted in calculating the amount of Investments at any time
outstanding included in the amount of Restricted Payments), an amount
equal to the lesser of the return of capital or repayment with respect
to such Investment and the initial amount of such Investment, in either
case, less the cost of the disposition of such Investment.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Capital Stock of the Company or Subordinated
Obligations made by exchange (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which cash
is paid in lieu of the issuance of fractional shares) for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued
or sold to a Subsidiary or an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries) or a substantially
concurrent capital contribution to the Company; provided, however, that (A)
such purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale or capital
contribution shall be excluded in subsequent calculations under clause (B)
of paragraph (a);
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(ii) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Subordinated Obligations made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Subordinated
Obligations of the Company that is permitted to be Incurred pursuant to the
covenant described under "Limitation on Indebtedness"; provided, however,
that such purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments;
(iii) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Subordinated Obligations from Net Available Cash to
the extent permitted by the covenant described under "-- Limitation on
Sales of Assets"; provided, however, that such purchase, redemption,
repurchase, defeasance, retirement or other acquisition shall be excluded
in subsequent calculations of the amount of Restricted Payments;
(iv) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Subordinated Obligations upon a Change of Control to
the extent required by the agreement governing such Subordinated
Obligations but only if the Company shall have complied with the covenant
described under "-- Change of Control" and purchased all Notes tendered
pursuant to the offer to repurchase all the Notes required thereby, prior
to purchasing or repaying such Subordinated Obligations; provided, however,
that (A) the purchase price (stated as a percentage of principal amount or
issue price plus accrued original issue discount, if less) of such
Subordinated Obligations shall not be greater than the price (stated as a
percentage of principal amount) of the Notes pursuant to any such offer to
repurchase the Notes in the event of a Change of Control, and (B) any such
purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be included in subsequent calculations of the amount of
Restricted Payments;
(v) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with paragraph (a); provided, however, that such dividends shall be
included in subsequent calculations of the amount of Restricted Payments;
(vi) loans, advances, dividends or distributions by the Company to
Holdings or G-II to permit Holdings or G-II, as the case may be, to
repurchase or otherwise acquire its Capital Stock or options, warrants or
other rights in respect thereof, or payments by the Company to repurchase
or otherwise acquire Capital Stock or options, warrants or other rights in
respect thereof, in each case from Management Investors, such payments,
loans, advances, dividends or distributions not to exceed an amount (net of
repayments of any such loans or advances) equal to $500,000 in any fiscal
year and $2.0 million in the aggregate (plus the Net Cash Proceeds received
by the Company since the Issue Date as a capital contribution from the sale
to Management Investors of Capital Stock or options, warrants or other
rights in respect thereof); provided, however, that such payments, loans,
advances, dividends or distributions will be included in subsequent
calculations of the amount of Restricted Payments;
(vii) loans, advances, dividends or distributions by the Company or
any Restricted Subsidiary to Holdings or G-II not to exceed an amount
necessary to permit Holdings or G-II to (A) pay its costs (including all
professional fees and expenses) incurred to comply with its reporting
obligations under federal or state laws or under the Indenture, including
any reports filed with respect to the Securities Act, Exchange Act or the
respective rules and regulations promulgated thereunder, (B) make payments
in respect of its indemnification obligations owing to directors, officers,
employees or other Persons under its charter or by-laws or pursuant to
written agreements with any such Person, to the extent such payments relate
to the Company and its Subsidiaries, (C) pay all reasonable fees and
expenses payable by it in connection with the Transactions, or (D) pay its
other operational expenses (other than taxes) incurred in the ordinary
course of business and not exceeding $500,000 in any fiscal year; provided,
however, that such loans, advances, dividends or distributions will be
excluded in subsequent calculations of the amount of Restricted Payments;
(viii) payments by the Company or any Restricted Subsidiary to
Holdings (A) to satisfy or permit Holdings to satisfy its obligations under
the Management Agreements, (B) pursuant to the Tax Sharing Agreement, (C)
to pay or permit Holdings to pay any taxes, charges or assessments,
including but not
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limited to sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross
receipts, excise, occupancy, intangibles or similar taxes, charges or
assessments (other than federal, state or local taxes measured by income
and federal, state or local withholding imposed on payments made by
Holdings), required to be paid by Holdings by virtue of its being
incorporated or having capital stock outstanding (but not by virtue of
owning stock of any corporation other than the Company or any of its
Subsidiaries), or being a holding company parent of the Company or
receiving dividends from or other distributions in respect of the stock of
the Company, or having guaranteed any obligations of the Company or any
Subsidiary thereof, or having made any payment in respect of any of the
items for which the Company is permitted to make payments to Holdings
pursuant to this covenant, or (D) to pay or permit Holdings to pay any
other federal, state, foreign, provincial or local taxes measured by income
for which Holdings is liable up to an amount not to exceed with respect to
such federal taxes the amount of any such taxes which the Company would
have been required to pay on a separate company basis or on a consolidated
basis if the Company had filed a consolidated return on behalf of an
affiliated group (as defined in Section 1504 of the Internal Revenue Code
of 1986, as amended, or an analogous provision of state, local or foreign
law) of which it were the common parent, or with respect to state and local
taxes, on a combined basis if the Company had filed a combined return on
behalf of an affiliated group consisting only of the Company and its
Subsidiaries; provided, however, that such payments will be excluded in
subsequent calculations of the amount of Restricted Payments;
(ix) the payment by the Company of, or loans, advances, dividends or
distributions by the Company to Holdings or G-II to pay, dividends on the
common stock of the Company, Holdings or G-II, as applicable, following an
initial public offering of such common stock, in an amount not to exceed in
any fiscal year 6% of the net proceeds received by the Company, in or from
such public offering; provided, however, that such payments, loans,
advances, dividends or distributions will be included in subsequent
calculations of the amount of Restricted Payments; and
(x) loans, advances, dividends or distributions by the Company or any
Restricted Subsidiary in an aggregate amount not to exceed $10.0 million;
provided, however, that (A) the Company or any Restricted Subsidiary shall
not be permitted to make Restricted Payments under this clause (x) unless,
after giving effect thereto (including the Incurrence of any Indebtedness
to fund such Restricted Payment), the Consolidated Coverage Ratio of the
Company would be at least equal to 2.25:1.00 and (B) such loans, advances,
dividends or distributions will be included in subsequent calculations of
the amount of Restricted Payments; and
provided, further, that in the case of clauses (vii), (ix) and (x) no Default or
Event of Default shall have occurred or be continuing at the time of such
payment after giving effect thereto.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the date of the Indenture (including, without
limitation, the Senior Credit Facility);
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary (x) pursuant to an agreement relating to any Indebtedness
Incurred by a Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company, or of another Person
that is assumed by the Company or a Restricted Subsidiary in connection
with the acquisition of assets from, or merger or consolidation with, such
Person (other than Indebtedness Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate,
the transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was acquired by the
Company, or such acquisition of assets, merger or consolidation) and
outstanding on the
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date of such acquisition, merger or consolidation or (y) pursuant to any
agreement (not relating to any Indebtedness) in existence when a Person
becomes a Subsidiary of the Company or when such agreement is acquired by
the Company or any Subsidiary thereof, that is not created in contemplation
of such Person becoming such a Subsidiary or such acquisition (for purposes
of this clause (2), if another Person is the Successor Company, any
Subsidiary or agreement thereof shall be deemed acquired or assumed, as the
case may be, by the Company when such Person becomes the Successor
Company);
(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement (a "Refinancing Agreement") effecting a
refinancing of Indebtedness Incurred pursuant to, or that otherwise
extends, renews, refinances or replaces, an agreement referred to in clause
(1) or (2) of this covenant or this clause (3) (an "Initial Agreement") or
contained in any amendment to an Initial Agreement; provided, however, that
the encumbrances and restrictions contained in any such Refinancing
Agreement or amendment are no less favorable to the Holders of the Notes
taken as a whole than encumbrances and restrictions contained in the
Initial Agreement or Initial Agreements to which such Refinancing Agreement
or amendment relates (as conclusively determined in good faith by the Board
of Directors);
(4) any encumbrance or restriction (A) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that
is subject to a lease, license or similar contract, or the assignment or
transfer of any lease, license or other contract, (B) by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by the Indenture, (C) contained in mortgages,
pledges or other security agreements securing Indebtedness of a Restricted
Subsidiary to the extent such encumbrance or restrictions restrict the
transfer of the property subject to such mortgages, pledges or other
security agreements or (D) pursuant to customary provisions restricting
dispositions of real property interests set forth in any reciprocal
easement agreements of the Company or any Restricted Subsidiary;
(5) any restriction with respect to a Restricted Subsidiary (or any of
its property or assets) imposed pursuant to an agreement entered into for
the direct or indirect sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary (or the property or
assets that are subject to such restriction) pending the closing of such
sale or disposition;
(6) any encumbrance or restriction on the transfer of property or
assets required by any regulatory authority having jurisdiction over the
Company or any Restricted Subsidiary or any of their businesses; and
(7) any encumbrance or restriction pursuant to an agreement relating
to any Indebtedness incurred, or any sale of receivables, by a Foreign
Subsidiary.
Limitation on Sales of Assets. (a) The Company will not, and will not
permit any Restricted Subsidiary to, make any Asset Disposition unless
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming
responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value of the
shares and assets subject to such Asset Disposition, as such fair market
value may be determined (and shall be determined, to the extent such Asset
Disposition or any series of related Asset Dispositions involves aggregate
consideration in excess of $1.0 million) in good faith by the Board of
Directors, whose determination shall be conclusive (including as to the
value of all noncash consideration),
(ii) at least 80% of the consideration therefor (excluding, in the
case of an Asset Disposition of assets, any consideration by way of relief
from, or by any other Person assuming responsibility for, any liabilities,
contingent or otherwise, which are not Indebtedness) received by the
Company or such Restricted Subsidiary is in the form of cash, and
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(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) as follows:
(A) first, to the extent the Company elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred
Stock) of a Restricted Subsidiary), to prepay, repay or purchase Senior
Indebtedness or such Indebtedness of a Restricted Subsidiary (in each
case other than Indebtedness owed to the Company or a Restricted
Subsidiary) within 365 days after the date of such Asset Disposition;
(B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the
Company or such Restricted Subsidiary elects, to reinvest in Additional
Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary) within 365 days from the date of such
Asset Disposition, or, if such reinvestment in Additional Assets is a
project authorized by the Board of Directors that will take longer than
such 365 days to complete, the period of time necessary to complete such
project;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B) (such balance,
the "Excess Proceeds"), to make an offer to purchase Notes and (to the
extent required by the terms thereof) any other Senior Subordinated
Indebtedness, pursuant and subject to the conditions of the Indenture
and the agreements governing such other Indebtedness, at a purchase
price of 100% of the principal amount thereof (or accreted value, as
applicable) plus accrued and unpaid interest to the purchase date; and
(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C) above, to
fund (to the extent consistent with any other applicable provision of
the Indenture) any general corporate purpose (including the repayment of
any Subordinated Obligations);
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary will retire such Indebtedness and will cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions of this covenant, the Company and the Restricted Subsidiaries shall
not be required to apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions that is not applied in accordance with this covenant exceeds $5.0
million. If the aggregate principal amount (or accreted value, as applicable) of
Notes and Senior Subordinated Indebtedness validly tendered and not withdrawn in
connection with an offer pursuant to clause (C) above exceeds the Excess
Proceeds, the Excess Proceeds will be apportioned between the Notes and such
Senior Subordinated Indebtedness, with the portion of the Excess Proceeds
payable in respect of the Notes to equal the lesser of (x) the Excess Proceeds
amount multiplied by a fraction, the numerator of which is the outstanding
principal amount of the Notes and the denominator of which is the sum of the
outstanding principal amount of the Notes and the outstanding principal amount
(or accreted value, as applicable) of the relevant Senior Subordinated
Indebtedness, and (y) the aggregate principal amount of Notes validly tendered
and not withdrawn.
For the purposes of this covenant, the following are deemed to be cash: (v)
Cash Equivalents, (w) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition, (x) Indebtedness of any
Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of
such Asset Disposition, to the extent that the Company and each other Restricted
Subsidiary is released from any Guarantee of such Indebtedness in connection
with such Asset Disposition, (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash, and (z) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary.
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(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a)(iii)(C) above, the Company will be required to
purchase Notes tendered pursuant to an offer by the Company for the Notes (the
"Offer") at a purchase price of 100% of their principal amount plus accrued and
unpaid interest to the Purchase Date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to the
Offer is less than the Net Available Cash allotted to the purchase of Notes, the
remaining Net Available Cash will be available to the Company for use in
accordance with clause (a)(iii)(C) (to repay Senior Subordinated Indebtedness)
or clause (a)(iii)(D) above. The Company shall not be required to make an Offer
for Notes pursuant to this covenant if the Net Available Cash available therefor
(after application of the proceeds as provided in clauses (a)(iii)(A) and
(a)(iii)(B) above) is less than $5.0 million for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or conduct any transaction or series of transactions (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that
taken as a whole are less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate and (ii) that, in the event such Affiliate Transaction involves an
aggregate amount in excess of $1.0 million, are not in writing and have not been
approved by a majority of the members of the Board of Directors having no
material personal financial interest in such Affiliate Transaction, or in the
event there are no such members, as to which the Company has not obtained a
Fairness Opinion (as hereinafter defined). In addition, any transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $10.0 million will also require an opinion
(a "Fairness Opinion") from an independent investment banking firm or appraiser,
as appropriate, of national prominence, to the effect that the terms of such
transaction taken as a whole are either (i) no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not an Affiliate or (ii) fair to the Company or such Restricted
Subsidiary, as the case may be, from a financial point of view.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted by the covenant described under "-- Limitation
on Restricted Payments," any Permitted Investment, or any other transaction
specifically excluded from the definition of the term "Restricted Payment," (ii)
the performance of the Company's or Restricted Subsidiary's obligations under
any employment contract, collective bargaining agreement, employee benefit plan,
related trust agreement or any other similar arrangement heretofore or hereafter
entered into in the ordinary course of business, (iii) payment of compensation,
performance of indemnification or contribution obligations, or any issuance,
grant or award of stock, options or other securities, to employees, officers or
directors in the ordinary course of business, (iv) maintenance in the ordinary
course of business of benefit programs or arrangements for employees, officers
or directors, including vacation plans, health and the insurance plans, deferred
compensation plans, and retirement or savings plans and similar plans, (v) any
transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries, (vi) loans or advances made to directors, officers or
employees of Holdings, the Company or any Restricted Subsidiary, or guarantees
in respect thereof or otherwise made on their behalf (including any payments
under such guarantees), (A) in respect of travel, entertainment or
moving-related expenses incurred in the ordinary course of business, or (B) in
the ordinary course of business not exceeding $500,000 in the aggregate
outstanding at any time, (vii) guarantees of borrowings by Management Investors
in connection with the purchase of Capital Stock of the Company, Holdings or
G-II by
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such Management Investors, which guarantees are permitted under the covenant
described under "-- Limitation on Indebtedness," and payments thereunder, (viii)
the Transactions and the incurrence and payment of all fees and expenses payable
in connection therewith, (ix) any other transaction arising out of agreements in
existence on the Issue Date, (x) execution, delivery and performance of the Tax
Sharing Agreement and the Management Agreements, including the initial payment
of a fee of $2.5 million to GSCP and the ongoing payment of fees to GSCP of up
to $1.75 million per year plus reasonable out of pocket expenses, (xi) any
commercial or other business transaction in the ordinary course of business with
any Permitted Holder or any Affiliate thereof, on terms that taken as a whole
are no less favorable to the Company and its Restricted Subsidiaries than those
that could be obtained at the time in arm's-length dealings with a Person who is
not an Affiliate of the Company and (xii) any transaction in the ordinary course
of business, or approved by a majority of the members of the Board of Directors
having no material personal financial interest in such transaction, between the
Company or any Restricted Subsidiary and any Affiliate of the Company controlled
by the Company that is a joint venture or similar entity primarily engaged in a
Related Business.
Limitation on the Sale or Issuance of Preferred Stock of Restricted
Subsidiaries. The Company will not sell any shares of Preferred Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Preferred Stock to any Person
(other than to the Company or a Restricted Subsidiary, or to directors as
directors' qualifying shares, or (in the case of any Foreign Subsidiary) to the
extent required by applicable law); provided, however, that (a) the Company or
any Restricted Subsidiary is permitted to sell Preferred Stock of a Subsidiary
in compliance with the terms of the covenant described under "-- Limitation on
Sales of Assets," and (b) any such Preferred Stock may be issued or sold if
Incurred by any Restricted Subsidiary in compliance with the covenant described
under "-- Limitation on Indebtedness."
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien (other than Permitted Liens) on any of its property or assets (including
Capital Stock of any other Person), whether owned on the date of the Indenture
or thereafter acquired, securing any Indebtedness that is not Senior
Indebtedness or Guarantor Senior Indebtedness (the "Initial Lien"), unless
contemporaneously therewith effective provision is made to secure the
Indebtedness due under the Indenture and the Notes or, in respect of Liens on
any Restricted Subsidiary's property or assets, any Note Guarantee of such
Restricted Subsidiary, equally and ratably with such obligation for so long as
such obligation is so secured by such Initial Lien. Any such Lien thereby
created in favor of the Notes or any such Note Guarantee will be automatically
and unconditionally released and discharged upon (i) the release and discharge
of the Initial Lien to which it relates, or (ii) any sale, exchange or transfer
to any Person not an Affiliate of the Company of the property or assets secured
by such Initial Lien, or of all of the Capital Stock held by the Company or any
Restricted Subsidiary in, or all or substantially all the assets of, any
Restricted Subsidiary creating such Lien.
SEC Reports. Notwithstanding that the Company may not be required to be or
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file (if then permitted to do so) with the SEC
and provide (whether or not so filed with the SEC) the Trustee and Noteholders
and prospective Noteholders (upon request) with the annual reports and the
information, documents and other reports, which are specified in Sections 13 and
15(d) of the Exchange Act. The Company also will comply with the other
provisions of TIA sec. 314(a).
Additional Note Guarantors. The Indenture will provide that if the Company
or any of its Domestic Subsidiaries shall acquire or create another Domestic
Subsidiary that is a Significant Subsidiary, then the Company, the Trustee and
such newly acquired or created Domestic Subsidiary shall execute and deliver a
supplemental indenture evidencing such Note Guarantee and deliver an opinion of
counsel, in accordance with the terms of the Indenture. The Company will also
have the right to cause any Restricted Subsidiary so to become a Note Guarantor.
Each Note Guarantee will be limited to an amount not to exceed the maximum
amount that can be Guaranteed by that Subsidiary without rendering the Note
Guarantee, as it relates to such Subsidiary, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. See "-- Note Guarantees."
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MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company") will
be a Person organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company) will expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) immediately
after giving effect to such transaction, the Consolidated Coverage Ratio of the
Successor Company would be at least equal to the greater of (A) 1.75:1.00 and
(B) a ratio equal to 75% of the actual Consolidated Coverage Ratio of the
Company as of such date of determination; (iv) each Note Guarantor (other than
any party to any such merger) shall have delivered a written instrument in form
and substance reasonably satisfactory to the Trustee confirming its Note
Guarantee; and (v) the Company will have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture, provided that (x) in giving such opinion such counsel
may rely on such officer's certificate as to any matters of fact (including
without limitation as to compliance with the foregoing clauses (ii) and (iii)),
and (y) no Opinion of Counsel will be required for a consolidation, merger or
transfer described in the last paragraph of this covenant. Any Indebtedness that
becomes an obligation of the Company or any Restricted Subsidiary (or that is
deemed to be Incurred by any Restricted Subsidiary that becomes a Restricted
Subsidiary) as a result of such transaction undertaken in compliance with this
covenant, and any Refinancing Indebtedness with respect thereto, shall be deemed
to have been Incurred in compliance with the covenant described under "Certain
Covenants -- Limitation on Indebtedness."
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, and
thereafter the predecessor Company shall be relieved of all obligations and
covenants under this Agreement, except that, in the case of a conveyance,
transfer or lease of all or substantially all its assets, the predecessor
Company will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (2) the Company may merge with an
Affiliate incorporated or organized for the purpose of reincorporating or
reorganizing the Company in another jurisdiction to realize tax or other
benefits.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by the provisions described under
"-- Ranking" above, (iii) the failure by the Company to comply with its
obligations under the covenant described under "-- Merger and Consolidation"
above, (iv) the failure by the Company to comply for 30 days after notice with
any of its obligations under the covenants described under "Change of Control"
or "-- Certain Covenants" above (in each case, other than a failure to purchase
Notes), (v) the failure by the Company to comply for 60 days after notice with
its other agreements contained in the Notes or the Indenture, (vi) the failure
by any Note Guarantor to comply with its obligations under any Note Guarantee to
which such Note Guarantor is a party, after any applicable grace period, (vii)
the failure by the Company or any Significant Subsidiary to pay any Indebtedness
within any applicable grace period after final maturity or the acceleration of
any such Indebtedness by the holders thereof because of a default if the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million or its
foreign currency equivalent (the "cross acceleration provision"), (viii) certain
events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"),
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(ix) the rendering of any judgment or decree for the payment of money in an
amount (net of any insurance or indemnity payments actually received in respect
thereof prior to or within 90 days from the entry thereof, or to be received in
respect thereof in the event any appeal thereof shall be unsuccessful) in excess
of $5.0 million or its foreign currency equivalent against the Company or a
Significant Subsidiary that is not discharged, or bonded or insured by a third
Person, if (A) an enforcement proceeding thereon is commenced or (B) such
judgment or decree remains outstanding for a period of 90 days following such
judgment or decree and is not discharged, waived or stayed (the "judgment
default provision") or (x) the failure of any Note Guarantee by a Note Guarantor
which is a Significant Subsidiary to be in full force and effect (except as
contemplated by the terms thereof or of the Indenture) or the denial or
disaffirmation in writing by any such Note Guarantor of its obligations under
the Indenture or any Note Guarantee if such Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event Of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a Default under clause (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the outstanding Notes notify the Company of the Default and the Company does not
cure such Default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least a
majority in principal amount of the outstanding Notes by notice to the Company
and the Trustee, may declare the principal of and accrued but unpaid interest on
all the Notes to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company occurs
and is continuing, the principal of and interest on all the Notes will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, or premium (if any) or interest on, any Note, the Trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding
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notice is in the interests of the Noteholders. In addition, the Company is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. The Company also is required to deliver
to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the Holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each Holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the principal
amount of Notes whose Holders must consent to an amendment, (ii) reduce the rate
of or extend the time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption of any Note or change the time at which any Note may
be redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) make any change to the
subordination provisions of the Indenture that adversely affects the rights of
any Holder, (vii) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes or (viii) make any change in the amendment provisions that
require each Holder's consent or in the waiver provisions. In addition, without
the consent of the Holders of 90% in principal amount of the Notes then
outstanding, no amendment may release any Note Guarantor that is a Significant
Subsidiary from any of its obligations under its Note Guarantee or the
Indenture, except in compliance with the terms thereof or of the Indenture.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor of the obligations of the Company under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided, however, that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add Guarantees with respect to the Notes, to secure the Notes, to add
to the covenants of the Company for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company, to provide that any
Indebtedness that becomes or will become an obligation of the Successor Company
pursuant to a transaction governed by the provisions described under "-- Merger
and Consolidation" (and that is not a Subordinated Obligation) is Senior
Subordinated Indebtedness for purposes of this Indenture, to make any change
that does not adversely affect the rights of any Holder or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the TIA. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment. After an amendment
under the Indenture becomes effective, the Company is required to mail to
Noteholders a notice briefly describing such amendment. However, the failure to
give such notice to all Noteholders, or any defect therein, will not impair or
affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "-- Certain Covenants," the operation of the cross
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acceleration provision, the bankruptcy provisions with respect to Subsidiaries
and the judgment default provision described under "-- Defaults" above and the
limitations contained in clause (iii) under "-- Merger and Consolidation" above
("covenant defeasance"). If the Company exercises its legal defeasance option or
its covenant defeasance option, each Note Guarantor will be released from all of
its obligations with respect to its Note Guarantee.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii), (viii) (but only with
respect to certain bankruptcy events of a Significant Subsidiary), (ix) or (x)
under "Defaults" above or because of the failure of the Company to comply with
clause (iii) under "-- Merger and Consolidation" above.
Either defeasance option may be exercised to any redemption date or to the
maturity date for the Notes. In order to exercise either defeasance option, the
Company must irrevocably deposit in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations, or a combination thereof, for the
payment of principal of, and premium (if any) and interest on, the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law since the date of the Indenture).
CONCERNING THE TRUSTEE
The Manufacturers and Traders Trust Company is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock of
any Person that at such time is a Restricted Subsidiary, acquired from a third
party; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the then outstanding principal amount of such Note
and (ii) the excess of (A) the present value of all remaining required interest
and principal payments due on such Note, computed using a discount rate equal to
the Treasury Rate plus 75 basis points, over (B) the then-outstanding principal
amount of such Note.
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"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares, or (in the case of a Foreign Subsidiary) to the extent
required by applicable law), property or other assets (each referred to for the
purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary, (ii) a disposition of inventory,
equipment, obsolete assets or surplus personal property in the ordinary course
of business, (iii) the sale of Temporary Cash Investments or Cash Equivalents in
the ordinary course of business, (iv) dispositions with a fair market value not
exceeding $500,000 in the aggregate in any fiscal year, (v) the sale or discount
(with or without recourse, and on commercially reasonable terms) of accounts
receivable or notes receivable arising in the ordinary course of business, or
the conversion or exchange of accounts receivable for notes receivable, (vi) the
licensing of intellectual property in the ordinary course of business, (vii) for
purposes of the covenant described under "-- Certain Covenants -- Limitation on
Sales of Assets" only, a disposition subject to the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments" or (viii) a
disposition of property or assets that is governed by the provisions described
under "-- Merger and Consolidation."
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable under or in respect of the Senior
Credit Facility, including without limitation principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or any Restricted
Subsidiary whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees,
other monetary obligations of any nature and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, at any time of determination, the Borrowing Base as
defined in the Senior Credit Agreement.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to close
in New York City.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
"Cash Equivalents" means any of the following: (a) securities issued or
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (b) time deposits, certificates of deposit or bankers'
acceptances of (i) any lender under the Senior Credit Agreement or (ii) any
commercial
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bank having capital and surplus in excess of $500,000,000 and the commercial
paper of the holding company of which is rated at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's (or if at
such time neither is issuing ratings, then a comparable rating of another
nationally recognized rating agency), (c) commercial paper rated at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (or if at such time neither is issuing ratings, then a comparable rating
of another nationally recognized rating agency) and (d) investments in money
market funds complying with the risk limiting conditions of Rule 2a-7 or any
successor rule of the Securities and Exchange Commission under the Investment
Company Act.
"Chase" means The Chase Manhattan Bank.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Telex Communications, Inc., a Delaware corporation and the
primary obligor on the Notes, and any successor thereto.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA of the Company and its Restricted
Subsidiaries for the period of the most recent four consecutive fiscal quarters
ending prior to the date of such determination for which consolidated financial
statements of the Company are available to (ii) Consolidated Interest Expense
for such four fiscal quarters (in each case, determined, for each fiscal quarter
(or portion thereof) of the four fiscal quarters ending prior to the Issue Date,
on a pro forma basis to give effect to the Recapitalization as if it had
occurred at the beginning of such four-quarter period); provided, however, that:
(1) if the Company or any Restricted Subsidiary (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period
(except that in making such computation, the amount of Indebtedness under
any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such
Indebtedness during such four fiscal quarters or such shorter period for
which such facility was outstanding or (B) if such facility was created
after the end of such four fiscal quarters, the average daily balance of
such Indebtedness during the period from the date of creation of such
facility to the date of such calculation) and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period, or (y) has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of the period
that is no longer outstanding on such date of determination, or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio involves a discharge of Indebtedness (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid), EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect on a pro
forma basis to such discharge of such Indebtedness, including with the
proceeds of such new Indebtedness, as if such discharge had occurred on the
first day of such period,
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition of any company
or any business or any group of assets constituting an operating unit of a
business, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and is continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (and, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated Interest
Expense for such
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period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale),
(3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company or any business or any group of assets
constituting an operating unit of a business, including any such
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or (3)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first day
of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an Asset Disposition, Investment or acquisition of assets, or any transaction
governed by the provisions described under "-- Merger and Consolidation", or the
amount of income or earnings relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred or repaid,
repurchased, defeased or otherwise discharged in connection therewith, the pro
forma calculations in respect thereof shall be as determined in good faith by a
responsible financial or accounting Officer of the Company, based on reasonable
assumptions. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at the
option of the Company or such Restricted Subsidiary, either a fixed or floating
rate. If any Indebtedness which is being given pro forma effect was Incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries,
the Company and its consolidated Restricted Subsidiaries, determined in
accordance with GAAP, minus, to the extent included in such interest expense,
amortization or write-off of financing costs, and plus, to the extent incurred
by the Company and its Restricted Subsidiaries in such period but not included
in such interest expense, without duplication, (i) interest expense attributable
to Capitalized Lease Obligations and the interest component of rent expense
associated with Attributable Debt in respect of the relevant lease giving rise
thereto, determined as if such lease were a capitalized lease, in accordance
with GAAP, (ii) amortization of debt discount, (iii) interest in respect of
Indebtedness of any other Person that has been Guaranteed by the Company or any
Restricted Subsidiary, but only to the extent that such interest is actually
paid by the Company or any Restricted Subsidiary, (iv) non-cash interest
expense, (v) net costs associated with Hedging Obligations, (vi) the product of
(A) Preferred Stock dividends in respect of all Preferred Stock of Domestic
Subsidiaries of the Company and Disqualified Stock of the Company held by
Persons other than the Company or a Restricted Subsidiary multiplied by (B) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
the Company, expressed as a decimal, in each case, determined on a consolidated
basis in accordance with GAAP; and (vii) the cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are used
by such plan or trust to pay interest to any Person (other than the Company or
any Restricted Subsidiary) on Indebtedness Incurred by such plan or trust;
provided, however, that there shall be excluded therefrom any such interest
expense of any Unrestricted
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Subsidiary to the extent the related Indebtedness is not Guaranteed or paid by
the Company or any Restricted Subsidiary. For purposes of the foregoing, gross
interest expense shall be determined after giving effect to any net payments
made or received by the Company and its Subsidiaries with respect to Interest
Rate Agreements.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its Restricted Subsidiaries, determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained
in clause (iv) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Person during
such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity in the net loss of such
Person shall be included to the extent of the aggregate Investment of the
Company or any of its Restricted Subsidiaries in such Person,
(ii) any net income (loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that
(A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend
that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the net loss of such
Restricted Subsidiary shall be included to the extent of the aggregate
Investment of the Company or any of its other Restricted Subsidiaries in
such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its consolidated Restricted Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in accounting principles.
"Consolidated Tangible Assets" means, as of any date of determination, the
total assets, less goodwill and other intangibles (other than patents,
trademarks, copyrights, licenses and other intellectual property) shown on the
balance sheet of the Company and its Restricted Subsidiaries as of the most
recent date for which such a balance sheet is available, determined on a
consolidated basis in accordance with GAAP. At March 31, 1997, on a pro forma
basis giving effect to the Transactions, the Consolidated Tangible Assets of the
Company was $103.6 million.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP;
provided, however, that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary, but the interest of the Company or any
Unrestricted Subsidiary will be accounted for as an investment. The term
"Consolidated" has a correlative meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangements
(including derivative agreements or arrangements) as to which such Person is a
party or a beneficiary.
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"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount to or under which, at the date of determination, the
holders thereof are committed to lend up to, at least $10.0 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the
Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
(other than Management Stock) that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable or exercisable) or
upon the happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case on or prior
to the 91st day after the Stated Maturity of the Notes.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"EBITDA" means, for any period, the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization of intangibles and
other non-cash charges or non-cash losses.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the Company
that is not organized under the laws of the United States of America or any
state thereof or the District of Columbia and (b) any Restricted Subsidiary of
the Company that has no material assets other than securities of one or more
Foreign Subsidiaries, and other assets relating to an ownership interest in any
such securities or Subsidiaries.
"G-II" means Greenwich II, LLC, a Delaware limited liability company, and
any successor in interest thereto.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date (for purposes of the definitions of
the terms "Consolidated Coverage Ratio," "Consolidated Interest Expense,"
"Consolidated Net Income" and "EBITDA," all defined terms in the Indenture to
the extent used in or relating to any of the foregoing definitions, and all
ratios and computations based on any of the foregoing definitions) and as in
effect from time to time (for all other purposes of the Indenture), including
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession all ratios and computations based on GAAP contained in the
Indenture shall be computed in conformity with GAAP.
"GST" means GST Acquisition Corp., a Delaware corporation, and any
successor thereto.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other nonfinancial
obligation of any other Person, including any such obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
such other obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
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"Guarantor Senior Indebtedness" means the following obligations, whether
outstanding on the date of the Indenture or thereafter issued, without
duplication: (i) any Guarantee of the Bank Indebtedness by such Note Guarantor
and all other Guarantees by such Note Guarantor of Senior Indebtedness of the
Company or Guarantor Senior Indebtedness for any other Note Guarantor; and (ii)
all obligations consisting of the principal of and premium, if any, and accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Note Guarantor
regardless of whether postfiling interest is allowed in such proceeding) on, and
fees and other amount owing in respect of, all other Indebtedness of the Note
Guarantor, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is expressly provided that the obligations
in respect of such Indebtedness are not senior in right of payment to the
obligations of such Note Guarantor under the Note Guarantee; provided, however,
that Guarantor Senior Indebtedness shall not include (1) any obligations of such
Note Guarantor to the Note Guarantor or any other Subsidiary of the Note
Guarantor, (2) any liability for Federal, state, local, foreign or other taxes
owed or owing by such Note Guarantor, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Note Guarantor that is expressly subordinate in right
of payment to any of the Indebtedness of such Note Guarantor, including any
Guarantor Senior Subordinated Indebtedness and Guarantor Subordinated
Obligations of such Note Guarantor or (5) any Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means, with respect to a Note
Guarantor, the obligations of such Note Guarantor under the Note Guarantee and
any other Indebtedness of such Note Guarantor that specifically provides that
such Indebtedness is to rank pari passu in right of payment with the obligations
of such Note Guarantor under the Note Guarantee and is not expressly
subordinated by its terms in right of payment to any Indebtedness of such Note
Guarantor which is not Guarantor Senior Indebtedness of such Note Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a Note
Guarantor, any Indebtedness of such Note Guarantor (whether outstanding on the
Issue Date or thereafter Incurred) which is expressly subordinate in right of
payment to the obligations of such Note Guarantor under the Note Guarantee
pursuant to a written agreement.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered in the Register.
"Holdings" means Holdings Acquisition Corp., a Delaware corporation, and
any successor thereto.
"Holdings" means Telex Communications Group, Inc., a Delaware corporation,
and any successor in interest thereto.
"Incur" means issue, assume, enter into any Guarantee of, incur or
otherwise become liable for; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Any
Indebtedness issued at a discount (including Indebtedness on which interest is
payable through the issuance of additional Indebtedness) shall be deemed
incurred at the time of original issuance of the Indebtedness at the initial
accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed money,
(ii) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person (including
reimbursement obligations) in respect of letters of credit or other similar
instruments (the amount of such obligations being equal at any time to
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the aggregate then undrawn and unexpired amount of such letters of credit
or other instruments plus the aggregate amount of drawings thereunder that
have not then been reimbursed),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than one year after the date of placing such
property in final service or taking final delivery and title thereto or the
completion of such services,
(v) all Capitalized Lease Obligations and Attributable Debt of such
Person,
(vi) the redemption, repayment or other repurchase amount of such
Person with respect to any Disqualified Stock or (if such Person is a
Subsidiary of the Company) any Preferred Stock of such Subsidiary, but
excluding, in each case, any accrued dividends (the amount of such
obligation to be equal at any time to the maximum fixed involuntary
redemption, repayment or repurchase price for such Capital Stock, or if
such Capital Stock has no such fixed price, to the involuntary redemption,
repayment or repurchase price therefor calculated in accordance with the
terms thereof as if then redeemed, repaid or repurchased, and if such price
is based upon or measured by the fair market value of such Capital Stock,
such fair market value shall be as determined in good faith by the Board of
Directors or the board of directors of the issuer of such Capital Stock),
(vii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, and
(ix) to the extent not otherwise included in this definition, net
Hedging Obligations of such Person (the amount of any such obligation to be
equal at any time to the termination value of such agreement or arrangement
giving rise to such Hedging Obligation that would be payable by such Person
at such time).
The amount of Indebtedness of any Person at any date shall be determined as
set forth above or otherwise provided in this Indenture, or otherwise in
accordance with GAAP.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement (including derivative agreements or arrangements) as to which
such Person is party or a beneficiary.
"Investment" in any Person by any other Person means any direct or indirect
advance, loan or other extension of credit (other than to customers, directors,
officers or employees of any Person in the ordinary course of business) or
capital contribution (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of others)
to, or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by, such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments," (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
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"Investors" means Greenwich Street Capital Partners, L.P., Greenwich Street
Capital Offshore Fund, Ltd., The Travelers Insurance Company, The Travelers Life
and Annuity Company, TRV Employees Fund, L.P. and the other parties that
purchased equity interests in G-II on the date of the Recapitalization.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Agreements" means, collectively, the Consulting Agreement, the
Fee Agreement and the Indemnification Agreement, each between the Company and
Greenwich Street Capital Partners, L.P. (and its permitted successors and
assigns thereunder), as each may be amended, supplemented, waived or otherwise
modified from time to time in accordance with the terms thereof and of the
Indenture.
"Management Investors" means the officers, directors, employees and other
members of the management of Holdings, the Company or any of their respective
Subsidiaries, or family members or relatives thereof, or trusts for the benefit
of any of the foregoing, or any of their heirs, executors, successors and legal
representatives, who at any date beneficially own or have the right to acquire,
directly or indirectly, Capital Stock of the Company, Holdings or G-II.
"Management Stock" means Capital Stock of the Company, Holdings or G-II, or
options, warrants or other rights in respect thereof, held by any of the
Management Investors.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made, and all installment payments required to be
made, on any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets, or that
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, or to any other Person (other than the Company or a
Restricted Subsidiary) owning a beneficial interest in the assets disposed of in
such Asset Disposition and (iv) appropriate amounts to be provided as a reserve,
in accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of any securities
of the Company or any Subsidiary by the Company or any Subsidiary, or any
capital contribution, means the cash proceeds of such issuance, sale or
contribution net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance, sale or
contribution and net of taxes paid or payable as a result thereof.
"Note Guarantee" means any guarantee that may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the covenant described
under "-- Certain Covenants -- Additional Note Guarantors."
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Officer" means the President, Chief Financial Officer, any Vice President,
Controller or Treasurer of the Company.
"Officer's Certificate" means a certificate signed by one Officer.
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"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holder" means any of the following: (i) any of the Investors,
Smith Barney Holdings Inc. and their respective Affiliates; (ii) any investment
fund or vehicle managed, sponsored or advised by Greenwich Street Capital
Partners, Inc., The Travelers Insurance Company, The Travelers Life and Annuity
Company, Smith Barney Holdings Inc. or any of their respective Affiliates; (iii)
any limited or general partners of, or other investors in, any of the Investors
and their respective Affiliates, or any such investment fund or vehicle; and
(iv) any Person acting in the capacity of an underwriter in connection with a
public or private offering of Capital Stock of the Company, Holdings or G-II.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
(iii) Temporary Cash Investments or Cash Equivalents;
(iv) receivables owing to the Company or any Restricted Subsidiary, if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(v) securities or other Investments received as consideration in sales
or other dispositions of property or assets, including Asset Dispositions
made in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets;"
(vi) securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or
enforcement of any Lien, or in satisfaction of judgments, including in
connection with any bankruptcy proceeding or other reorganization of
another Person;
(vii) Investments in existence or made pursuant to legally binding
written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and related
Hedging Obligations, which obligations are Incurred in compliance with the
covenant described under "-- Certain Covenants -- Limitation on
Indebtedness;"
(ix) pledges or deposits (x) with respect to leases or utilities
provided to third parties in the ordinary course of business or (y)
otherwise described in the definition of "Permitted Liens"; and
(x) other Investments in an aggregate amount outstanding at any time
not to exceed the greater of (A) $7,000,000 and (B) 7% of Consolidated
Tangible Assets.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or the nonpayment of which in the aggregate would not reasonably
be expected to have a material adverse effect on the Company and its
Restricted Subsidiaries, or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or a Subsidiary thereof, as the case
may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations that are not overdue for a period
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of more than 60 days, or that are bonded or that are being contested in
good faith and by appropriate proceedings;
(c) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other
similar legislation or other insurance related obligations (including,
without limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements);
(d) pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed
money), obligations for utilities, leases, licenses, statutory obligations,
surety, judgment and appeal bonds, performance bonds and other obligations
of a like nature incurred in the ordinary course of business;
(e) easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations, restrictions, encroachments, changes,
and other similar encumbrances or title defects incurred, or leases or
subleases granted to others, in the ordinary course of business, which do
not in the aggregate materially interfere with the ordinary conduct of the
business of the Company and its Subsidiaries, taken as a whole;
(f) Liens existing on, or provided for under written arrangements
existing on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising
under written arrangements existing on the Issue Date) securing any
Refinancing Indebtedness in respect of such Indebtedness so long as the
Lien securing such Refinancing Indebtedness is limited to all or part of
the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness;
(g) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company
or any Restricted Subsidiary of the Company has easement rights or on any
leased property and subordination or similar agreements relating thereto
and (ii) any condemnation or eminent domain proceedings affecting any real
property;
(h) Liens securing Hedging Obligations Incurred in compliance with the
covenant described under "-- Certain Covenants -- Limitation on
Indebtedness;"
(i) Liens arising out of judgments, decrees, orders or awards in
respect of which the Company shall in good faith be prosecuting an appeal
or proceedings for review, which appeal or proceedings shall not have been
finally terminated, or if the period within which such appeal or
proceedings may be initiated shall not have expired;
(j) leases, subleases, licenses or sublicenses to third parties;
(k) Liens securing (x) Indebtedness Incurred in compliance with clause
(b)(i), (b)(ii), (b)(v) or (b)(vii) of the covenant described under
"Certain Covenants -- Limitation on Indebtedness", or clause (b)(iv)
thereof (other than Refinancing Indebtedness Incurred in respect of
Indebtedness described in paragraph (a) thereof) or (y) Bank Indebtedness;
(l) Liens securing commercial bank indebtedness;
(m) Liens on properties or assets (1) of the Company or any Note
Guarantor securing Senior Indebtedness or Guarantor Senior Indebtedness,
(2) of any Wholly Owned Subsidiary that is not a Note Guarantor securing
Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor or
(3) of any Restricted Subsidiary that is not a Note Guarantor securing its
Indebtedness;
(n) Liens existing on property or assets of a Person at the time such
Person becomes a Subsidiary of the Company (or at the time the Company or a
Restricted Subsidiary acquires such property or assets); provided, however,
that such Liens are not created in connection with, or in contemplation of,
such other Person becoming such a Subsidiary (or such acquisition of such
property or assets), and that such Liens
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are limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in respect
thereof) that secured (or, under the written arrangements under which such
Liens arose, could secure) the obligations to which such Liens relate;
(o) Liens on Capital Stock of an Unrestricted Subsidiary that secure
Indebtedness or other obligations of such Unrestricted Subsidiary;
(p) any encumbrance or restriction (including, but not limited to, put
and call agreements) with respect to Capital Stock of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement;
(q) Liens securing the Notes; and
(r) Liens securing Refinancing Indebtedness Incurred in respect of any
Indebtedness secured by, or securing any refinancing, refunding, extension,
renewal or replacement (in whole or in part) of any other obligation
secured by, any other Permitted Liens, provided that any such new Lien is
limited to all or part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect thereof) that
secured (or, under the written arrangements under which the original Lien
arose, could secure) the obligations to which such Liens relate.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company, Holdings or G-II pursuant to an effective
registration statement under the Securities Act (whether alone or in conjunction
with any secondary public offering), the proceeds of which, if issued by
Holdings or G-II, are contributed to the Company.
"Public Market" means any time after a Public Equity Offering has been
consummated and either (x) at least 10% of the total issued and outstanding
common stock (or equivalent equity interests) of the Company, Holdings or G-II
has been distributed by means of an effective registration statement under the
Securities Act or (y) an established public trading market otherwise exists for
any such common stock or equivalent equity interests.
"Recapitalization" means the recapitalization of Holdings pursuant to the
Recapitalization Agreement.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," "refinanced" and
"refinancing" as used in the Indenture shall have a correlative meaning) any
Indebtedness existing on the date of the Indenture or Incurred in compliance
with the Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in the
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and (iii)
such Refinancing Indebtedness is Incurred in an aggregate principal amount (or
if issued with original issue discount, an aggregate issue price) that is equal
to or less than the sum of (x) the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced, plus (y) fees, underwriting discounts, premiums
and other costs and expenses incurred in connection with such Refinancing
Indebtedness; provided further, however, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor
that
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refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means those businesses in which the Company or any of
its Subsidiaries is engaged on the date of the Indenture, or that are reasonably
related, complementary or incidental thereto.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility under the
Senior Credit Facility (which may include any swing line or letter of credit
facility or subfacility thereunder).
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or such Restricted Subsidiary transfers such property to a Person
and the Company or such Restricted Subsidiary leases it from such Person, other
than leases (x) between the Company and a Restricted Subsidiary or between or
(y) required to be classified and accounted for as capitalized leases for
financial reporting purposes in accordance with GAAP.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Credit Agreement" means the credit agreement dated as of May 6,
1997, among the Company (after giving effect to the Transactions), the banks and
other financial institutions party thereto from time to time, Morgan Stanley
Senior Funding, Inc., as documentation agent, and Chase as administrative agent,
as such agreement may be assumed by any successor in interest, and as such
agreement may be amended, supplemented, waived or otherwise modified from time
to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or otherwise,
and whether provided under the original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior
Credit Agreement, any Loan Documents (as defined therein), any notes and letters
of credit issued pursuant thereto and any guarantee and collateral agreement,
patent and trademark security agreement, mortgages, letter of credit
applications and other security agreements and collateral documents, and other
instruments and documents, executed and delivered pursuant to or in connection
with any of the foregoing, in each case as the same may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Senior Credit Agreement or otherwise). Without limiting the generality
of the foregoing, the term "Senior Credit Facility" shall include any agreement
(i) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness
incurred thereunder or available to be borrowed thereunder or (iv) otherwise
altering the terms and conditions thereof.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that (i) specifically provides that such
Indebtedness is to rank pari passu with the Notes or is otherwise entitled
"Senior Subordinated" Indebtedness and (ii) is not expressly subordinated by its
terms in right of payment to any Indebtedness of the Company that is not Senior
Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, as in effect on the Issue Date.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
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"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter Incurred) which is
expressly subordinate in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other equity interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such person or (ii) one or
more Subsidiaries of such Person.
"Successor Company" shall have the meaning assigned thereto in clause (i)
under "-- Merger and Consolidation."
"Tax Sharing Agreement" means the Tax Sharing Agreement between the Company
and Holdings, as the same may be amended, supplemented, waived or otherwise
modified from time to time in accordance with the terms thereof and of the
Indenture.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations (x) of the United States of America or any agency thereof
or obligations Guaranteed by the United States of America or any agency thereof
or (y) of any foreign country recognized by the United States of America rated
at least "A" by S&P or "A1" by Moody's, (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 180
days of the date of acquisition thereof issued by a bank or trust company that
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having capital
and surplus aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" by S&P or "A-1" by
Moody's, (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) or (ii) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
Investments in commercial paper, maturing not more than 270 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any Investment therein is made of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P, (v) Investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's, (vi) any money market deposit accounts
issued or offered by a domestic commercial bank or a commercial bank organized
and located in a country recognized by the United States of America, in each
case, having capital and surplus in excess of $250 million (or the foreign
currency equivalent thereof), or investments in money market funds complying
with the risk limiting conditions of Rule 2a-7 or any short-term successor rule)
of the SEC, under the Investment Company Act of 1940, as amended, and (vii)
similar short-term investments approved by the Board of Directors in the
ordinary course of business.
"Term Loan Facility" means the term loan facilities provided under the
Senior Credit Facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec.
77aaa-77bbbb) as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
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"Transactions" means, collectively, the Recapitalization, the initial
equity investment by the Investors, the Offering, the initial borrowings under
the Senior Credit Facility, and all other transactions relating to the
Recapitalization or the financing thereof.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to the Stated Maturity; provided, however, that if the
period from the Redemption Date to the Stated Maturity is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to the Stated Maturity
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under "-- Certain
Covenants -- Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could incur at least $1.00 of additional Indebtedness under paragraph
(a) in the covenant described under "-- Certain Covenants -- Limitation on
Indebtedness" and (y) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Company's Board
of Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares, or (in the
case of any Foreign Subsidiary) to the extent required by applicable law) is
owned by the Company or another Wholly Owned Subsidiary.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax consequences of the purchase, ownership and disposition of the New
Notes. This summary applies only to a beneficial owner of a Note who acquires a
New Note at the initial offering thereof. This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to change, possibly
with retroactive effect, or different
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interpretations. This discussion does not address the tax consequences to
subsequent purchasers of New Notes, and is limited to investors who hold the New
Notes as capital assets. Moreover, this discussion is for general information
only, and does not address all of the tax consequences that may be relevant to
particular investors in light of their personal circumstances, or to certain
types of investors (such as certain financial institutions, insurance companies,
tax-exempt entities, dealers in securities, persons who have acquired New Notes
as part of a straddle, hedge, conversion transaction or other integrated
investment or persons whose functional currency is not the U.S. Dollar).
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NEW NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR GIFT TAX
LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS
AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
EXCHANGE OFFER
The exchange of an Existing Note for a New Note should not constitute a
taxable exchange of an Existing Note, in which case a Holder would not recognize
taxable gain or loss upon receipt of a New Note, a Holder's holding period for a
New Note would generally include the holding period for the Existing Note so
exchanged and such holder's adjusted tax basis in a New Note would generally be
the same as such holder's adjusted tax basis in the Note so exchanged. The
following discussion assumes that the exchange of Existing Notes for New Notes
pursuant to the Exchange Offer will not be treated as an exchange for federal
income tax purposes, and that the Existing Notes and the New Notes will be
treated as the same security for federal income tax purposes.
UNITED STATES TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a beneficial owner of
a New Note that is, for United States federal income tax purposes, (i) a citizen
or resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust that is
subject to the supervision of a court within the United States and the control
of one or more United States fiduciaries as described in section 7701(a)(3) of
the Code.
Payment of Stated Interest on New Notes. Subject to the discussion below
under "Payments on Registration Default", in general, (i) interest paid or
payable on a New Note will be taxable to a United States Holder as ordinary
interest income as received or accrued, in accordance with such holder's method
of accounting for federal income tax purposes, and (ii) assuming that original
issue discount on the Existing Note is less than a de minimis amount equal to
0.25% of its stated principal amount multiplied by the number of complete years
to its maturity, any such discount will be deemed to be equal to zero, and a
holder will not be required to accrue a portion of such discount as income in
each taxable year.
Payments on Registration Default. Because the Existing Notes provide for
the payment of liquidated damages under the circumstances described above under
"Exchange and Registration Rights Agreement," the Existing Notes will be subject
to the Treasury Regulations that apply to debt instruments that provide for one
or more contingent payments. Under those Regulations, however, a payment is not
a contingent payment merely because of a contingency that, as of the issue date,
is either "remote" or "incidental". The Company intends to take the position
that, solely for these purposes, the payment of such liquidated damages is a
remote or incidental contingency, in which case the possibility of such payment
would not, as of the issue date, cause the Existing Notes to be treated as
having been issued with original issue discount, and the rules described above
under "Payment of Interest on Notes" would apply. The Company's determination
that such payments are a remote or incidental contingency for these purposes is
binding on a holder, unless such holder discloses in the proper manner to the
IRS that it is taking a different position.
103
<PAGE> 105
If the Existing Notes (or New Notes received in exchange thereof pursuant
to the Exchange Offer) were treated as having been issued with original issue
discount, a United States Holder could be required to accrue all payments on the
New Notes (including amounts that would otherwise constitute de minimis original
issue discount and projected payments of liquidated damages) on a constant yield
basis (including holders who otherwise use a cash method of accounting for
federal income tax purposes), and in certain circumstances to include market
discount in income sooner than otherwise required and to treat as interest
income any gain recognized on the disposition of the debt instrument (rather
than as capital gain).
Prospective investors should consult their tax advisors as to the tax
considerations relating to the payment of such liquidated damages, in particular
in connection with the possible application of the regulations relating to
contingent payment instruments.
Sale, Exchange or Retirement of the Notes. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a New Note, a United
States Holder will generally recognize taxable gain or loss equal to the
difference between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued interest, which will be taxable as ordinary
income) and such holder's adjusted tax basis in the New Note. Gain or loss
recognized on the disposition of a New Note generally will be capital gain or
loss and will be long-term capital gain or loss if, at the time of such
disposition, the United States Holder's holding period for the New Note is more
than one year. Under current law, in the case of United States Holders who are
individuals, net long-term capital gains are taxed at a lower rate than ordinary
income and capital losses are subject to certain limitations.
Backup Withholding and Information Reporting. In general, a United States
Holder of a New Note will be subject to backup withholding at the rate of 31%
with respect to interest, principal and premium, if any, paid on a New Note,
unless the holder (a) is an entity (including corporations, tax-exempt
organizations and certain qualified nominees) that is exempt from withholding
and, when required, demonstrates this fact, or (b) provides the Company with its
Taxpayer Identification Number ("TIN") (which for an individual would be the
holder's Social Security number), certifies that the TIN provided to the Company
is correct and that the holder has not been notified by the IRS that it is
subject to backup withholding due to underreporting of interest or dividends,
and otherwise complies with applicable requirements of the backup withholding
rules. In addition, such payments of principal, premium and interest to United
States Holders that are not corporations, tax-exempt organizations or qualified
nominees will generally be subject to information reporting requirements.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such holder's federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.
UNITED STATES TAXATION OF FOREIGN HOLDERS
Payment of Interest on New Notes. In general, payments of interest
received by any beneficial owner of a New Note that is not a United States
Holder (a "Foreign Holder") will not be subject to a United States federal
withholding tax, provided that (i)(a) the Foreign Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote within the meaning of Section 871(h)(3)
of the Code and the Treasury Regulations thereunder, (b) the Foreign Holder is
not a controlled foreign corporation that is related to the Company actually or
constructively through stock ownership, (c) the Foreign Holder is not a bank
whose receipt of interest on a New Note is described in section 881(c)(3)(A) of
the Code and (d) either (x) the beneficial owner of the New Note, under
penalties of perjury, provides the Company or its agent with the beneficial
owner's name and address and certifies that it is not a United States Holder on
IRS Form W-8 (or a suitable substitute or successor form) or (y) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") holds the New Note and certifies to the Company or its agent under
penalties of perjury that such a Form W-8 (or suitable substitute or successor
form) has been received by it from the beneficial owner or qualifying
intermediary and furnishes the payor a copy thereof; (ii) the Foreign Holder is
subject to United States federal income tax with respect to the New
104
<PAGE> 106
Note on a net basis because payments received with respect to the New Note are
effectively connected with a U.S. trade or business of the Foreign Holder (in
which case the Foreign Holder may also be subject to "branch profits tax" under
section 884 of the Code) and provides the Company with a properly executed IRS
Form 4224 or successor form; or (iii) the Foreign Holder is entitled to the
benefits of an income tax treaty under which the interest is exempt from United
States withholding tax, and the Foreign Holder or such Holder's agent provides a
properly executed IRS Form 1001 or successor form claiming the exemption.
Payments of interest not exempt from U.S. federal withholding tax as described
above will be subject to such withholding tax at the rate of 30% (subject to
reduction under an applicable income tax treaty).
Sales, Exchange or Retirement of the New Notes. A Foreign Holder generally
will not be subject to United States federal income tax (and generally no tax
will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of a New Note, unless
(i) the gain is effectively connected with a United States trade or business
conducted by the Foreign Holder or (ii) the Foreign Holder is an individual who
is present in the United States for a period or periods aggregating 183 or more
days in the taxable year of the disposition and certain other conditions are
met.
Backup Withholding and Reporting. Under current Treasury regulations,
backup withholding and information reporting on IRS Form 1099 do not apply to
payments made by the Company or a paying agent to Foreign Holders if the
certification described under "United States Taxation of Foreign
Holders -- Payment of Interest on New Notes" is received, provided that the
payor does not have actual knowledge that the holder is a United States Holder.
If any payments of principal, premium (if any) and interest are made to the
beneficial owner of a New Note by or through the foreign office of a foreign
custodian, foreign nominee or other foreign agent of such beneficial owner, or
if the foreign office of a foreign "broker" (as defined in applicable United
States Treasury Department regulations) pays the proceeds of the sale of a New
Note to the seller thereof, backup withholding and information reporting will
not apply. Information reporting requirements (but not backup withholding) will
apply, however, to any such payments by a foreign office of a broker that is,
for United States federal income tax purposes, a United States person, or a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or a "controlled
foreign corporation" (generally, a foreign corporation controlled by United
States shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a Foreign Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Any such payments by a United States office of a custodian, nominee
or agent or by a United States office of a broker are subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies under penalties of perjury that it is a Foreign Holder and the payor
does not have actual knowledge that the beneficial owner is a United States
person or otherwise establishes an exemption. A Foreign Holder may obtain a
refund or a credit against such Holder's U.S. federal income tax liability of
any amounts withheld under the backup withholding rules, provided the required
information is furnished to the IRS.
In addition, in certain circumstances, interest on a New Note owned by a
Foreign Holder will be required to be reported annually on IRS Form 1042S, in
which case such form will be filed with the IRS and furnished to the Foreign
Holder.
PROPOSED REGULATIONS
In April 1996, the IRS issued proposed regulations that would change
certain of the certification and other procedures described under "United States
Taxation of Foreign Holders" ("1996 Proposed Regulations"). For example, under
the 1996 Proposed Regulations, a Foreign Holder claiming an exemption from
withholding because it is subject to U.S. tax on a net income basis or claiming
the benefit of an income tax treaty as described in clauses (ii) and (iii)
respectively, of the paragraph under " -- United States Taxation of Foreign
Holders -- Payment of Interest on Notes" (but not a Foreign Holder claiming the
portfolio interest exemption described in clause (i)) would be required to
provide its TIN to the payor. The 1996 Proposed Regulations would apply to
payments of interest made after December 31, 1997. There can be no assurance,
however, that the 1996 Proposed Regulations will be adopted without change in
final form.
105
<PAGE> 107
BOOK-ENTRY; DELIVERY AND FORM
GLOBAL NOTES
The Notes will initially be issued in the form of one or more registered
Notes in global form without coupons (each a "Global Note"). Each Global Note
will be deposited with, or on behalf of, the Depository Trust Company ("DTC")
and registered in the name of Cede & Co., as nominee of DTC, or will remain in
the custody of the Trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York banking law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with an interest in the Global Note and
(ii) ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of beneficial ownership therein will be effected only through,
records maintained by DTC (with respect to the interest of the Participants),
the Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes or to pledge the Notes as collateral
to persons in such states will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the Indenture
and the Notes. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Securities, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
giving of any directions, instruction or approval to the Trustee thereunder. As
a result, the ability of a person having a beneficial interest in Notes
represented by a Global Note to pledge or transfer such interest to persons or
entities that do not participate in DTC's system or to otherwise take action
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Payments with respect to the principal of, premium, if any, and interest
on, any Notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of interest in the Global Note (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Note as shown on the
records of DTC. The Company expects that payments by the Participants and the
106
<PAGE> 108
Indirect Participants to the beneficial owners of interests in the Global Note
will be governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources the Company believes to be reliable.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of its Global Notes, then Certificated
Securities will be issued to each person that DTC identifies as the beneficial
owner of the Notes represented by the Global Note. In addition, subject to
certain conditions, any person having a beneficial interests in a Global Note
may, upon request to the Trustee, exchange such beneficial interest for
Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of such person or persons (or
the nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 90
days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1997, all dealers effecting transactions
in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit or any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Existing Notes) other than
107
<PAGE> 109
commissions or concessions of any brokers-dealers and will indemnify the Holders
of the Existing Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
CSI is an affiliate of Chase, which is the administrative agent and a
lender to the Company under the Senior Secured Credit Facility. Chase has
received customary fees in connection with the Senior Secured Credit Facility.
CSI acted as a Dealer Manager in connection with the Tender Offer. In addition,
CSI and Chase, or their affiliates, participate from time to time in various
general financing and banking transactions for GSCP and its affiliates. An
affiliate of CSI is a limited partner in GSCP.
GSCP and Smith Barney Inc. are both affiliated companies of Travelers Group
Inc. Princes Gate, an investment fund affiliated with Morgan Stanley & Co.
Incorporated, together with certain affiliated investors, will be the owners of
the GST Subordinated Debentures.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Debevoise
& Plimpton, New York, New York.
EXPERTS
The Consolidated Financial Statements of Telex Communications, Inc. as of
March 31, 1997 and March 31, 1996 and for the three years ended March 31, 1997
and schedule audited by Ernst & Young LLP have been included in this Prospectus
in reliance on their report given on their authority as experts in accounting
and auditing.
108
<PAGE> 110
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Audited Consolidated Financial Statements
Report of Independent Auditors...................................................... F-2
Consolidated Balance Sheets as of March 31, 1997 and 1996........................... F-3
Consolidated Statements of Operations for the years ended March 31, 1997, 1996 and
1995.............................................................................. F-4
Consolidated Statements of Shareholder's Equity (Deficit) for the years ended March
31, 1997, 1996 and 1995........................................................... F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1997, 1996 and
1995.............................................................................. F-6
Notes to Consolidated Financial Statements.......................................... F-7
Schedule II -- Valuation and Qualifying Accounts.................................... F-20
</TABLE>
F-1
<PAGE> 111
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholder
Telex Communications, Inc.
We have audited the accompanying consolidated balance sheets of Telex
Communications, Inc. as of March 31, 1997 and 1996, and the related consolidated
statements of operations, shareholder's equity (deficit), and cash flows for
each of the three years in the period ended March 31, 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Telex Communications, Inc. at March 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1997, in conformity with generally accepted accounting
principles.
Minneapolis, Minnesota
June 2, 1997
F-2
<PAGE> 112
TELEX COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 35,742 $ 23,001
Accounts receivable, net of allowance for doubtful accounts
(1997 -- $641; 1996 -- $533)...................................... 29,459 25,438
Inventories.......................................................... 23,495 21,711
Deferred income taxes................................................ 2,813 2,433
Other................................................................ 1,525 1,057
-------- --------
Total current assets......................................... 93,034 73,640
Property, plant and equipment, net of accumulated depreciation......... 20,867 17,616
Deferred financing costs............................................... 2,525 2,884
Deferred income taxes.................................................. 3,990 4,629
Intangible assets, net of accumulated amortization..................... 20,400 22,048
-------- --------
$140,816 $120,817
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable..................................................... $ 12,224 $ 9,091
Accrued wages and benefits........................................... 3,813 3,289
Taxes other than income taxes........................................ 470 717
Other accrued liabilities............................................ 6,909 6,329
Accrued interest..................................................... 2,504 2,508
Income taxes......................................................... 2,991 3,436
-------- --------
Total current liabilities.................................... 28,911 25,370
Long-term debt......................................................... 100,000 100,000
Due to parent.......................................................... 3,502 2,029
Pension accrual........................................................ 1,844 1,207
Other accrued liabilities.............................................. 303 280
-------- --------
Total liabilities............................................ 134,560 128,886
-------- --------
Commitments and contingencies.......................................... -- --
Shareholder's equity (deficit):
Common stock, $.01 par value, 1,000 shares authorized, 500 shares
issued............................................................ -- --
Capital in excess of par............................................. 20,001 20,001
Retained earnings (deficit).......................................... (13,745) (28,070)
-------- --------
Total shareholder's equity (deficit)......................... 6,256 (8,069)
-------- --------
$140,816 $120,817
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 113
TELEX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $170,881 $145,348 $141,572
Cost of sales.............................................. 99,624 90,120 89,548
-------- -------- --------
Gross profit............................................. 71,257 55,228 52,024
-------- -------- --------
Operating expenses:
Engineering and development.............................. 7,645 6,756 6,138
Marketing................................................ 18,628 16,678 15,865
General and administrative............................... 8,917 7,510 7,545
Amortization of goodwill and other intangibles........... 1,648 3,385 3,536
Corporate charges........................................ -- -- 2,750
Special charges.......................................... -- 13,785 --
-------- -------- --------
36,838 48,114 35,834
-------- -------- --------
Operating profit........................................... 34,419 7,114 16,190
Interest expense........................................... (12,513) (12,517) (12,490)
Other income............................................... 1,671 1,119 433
-------- -------- --------
Income (loss) before income taxes.......................... 23,577 (4,284) 4,133
Provision (benefit) for income taxes....................... 9,252 (180) 826
-------- -------- --------
Income (loss) before extraordinary item.................... 14,325 (4,104) 3,307
Extraordinary loss from early retirement of debt, net of
income taxes............................................. -- -- (3,239)
-------- -------- --------
Net income (loss).......................................... $ 14,325 $ (4,104) $ 68
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 114
TELEX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
CAPITAL RETAINED SHAREHOLDER'S
NUMBER COMMON IN EXCESS EARNINGS EQUITY
OF SHARES STOCK OF PAR (DEFICIT) (DEFICIT)
--------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1994............ 500 $ -- $20,001 $ 12,734 $ 32,735
Net income......................... -- -- -- 68 68
Cash dividend declared and paid on
common stock.................... -- -- -- (36,768) (36,768)
--- ------- ------- -------- --------
Balance at March 31, 1995............ 500 -- 20,001 (23,966) (3,965)
Net (loss)......................... -- -- -- (4,104) (4,104)
--- ------- ------- -------- --------
Balance at March 31, 1996............ 500 -- 20,001 (28,070) (8,069)
Net income......................... -- -- -- 14,325 14,325
--- ------- ------- -------- --------
Balance at March 31, 1997............ 500 $ -- $20,001 $(13,745) $ 6,256
=== ======= ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 115
TELEX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).......................................... $14,325 $(4,104) $ 68
Adjustments to reconcile net income (loss) to cash flows
from operations:
Extraordinary loss on early retirement of debt.......... -- -- 3,239
Non-cash special charges................................ -- 13,345 --
Depreciation............................................ 3,978 6,192 5,408
Amortization of intangibles and deferred financing
costs................................................. 2,007 3,755 4,293
Provision for bad debts................................. 300 98 303
Deferred income taxes................................... 259 (3,359) (36)
Change in operating assets and liabilities:
Receivables........................................... (4,321) (4,472) (577)
Inventories........................................... (1,784) 3,035 (3,709)
Other current assets.................................. (468) 228 100
Accounts payable and accrued expenses................. 5,446 2,393 1,288
Accrued interest...................................... (4) (32) (207)
Income taxes payable.................................... (445) 2,067 780
Change in non-current liabilities....................... 2,133 (618) (83)
------- ------- --------
Net cash provided by operating activities.......... 21,426 18,528 10,867
------- ------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment................. (8,685) (3,320) (3,596)
------- ------- --------
Net cash (used in) investing activities.................... (8,685) (3,320) (3,596)
------- ------- --------
FINANCING ACTIVITIES:
Early retirement of long-term debt......................... -- -- (72,049)
Deferred financing costs................................... -- -- (3,500)
Cash dividends paid........................................ -- -- (36,768)
Proceeds from issuance of long-term debt................... -- -- 100,000
------- ------- --------
Net cash (used in) financing activities.................... -- -- (12,317)
------- ------- --------
Cash and cash equivalents:
Net increase (decrease).................................... 12,741 15,208 (5,046)
Beginning of period........................................ 23,001 7,793 12,839
------- ------- --------
End of period.............................................. $35,742 $23,001 $ 7,793
======= ======= ========
Supplemental disclosures:
Interest paid.............................................. $12,154 $12,159 $ 12,043
======= ======= ========
Income taxes paid, net..................................... $ 7,975 $ 2,062 $ 85
======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 116
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT POLICIES
ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
Telex Communications, Inc. ("Telex" or the "Company"), a Delaware
corporation, is a wholly-owned subsidiary of Telex Communications Group, Inc.
("TCG"). The assets of TCG consist primarily of its investment in Telex. The
Company designs, manufactures and markets sophisticated audio, visual and
multimedia communications equipment for commercial, professional and industrial
customers. The Company offers a broad product line that includes advanced
intercom systems, wired and wireless microphones, headsets, multimedia
presentation products, audio cassette duplicators and hearing aids. The Company
focuses on commercial, professional and industrial markets.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Telex and its
wholly-owned subsidiaries.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
All temporary investments with a maturity of three months or less at the
time of purchase are considered cash equivalents. These investments are
considered available for sale and carried at cost, which approximates market
value.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation of
property, plant and equipment is computed principally by the straight-line
method over the estimated useful lives of the assets; leasehold improvements are
amortized over the lesser of their estimated useful lives or the lease terms
using the straight-line method.
The carrying value of property, plant and equipment is assessed when
factors indicating impairment are present. If impairment indicators are present
and the estimated future undiscounted cash flows are less than the carrying
value of the assets and any related goodwill, the carrying value is reduced to
estimated fair value of the assets.
Beginning in 1997, the Company capitalized certain software implementation
costs. Prior to 1997, such costs were not significant. Implementation costs are
expensed until the Company has determined that the software will result in
probable future economic benefits and management has committed to funding the
project. Thereafter, certain internal and all external implementation costs and
purchased software costs are capitalized and depreciated using the straight-line
method over the remaining estimated useful lives, not exceeding five years. As
of March 31, 1997 software implementation costs of $4.5 million have been
capitalized and are included in equipment and construction in progress.
F-7
<PAGE> 117
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the Company's 1996 review for asset impairment (see
Note 2 -- Special Charges), a review of useful lives for assets not impaired was
also conducted in light of changing business conditions. As a result of this
review, the Company shortened its estimated useful lives on specific
manufacturing assets to better reflect current estimates of use. The change in
useful lives resulted in the recording of additional depreciation expense of
$0.5 million in Fiscal 1996.
INTANGIBLE ASSETS
Intangible assets are recorded at their estimated fair values at date of
acquisition and 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
</TABLE>
The carrying value of identifiable intangible assets is assessed when
factors indicating impairment are present. If impairment indicators are present
and the estimated future undiscounted cash flows are less than the carrying
value of the assets and any related goodwill, the carrying value is reduced to
the estimated fair value as measured by the discounted cash flows. Goodwill that
is not associated with specific assets that are impaired is assessed for
impairment when impairment indicators are present and reduced to its associated
estimated undiscounted cash flows if less than its carrying value.
DEFERRED FINANCING COSTS
Deferred financing costs represent costs incurred by the Company to issue
the senior notes and to secure the revolving credit agreement and are being
amortized over the term of the related borrowings. Unamortized deferred
financing costs of $2.5 million at March 31, 1997 will be written off in the
first quarter of Fiscal 1998 as a result of the retirement of the senior notes
and revolving credit agreement as described in Note 15 -- Subsequent event.
WARRANTY COSTS
The Company warrants certain of its products as to 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.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment. Revenue
from the sale of hearing instrument extended warranty contracts is recognized
ratably over the life of the contracts.
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. Telex's tax provision is calculated on a separate company basis,
and Telex's taxable income is included in the consolidated federal income tax
returns of TCG.
PRODUCT DEVELOPMENT COSTS
Costs associated with the development of new products and changes to
existing products are charged to operations as incurred ($5.7 million, $4.9
million and $4.6 million, for the years ended March 31, 1997, 1996 and 1995,
respectively).
F-8
<PAGE> 118
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FORWARD EXCHANGE CONTRACT GAINS AND LOSSES
Gains and losses due to changes in market value on foreign currency
contracts used to hedge firm inventory purchase commitments are deferred and
recognized in earnings when the future sale of inventory occurs.
ADVERTISING EXPENSES
Advertising costs are expensed when incurred. Advertising costs for the
Fiscal years ended 1997, 1996, and 1995 were $3.3 million, $3.1 million and $2.7
million, respectively.
PRESENTATION
Certain prior-year amounts have been reclassified to conform to the Fiscal
1997 presentation.
2. SPECIAL CHARGES
The Company adopted Statement of Financial Accounting Standards No. 121
"Accounting for Impairment of Long-Lived Assets and Assets to Be Disposed Of" in
the fourth quarter of Fiscal 1996. During Fiscal 1996, several business
conditions changed for the Company including the discontinuance of a number of
product lines and the closing of one of the Company's manufacturing facilities
which was intended to provide the Company with a greater level of manufacturing
efficiency. These changing business conditions had a potential impact on the
realizability of virtually all of the Company's long-lived assets, including
property, plant, equipment, identifiable intangible assets, and the goodwill
that was allocable to these assets. Accordingly, the Company evaluated the
ongoing value of each of these asset categories which related to all of the
Company's operating segments. Based on this evaluation, the Company determined
that assets to be held with a carrying value of $18.4 million were impaired and
wrote them down by $13.3 million to their fair value. These write downs are
included in special charges. Fair value was generally based on estimated future
cash flows associated with each of the assets, discounted at a market rate of
interest.
This charge resulted primarily from a change in the Company's accounting
policy for evaluating and measuring impairment. Under the Company's previous
accounting policy, each of the Company's operating segments' long-lived assets
to be held and used in the business were evaluated for impairment if the segment
was incurring operating losses or was expected to incur operating losses in the
future. Because of strong operating profit history and favorable prospects for
each segment, no impairment evaluation had been required in Fiscal 1995.
Considerable management judgment is necessary to estimate discounted 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 assets down further. The carrying value prior to write-down and associated
write down of the specific assets is as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING VALUE WRITE DOWN
-------------- ----------
<S> <C> <C>
Property, plant and equipment...................... $ 2,300 $ 2,022
Intangible assets:
Dealer and distributor listed products........... 1,822 1,096
Patents and engineering drawings................. 3,653 2,587
Goodwill......................................... 10,644 7,640
------- -------
$ 18,419 $ 13,345
======= =======
</TABLE>
F-9
<PAGE> 119
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The write down includes $8.3 million, $2.7 million, $1.4 million, and $0.9
million associated with the Professional Sound and Entertainment,
Multimedia/Audio Communications, RF/Communications, and Hearing Instruments
business segments, respectively.
The Company plans to sell one of its manufacturing facilities related
primarily to the Professional Sound and Entertainment business segment and has
recorded a loss in Fiscal 1996 of $239,000 representing the estimated sales
value, less the carrying value of the assets and related selling costs. The
Company expects to have completed the sale in Fiscal 1998. The Company also
accrued $201,000 in Fiscal 1996 for severance benefits payable to employees at
the facility, all of which was paid in Fiscal 1997. These charges are also
included in special charges.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
Raw materials and parts.................................. $15,097 $13,975
Work in process.......................................... 2,954 2,827
Finished goods........................................... 5,444 4,909
------- -------
$23,495 $21,711
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (see also Note 2 -- Special charges) consist
of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
Land..................................................... $ 1,591 $ 1,591
Building................................................. 9,858 9,700
Equipment................................................ 29,580 23,056
Construction in progress................................. 2,102 1,555
------- -------
43,131 35,902
Less accumulated depreciation............................ 22,264 18,286
------- -------
$20,867 $17,616
======= =======
</TABLE>
F-10
<PAGE> 120
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets (see also Note 2 -- Special charges) consist of the
following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
Dealer and distributor lists............................. $ 7,894 $ 7,894
Patents and engineering drawings......................... 5,999 5,999
Goodwill................................................. 21,253 21,253
Other intangibles........................................ 2,804 2,804
------- -------
37,950 37,950
Less accumulated amortization............................ 17,550 15,902
------- -------
$20,400 $22,048
======= =======
</TABLE>
6. LONG-TERM DEBT AND EXTRAORDINARY ITEM
In July 1994, the Company completed a refinancing of its debt that included
an offering of $100.0 million of senior unsecured notes due 2004, the redemption
and repayment of substantially all of the Company's existing indebtedness and a
dividend to TCG of $32.0 million which was used by TCG to repay substantially
all of its existing indebtedness and to purchase the Debt Warrants.
As a result of the July 1994 debt refinancing, the Company has recorded an
extraordinary loss of $4.6 million ($3.2 million net of taxes) for the year
ended March 31, 1995 consisting of redemption premiums and prepayment penalties
of $2.5 million and the write-off of deferred financing costs related to the
early retirement of debt of $2.1 million.
The senior unsecured notes bear interest at 12% and pay interest
semi-annually. There were $100 million of such notes outstanding at both March
31, 1997 and 1996. The fair value of the senior fixed rate notes at March 31,
1997 was approximately $113.6 million as determined by its quoted market value.
The notes are redeemable, at the option of the Company, in whole or in part, at
any time on or after July 15, 1999, at 106% of their principal amount, declining
to 100% of such principal amount on or after July 15, 2001, in each case, plus
accrued interest. In addition, prior to July 15, 1997, up to 35% of the original
principal amount of the notes may be redeemable, at the option of the Company,
from the proceeds of one or more public equity offerings at 110% of their
principal amount, plus accrued interest.
The agreement contains certain financial covenants and other covenants
which limit the ability of the Company and certain of its subsidiaries to incur
additional indebtedness, to pay dividends on or to redeem capital stock of the
Company and certain of its subsidiaries, to make investments in unrestricted
subsidiaries, to make distributions from certain subsidiaries, to dispose of
assets and subsidiary stock, to make certain transactions with affiliates, to
create liens, and to sell and leaseback assets. The agreement also restricts the
Company's ability to consolidate or merge with other entities.
In July 1994, the Company also entered into a new revolving credit
agreement that replaced an existing revolving credit agreement. The commitment
under the new facility is $25 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. These margins are based
upon the quarterly measurement of the Company's adjusted interest coverage
ratio, as defined. The credit agreement expires July 20, 1998. The Company may
terminate the agreement prior to the expiration date without a prepayment
penalty. The credit agreement requires an annual commitment fee of 0.375% of the
unused portion of the commitment. The commitment fee percentage is based upon
the quarterly measurement of the Company's adjusted interest coverage ratio, as
defined. Borrowings under the facility are secured by accounts receivable and
inventory. The
F-11
<PAGE> 121
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company had letters of credit outstanding at March 31, 1997 and 1996 in the
amount of $2.9 million and $3.8 million, respectively, reducing the amount of
availability under the credit agreement. There were no borrowings outstanding
under this revolving credit agreement at March 31, 1997 or 1996, respectively.
Subsequent to March 31, 1997, the Company refinanced the senior unsecured
notes and revolving credit agreement (see Note 15 -- Subsequent event).
7. INCOME TAXES
Significant components of the provision for income taxes attributable to
income (loss) before extraordinary item are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1997 1996 1995
------ ------- ----
<S> <C> <C> <C>
Current:
Federal................................................. $7,852 $ 3,030 $630
State................................................... 1,118 149 289
Foreign................................................. 23 -- (57)
------ ------- ----
8,993 3,179 862
Deferred.................................................. 259 (3,359) (36)
------ ------- ----
$9,252 $ (180) $826
====== ======= ====
</TABLE>
A tax benefit in the amount of $1.4 million has been allocated to the
extraordinary loss from early retirement of debt in Fiscal 1995.
A reconciliation of the income taxes computed at the federal statutory rate
to the Company's income tax expense (benefit) before extraordinary loss is as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------
1997 1996 1995
------ ------- ------
<S> <C> <C> <C>
Expense (benefit) at statutory rate..................... $8,252 $(1,457) $1,405
State income taxes, net of federal tax benefit.......... 740 106 132
Amortization and write-off of goodwill.................. 188 2,760 241
FSC benefits............................................ (387) (256) (223)
Change in deferred tax asset valuation reserve and other
income tax accruals(1)................................ 340 (1,438) (756)
Other................................................... 119 105 27
------ ------- ------
$9,252 $ (180) $ 826
====== ======= ======
</TABLE>
- ---------------
(1) Net of the change in the valuation reserve relating to tax benefit of tax
identifiable intangibles in the amount of $1.0 million and $0.2 million for
the Fiscal years ended March 31, 1996 and 1995, respectively, which were
recorded as a reduction to goodwill.
F-12
<PAGE> 122
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
------ ------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation....................................... $1,718 $1,188
------ ------
Total deferred tax liabilities........................... 1,718 1,188
Deferred tax assets:
Book over tax amortization....................................... 1,983 2,373
Pension.......................................................... 944 600
Inventory reserves............................................... 1,097 814
Accounts receivable allowance.................................... 245 196
Deferred revenue................................................. 264 371
Vacation accrual................................................. 432 370
Warranty reserves................................................ 414 333
Tax benefit of identifiable intangibles.......................... 1,771 1,883
Accrued plant closing costs and impairment writedown............. 837 903
Other............................................................ 534 407
------ ------
Total deferred tax assets................................ 8,521 8,250
Valuation allowance for deferred tax assets...................... -- --
------ ------
Net deferred tax assets.................................. 8,521 8,250
------ ------
Net deferred tax assets.......................................... $6,803 $7,062
====== ======
</TABLE>
The Company has a net deferred tax asset of $6.8 million at March 31, 1997.
The Company will be required to generate approximately $17.0 million of future
taxable income in order to fully realize this net asset. The Company believes
that it is probable that it will generate sufficient levels of future taxable
income to realize the net asset, based on historical taxable income levels and
continued strength of its operations. As a result of these factors the Company
has recorded no valuation allowance at March 31, 1997.
The Company received a settlement offer from the IRS with respect to the
amortization of its intangibles for the taxable years 1990, 1991 and 1992. The
Company has reviewed the IRS settlement offer and determined not to accept it.
The accounting under Statement of Financial Accounting Standards No. 109
resulting from any adjustment imposed by the IRS relating to the intangible
assets would not likely result in a material adjustment to current earnings,
because it would be recorded principally as an adjustment to goodwill.
8. RELATED PARTY TRANSACTIONS
The Company paid management fees of approximately $2.8 million to a TCG
shareholder for the year ended March 31, 1995, which is presented in the
consolidated statements of operations as corporate charges. The amount paid in
Fiscal 1995 satisfied all remaining obligations under the consulting agreement
and was paid at the completion of the debt refinancing.
TCG had 107,177 warrants outstanding at March 31, 1997. Each warrant
entitled the owner to receive one share of common stock at a price of $.01 per
share. The warrants expire on May 31, 2004.
F-13
<PAGE> 123
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TCG's principal asset is its investment in Telex and, therefore, TCG is
dependent on the operations of Telex for its cash flow needs. However, there are
no agreements between Telex and TCG requiring the transfer of funds from Telex
to TCG. The senior notes and the provisions of the indenture agreements pursuant
to which the senior notes were issued restrict Telex's payment of dividends,
loans or advances to its affiliates.
Accrued income taxes and recoverable income taxes include tax benefits
related to TCG as the Company makes all tax payments for the consolidated group.
The amount recorded as "Due to Parent" represents the tax benefit recorded
related to TCG's activities.
In July 1995, the Company distributed to TCG approximately $32.0 million in
the form of a dividend to repay existing TCG debt. An additional $4.8 million
was distributed to TCG in February 1995 in form of a dividend to purchase 75,511
shares of TCG common stock.
9. RETIREMENT PLAN
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>
YEARS ENDED MARCH 31,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost for benefits earned during the year...... $ 1,047 $ 981 $ 1,023
Interest cost on projected benefit obligation......... 1,663 1,638 1,555
Actual return on plan assets.......................... (1,486) (3,069) (1,068)
Net amortization and deferral......................... 298 1,937 201
------- ------- -------
Net pension cost...................................... $ 1,522 $ 1,487 $ 1,711
======= ======= =======
</TABLE>
The following table presents the funded status of the above plan as
recognized in the consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits.............................................. $(17,759) $(16,275)
Nonvested benefits........................................... (509) (400)
-------- --------
Accumulated benefit obligation................................. (18,268) (16,675)
Effect of projected pay increases.............................. (4,428) (4,515)
-------- --------
Projected benefit obligation................................... (22,696) (21,190)
Plan assets at market value.................................... 16,990 15,736
-------- --------
Projected benefit obligation in excess of plan assets.......... (5,706) (5,454)
Unrecognized net loss.......................................... 2,159 2,083
Unrecognized net transition obligation......................... 158 198
Unrecognized prior service cost................................ 10 12
-------- --------
Pension liability accrued...................................... $ (3,379) $ (3,161)
======== ========
</TABLE>
F-14
<PAGE> 124
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assumptions used in the accounting for the defined benefit plan as of March
31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate................................. 7.75% 7.75% 8.25%
Rate of increase in future compensation levels................. 4.50% 4.50% 4.50%
Expected long-term rate of return on plan assets............... 9.00% 9.00% 9.00%
</TABLE>
Plan assets consist primarily of equity and debt securities and cash
equivalents.
10. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits that have arisen in the
ordinary course of business. The Company believes such litigation, considered
separately or in the aggregate, will not have a material adverse effect on the
financial condition of the Company. The Company believes that the ultimate
resolution of the disputes will not have a material impact on its financial
position, but could be material to the net income of a particular quarter (or
year), if resolved unfavorably.
ENVIRONMENTAL MATTERS
In connection with the consent decree with the Nebraska Department of
Environmental Control relating to the clean-up of the improper disposal of
hazardous waste, the Company has outstanding, as of March 31, 1997 and 1996, a
letter of credit for $0.2 million pending future post-closing monitoring of the
disposal site.
The Company has accrued $0.3 million as of March 31, 1997, for the probable
exposure with respect to costs incurred in cleaning up the hazardous waste. The
Company does not expect to incur costs that are materially higher than those
accrued for March 31, 1997 based upon the information currently available.
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.
LETTERS OF CREDIT
The Company had outstanding letters of credit securing various vendor
supply and other arrangements of approximately $2.9 million and $3.8 million at
March 31, 1997 and 1996, respectively.
F-15
<PAGE> 125
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SEGMENT INFORMATION
Summarized financial information by business segment is as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales:
Professional Sound and Entertainment............. $ 58,870 $ 52,637 $ 49,673
Multimedia/Audio Communications.................. 61,897 45,031 37,198
RF/Communications................................ 25,320 25,000 33,052
Hearing Instruments.............................. 24,794 22,680 21,649
-------- -------- --------
$170,881 $145,348 $141,572
======== ======== ========
Operating earnings:
Professional Sound and Entertainment............. $ 12,260 $ 832 $ 10,163
Multimedia/Audio Communications.................. 14,321 5,701 4,599
RF/Communications................................ 7,157 1,278 4,241
Hearing Instruments.............................. 1,560 (314) 199
Corporate........................................ (879) (383) (3,012)
-------- -------- --------
$ 34,419 $ 7,114 $ 16,190
======== ======== ========
Depreciation and amortization:
Professional Sound and Entertainment............. $ 1,338 $ 3,209 $ 3,064
Multimedia/Audio Communications.................. 2,022 2,672 2,270
RF/Communications................................ 944 1,590 1,683
Hearing Instruments.............................. 485 1,025 975
Corporate........................................ 837 1,081 638
-------- -------- --------
$ 5,626 $ 9,577 $ 8,630
======== ======== ========
Assets:
Professional Sound and Entertainment............. $ 41,781 $ 40,507 $ 42,298
Multimedia/Audio Communications.................. 43,475 33,707 31,328
RF/Communications................................ 17,241 20,075 23,169
Hearing Instruments.............................. 12,082 12,937 13,480
Corporate........................................ 26,237 13,591 8,843
-------- -------- --------
$140,816 $120,817 $119,118
======== ======== ========
Capital expenditures:
Professional Sound and Entertainment............. $ 1,083 $ 1,362 $ 1,280
Multimedia/Audio Communications.................. 1,072 881 949
RF/Communications................................ 412 549 703
Hearing Instruments.............................. 330 353 408
Corporate........................................ 5,788 175 256
-------- -------- --------
$ 8,685 $ 3,320 $ 3,596
======== ======== ========
</TABLE>
Corporate assets and expenditures relate principally to the Company's
investment in information systems and corporate facilities, as well as deferred
income taxes and deferred financing costs.
F-16
<PAGE> 126
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Sales to customers outside the United States were approximately $40.4
million, $29.8 million and $26.6 million, for the years ended March 31, 1997,
1996 and 1995, respectively. A summary of these export sales by geographic area
is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
European Sales........................................ $17,700 $ 9,800 $ 8,300
Canadian Sales........................................ 5,200 3,700 3,000
Other Foreign Sales................................... 17,500 16,300 15,300
------- ------- -------
$40,400 $29,800 $26,600
======= ======= =======
</TABLE>
12. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
Accounts receivable are generally unsecured; however, concentrations of credit
risk with respect to these accounts receivable are limited due to the large
number of customers and their dispersion across many different geographic areas.
As of March 31, 1997, the Company had no significant concentrations of credit
risk.
13. STOCK OPTION PLANS
In Fiscal 1992 TCG granted options to purchase up to 41,064 shares of TCG
common stock at an exercise price of $0.10 per share to the new Chairman,
President and Chief Executive Officer of the Company. These options will expire
on October 25, 1998 and contain certain call and put provisions. Options
exercised in Fiscal 1997, 1996 and 1995 were 7,000, 1,500 and 15,399,
respectively. As of March 31, 1997, 700 options were exercisable in the future.
In Fiscal 1993, TCG and the Company adopted a non-qualified stock option
plan under which 72,000 shares of TCG common stock are available to be granted.
In Fiscal 1995, TCG and the Company authorized an additional 7,500 shares of TCG
common stock to be granted. In Fiscal 1995, TCG and the Company adopted a
non-qualified stock option plan under which options to receive 9,000 shares of
TCG common stock were granted to certain members of its Board of Directors. In
Fiscal 1996, TCG and the Company amended the plan and authorized an additional
9,800 shares of TCG common stock. Non-qualified options are granted to certain
key employees, directors and independent contractors of the Company or TCG.
A summary of the Company's stock option activity, and related information
for the years ended March 31 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year............... 56,545 $13.38 59,750 $ 5.12 56,000 $ 1.50
Granted......................... -- -- 9,800 56.00 16,500 15.00
Exercised....................... (750) 1.50 (12,005) 3.47 (12,750) 2.03
Cancelled....................... (500) 1.50 (1,000) 56.00 -- --
------ ----- ------- ----- ------- -----
End of year..................... 55,295 $13.65 56,545 $13.38 59,750 $ 5.12
====== ===== ======= ===== ======= =====
Exercisable at end of year...... 37,945 $ 7.68 20,745 $ 4.43 16,000 $ 3.40
====== ===== ======= ===== ======= =====
Available for future grants..... 16,000 16,000 16,000
====== ======= =======
</TABLE>
F-17
<PAGE> 127
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Exercise prices for options outstanding as of March 31, 1997 range from
$1.50 to $56.00. The weighted average remaining contractual life of those
options is 6.7 years at March 31, 1997.
Options are generally granted with an exercise price equal to the fair
value of the stock at the date of the grant. However, in Fiscal 1995 options to
purchase 9,000 shares of TCG common stock were granted to members of the Board
of Directors with the fair market value exceeding the option exercise price.
Additionally, 500 shares of TCG common stock were granted to a member of the
Board of Directors, resulting in the recording of $28,000 of compensation
expense for these transactions, representing the excess of the fair value over
the grant price of the options and the shares.
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. 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 awards, the Company's 1997 and
1996 net income would have decreased by less than 1%. The effects of applying
the fair value method of measuring compensation expense for 1997 and 1996 is
likely not representative of the effects of future years in part because the
fair value method was applied only to stock options granted after March 31,
1995.
14. USE OF FOREIGN CURRENCY FORWARD CONTRACTS
The Company enters into foreign currency forward exchange contracts to
hedge certain firm purchase commitments denominated in yen. The purpose of the
Company's foreign currency hedging activities is to protect the Company from the
risk that the eventual dollar cash flows resulting from the purchase of
inventory from international vendors will be adversely affected by changes in
exchange rates. At March 31, 1997 and 1996 the Company had no foreign currency
forward exchange contracts to exchange yen for U.S. dollars outstanding.
15. SUBSEQUENT EVENT
On May 6, 1997, Telex Communications Group, Inc. ("TCG"), completed a
recapitalization among TCG, Greenwich Street Capital Partners, L.P. ("GSCP") and
certain other co-investors. Under the recapitalization agreement, all of the
outstanding shares of common stock of TCG and options and warrants to acquire
TCG common stock (other than certain shares of TCG common stock and certain
options to acquire TCG common stock owned by certain members of management of
the Company), were converted into the right to receive an aggregate amount of
cash equal to approximately $253.9 million. Under the recapitalization
agreement, certain members of management have retained certain shares of TCG and
certain options to acquire additional shares of TCG common stock, with an
aggregate value of $21.2 million, representing approximately 14.3% equity
interest on a non-diluted basis and 20.6% on a fully diluted basis.
In connection with the recapitalization, TCG completed the tender offer to
repurchase all the Company's $100.0 million aggregate outstanding principal
amount of the 12% Senior Notes due 2004 including redemption and consent fees
along with accrued interest for $118.3 million.
These transactions were financed by (i) $108.4 million of new equity
provided by GSCP and certain other co-investors, (ii) the rollover of certain
shares and options owned by existing management with a transaction value of
$21.2 million, (iii) the issuance of $140.0 million senior secured credit
facility due November 6, 2002 consisting of (a) a $115.0 million term loan
facility, all of which was drawn at closing and (b) a $25.0 million revolving
credit facility, of which $5.0 million was drawn at closing, (iv) $125.0 million
of
F-18
<PAGE> 128
TELEX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
senior subordinated notes (due 2007, bearing interest at 10 1/2%), and (v) $36.5
million of available cash of the Company.
The transaction will be accounted for as a leveraged recapitalization.
Accordingly, the basis of all assets and liabilities will be retained for
financial reporting purposes, and the repurchases of existing common stock and
issuance of new common stock will be accounted for as equity transactions.
Unamortized deferred financing costs associated with the retired debt of
$2.5 million as of March 31, 1997 will be written-off in the first quarter of
Fiscal 1998. Also compensation expense of $7.4 million related to the extension
of terms on the 242,000 management rollover options will be recognized in the
first quarter of Fiscal 1998. In addition, as part of the transaction, the
Company granted 394,540 options at a 75% discount from fair value to certain
management employees. Included in these option grants are 198,200 options which
have certain performance requirements for vesting to occur. The total discount
of $9.4 million will be recognized as compensation expense ratably over the
vesting or performance period of the options, generally three to five years.
The following table presents the capitalization of the Company as of March
31, 1997 as reported and on a pro forma basis assuming the Recapitalization had
occurred on that date (in millions):
<TABLE>
<CAPTION>
MARCH 31, 1997
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS (UNAUDITED)
----------- -------------- -----------
<S> <C> <C> <C>
Cash and cash equivalents....................... 35.7 (35.7)(a) --
Revolving credit facility....................... -- 6.9(b) 6.9
12% Senior Notes................................ 100.0 (100.0)(c) --
Term Loan....................................... -- 115.0(d) 115.0
Notes........................................... -- 125.0(e) 125.0
Stockholder's equity (deficit).................. 6.3 (150.4)(f) (144.1)
</TABLE>
- ---------------
(a) Reflects use of the Company's cash at closing.
(b) The Company entered into a $25.0 million Revolving Credit Facility for
working capital and general corporate purposes of which $6.9 million would
be drawn at closing.
(c) Reflects the redemption of the Telex Notes.
(d) Represents borrowings under the Term Loan Facility.
(e) Represents the gross proceeds of $125.0 million from the sale of the Notes.
(f) The pro forma adjustments to Shareholder's equity (deficit) reflects the
following (in millions):
<TABLE>
<S> <C>
Convert stock and stock equivalents to cash................................ $(253.9)
GST Equity Investment...................................................... 108.4
Tender Offer premium and consent fee....................................... (14.6)
Write off of deferred financing costs associated with the Notes............ (2.5)
Fees and expenses associated with the Transactions......................... (9.3)
Tax effect of (i) Tender Offer premium and consent fee, (ii) the write-off
of the unamortized deferred financing costs related to the Notes, (iii)
the compensation expense associated with the exercise of options and
change in vesting terms of the Rollover Options and (iv) certain fees and
expenses................................................................. 21.5
-------
$(150.4)
=======
</TABLE>
F-19
<PAGE> 129
SCHEDULE II
TELEX COMMUNICATIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
APRIL 1, 1996 EXPENSE DEDUCTIONS MARCH 31, 1997
------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts......... $ 533 $ 300 $ 192(A) $ 641
Reserve for inventory obsolescence...... 2,217 804 $ 190(B) 2,831
Warranty reserve........................ 906 3,539 $3,362(C) 1,083
Medical claims accrual.................. 700 2,916 $2,923(D) 693
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
APRIL 1, 1995 EXPENSE DEDUCTIONS MARCH 31, 1996
------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts......... $ 631 $ 98 $ 196(A) $ 533
Reserve for inventory obsolescence...... 1,878 757 418(B) 2,217
Warranty reserve........................ 886 3,195 3,175(C) 906
Medical claims accrual.................. 911 3,188 3,399(D) 700
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
APRIL 1, 1994 EXPENSE DEDUCTIONS MARCH 31, 1995
------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts......... $ 677 $ 303 $ 349(A) $ 631
Reserve for inventory obsolescence...... 1,427 1,567 1,116(B) 1,878
Warranty reserve........................ 814 3,344 3,272(C) 886
Medical claims accrual.................. 661 2,880 2,630(D) 911
</TABLE>
- ---------------
(A) Represents amounts charged off, net of bad debt recoveries.
(B) Represents inventory that was scrapped.
(C) Represents warranty repair work incurred during the period.
(D) Represents payments made against the accrual.
F-20
<PAGE> 130
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 131
=========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 4
Prospectus Summary...................... 5
Risk Factors............................ 18
Use of Proceeds......................... 23
Capitalization.......................... 24
Unaudited Pro Forma Consolidated
Financial Information................. 25
Selected Historical And Pro Forma
Financial Information................. 30
Management's Discussion And Analysis of
Financial Condition And Results of
Operations............................ 33
Business................................ 39
Management.............................. 51
Ownership of Capital Stock.............. 58
The Recapitalization.................... 58
Interest of Certain Persons............. 60
Related Transactions.................... 60
Description of Senior Secured Credit
Facility.............................. 61
The Exchange Offer...................... 63
Description of Notes.................... 68
Certain Federal Income Tax
Considerations........................ 102
Book-entry; Delivery and Form........... 106
Plan of Distribution.................... 107
Legal Matters........................... 108
Experts................................. 108
Index to Financial Statements........... F-1
</TABLE>
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
=========================================================
=========================================================
TELEX COMMUNICATIONS, INC.
OFFER TO EXCHANGE
10 1/2% SENIOR SUBORDINATED NOTES,
SERIES A
DUE 2007, WHICH HAVE BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933
AS AMENDED, FOR ANY AND ALL
OUTSTANDING 10 1/2% SENIOR
SUBORDINATED NOTES DUE 2007.
--------------------
PROSPECTUS
--------------------
, 1997
=========================================================
<PAGE> 132
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware Corporation Law, as amended, provides in
regards to indemnification of directors and officers as follows:
"145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. -- (a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation. and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or
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<PAGE> 133
proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses or by, or granted
pursuant to the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
The Certificate of Incorporation and Article IX of the By-Laws of the
Company authorize indemnification of officers and directors to the full extent
permitted under Delaware law, including a provision eliminating (except under
certain enumerated circumstances) the liability of directors for duty of care
violations.
The indemnification provided for the Delaware General Corporation Law is
not exclusive of any other rights of indemnification, and a corporation may
maintain insurance against liabilities for which indemnification is not
expressly provided by the Delaware General Corporation Law.
II-2
<PAGE> 134
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- --------------------------------------------------------------------------------
<S> <C> <C>
*2(a) -- Recapitalization Agreement and Plan of Merger, dated March 4, 1997, among
Greenwich II LLC ("G-II"), GST Acquisition Corp. ("GST") and the Company.
*2(b) -- Amendment No. 1 to the Recapitalization Agreement and Plan of Merger, dated as
of April 17, 1997.
*2(c) -- Amendment No. 2 to the Recapitalization Agreement and Plan of Merger, dated as
of April 25, 1997.
*3(a) -- Certificate of Incorporation of the Company, as amended.
*3(b) -- By-laws of the Company, as amended.
*4(a) -- Indenture (the "Indenture"), dated as of May 6, 1997, among the Company and
Manufacturers and Traders Trust Company, governing the rights of the securities
being registered.
*4(b) -- The First Supplemental Indenture, dated May 6, 1997, to the Indenture.
*4(c) -- Purchase Agreement, dated April 29, 1997, among GST, the Company, Chase
Securities Inc., Morgan Stanley & Co. Incorporated and Smith Barney
(collectively, the "Initial Purchasers").
*4(d) -- Credit Agreement (the "Credit Agreement"), dated May 6, 1997, among the Company,
the lenders named on the signature pages thereof (the "Senior Lenders") and The
Chase Manhattan Bank, a New York banking corporation ("Chase"), as
administrative agent for such Senior Lenders (the "Administrative Agent").
*4(e) -- The Assignment and Assumption Agreement, dated May 6, 1997, made by the Company
and Telex Communications Group, Inc. in favor of the Administrative Agent for
the benefit of the Senior Lenders.
*4(f) -- Guarantee and Collateral Agreement, dated May 6, 1997, made by the Company and
Telex Communications Group, Inc. in favor of the Administrative Agent for the
benefit of the Senior Lenders and certain other secured parties.
*4(g) -- Patent and Trademark Security Agreement, dated March 6, 1997, made by the
Company in favor of the Administrative Agent for the benefit of the Senior
Lenders under the Credit Agreement.
**5 -- Opinion of Debevoise & Plimpton regarding the legality of the New Notes being
registered.
*10(a) -- Amended and Restated Stockholders Agreement, dated March 4, 1997, among Telex
Communications Group, Inc., G-II and the Stockholders set forth on Schedule A
thereto.
*10(b) -- Trademark License Agreement, dated May 25, 1989, by and between MT Corp. and the
Company, relating to the "Telex" name.
*10(c) -- Consulting Agreement, dated May 6, 1997, between Greenwich Street Capital
Partners, Inc. ("GSCP Inc."), Group and G-II.
*10(d) -- Indemnification Agreement, dated May 6, 1997, between GSCP Inc., Group and G-II.
*10(e) -- Fee Agreement, dated May 6, 1997, between GSCP Inc. and Group.
*10(f) -- Employment Agreement, dated March 4, 1997, between Group, the Company and John
L. Hale.
*10(g) -- Employment Agreement, dated March 4, 1997, between Group, the Company and John
A. Palleschi.
</TABLE>
II-3
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- --------------------------------------------------------------------------------
<S> <C> <C>
**10(h) -- Employment Agreement, dated March 4, 1997, between Group, the Company and John
T. Hislop.
**10(i) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as Mortgagor,
to the Administrative Agent, with respect to Bloomington, Minnesota.
**10(j) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as Mortgagor,
to the Administrative Agent, with respect to Blue Earth, Minnesota.
**10(k) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as Mortgagor,
to the Administrative Agent, with respect to Glen Cove, Minnesota.
**10(l) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as Mortgagor,
to the Administrative Agent, with respect to Rochester, Minnesota.
**10(m) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as Mortgagor,
to the Administrative Agent, with respect to Lincoln, Nebraska.
**10(n) -- 1997 Telex Communications Group, Inc. Stock Option Plan.
**10(o) -- Telex Communications Group, Inc. Cash Bonus Plan.
**10(p) -- Telex Communications Group, Inc. Management Cash Compensation Plan.
*12(a) -- Computation of Ratio of Earnings to Fixed Charges.
*12(b) -- Computation of EBITDA to Interest Expense.
*21 -- List of Subsidiaries of the Registrant.
*23(a) -- Consent of Ernst & Young LLP
*23(b) -- Consent of Debevoise & Plimpton (included in Exhibit filed as Exhibit 5).
*24 -- Powers of Attorney (included on signature pages to this Registration Statement
on Form S-4).
*25 -- State of Eligibility and Qualification Under the Trust Indenture Act of 1939
(Form T-1) of Manufacturers and Traders Trust Company.
*99(a) -- Form of Letter of Transmittal.
*99(b) -- Form of Notice of Guaranteed Delivery.
**99(c) -- Form of Exchange Agreement between the Company and the Exchange Agent.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules of the Company for which provision is made in
the applicable accounting regulations of the Commissions are not required, are
inapplicable or have been disclosed in the notes to the financial statements and
therefore have been omitted.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes
(1) To file, during any period in which officers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the
II-4
<PAGE> 136
low or high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement by any person or party who is deemed to be an underwriter within
the meaning of Rule 145 (c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph(4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415 will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrants pursuant to the foregoing provisions or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrants of expenses incurred or paid by
a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrants will, unless in the opinion of their
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Telex
Communications, Inc. has caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Bloomington, State of Minnesota, on the 30th day of June, 1997.
TELEX COMMUNICATIONS, INC.
By: /s/ JOHN L. HALE
------------------------------------
Name: John L. Hale
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John A. Palleschi, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead in any and all
capacities, to sign any or all amendments to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
persons hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ JOHN L. HALE Chairman of the Board, President June 30, 1997
- ------------------------------------------ and Chief Executive Officer
John L. Hale
PRINCIPAL ACCOUNTING OFFICER:
/s/ JOHN T. HISLOP Vice President and Chief Financial June 30, 1997
- ------------------------------------------ Officer
John T. Hislop
PRINCIPAL FINANCIAL OFFICER:
/s/ JOHN T. HISLOP Vice President and Chief Financial June 30, 1997
- ------------------------------------------ Officer
John T. Hislop
</TABLE>
II-6
<PAGE> 138
<TABLE>
<S> <C> <C>
DIRECTORS:
/s/ LODWRICK M. COOK Director June 30, 1997
- ------------------------------------------
Lodwrick M. Cook
/s/ ALFRED C. ECKERT Director June 30, 1997
- ------------------------------------------
Alfred C. Eckert III
/s/ NICHOLAS E. SOMERS Director June 30, 1997
- ------------------------------------------
Nicholas E. Somers
*By: /s/ JOHN A. PALLESCHI
- ------------------------------------------
Attorney-in Fact
</TABLE>
II-7
<PAGE> 139
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------------------------- ------------
<S> <C> <C> <C>
*2(a) -- Recapitalization Agreement and Plan of Merger, dated March 4, 1997,
among Greenwich II LLC ("G-II"), GST Acquisition Corp. ("GST") and
the Company.
*2(b) -- Amendment No. 1 to the Recapitalization Agreement and Plan of Merger,
dated as of April 17, 1997.
*2(c) -- Amendment No. 2 to the Recapitalization Agreement and Plan of Merger,
dated as of April 25, 1997.
*3(a) -- Certificate of Incorporation of the Company, as amended.
*3(b) -- By-laws of the Company, as amended.
*4(a) -- Indenture (the "Indenture"), dated as of May 6, 1997, among the
Company and Manufacturers and Traders Trust Company, governing the
rights of the securities being registered.
*4(b) -- The First Supplemental Indenture, dated May 6, 1997, to the
Indenture.
*4(c) -- Purchase Agreement, dated April 29, 1997, among GST, the Company,
Chase Securities Inc., Morgan Stanley & Co. Incorporated and Smith
Barney (collectively, the "Initial Purchasers").
*4(d) -- Credit Agreement (the "Credit Agreement"), dated May 6, 1997, among
the Company, the lenders named on the signature pages thereof (the
"Senior Lenders") and The Chase Manhattan Bank, a New York banking
corporation ("Chase"), as administrative agent for such Senior
Lenders (the "Administrative Agent").
*4(e) -- The Assignment and Assumption Agreement, dated May 6, 1997, made by
the Company and Telex Communications Group, Inc. in favor of the
Administrative Agent for the benefit of the Senior Lenders.
*4(f) -- Guarantee and Collateral Agreement, dated May 6, 1997, made by the
Company and Telex Communications Group, Inc. in favor of the
Administrative Agent for the benefit of the Senior Lenders and
certain other secured parties.
*4(g) -- Patent and Trademark Security Agreement, dated March 6, 1997, made by
the Company in favor of the Administrative Agent for the benefit of
the Senior Lenders under the Credit Agreement.
**5 -- Opinion of Debevoise & Plimpton regarding the legality of the New
Notes being registered.
*10(a) -- Amended and Restated Stockholders Agreement, dated March 4, 1997,
among Telex Communications Group, Inc., G-II and the Stockholders set
forth on Schedule A thereto.
*10(b) -- Trademark License Agreement, dated May 25, 1989, by and between MT
Corp. and the Company, relating to the "Telex" name.
*10(c) -- Consulting Agreement, dated May 6, 1997, between Greenwich Street
Capital Partners, Inc. ("GSCP Inc."), Group and G-II.
*10(d) -- Indemnification Agreement, dated May 6, 1997, between GSCP Inc.,
Group and G-II.
*10(e) -- Fee Agreement, dated May 6, 1997, between GSCP Inc. and Group.
</TABLE>
II-8
<PAGE> 140
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------------------------- ------------
<S> <C> <C> <C>
*10(f) -- Employment Agreement, dated March 4, 1997, between Group, the Company
and John L. Hale.
*10(g) -- Employment Agreement, dated March 4, 1997, between Group, the Company
and John A. Palleschi.
*10(h) -- Employment Agreement, dated March 4, 1997, between Group, the Company
and John T. Hislop.
**10(i) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as
Mortgagor, to the Administrative Agent, with respect to Bloomington,
Minnesota.
**10(j) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as
Mortgagor, to the Administrative Agent, with respect to Blue Earth,
Minnesota.
**10(k) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as
Mortgagor, to the Administrative Agent, with respect to Glen Cove,
Minnesota.
**10(l) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as
Mortgagor, to the Administrative Agent, with respect to Rochester,
Minnesota.
**10(m) -- Mortgage (or deed of trust), dated May 6, 1997, from the Company, as
Mortgagor, to the Administrative Agent, with respect to Lincoln,
Nebraska.
**10(n) -- 1997 Telex Communications Group, Inc. Stock Option Plan.
**10(o) -- Telex Communications Group, Inc. Cash Bonus Plan.
**10(p) -- Telex Communications Group, Inc. Management Cash Compensation Plan.
*12(a) -- Computation of Ratio of Earnings to Fixed Charges.
*12(b) -- Computation of EBITDA to Interest Expense.
*21 -- List of Subsidiaries of the Registrant.
*23(a) -- Consent of Ernst & Young LLP
*23(b) -- Consent of Debevoise & Plimpton (included in Exhibit filed as Exhibit
5).
*24 -- Powers of Attorney (included on signature pages to this Registration
Statement on Form S-4).
*25 -- State of Eligibility and Qualification Under the Trust Indenture Act
of 1939 (Form T-1) of Manufacturers and Traders Trust Company.
*99(a) -- Form of Letter of Transmittal.
*99(b) -- Form of Notice of Guaranteed Delivery.
**99(c) -- Form of Exchange Agreement between the Company and the Exchange
Agent.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
II-9
<PAGE> 1
Exhibit 2(a)
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER dated as of March 4, 1997 by
and among Greenwich II LLC, a Delaware limited liability company, ("Parent"),
GST Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent (the "Purchaser"), and Telex Communications Group, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Managing Member of Parent and the Boards of Directors of the
Purchaser and the Company each have determined that it is fair to, and in the
best interests of, their respective members and stockholders for Parent to
acquire the Company pursuant to a merger (the "Merger") in which the Purchaser
shall be merged with and into the Company pursuant to this Agreement; and
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial and accounting purposes;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
1. THE MERGER
1.1 Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the applicable provisions of the Delaware
General Corporation Law ("DGCL") the Purchaser shall be merged with and into the
Company. The Company shall be the surviving corporation in the Merger (sometimes
referred to as the "Surviving Corporation") and shall continue its existence
under the laws of the State of Delaware. The separate existence of the Purchaser
shall cease. The name of the Surviving Corporation shall be "Telex
Communications Group, Inc."
1.2 Effect of Merger. The Certificate of Incorporation and the Bylaws of
the Company in effect upon consummation of the Merger shall be the Certificate
of Incorporation and Bylaws of the Surviving Corporation, except that the
Certificate of Incorporation and Bylaws of the Company shall be amended by
virtue of the Merger to read in their entirety as set forth in Exhibits A and B,
respectively. The directors of the Purchaser immediately prior to the Effective
Time (as defined in Section 1.7) shall be the directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified. The Merger shall
have the effects set forth in Section 259 of the DGCL.
<PAGE> 2
1.3 Conversion of Shares.
(a) Merger Consideration. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof: (a) each share
of the common stock of the Company, par value $.01 per share (the "Shares")
issued and outstanding immediately prior to the Effective Time (other than the
Rollover Shares (as defined below), Shares to be cancelled pursuant to clause
(b) below and any Dissenting Shares (as defined in Section 1.8)) shall be
converted into the right to receive in cash an amount per Share equal to the
Merger Consideration (as defined below), subject to any required withholding of
taxes and without interest; (b) each Share owned by Parent, the Purchaser or any
other direct or indirect subsidiary of Parent, or held in the treasury of the
Company, immediately prior to the Effective Time, shall be cancelled and
extinguished, and no payment will be made with respect to those Shares; (c) each
share of preferred stock of the Company shall not be cancelled and shall remain
outstanding as a share of preferred stock of the Surviving Corporation; (d) all
shares of common stock, without par value, of the Purchaser then issued and
outstanding shall be converted into a number of shares of common stock of the
Surviving Corporation equal to (x) the aggregate amount contributed by the GSCP
Group (as defined in Section 2.1(d)) to Parent and the Purchaser at or prior to
the Effective Time to enable them to consummate the Merger and the transactions
contemplated by this Agreement divided by (y) the Merger Consideration; and (e)
each Rollover Share shall be retained and shall remain outstanding as a Share.
"Merger Consideration" means (I) (a) $274,998,417, plus (b) the amount, if any,
by which Closing Cash (as defined below) exceeds $35,000,000, minus (c) 50% of
the amount by which the tender offer premium for the 12% Senior Notes Due 2004
(the "Senior Notes") of Telex Communications, Inc. ("TCI") exceeds $17,000,000,
minus (d) the amount, if any, by which Closing Cash is less than $35,000,000,
divided by (II) the total number of Shares outstanding on a fully diluted basis
as of immediately prior to the Effective Time, assuming the exercise of all
outstanding Options and Warrants. "Rollover Shares" means the Shares identified
on, and registered in the names of the employees identified on, Exhibit C
hereto. "Closing Cash" means the amount of cash and cash equivalents of the
Company and its subsidiaries immediately prior to the Effective Time determined
in accordance with Section 1.3(b).
(b) Determination of Closing Cash. At least three business days
prior to the anticipated date of the Effective Time, the Company shall deliver
to the Purchaser a statement setting forth the Company's good faith calculation
of the Closing Cash as of immediately prior to the Effective Time, together with
reasonable supporting documentation with respect to such calculation; it being
understood and agreed that Closing Cash shall be calculated on the same basis on
which the Company has historically calculated its cash and cash equivalents for
purposes of its financial statements. If Parent is not satisfied that the
calculation of Closing Cash is consistent with the Company's reporting of cash
and cash equivalents in its financial statements consistent with past practice,
the Company and the Purchaser shall promptly agree on a revised calculation of
the Closing Cash as of immediately prior to the Effective Time, whereupon such
revised calculation shall constitute the amount of the Closing Cash for all
purposes of this Agreement.
2
<PAGE> 3
1.4 Stock Options. Immediately prior to the Effective Time, each
outstanding stock option (the "Options") granted to employees and directors of
the Company, whether or not then exercisable, other than the Rollover Options
(as defined below), shall be cancelled by the Company and each holder of such a
cancelled Option shall be entitled to receive from the Purchaser, in connection
with the Merger and the cancellation and settlement of the Option, an amount
equal to the product of (i) the number of Shares previously subject to the
Option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per Share previously subject to the Option (the "Option
Consideration"). As of the Effective Time, each holder of an Option, other than
a Rollover Option, will be entitled to receive only an amount equal to the
Option Consideration. All amounts payable under this Section 1.4 shall be
subject to any required withholding of taxes and shall be paid without interest.
"Rollover Options" means the Options identified on, and held by the employees
identified on, Exhibit C hereto.
1.5 Warrants. At the Effective Time, in accordance with the terms of the
Warrant Agreement dated as of May 25, 1989 (the "Warrant Agreement") between the
Company and Norwest Bank Minnesota, N.A., as Warrant Agent (the "Warrant
Agent"), and the Warrant Certificates issued thereunder, the outstanding
warrants of the Company (the "Warrants") (other than Warrants owned by Parent,
the Purchaser or any other direct or indirect subsidiary of the Parent, which
Warrants shall be cancelled and extinguished at the Effective Time, with no
payment being made with respect to such Warrants) shall be converted into the
right to receive, upon exercise of the Warrants, in cash an amount per Warrant
equal to the product of (i) the number of Shares issuable upon exercise of such
Warrant and (ii) the excess, if any, of the Merger Consideration over the per
Share exercise price of such Warrant (the "Warrant Consideration"), without
interest. Parent shall, or shall cause its subsidiaries to, take any and all
actions as may be necessary to cancel and extinguish any Warrants owned by any
of them immediately prior to the Effective Time. As of the Effective Time, each
holder of Warrants will be entitled to receive only an amount equal to the
Warrant Consideration pursuant to the terms hereof. All amounts payable under
this Section 1.5 shall be subject to any required withholding of taxes and shall
be paid without interest.
1.6 Stockholders' Meeting; Tender Offer for Senior Notes.
(a) Stockholders' Meeting. The Company will, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Company Stockholders
Meeting") for the purpose of obtaining the approval of the stockholders of the
Company. The Company will, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement and the transactions
contemplated hereby in a Proxy Statement (the "Proxy Statement") prepared by the
Company, except to the extent that the Board of Directors of the Company shall
have withdrawn or modified its approval or recommendation of this Agreement or
the Merger in accordance with Section 3.1(b).
3
<PAGE> 4
(b) Tender Offer for Senior Notes. The Company will, as soon as
practicable following the date of this Agreement, offer to purchase all of the
Senior Notes and solicit consents to the amendment of the terms of the Indenture
governing the Senior Notes in a manner mutually agreed to by Parent and the
Company.
1.7 Consummation of the Merger. Upon the terms and subject to the
conditions of this Agreement and after the vote of the stockholders of the
Company in favor of adoption of the Merger and this Agreement has been obtained,
the Company shall execute in the manner required by the DGCL, and deliver to the
Secretary of State of the State of Delaware, a duly executed certificate of
merger as required by the DGCL, and the parties shall take all such other and
further actions as may be required by law to make the Merger effective. Prior to
the filing referred to in this Section 1.7, a closing will be held at the
offices of O'Melveny & Myers LLP, Citicorp Center, 153 East 53rd Street, 54th
Floor, New York, New York, on April 29, 1997 (or such other time as the
Purchaser and the Company may agree, immediately after the conditions set forth
in Article IV have been satisfied or waived) for the purpose of confirming all
of the foregoing. The time the Merger becomes effective in accordance with
applicable law is referred to as the "Effective Time". It is the intent of the
parties that the Effective Time occur as soon as is practicable with the
proceeds of the Financing; provided that notwithstanding the foregoing the
Purchaser shall have the right to utilize sources of funding other than the
Financing (such as by the issuance of senior subordinated notes) so long as the
use of such sources does not delay the Effective Time beyond April 29, 1997.
1.8 Dissenters' Rights. Notwithstanding any provision of this Agreement to
the contrary, any shares of capital stock of the Company outstanding immediately
prior to the Effective Time held by a holder who has demanded and perfected the
right, if any, for appraisal of those shares in accordance with the provisions
of Section 262 of the DGCL and as of the Effective Time has not withdrawn or
lost such right to such appraisal ("Dissenting Shares") shall not be converted
into or represent a right to receive the consideration set forth in Section
1.3(a), but the holder shall only be entitled to such rights as are granted by
the DGCL. If a holder of shares of capital stock of the Company who demands
appraisal of those shares under the DGCL shall effectively withdraw or lose
(through failure to perfect or otherwise) the right to appraisal, then, as of
the Effective Time or the occurrence of such event, whichever last occurs, those
shares shall be converted into and represent only the right to receive the
consideration as provided in Section 1.3(a), without interest, upon the
surrender of the certificate or certificates representing those shares. The
Company shall give Parent (i) prompt notice of any written demands for appraisal
of any shares of capital stock of the Company, attempted withdrawals of such
demands, and any other instruments served pursuant to the DGCL received by the
Company relating to stockholders' rights of appraisal and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisals
of capital stock of the Company, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
4
<PAGE> 5
1.9 Payment for Shares, Warrants and Options.
(a) Shares. Prior to the Effective Time, the Purchaser shall
designate a commercial bank or trust company organized under the laws of the
United States or any state of the United States with capital, surplus and
undivided profits of at least $100,000,000 to act as Paying Agent with respect
to the Merger (the "Paying Agent"). Each holder (other than Parent, the
Purchaser or any subsidiary of Parent) of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time represented
outstanding Shares (other than Rollover Shares and Dissenting Shares) will be
entitled to receive, upon surrender to the Paying Agent of the Certificates for
cancellation, cash in an amount equal to the product of the number of Shares
previously represented by the Certificates multiplied by the Merger
Consideration, subject to any required withholding of taxes. At or prior to the
Effective Time, the Purchaser shall make available to the Paying Agent
sufficient funds to make all payments pursuant to the preceding sentence. No
interest shall accrue or be paid on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificates surrendered are registered, it shall be a condition
of payment that the Certificates so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting the payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificates surrendered or
establish to the satisfaction of the Surviving Corporation that the tax has been
paid or is not applicable. Following the Effective Time, until surrendered to
the Paying Agent in accordance with the provisions of this Section 1.9(a), each
Certificate (other than Certificates representing Dissenting Shares, Rollover
Shares and Shares owned by Parent or any subsidiary of Parent) shall represent
for all purposes only the right to receive upon surrender the Merger
Consideration multiplied by the number of Shares evidenced by the Certificate,
without any interest, subject to any required withholding taxes. Any funds
delivered or made available to the Paying Agent pursuant to this Section 1.9(a)
and not exchanged for Certificates within six months after the Effective Time
will be returned by the Paying Agent to the Surviving Corporation, which
thereafter will act as Paying Agent, subject to the rights of holders of
unsurrendered Certificates under this Section 1.9(a), and any former
stockholders of the Company who have not previously exchanged their Certificates
will thereafter be entitled to look only to the Surviving Corporation for
payment of their claim for the consideration set forth in Section 1.3(a),
without any interest, but will have no greater rights against the Surviving
Corporation than may be accorded to general creditors thereof under applicable
law. Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of Shares for any cash or interest delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws. If any Certificates shall not have been surrendered prior to three
years after the Effective Time (or immediately prior to such earlier date on
which any payment in respect hereof would otherwise escheat to or become the
property of any governmental unit or agency), the payment in respect of such
Certificates shall, to the extent permitted by applicable laws, become the
property of the Surviving Corporation, free and clear of all claims of interest
of any person previously entitled thereto. As soon as practicable after the
Effective Time, the Surviving Corporation will cause the Paying Agent to mail to
each record holder of Certificates a form of letter of transmittal (which will
5
<PAGE> 6
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment.
(b) Warrants. Other than the Warrants to be cancelled pursuant to
Section 1.5 hereof, each holder of a Warrant Certificate which, immediately
prior to the Effective Time, was exercisable for Shares will be entitled to
receive, upon surrender to the Warrant Agent of the Warrant Certificates for
cancellation, cash in an amount equal to the product of the number of Warrants
previously represented by the Warrant Certificates multiplied by the Warrant
Consideration in respect of such Warrants, subject to any required withholding
of taxes. At or prior to the Effective Time, the Purchaser shall make available
to the Warrant Agent sufficient funds to make all payments pursuant to the
preceding sentence. No interest shall accrue or be paid on the cash payable upon
the surrender of the Warrant Certificates. Such cancellation and payment shall
be conducted in accordance with the terms and conditions of the Warrant
Agreement.
(c) Options. Each holder of an Option which, immediately prior to
the Effective Time, was exercisable for Shares (other than Rollover Options)
will be entitled to receive cash in an amount equal to the product of the number
of Options held by such holder multiplied by the Option Consideration in respect
of such Options, subject to any required withholding taxes and without interest.
At or prior to the Effective Time, the Purchaser shall make available to the
Paying Agent sufficient funds to make all payments pursuant to the preceding
sentence. At or prior to the Effective Time, the Board of Directors of the
Company shall adopt such resolutions or take such other actions as may be
necessary to cause each Option outstanding immediately prior to the Merger to
vest as a consequence of the Merger.
1.10 Closing of the Company's Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
converted into the right to receive the Merger Consideration pursuant to the
terms hereof, Dissenting Shares or Shares to be cancelled pursuant to Section
1.3(a) hereof shall thereafter be made. If, after the Effective Time,
Certificates for such Shares are presented to the Surviving Corporation, they
shall be cancelled and exchanged for cash or merely cancelled, as the case may
be, pursuant to and in accordance with Sections 1.3(a), 1.8 and 1.9 hereof,
subject to applicable law in the case of Dissenting Shares.
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Parent and the Purchaser. Parent and
the Purchaser represent and warrant to the Company that:
(a) Corporate Organization. Parent is a limited liability company
duly organized and in good standing under the laws of the State of Delaware and
has the power and authority to carry its business as presently conducted. The
Purchaser is a corporation
6
<PAGE> 7
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power to carry on its business
as it is now being conducted. Parent owns all of the issued and outstanding
capital stock of the Purchaser. Each of Parent and the Purchaser is qualified to
do business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on Parent. "Material Adverse Effect"
means, with respect to any person or entity, a material adverse effect on the
business, operations or condition (financial or otherwise) of such person or
entity and its subsidiaries, taken as a whole. True, accurate and complete
copies of each Parent's and the Purchaser's Certificates of Incorporation and
By-laws (and the equivalent documents for Parent), in each case as in effect on
the date hereof, including all amendments thereto, have heretofore been
delivered to the Company.
(b) Authority. Each of Parent and the Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate or other action on
the part of each of Parent and the Purchaser. This Agreement has been duly
executed and constitutes a valid and binding obligation of each of them,
enforceable against each of them in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally or by general principles
of equity.
(c) Consents; No Violation. Neither the execution and delivery of
this Agreement by Parent and the Purchaser nor the consummation of the
transactions contemplated by this Agreement will (i) conflict with, or result in
any breach or violation of, any provision of the Purchaser's Certificates of
Incorporation or By-laws and the equivalent documents for Parent; (ii)
constitute, with or without notice, the passage of time or both, a breach,
violation or default, create a lien, or give rise to any right of termination,
modification, cancellation, prepayment or acceleration, under any law, order,
judgment, writ, injunction, decree, statute, rule or regulation, governmental
permit or license (collectively "Laws"), or any mortgage, indenture, lease,
license, agreement or other instrument of Parent, the Purchaser or any of their
respective subsidiaries, or to which Parent, the Purchaser or any of their
respective subsidiaries or any of their respective properties is subject, except
for breaches, violations, defaults, liens, or rights of termination,
modification, cancellation, prepayment or acceleration which would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect on Parent or materially adversely affect the ability of Parent or
the Purchaser to consummate the transactions contemplated hereby; or (iii)
require any consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or administrative authority,
foreign or domestic (each, a "Governmental Entity"), on the part of Parent or
the Purchaser, other than (v) the filing of a certificate of merger with respect
to the Merger in accordance with the DGCL, (w) any applicable filings under
federal or state securities, "Blue Sky" or state anti-takeover laws, (x) any
applicable filings and approvals required under the
7
<PAGE> 8
laws of foreign jurisdictions, (y) filings required pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (z) consents, approvals, authorizations, notifications or filings the
failure of which to obtain or make would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on Parent or
materially adversely affect the ability of Parent or the Purchaser to consummate
the transactions contemplated hereby.
(d) Financing. Prior to the date hereof, the Purchaser has
delivered to the Company a written commitment from Greenwich Street Capital
Partners, L.P. Greenwich Street Capital Offshore Fund, LTD, TRV Employees Fund,
L.P., The Travelers Insurance Company, and The Travelers Life and Annuity
Company (collectively, "GSCP Group") which contains the terms and conditions
upon which each member of GSCP Group has severally agreed to provide equity
capital funds to the Purchaser to enable it to fund a portion of the Merger
Consideration and to perform its other obligations set forth in this Agreement.
The aggregate amount of such commitments is $103,139,783. Prior to the date
hereof, the Purchaser has delivered to the Company written commitments (the
"Bank Commitments") from one or more banks or other financial institutions which
contain the general terms and conditions upon which such banks or financial
institutions have agreed to make loans to the Purchaser, the proceeds of which
loans, together with the Purchaser's net equity capital funds immediately prior
to the Effective Time, will be sufficient to enable the Purchaser to consummate
the transactions contemplated in this Agreement (the funds to be loaned to the
Purchaser are hereinafter referred to as the "Financing").
2.2 Representations and Warranties of the Company. The Company represents
and warrants to Parent and the Purchaser that:
(a) Corporate Organization. Each of the Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the requisite corporate power to own, lease and operate its properties and
assets and to carry on its businesses as they are now being conducted. The
Company has delivered to Parent copies of the Certificates of Incorporation and
By-laws, as amended to this date, of the Company and each of its subsidiaries,
which Certificates and By-laws are in full force and effect.
(b) Capitalization. The authorized capital stock of the Company
consists of 2,000,000 Shares, 100,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share (the "Series A Shares") and 200,000 shares of
Series B Preferred Stock (the "Series B Shares"). As of the date hereof, (i)
268,869 Shares are issued and outstanding, all of which are validly issued,
fully paid and nonassessable and not subject to preemptive rights except as
described on the Disclosure Schedule delivered by the Company to Parent on or
prior to the date hereof (the "Disclosure Schedule"); (ii) 107,177 Warrants are
issued and outstanding, all of which are validly issued and are currently
exercisable for 107,177 Shares in the aggregate; and (iii) there are outstanding
Options to purchase an aggregate of 55,995 Shares. There are no stock
appreciation rights outstanding. All of the issued and outstanding Series A
Shares and Series B Shares are held by Telex Investments,
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Inc. ("Investments"), a wholly-owned subsidiary of the Company. All of the
outstanding shares of capital stock of each subsidiary of the Company are
validly issued, fully paid and nonassessable. The Disclosure Schedule sets forth
a list, complete and correct as of the date hereof, of the holders of all
Options and Warrants, the number of shares of Company Common Stock issuable upon
the exercise of each such Option and Warrant and the exercise prices thereof.
There are no bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of the Company
may vote. Except as set forth in this Section 2.2(b), no shares of capital stock
or other voting securities are issued, reserved for issuance or outstanding, nor
are there any outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of the Company or any of
its subsidiaries obligating the Company or any of its subsidiaries to issue,
deliver, sell or purchase, or cause to be issued, delivered, sold or purchased,
any securities of the Company or any of its subsidiaries. There are no voting
trusts or other agreements or understandings to which the Company or any of its
subsidiaries is a party with respect to the voting of capital stock of the
Company or any of its subsidiaries.
(c) Subsidiaries. The Disclosure Schedule sets forth a list, true
and complete as of the date hereof, of all of the subsidiaries of the Company.
All of the outstanding shares of capital stock of each subsidiary of the Company
have been validly issued and are fully paid and nonassessable and are owned
directly or indirectly by the Company, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"). Except for the capital stock of its
subsidiaries, as of the date hereof, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
limited liability company, partnership, joint venture or other entity.
(d) Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject only, to the extent required, to approval by the stockholders of the
Company as provided in Section 1.6. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, the Company,
enforceable against the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally or by general
principles of equity.
(e) Consents; No Violation. Neither the execution and delivery of
this Agreement by the Company nor the consummation of the transactions
contemplated hereby will (i) conflict with, or result in a breach or a violation
of, any provision of the Certificate of Incorporation or By-laws of the Company
or any of its subsidiaries; (ii) constitute, with or without notice, the passage
of time or both, a breach, violation or default, create a Lien, or give rise to
any right of termination, modification, cancellation, prepayment or
acceleration,
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<PAGE> 10
under any Laws or any mortgage, indenture, lease, license, agreement or other
instrument of the Company or any of its subsidiaries, or to which the Company or
any of its subsidiaries or any of their respective properties is subject, except
for breaches, violations, defaults, liens, or rights of termination,
modification, cancellation, prepayment or acceleration which would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect on the Company or materially adversely affect the ability of the
Company to consummate the transactions contemplated hereby; or (iii) require any
consent, approval or authorization of, notification to, or filing with, any
Governmental Entity, on the part of the Company or any of its subsidiaries,
other than (u) required consents from the holders of the Senior Notes, (v) the
filing of a certificate of merger with respect to the Merger in accordance with
the DGCL, (w) filings required under the HSR Act, (x) any applicable filings and
approvals required under the laws of foreign jurisdictions, (y) any applicable
filings under federal and state securities laws or state anti-takeover laws, and
(z) consents, approvals, authorizations, notifications or filings the failure of
which to obtain or make would not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect on the Company or materially
adversely effect the ability of the Company to consummate the transactions
contemplated hereby.
(f) SEC Reports; Company Assets and Liabilities. TCI has filed all
forms, reports, statements and schedules with the Securities and Exchange
Commission (the "Commission") required to be filed pursuant to the Exchange Act
of 1934, as amended (the "Exchange Act"), or other federal securities laws, and
the rules and regulations promulgated thereunder, since January 1, 1995 (the
"SEC Reports"). The SEC Reports complied in all material respects with all
applicable requirements of the Exchange Act and such other federal securities
laws, and the rules and regulations promulgated thereunder, and did not (as of
their respective filing dates) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The audited and unaudited consolidated
financial statements of TCI included (or incorporated by reference) in the SEC
Reports comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as stated in the financial
statements, including the related notes, and except that the quarterly financial
statements do not contain all of the footnote disclosures required by generally
accepted accounting principles) and fairly present the financial position of TCI
and its consolidated subsidiaries as of the dates thereof and the results of
their operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited financial statements, to normal year-end
adjustments and any other adjustments described therein. The Company's sole
assets consist of the capital stock of TCI and Investments, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practices since the date of the most recent consolidated
balance sheet included in the SEC Reports, neither the Company nor any of its
subsidiaries has incurred any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) other than those reflected
in the SEC Reports and those incurred in connection with the transactions
contemplated hereby.
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(g) No Material Adverse Change. Except as and to the extent
disclosed in the SEC Reports or as set forth on the Disclosure Schedule, since
March 31, 1996, there has not been (i) any material adverse change in the
business, operations or condition (financial or other) of the Company and its
subsidiaries taken as a whole, (ii) any granting by the Company (x) to any
executive officer or other key employee of the Company of any increase in
compensation, except for normal increases in the ordinary course of business
consistent with past practice or as required under employment agreements in
effect as of the date of the most recent SEC Reports and set forth in the
Disclosure Schedule or (y) to any such executive officer of any increase in
severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of the date of the most recent
audited financial statements included in the SEC Reports and set forth in the
Disclosure Schedule (other than the severance arrangements referred to in
Section 3.6(e)), or (iii) except as may have been required by a change in
generally accepted accounting principles or as disclosed in the SEC Reports, any
change in accounting methods, principles or practices by the Company or any of
its subsidiaries materially affecting its assets, liabilities or business.
(h) Litigation. Except as disclosed in the SEC Reports or on the
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries that individually or in the aggregate would reasonably be
expected to (i) have a Material Adverse Effect on the Company, (ii) impair the
ability of the Company to perform its obligations under this Agreement in any
material respect or (iii) delay in any material respect or prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or any of its subsidiaries having,
or which would reasonably be expected to have, any effect referred to in clause
(i), (ii) or (iii) above.
(i) Fees. Except as set forth on the Disclosure Schedule, neither
the Company nor any of its subsidiaries has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary or other similar Person
in connection with the transactions contemplated hereby or in connection with
any other offer to acquire the Company's shares or assets.
(j) Certificate and By-laws. Neither the Certificate of
Incorporation nor the By-laws of the Company contains any provision that would
require a vote of the Company's stockholders in excess of a majority of the
outstanding shares of Company Common Stock in order to approve the Merger in
accordance with the terms of this Agreement.
(k) State Takeover Statutes. To the best of the Company's
knowledge, no state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or any of the transactions
contemplated by this Agreement, and no provision of the Certificate of
Incorporation, By-laws or other governing instruments of the Company or any of
its subsidiaries would, directly or indirectly, restrict or
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<PAGE> 12
impair the ability of Parent to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of the capital stock of Company and its
subsidiaries that may be acquired or controlled by Parent. There are fewer than
2,000 record holders of Shares, and therefore the provisions of Section 203 of
the DGCL are not applicable to the Merger.
(l) Employee Benefit Plans; Employee Agreements.
(i) The Disclosure Schedule sets forth a true and
complete list of each employee benefit plan within the meaning set forth
in Section 3(3) of ERISA and each bonus, incentive, deferred compensation,
severance, termination, retention, change of control, stock option or
other equity-based performance or other compensation plan, program,
arrangement, policy or understanding, whether written or unwritten, that
is or has been maintained or established by the Company or any other
Person that, together with the Company, is treated as a single employer
under Section 414 of the Code (each a "Commonly Controlled Entity"), or to
which the Company or any Commonly Controlled Entity contributes or is or
has been obligated or required to contribute or with regard to which the
Company or any of its Commonly Controlled Entities may have any liability
at the Closing Date (collectively, the "Plans"). Each employment agreement
to which the Company or any of its subsidiaries is a party, and each
employee benefit plan adopted by the Company or any of its subsidiaries,
which in either case becomes effective or grants rights to any person upon
a "change of control" of the Company is set forth in the Disclosure
Schedule. True and complete copies of each such Plan and the most recent
annual report on Form 5500 for each such Plan have been delivered to the
Purchaser.
(ii) Each Plan intended to be qualified under Section
401(a) of the Code and the trust forming a part thereof has received a
favorable determination letter from the IRS as to its qualification under
the Code and to the effect that each such trust is exempt from taxation
under Section 501(a) of the Code and nothing has occurred since the date
of such determination that could adversely affect such qualification or
tax-exempt status.
(iii) Except as set forth in the Disclosure Schedule, no
material liability has been or is expected to be incurred by the Company
or any Commonly Controlled Entity (either directly or indirectly,
including as a result of an indemnification obligation or any joint and
several liability obligations) under or pursuant to Title I or IV of ERISA
or the penalty, excise tax or joint and several liability provisions of
the Code relating to employee benefit plans, and no event, transaction or
condition has occurred or exists that would reasonably be expected to
result in any such liability to the Purchaser, the Surviving Corporation
or any Commonly Controlled Entity or any employee benefit plan of the
Surviving Corporation or any Commonly Controlled Entity.
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(m) Compliance with Applicable Laws. Except as disclosed in the
SEC Reports or the Disclosure Schedule, the businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which
would not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(n) Contracts; Debt Instruments. Neither the Company nor any of
its subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time, the giving of notice or both would
cause such a violation of or default under) any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding to which it is a party
or by which it or any of its properties or assets is bound, except for
violations or defaults that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect on the Company.
(o) Taxes and Tax Returns. Except as set forth in the SEC Reports
or on the Disclosure Schedule, (a) all material tax returns, declarations,
reports, estimates, information returns and statements required to be filed with
respect to Taxes (as defined herein) under federal, state, local or foreign laws
("Returns") by the Company or any subsidiary of the Company have been timely
filed (taking into account any extensions of time for filing such Returns), (b)
at the time filed, such Returns were (and, as to Returns not filed as of the
date hereof, will be) true, correct and complete in all material respects and
each of the Company and each subsidiary of the Company has timely paid all Taxes
shown to be due and payable on such Returns, (c) there are no material liens for
Taxes upon the assets of the Company or any subsidiary of the Company which are
not provided for in the financial statements included in the SEC Reports, except
liens for Taxes not yet due, (d) there are no material outstanding deficiencies
for any Taxes proposed, asserted or assessed against the Company or any
subsidiary of the Company which are not provided for in the financial statements
included in the SEC Reports, (e) except as set forth on the Disclosure Schedule,
there are no material federal, state, local or foreign audits or other
administrative proceedings presently pending with regard to any Taxes or
Returns, and (f) the Company has filed a consolidated Return for federal income
tax purposes on behalf of itself and all of its domestic subsidiaries as the
common parent corporation of an "affiliated group" (within the meaning of
Section 1504(a) of the Code) of which such subsidiaries are "includible
corporations" in such affiliated group within the meaning of Section 1504(c)(2)
of the Code. For purposes of this Agreement, "Taxes" means all income, gross
income, gross receipts, premium, sales, use, transfer, franchise, profits,
withholding, payroll, employment, excise, severance, property and windfall
profits taxes, and all other taxes, assessments or similar charges of any kind
whatsoever thereon or applicable thereto, together with any interest and any
penalties, additions to tax or additional amounts, in each case imposed by any
taxing authority (domestic or foreign) upon the Company or any subsidiary of the
Company, including, without limitation, all amounts imposed as a result of being
a member of any affiliated or combined group.
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(p) Labor Matters. Neither the Company nor any of its subsidiaries
is the subject of any suit, action or proceeding which is pending or, to the
knowledge of the Company, threatened, asserting that the Company or any of its
subsidiaries has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or applicable state statutes) or seeking to compel
the Company or any of its subsidiaries to bargain with any labor organization as
to wages and conditions of employment, in any such case, that would reasonably
expected to have a Material Adverse Effect on the Company. No strike or other
labor dispute involving the Company or any of its subsidiaries is pending or, to
the knowledge of the Company, threatened, and, to the knowledge of the Company,
there is no activity involving any employees of the company or any of its
subsidiaries seeking to certify a collective bargaining unit or engaging in any
other organizational activity, except for any such dispute or activity which
would not reasonably be expected to have a Material Adverse Effect on the
Company.
(q) Fairness Opinion. The Board of Directors of the Company has
received a written opinion from Donaldson, Lufkin & Jenrette Securities
Corporation that the Merger Consideration to be received by non-management
holders of Shares is fair from a financial point of view to such holders of
Shares.
3. COVENANTS
3.1 Acquisition Transactions.
(a) After the date hereof and prior to the Effective Time or
earlier termination of this Agreement, unless Parent shall otherwise agree in
writing, the Company shall not, shall not permit any of its subsidiaries to, and
shall not authorize or permit any officer, director or employee or any
investment banker, attorney, accountant or other advisor or representative of
the Company or any of its subsidiaries to, directly or indirectly, (i) initiate,
solicit, negotiate, encourage, or provide confidential information to facilitate
any proposal or offer to acquire all or any substantial part of the business and
properties of the Company and its subsidiaries, taken as a whole, or beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the capital stock of the Company, or 20% or more of the
Senior Notes, whether by merger, purchase of assets, tender offer or otherwise,
whether for cash, securities or any other consideration or combination thereof
(such transactions being referred to herein as "Acquisition Transactions"), (ii)
enter into any agreement with respect to any Acquisition Transaction or give any
approval of the type referred to in Section 3.1(b) with respect to any
Acquisition Transaction or (iii) participate in any discussions regarding, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes or may reasonably be expected to lead to any Acquisition
Transaction; provided, however, that, in response to any unsolicited proposal
for an Acquisition Transaction, the Company and its subsidiaries may (at any
time prior to adoption of this Agreement by the stockholders of the Company
("Company Stockholder Approval")) furnish information concerning its business,
properties or assets to the corporation, partnership, person or other entity or
group (a "Potential Acquiror") making
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<PAGE> 15
such proposal for an Acquisition Transaction and participate in negotiations
with the Potential Acquiror if (x) the Company's Board of Directors is advised
by one or more of its independent financial advisors that such Potential
Acquiror has the financial wherewithal to consummate such an Acquisition
Transaction, (y) the Company's Board of Directors reasonably determines, after
receiving advice from the Company's financial advisor, that such Potential
Acquiror has submitted a proposal for an Acquisition Transaction that involves
consideration to the Company's stockholders and other terms that taken as a
whole are superior to the Merger, and (z) based upon advice of counsel to such
effect, the Company's Board of Directors determines in good faith that it is
necessary to so furnish information and negotiate in order to comply with its
fiduciary duty to stockholders of the Company. In the event the Company shall
determine to provide any information as described above, or shall receive any
offer of the type referred to in this Section 3.1, it shall promptly inform
Parent orally or in writing as to the fact that information is to be provided
and shall furnish to Parent the identity of the recipient of such information
and/or the proponent of such offer and a description of the material terms
thereof. The Company will keep Parent fully informed of the status and details
(including amendments or proposed amendments of any such proposed Acquisition
Transaction); provided that the Company shall not be required to disclose to
Parent information regarding a Potential Acquiror's business or affairs which
such Potential Acquiror has requested the Company keep confidential.
(b) Neither the Board of Directors of the Company nor any
committee thereof (x) shall withdraw or modify or propose to withdraw or modify,
in any manner adverse to Parent, the approval of recommendation of such Board of
Directors or such committee of this Agreement or the Merger or (y) approve or
recommend, or propose to approve or recommend, any proposal for an Acquisition
Transaction except, in each case, in connection with a Superior Proposal (as
defined in Section 5.5).
3.2 Interim Operations. During the period from the date of this Agreement
to the Effective Time, except as contemplated by this Agreement, or as otherwise
approved in writing by the Purchaser:
(a) Conduct of Business. The Company shall, and shall cause each
of its subsidiaries to, conduct business only in, and not to take any action
except in, the ordinary course of business and in substantially the same manner
as heretofore conducted and in compliance in all material respects with all
applicable Laws.
(b) Charters and By-laws. The Company shall not make or propose
any change or amendment in its charter or by-laws.
(c) Capital Stock. The Company shall not issue, pledge or sell any
shares of capital stock of the Company or issue any securities convertible into,
exchangeable for or representing a right to purchase or receive, or enter into
any contract, understanding or arrangement with respect to the issuance of, any
shares of capital stock of the Company (other than pursuant to this Agreement or
the exercise of the Warrants or Options outstanding on the date hereof), or
enter into any arrangement or contract with respect to the purchase or
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<PAGE> 16
voting of shares of its capital stock, or adjust, split, combine or reclassify
any of its capital stock.
(d) Dividends. The Company shall not declare, set aside, pay or
make any dividend or other distribution or payment (whether in cash, stock or
property) with respect to, or purchase or redeem, any shares of its capital
stock.
(e) Relationships. The Company shall use its reasonable best
efforts to preserve intact the business organization of the Company and each of
its subsidiaries, to keep available the services of its and their present
officers and key employees, and to preserve the good will of those having
business relationships with it and its subsidiaries.
(f) Indebtedness. The Company shall not incur any indebtedness for
borrowed money.
(g) Capital Expenditures. The Company shall not make or agree to
make any new capital expenditure with respect to any single project in excess of
$250,000.
(h) Taxes. The Company shall not make any tax election that would
reasonably be expected to have a Material Adverse Effect on the Company or
settle or compromise any material income tax liability.
(i) Accounting Changes. The Company shall not make any material
changes to its accounting methods, principles or practices, except as may be
required by generally accepted accounting principles.
(j) Employee Related Matters. The Company shall not, unless
otherwise required by law, increase any employee benefits provided to, or,
except in the ordinary course of business consistent with past practices,
increase the compensation payable to, any employee or former employee of the
Company or any subsidiary of the Company other than as provided in Section
3.6(e).
(k) No Authorization. The Company shall not authorize, or commit
or agree to take, any of the foregoing actions.
(l) Control of the Company's Operations. Nothing contained in this
Agreement shall give to Parent or the Purchaser, directly or indirectly, rights
to control or direct the Company's operations prior to the Effective Time. Prior
to the Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
(m) Cash Management. The Company and its subsidiaries will conduct
their cash management policies in the ordinary course of business consistent
with past practice.
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3.3 Access and Information. Throughout the period prior to the Effective
Time, the Company shall afford to the Purchaser and its representatives such
access, during normal business hours, to the Company's and its subsidiaries'
books, records (including, without limitation, tax returns and work papers of
the Company's independent auditors), plant and personnel, and to such other
information, as Parent shall reasonably request. Parent and the Purchaser will
treat, and will cause their respective accountants, counsel and other
representatives to treat, as strictly confidential all non-public documents and
non-public information concerning the Company furnished to Parent or the
Purchaser in connection with the transactions contemplated by this Agreement,
subject to the requirements of law and the provisions of this Agreement. If the
transactions contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information can be shown to have
been (i) in the public domain through no fault of Parent or the Purchaser or
(ii) later lawfully acquired by Parent or the Purchaser from other sources. If
requested by the Company, Parent and the Purchaser will return to the Company
all copies of written information furnished by the Company to Parent or the
Purchaser or its agents, representatives or advisors.
3.4 Certain Filings, Consents and Arrangements. Parent, the Purchaser and
the Company shall (a) use their best efforts to make promptly any required
submissions under the HSR Act with respect to the Merger and the transactions
contemplated by this Agreement and (b) cooperate with one another (i) in
promptly determining whether any filings are required to be made or consents,
approvals, permits or authorizations are required to be obtained under any other
federal, state or foreign Law or any consents, approvals or waivers are required
to be obtained from other parties to loan agreements or other contracts material
to the Company's business in connection with the consummation of the Merger and
(ii) in promptly making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such consents, permits,
authorizations, approvals or waivers. The Company shall also use its reasonable
best efforts to assist Parent in obtaining the Financing required to consummate
the transactions contemplated by this Agreement.
3.5 State Takeover Statutes. The Company shall use its best efforts to
ensure that no state takeover statute or similar law becomes applicable to the
Merger or the other transactions contemplated hereby.
3.6 Employee Benefits.
(a) Employment Agreements. From and after the Effective Time,
Parent will cause the Surviving Corporation to honor, in accordance with their
respective terms in effect on this date, the employment agreements to which the
Company or any of its subsidiaries is a party which are listed on the Disclosure
Schedules.
(b) Employee Benefit Plans. Each of Parent and the Purchaser
acknowledges that the consummation of the transactions contemplated by this
Agreement will constitute a change in control of the Company (to the extent such
concept is applicable) for the purposes of all agreements, contracts, plans,
programs, policies or arrangements of the
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Company referred to in Section 3.6(e). Until March 31, 1999, Parent agrees that
it shall cause the Surviving Corporation to maintain employee benefit plans
(other than stock based plans or stock based provisions in plans) (collectively
referred to herein as "Benefit Plans") for the benefit of employees of the
Surviving Corporation (other than those employees who are employed pursuant to a
collective bargaining agreement or who are members of a collective bargaining
unit or labor union) which are substantially comparable in the aggregate to the
employee benefit plans of the Company in effect on the date hereof (other than
stock based plans or stock based provisions in the plans); provided, however,
that during such period any Benefit Plan (i) may be amended to the extent
required by applicable law, (ii) may be amended with the unanimous approval of
the Board of Directors of the Company, and (iii) shall not be required to be
continued if by its terms it expires before the end of such period.
(c) Headquarters. Parent shall cause the Surviving Corporation to
maintain the Company's headquarters in Minneapolis, Minnesota for a period of at
least two years following the Effective Time.
(d) Officers' and Directors' Indemnification Insurance.
(i) After the Effective Time, Parent shall, and shall
cause the Company (or the Surviving Corporation after the Effective Time)
to, indemnify and hold harmless, each present and former director,
officer, employee and agent of the Company or any of its subsidiaries
(each, together with such person's heirs, executors or administrators, an
"Indemnified Party" and collectively, the "Indemnified Parties") against
any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of,
relating to or in connection with any action or omission occurring prior
to or at the Effective Time (including, without limitation, acts or
omissions in connection with such persons' serving as an officer, director
or other fiduciary in any entity if such service was at the request or for
the benefit of the Company or any of its subsidiaries) or arising out of
or pertaining to the transactions contemplated by this Agreement,
regardless of whether any such claim, action, suit, proceeding or
investigation is asserted or claimed prior to, at or after the Effective
Time. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (x)
Parent shall pay the reasonable fees and expenses of one counsel selected
by the Indemnified Parties, which counsel shall be reasonably satisfactory
to Parent, promptly after statements therefor are received, (y) Parent
will cooperate in the defense of any such matter, and (z) any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under Delaware or
other applicable law or Parent's Certificate of Incorporation or By-laws
shall be made by independent counsel acceptable to Parent and the
Indemnified Party; provided, however, that Parent shall not be liable for
any settlement effected without its written consent (which consent shall
not be unreasonably withheld). Without limiting the
18
<PAGE> 19
foregoing, in the event any Indemnified Party becomes involved in any
capacity in any claim, action suit, proceeding or investigation, then from
and after the Effective Time Parent shall, or shall cause the Surviving
Corporation to, periodically advance to such Indemnified Party its legal
and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the provision by
such Indemnified Party of an undertaking to reimburse the amounts so
advanced in the event of a final non-appealable determination by a court
of competent jurisdiction that such Indemnified Party is not entitled
thereto. Parent and the Surviving Corporation agree that all rights to
indemnification and all limitations of liability existing in favor of the
Indemnified Parties as provided in the Company's Certificate of
Incorporation or By-laws or the certificate or articles of incorporation,
by-laws or similar organizational documents of any of the Company's
subsidiaries as in effect as of the date hereof with respect to matters
occurring at or prior to the Effective Time shall survive the Merger and
shall continue in full force and effect, without any amendment thereto.
(ii) In the event the Surviving Corporation or Parent or
any of their successors or assigns (x) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (y) transfers all or
substantially all of its properties and assets to any person, then and in
each such case, proper provisions shall be made so that the successors and
assigns of the Surviving Corporation or Parent shall assume the
obligations set forth in this Section 3.6(d).
(iii) Parent shall cause to be maintained in effect for
six years from the Effective Time the current policies of the directors'
and officers' liability insurance maintained by the Company (provided that
Parent may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous) with
respect to matters occurring on or prior to the Effective Time; provided,
however, that the Parent shall not be required to cause such insurance to
be maintained if the annual premium therefor would be in excess of 250% of
the last annual premium paid prior to the date of this Agreement;
provided, further, that if the same coverage cannot be obtained without
paying an annual premium in excess of such limit, Parent shall cause to be
maintained as much coverage as can be obtained by paying an annual premium
equal to such limit.
(e) Severance Arrangements. Prior to the Effective Time, the
Company will enter into severance arrangements with the executive officers of
the Company listed on the Disclosure Schedules consistent with the resolution of
the Board of Directors of the Company dated April 11, 1996 and consistent with
the terms set forth in Exhibit E. Parent and the Purchaser agree that such
arrangements will survive the Merger and become obligations of the Surviving
Corporation.
3.7 Best Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties agrees to use its best efforts to take promptly,
or cause to be
19
<PAGE> 20
taken, all actions and to do promptly, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, including using its best efforts (i) to obtain
all necessary waivers, consents and approvals, (ii) to obtain the Financing
contemplated by this Agreement and (iii) to effect all necessary registrations
and filings, subject, however, to any appropriate approval of the Merger by the
stockholders of the Company. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and/or directors of Parent, the Purchaser and the
Company shall take the necessary action.
3.8 Public Statements. The parties shall consult with each other prior to
issuing any press release or any written public statement with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or written public statement prior to such consultation.
3.9 Proxy Statement; Senior Note Tender Documents. The Company agrees that
none of the information included or incorporated by reference in the Proxy
Statement or in the documents pursuant to which TCI tenders for the Senior
Notes, or otherwise supplied by the Company to its stockholders or by TCI to the
holders of the Senior Notes, including any amendments to any of the foregoing,
will be false or misleading with respect to any material fact or will omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading; provided, that the foregoing shall not apply to
information supplied by or on behalf of Parent or the Purchaser specifically for
inclusion or incorporation by reference in any such document.
3.10 Stockholder Litigation. The Company shall give the Purchaser the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that the Purchaser shall have
the right to prevent the Company from entering into any such settlement without
the Purchaser's consent if (x) the Purchaser agrees to indemnify each director
of the Company for the amount of his or her individual liability (whether as a
director or in any other capacity), if any, arising from the underlying claim,
net of any insurance proceeds received by such director, that is in excess of
the amount that such director would have been liable for under such settlement
(whether as a director or in another capacity) and (y) the Purchaser provides
each member of the Board of Directors with such assurances and/or security with
respect to such indemnity as is acceptable to each such director in his or her
reasonable discretion.
3.11 Certain Agreements. The Company shall use commercially reasonable
efforts, beginning concurrently with the mailing of the Proxy Statement, to
obtain agreement from holders of at least 90,000 Shares and/or Warrants (other
than Shares held by officers and directors of the Company) pursuant to which
such holders shall agree to, in the case of Shares, vote their Shares in favor
of the adoption of this Agreement and the transactions contemplated hereby or,
in the case of holders of the Warrants, to tender their Warrants to
20
<PAGE> 21
Parent or its designee immediately prior to the Effective Time at a cash price
per Warrant equal to the Warrant Consideration.
3.12 Preferred Stock. The Company shall take such actions with respect to
the Series A Shares and the Series B Shares as the Purchaser may reasonably
request; provided that such actions do not have adverse tax consequences to the
Company or Investments.
4. CONDITIONS
4.1 Conditions to the Obligations of Parent, the Purchaser and the
Company. The obligations of Parent, the Purchaser and the Company to consummate
the Merger are subject to the satisfaction, at or before the Effective Time, of
each of the following conditions:
(a) The stockholders of the Company shall have duly adopted this
Agreement.
(b) The consummation of the Merger shall not be precluded by any
order, decree or injunction of a court of competent jurisdiction (each party
agreeing to use its best efforts to have any such order reversed or injunction
lifted), and there shall not have been any action taken or any Law enacted,
promulgated or deemed applicable to the Merger by any Governmental Entity that
makes consummation of the Merger illegal.
(c) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) The Board of Directors of the Company shall have received a
written opinion from Donaldson Lufkin & Jenrette Securities Corporation that the
Merger Consideration to be received by non-management holders of Shares is fair
from a financial point of view to such holders of Shares as of the date of the
stockholders meeting approving the Merger.
4.2 Conditions to the Obligations of Parent and Purchaser. The obligations
of Parent and the Purchaser to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of the following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of (i) the date made and (ii) except in the case of representations
and warranties expressly made solely with reference to a particular date, the
Effective Time, and Parent and the Purchaser shall have received a certificate
of an executive officer of the Company to such effect.
21
<PAGE> 22
(b) There shall be no impediment to the employment agreements of
John L. Hale, John A. Palleschi or John T. Hislop executed on the date hereof
shall have becoming effective immediately after the Effective Time.
(c) Parent shall have entered into a Stockholders Agreement with
each of the employees of the Company identified on Exhibit D hereto, effective
as of the Effective Time, substantially in the form of Exhibit D hereto.
(d) Closing Cash of the Company and its subsidiaries, as
determined in accordance with Section 1.3(b), shall be at least $25 million.
(e) The Company shall not have received notice from the holder or
holders of more than 5% of the outstanding Shares, determined on a fully diluted
basis, that such holder or holders have exercised or intend to exercise its or
their appraisal rights under Section 262 of the DGCL.
(f) At least 90% of the aggregate principal amount of the Senior
Notes shall have been tendered to Telex (and not withdrawn) as of immediately
prior to the Effective Time, and requisite consents shall have been obtained
from the holders of the Senior Notes agreeing to the execution and delivery of a
supplemental indenture amending the terms and provisions of the Indenture
governing the Senior Notes in a manner mutually agreed to by the Purchaser and
the Company.
(g) The Purchaser shall have obtained funds which, together with
the equity commitments of the GSCP Group, are sufficient to enable it to
consummate the transactions contemplated by this Agreement on such terms as are
consistent with the Bank Commitments and satisfactory to the Purchaser in its
reasonable judgment.
4.3 Conditions to the Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the satisfaction, at or before
the Effective Time, of the following conditions:
(a) Parent and the Purchaser shall have performed in all material
respects their agreements contained in this Agreement required to be performed
on or prior to the Effective Time and the representations and warranties of the
Parent and the Purchaser contained in this Agreement shall be true and correct
in all material respects on and as of (i) the date made and (ii) except in the
case of representations and warranties expressly made solely with reference to a
particular date, the Effective Time, and the Company shall have received a
certificate of an executive officer of Parent to such effect.
22
<PAGE> 23
5. MISCELLANEOUS
5.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether prior to or after approval by the stockholders of the Company:
(a) by the mutual written consent of Parent, the Purchaser and the
Company;
(b) by either the Purchaser or the Company if, upon a vote at a
duly held Company Stockholders Meeting or any adjournment thereof at which the
Company Stockholder Approval shall have been voted upon, the Company Stockholder
Approval shall not have been obtained;
(c) by either the Purchaser or the Company, so long as such party
has not breached its obligations hereunder (except for such breaches as are
clearly immaterial), if the Merger shall not have been consummated on or before
June 30, 1997;
(d) unilaterally by the Purchaser or the Company (i) if the other
fails to perform any material covenant in any material respect in this
Agreement, and does not cure the failure in all material respects within 30
business days after the terminating party delivers written notice of the alleged
failure or (ii) if any condition to the obligations of that party is not
satisfied (other than by reason of a breach by that party of its obligations
hereunder), and it reasonably appears that the condition cannot be satisfied
prior to June 30, 1997;
(e) by either the Purchaser or the Company if either is prohibited
by an order or injunction (other than an order or injunction on a temporary or
preliminary basis) of a court of competent jurisdiction or other Governmental
Entity from consummating the Merger and all means of appeal and all appeals from
such order or injunction have been finally exhausted;
(f) by the Purchaser if the Board of Directors of the Company
shall have withdrawn or modified, or resolved to withdraw or modify, in any
manner which is adverse to Parent or the Purchaser, its recommendation or
approval of the Merger or this Agreement; provided, however, that a termination
pursuant to this Section shall not become effective if, as a result of the
Company's receipt of a proposal for an Acquisition Transaction from a third
party, the Company, in accordance with Section 3.1(b), withdraws or modifies, or
resolves to withdraw or modify, in any manner which is adverse to Parent or the
Purchaser, its recommendation or approval of the Merger or this Agreement and if
within ten business days of taking and disclosing to its stockholders the
aforementioned position the Company publicly reconfirms its recommendation of
the transactions contemplated hereby;
(g) by the Company if (i) the Board of Directors of the Company
shall have determined in good faith, based on the advice of outside counsel,
that it is necessary, in
23
<PAGE> 24
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, to terminate this Agreement to enter into an agreement with
respect to or to consummate a transaction constituting a Superior Proposal (as
defined in Section 5.5), (ii) the Company shall have given notice to the
Purchaser advising the Purchaser that the Company has received a Superior
Proposal from a third party, specifying the material terms and conditions
(including the identity of the third party), and that the Company intends to
terminate this Agreement in accordance with this Section 5.1(g), (iii) either
(A) the Purchaser shall not have revised its proposal for an Acquisition
Transaction within two business days from the time on which such notice is
deemed to have been given to Parent, or (B) if the Purchaser within such period
shall have revised its proposal for an Acquisition Transaction, the Board of
Directors of the Company, after receiving advice from the Company's financial
advisor, shall have determined in its good faith reasonable judgment that the
third party's proposal for an Acquisition Transaction is superior to Parent's
revised proposal for an Acquisition Transaction, and (iv) the Company, at the
time of such termination, pays the Expenses and the Termination Fee in
accordance with Section 5.12; or
In the event of a termination of this Agreement and an abandonment of the
Merger, no party hereto (or any of its directors, officers, representatives or
agents) shall have any further liability or further obligation to any other
party to this Agreement, except with respect to the provisions of this Article 5
and the other provisions that survive the Merger pursuant to Section 5.2 and
except that nothing herein will relieve any party from liability for any breach
of its representations, warranties, covenants and agreements set forth in this
Agreement.
5.2 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or the termination of this Agreement pursuant to Section 5.1,
as the case may be, except that the representations, warranties and agreements
set forth in Sections 3.3, 3.6(a), 3.6(d), 5.12 and the last sentence of Section
3.7 shall survive indefinitely (whether or not the Effective Time occurs), those
set forth in Sections 3.6(b), (c) and (e) shall survive for the period of time
therein specified.
5.3 Amendment and Waiver. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto and in
compliance with applicable law. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
5.4 Entire Agreement. This Agreement, the Stockholder Agreement, the
Lockup Agreement dated as of the date hereof among Parent and certain
stockholders of the Company and the Confidentiality Agreement dated as of
November 8, 1996 between Parent and the Company contain the entire agreement
among Parent, the Purchaser and the
24
<PAGE> 25
Company with respect to the Merger and the other transactions contemplated
hereby and thereby, and such agreement supersede all prior agreements among the
parties with respect to these matters.
5.5 Definitions.
(a) As used herein, the term "Superior Proposal" means a bona fide
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms which the
Board of Directors of the Company determines in its good faith reasonable
judgment to be more favorable to the Company's stockholders than the Merger
(based on advise of the Company's independent financial advisor that the value
of the consideration provided for in such proposal is superior to the value of
the consideration provided for in the Merger), for which financing, to the
extent required, is then committed or which, in the good faith reasonable
judgment of the Board of Directors, based on advice from the Company's
independent financial advisor, is reasonably capable of being financed by such
third party and for which the Board of Directors determines, in its good faith
reasonable judgment, that such proposed transaction is reasonably likely to be
consummated without undue delay.
(b) As used herein, the term "Person" means any individual,
corporation, partnership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity.
5.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
5.7 Headings. The descriptive headings contained in this Agreement are for
convenience and reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.8 Notices. Each party shall promptly give written notice to the other
party upon becoming aware of the occurrence or, to its knowledge, impending or
threatened occurrence, of any event which would cause or constitute a breach of
any of its representations, warranties or covenants contained or referenced in
this Agreement and will use its best efforts to prevent or promptly remedy the
same. All notices or other communications under this Agreement shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by facsimile, telex or other standard form of
telecommunications, by courier service, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
25
<PAGE> 26
If to the Company:
9600 Aldrich Avenue South
Minneapolis, Minnesota 55420
Fax: (612) 887-5588
Attn: John A. Palleschi, Esq.
With a copy to:
O'Melveny & Myers LLP
555 13th Street, N.W., Suite 500 West
Washington, D.C. 20004-1109
Fax: (202) 383-5414
Attn: David G. Pommerening, Esq.
If to Parent or the Purchaser:
c/o Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, New York 10033
Fax: (212) 816-0166
Attn: Nicholas E. Somers
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Attn: Andrew L. Sommer
or to such other address or facsimile number as any party may have furnished to
the other parties in writing in accordance with this Section 5.8.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one agreement.
5.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
26
<PAGE> 27
5.11 Parties in Interest; Assignment. This Agreement is binding upon and
is solely for the benefit of the parties hereto and their respective successors,
legal representatives and assigns, except that Section 3.6 is intended to be for
the benefit of the parties referred to therein, and may be enforced by such
parties. The Purchaser shall have the right (a) to assign to Parent or any
direct or indirect wholly-owned subsidiary of Parent any and all rights and
obligations of the Purchaser under this Agreement, including, without
limitation, the right to substitute in its place such a subsidiary as one of the
constituent corporations in the Merger (such subsidiary assuming all of the
obligations of the Purchaser in connection with the Merger) and may require
subsidiaries of the Company to merge with subsidiaries of the Purchaser (or its
assignees) in connection with the Merger and (b) to restructure the transaction
to provide for the merger of the Company with and into the Purchaser or such
other entity as provided above; provided, however, that the Company shall not be
deemed to have breached any of its representations and warranties herein by
reason of the Purchaser exercising its rights hereunder, and by exercising such
rights Parent will be deemed to have waived the receipt of any additional
consents of third parties required by virtue thereof. If the Purchaser exercises
its right to so restructure the transaction, the Company shall promptly enter
into appropriate agreements to reflect such restructuring.
5.12 Fees and Expenses.
(a) Except as provided below in this Section 5.12, all fees and
expenses incurred in connection with the Merger, this Agreement, the Stockholder
Agreement and the transactions contemplated by this Agreement and the
Stockholder Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in the same day
funds to Parent the sum of (x) Parent's Expenses (as defined below) and (y)
$7,500,000 (the "Termination Fee") upon demand if (i) the Company terminates
this Agreement pursuant to Section 5.1(g) or (ii) the Purchaser terminates this
Agreement pursuant to Section 5.1(b), 5.1(d) or 5.1(f) at any time after a
proposal for an Acquisition Transaction has been made and within one year after
such a termination, the Person that made the proposal for an Acquisition
Transaction (or an affiliate thereof) completes a merger, consolidation or other
business combination with the Company or a subsidiary of the Company, or the
purchase from the Company or from a subsidiary of the Company of 30% or more (in
voting power) of the voting securities of the Company or of 30% or more (in
market value) of the assets of the Company and its subsidiaries, on a
consolidated basis; provided that the Company will not have any obligations
under this Section 5.12(b) if the Purchaser terminates this Agreement pursuant
to Section 5.1(d)(ii) as a result of the failure of a condition to be satisfied
unless the reason for the failure of such condition to be satisfied is
reasonably related to the making of such proposal for an Acquisition Transaction
by the Person that ultimately consummated a transaction with the Company.
"Expenses" shall mean reasonable and reasonably documented out-of-pocket fees
and expenses incurred or paid by or on behalf of Parent in connection with the
Merger or the consummation of any of the transactions contemplated by this
Agreement (including fees and expenses of one counsel representing the
27
<PAGE> 28
financial institutions providing the Bank Commitments), but expressly excluding
(i) all fees and expenses of commercial banks, investment banking firms, and
other potential financing sources for Parent and the Purchaser (including,
without limitation, the fees and expenses of the counsel (except as provided
above), accountants and other experts of all such potential financing sources)
and (ii) investment banking, structuring, management and similar fees of Parent,
the Purchaser and any of their affiliates.
5.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
28
<PAGE> 29
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date set forth above.
TELEX COMMUNICATIONS GROUP, INC.
By: ____________________________
Name:
Title:
GREENWICH II LLC
By: ____________________________
Name:
Title:
GST ACQUISITION CORP.
By: ____________________________
Name:
Title
S-1
<PAGE> 30
Exhibit A
FORM OF CERTIFICATE OF INCORPORATION
Exh. A-1
<PAGE> 31
Exhibit B
FORM OF AMENDED AND RESTATED BY-LAWS
Exh. B-1
<PAGE> 32
Exhibit C
ROLLOVER SHARES AND ROLLOVER OPTIONS
Exh. C-1
<PAGE> 33
Exhibit C to Recapitalization
Agreement and Plan of Merger
ROLLOVER SHARES AND ROLLOVER OPTIONS
<TABLE>
<CAPTION>
=====================================================================================
ROLLOVER SHARE NUMBER OF NUMBER OF
NAME CERTIFICATE NO. ROLLOVER SHARES ROLLOVER OPTIONS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Hale C-567, C-568, 15,121 5,341
C-595, C-634
- -------------------------------------------------------------------------------------
Dan M. Dantzler C-130 2,342 895
- -------------------------------------------------------------------------------------
John A. Palleschi C-610 3,033 1,234
- -------------------------------------------------------------------------------------
Joseph P. Winebarger C-644 2,888 757
- -------------------------------------------------------------------------------------
Kathleen A. Curran C-657 333 383
- -------------------------------------------------------------------------------------
Glen E. Cavanaugh C-613 1,333 1,535
- -------------------------------------------------------------------------------------
John T. Hislop C-654 1,085 2,915
- -------------------------------------------------------------------------------------
Daniel G. Wright C-566 and C-604 750 1,939
=====================================================================================
</TABLE>
Exh. C-2
<PAGE> 34
Exhibit D
FORM OF STOCKHOLDERS AGREEMENT
Employees party to Stockholders Agreement
John L. Hale
John A. Palleschi
John T. Hislop
Dan M. Dantzler
Joseph P. Winebarger
Glen E. Cavanaugh
Daniel G. Wright
Kathleen A. Curran
Exh. D-1
<PAGE> 35
Exhibit E
CHANGE OF CONTROL -- "TERM SHEET"
Exh. E-1
<PAGE> 1
Exhibit 2(b)
Execution Copy
AMENDMENT NO. 1 TO THE
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
Amendment No. 1, dated as of April 17, 1997 (this
"Amendment"), to the Recapitalization Agreement and Plan of Merger, dated as of
March 4, 1997 (the "Recapitalization Agreement"), among Greenwich II LLC, a
Delaware limited liability company (the "Parent"), GST Acquisition Corp., a
Delaware corporation (the "Purchaser") and Telex Communications Group, Inc., a
Delaware corporation (the "Company").
WHEREAS, Parent, the Purchaser and the Company have heretofore
entered in the Recapitalization Agreement;
WHEREAS, Parent, the Purchaser and the Company have agreed to
amend certain provisions of the Recapitalization Agreement;
WHEREAS, the Bank commitments among Parent, the Purchaser and
certain banks party thereto (collectively, the "Banks") have been amended by an
amendment dated as of April 2, 1997 (the "Commitment Amendment"), among the
Banks, Parent and the Purchaser;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Parent, the Purchaser
and the Company do hereby agree as follows:
Section 1. Definitions Unless otherwise defined herein, capitalized terms that
are defined in the Recapitalization Agreement and used herein shall have the
meanings set forth in the Recapitalization Agreement.
Section 2. Amendments
2.1 Section 1.7. of the Recapitalization Agreement is hereby
amended and restated in its entirety as follows:
"Upon the terms and subject to the conditions of this
Agreement and after the vote of the stockholders of the
Company in favor of the adoption of the Merger and this
Agreement has been obtained, the Company shall execute in the
manner required by the DGCL, and deliver to the Secretary of
State
1
<PAGE> 2
of the State of Delaware, a duly executed certificate of
merger as required by the DGCL, and the parties shall take all
such other and further actions as may be required by law to
make the Merger effective. Prior to the filing referred to in
this Section 1.7, a closing will be held at the offices of
O'Melveny & Myers LLP, Citicorp Center, 153 East 53rd Street,
54th Floor, New York, New York, on May 2, 1997 (or such other
time as the Purchaser and the Company may agree, immediately
after the conditions set forth in Article IV have been
satisfied or waived) for the purpose of confirming all of the
foregoing. The time the Merger becomes effective in accordance
with applicable law is referred to as the "Effective Time". It
is the intent of the parties that the Effective Time occur as
soon as is practicable with the proceeds of the Financing;
provided that notwithstanding the foregoing the Purchaser
shall have the right to utilize sources of funding other than
the Financing (such as by the issuance of senior subordinated
notes) so long as the use of such sources does not delay the
Effective Time beyond May 2, 1997; and provided further that
in the event that on or subsequent to April 18, 1997, the
Company determines, in its reasonable judgment, that there is
a reasonable likelihood that the proceeds of the $125.0
million senior subordinated credit facility (the " Bridge
Facility") included in the Bank Commitments (as hereafter
defined) will be required to cause the Effective Time to occur
no later than May 2, 1997, the Company may, by providing
notice to such effect, require the Purchaser to cause to be
prepared and negotiated definitive documentation for the
Bridge Facility so as to enable the Effective Time to occur no
later than May 2, 1997 utilizing the proceeds of the Bridge
Facility."
Section 3. Commitment Amendment The Company hereby acknowledges receipt of a
copy of the Commitment Amendment and agrees that all references to the Bank
Commitments in the Recapitalization Agreement shall mean and be a reference to
the Bank Commitments as amended by such Commitment Amendment.
Section 4. Miscellaneous
4.1 Each reference in the Recapitalization Agreement to "this
Agreement", "hereof", "hereunder" or words of like import referring to the
Recapitalization Agreement shall mean and be a reference to the Recapitalization
Agreement as amended by this Amendment. This Amendment shall not constitute an
amendment or waiver of any provision of the Recapitalization Agreement not
expressly referred to herein and shall not be construed as an amendment, waiver
or consent to any action that would require an amendment, waiver or consent
except as expressly stated
2
<PAGE> 3
herein. The Recapitalization Agreement, as amended by this Amendment, is and
shall continue to be in full force and effect and is in all respects ratified
and confirmed hereby.
4.2 This Amendment may be executed in any number of
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same Amendment.
4.3 This Amendment shall be governed by, and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law provisions thereof.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
TELEX COMMUNICATIONS GROUP, INC.
By:__________________________________
Name:
Title:
GREENWICH II LLC
By: Greenwich Street Capital Partners, L.P.,
its managing member
By: Greenwich Street Investments,
L.P., its general partner
By: Greenwich Street Investments,
Inc., General Partner
By:__________________________________
Name: Nicholas E. Somers
Title: Vice President and Treasurer
GST ACQUISITION CORP.
By:__________________________________
Name: Nicholas E. Somers
Title: President
4
<PAGE> 1
Exhibit 2(c)
Execution Copy
AMENDMENT NO. 2 TO THE
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
Amendment No. 2, dated as of April 25, 1997 (this
"Amendment"), to the Recapitalization Agreement and Plan of Merger, dated as of
March 4, 1997 (the "Recapitalization Agreement"), among Greenwich II LLC, a
Delaware limited liability company (the "Parent"), GST Acquisition Corp., a
Delaware corporation (the "Purchaser") and Telex Communications Group, Inc., a
Delaware corporation (the "Company"), as amended.
WHEREAS, Parent, the Purchaser and the Company have heretofore
entered into the Recapitalization Agreement;
WHEREAS, Parent, the Purchaser and the Company have agreed to
amend certain provisions of the Recapitalization Agreement;
WHEREAS, the amended Bank commitments among Parent, the
Purchaser and certain banks party thereto (collectively, the "Banks") have been
further amended by an amendment dated as of April 17, 1997 (the "Commitment
Amendment"), among the Banks, Parent and the Purchaser;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Parent, the Purchaser
and the Company do hereby agree as follows:
Section 1. Definitions Unless otherwise defined herein, capitalized terms
that are defined in the Recapitalization Agreement and used herein shall have
the meanings set forth in the Recapitalization Agreement.
Section 2. Amendments
2.2. Section 2.1(d) of the Recapitalization Agreement is
hereby amended by adding the following after the final sentence thereof:
"provided that the Purchaser may, at its option, utilize the
$25,175,000 of proceeds of its subordinated debt offering to
Princess Gate Investors II, L.P. and related investors (on
substantially the terms previously provided
1
<PAGE> 2
to the Company) in connection with the financing of the
transactions contemplated by the Recapitalization Agreement
(the "Revised Financing Structure"), of which approximately
$20,075,000 shall be applied to reduce the net equity capital
funds of the Purchaser otherwise required to be provided by
the GSCP Group, and the balance shall be applied to reduce the
amount of the Rollover Equity and the Rollover Options as
reflected on Schedule C. Nothing herein shall be construed as
relieving (i) the GSCP Group of its obligation to provide an
aggregate of $103,139,783 (subject to adjustment) in
connection with the consummation of the financing of the
transactions contemplated by the Recapitalization Agreement on
the terms and conditions set forth in their written
commitments previously provided to the Company (the "Original
Financing Structure"), or (ii) the Purchaser of its obligation
to consummate the Merger utilizing the Original Financing
Structure, in the event that Purchaser for any reason fails to
consummate the Merger utilizing the Revised Financing
Structure."
2.2 Schedule C to the Recapitalization Agreement is amended
and restated in its entirety as provided in Attachment I.
Section 3. Commitment Amendment The Company hereby acknowledges receipt of a
copy of the Commitment Amendment and agrees that all references to the Bank
Commitments in the Recapitalization Agreement shall mean and be a reference to
the Bank Commitments as amended by such Commitment Amendment.
Section 4. Miscellaneous
4.1 Each reference in the Recapitalization Agreement to "this
Agreement", "hereof", "hereunder" or words of like import referring to the
Recapitalization Agreement shall mean and be a reference to the Recapitalization
Agreement as amended by this Amendment. This Amendment shall not constitute an
amendment or waiver of any provision of the Recapitalization Agreement not
expressly referred to herein and shall not be construed as an amendment, waiver
or consent to any action that would require an amendment, waiver or consent
except as expressly stated herein. The Recapitalization Agreement, as amended by
this Amendment, is and shall continue to be in full force and effect and is in
all respects ratified and confirmed hereby.
4.2 This Amendment may be executed in any number of
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same Amendment.
2
<PAGE> 3
4.3 This Amendment shall be governed by, and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law provisions thereof.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
TELEX COMMUNICATIONS GROUP, INC.
By:__________________________________
Name:
Title:
GREENWICH II LLC
By: Greenwich Street Capital Partners, L.P.,
its managing member
By: Greenwich Street Investments,
L.P., its general partner
By: Greenwich Street Investments,
Inc., General Partner
By:__________________________________
Name: Nicholas E. Somers
Title: Vice President and Treasurer
GST ACQUISITION CORP.
By:__________________________________
Name: Nicholas E. Somers
Title: President
4
<PAGE> 1
Exhibit 3(a)
CERTIFICATE OF INCORPORATION
OF
TCI ACQUISITION CORP.
1. The name of this Corporation (hereinafter referred to as the
"Corporation") is:
TCI ACQUISITION CORP.
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").
<PAGE> 2
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.
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
2
<PAGE> 3
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. Reiderscheit, 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
3
<PAGE> 4
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 S, 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.
THE UNDERSIGNED, being the incorporator hereinbefore named for the
purpose of forming a corporation in pursuance of the General Corporation Law of
Delaware and the acts amendatory thereof and supplemental thereto, does make
and file this Certificate of Incorporation hereby declaring and certifying that
the facts herein are true, and accordingly has hereunto set his hand this 10th
day of April, 1989.
/s/ John W. Heiderscheit, III
------------------------------
John W. Heiderscheit, III
4
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * * * * * *
TCI Acquisition Corp., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY;
FIRST: That the Board of Directors of said corporation, by unanimous
written consent filed with the minutes of the board, adopted a resolution
declaring advisable the following amendment to the Certificate of Incorporation
of said corporation and proposing the same to the stockholders of said
corporation for their consideration:
RESOLVED, that the following amendment to the Certificate of
Incorporation of the Corporation be, and it hereby is, adopted pursuant to
Section 242 of the General Corporation Law of the State of Delaware as follows:
ARTICLE One is amended to read in its entirety as follows:
1. The name of this corporation (hereinafter referred to as the
"Corporation") is: Telex Communications, Inc.
SECOND: That, in lieu of a meeting and vote of the stockholders, the
stockholders, and each class of stockholders entitled to vote thereon pursuant
to Section 242 of the General Corporation Law of the State of Delaware, have
given their unanimous consent to the adoption
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<PAGE> 6
of said amendment in accordance with the provisions of section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of sections 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Jeffrey S. Wetherell, its President, and attested by Michael S.
Shein, its Assistant Secretary, as of this 23rd day of May, 1989.
/s/ Jeffrey S. Wetherell
-----------------------------------
Jeffrey S. Wetherell
President
/s/ Michael S. Shein
- ------------------------------
Michael S. Shein
Assistant Secretary
2
<PAGE> 7
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
* * * *
Telex Communications, Inc., a corporation organized and existing under any by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
The present registered agent of the corporation is The Corporation
Service Company and the present registered office of the corporation is in the
county of New Castle.
The Board of Directors of Telex Communications, Inc. adopted the
following resolution on the 29th day of August, 1990.
Resolved, that the registered office of Telex Communications,
Inc. in the state of Delaware be and it hereby is changed to Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of
New Castle, and the authorization of the present registered agent of
this corporation be and the same is hereby withdrawn, and THE
CORPORATION TRUST COMPANY, shall be and is hereby constituted and
appointed the registered agent of this corporation at the address of its
registered office.
IN WITNESS WHEREOF, Telex Communications, Inc. has caused this
statement to be signed by John A Palleschi, its Vice President and attested by
Darrell D. Dyer, its Assistant Secretary this 29th day of August, 1980.
By /s/ John A. Palleschi
-----------------------------------------
Vice President
ATTEST:
By /s/ David D. Dyer
-----------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 3(b)
BYLAWS
OF
TCI ACQUISITION CORP.
ARTICLE I
Offices
Section 1. Registered Office. The registered office of this
Corporation shall be Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805, and the name of the registered agent in charge thereof is The
Corporation Service Company.
Section 2. Additional Offices. The Corporation may also have offices
at such other places, either within or without the State of Delaware, as the
Board of Directors may from time to time designate or the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meetings. Meetings of stockholders shall be held
at such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meetings. The annual meetings of stockholders shall
be held on such date and at such time as may be designated by a resolution of
the Board of Directors or by written consent of stockholders entitled to vote
at such meeting, holding at least a majority of such shares, and stated in the
notice of the meeting, at which time the directors for the ensuring year shall
be elected and any other proper business may be transacted.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date, and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 4. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, unless otherwise prescribed by applicable law or by the
Certificate of Incorporation, may be called by the Chairman of the Board or the
President and shall be called by the Chairman of the Board or the President at
the request in writing of a majority of the Board of Directors, or at the
request in
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<PAGE> 2
writing of stockholders owning a majority in amount of the entire capital stock
of the Corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting and the Chairman of
the Board or the President shall include such purpose or purposes in the notice
of meeting, and the business transacted at any such special meeting of
stockholders shall be limited to the purposes set forth in the notice.
Section 5. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 6. Quorum and Adjournment. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of stockholders
for the transaction of business except as otherwise provided by applicable law
or by the Certificate of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meetings, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of applicable law
or of the Certificate of Incorporation, a different vote is required, in which
case such express provision shall govern and control the decision of such
question. Unless otherwise provided in the Certificate of Incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder.
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<PAGE> 3
Section 8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted on or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 9. Stockholders Lists. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, or cause to be prepared or
made, pursuant to the provisions of Section 219 of the General Corporation Law
of Delaware, as amended from time to time, a complete list of stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
Section 10. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of the stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the actions so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
Directors
Section 1. Powers. The Board of Directors shall have the power to
manage the property, business and affairs of the Corporation, to exercise all
of its corporate power and do all such lawful acts and things as are not by
applicable law or by the Certificate of Incorporation or by these
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<PAGE> 4
Bylaws directed or required to be exercised or done by the stockholders.
Section 2. Number, Election and Term. The Board of Directors shall
consist of not less than one nor more than seven members in such number as
shall be determined from time to time by resolution of the Board. Until
otherwise determined by such resolution, the Board shall consist of one member.
Directors need not be stockholders, and except as otherwise provided in these
Bylaws, shall be elected at the annual meeting of the stockholders and shall
serve until their respective successors shall be duly elected and qualified.
Section 3. Vacancies. Any vacancy in the Board of Directors whether
caused by resignation, by death or otherwise, may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. Each director so chosen shall hold the office until the
next annual election of directors, and until his successor shall be elected and
qualified, or until his death or until he shall resign or shall have been
removed from office.
Section 4. Removal of Directors. Any director may be removed at any
time, either with or without cause, by vote of the holders of a majority of the
stock having voting power, present in person or represented by proxy, at such
regular or special meeting of the stockholder called for such purpose.
Section 5. Holding Meetings Without the State. The Board of Directors
of the Corporation may hold meetings, both regular and special, either within
or without the State of Delaware.
Section 6. Initial Meetings. The newly elected Board of Directors shall
meet immediately after the annual meeting of stockholders at the place of such
meeting or at such other place and time as shall be designated by the presiding
officer of the annual meeting of the stockholders or as shall be fixed by
resolution of the Board of Directors prior to the annual meeting of the
stockholders or as may otherwise be fixed by a vote of the stockholders at the
annual meeting, for the purpose of organization, election of officers, and the
transaction of such other business as they may deem necessary. If such meeting
is held immediately after and at the place of the annual meeting of the
stockholders or if a majority of the whole Board shall be present, no call or
notice of such meeting shall be necessary and is hereby dispensed with. In the
event a meeting of the Board of Directors is not held immediately
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<PAGE> 5
after the annual meeting, such meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for in the case of
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 7. Regular Meetings. Regular meetings of the Board of Directors
shall be held without call or notice at such time and place as shall from time
to time be determined by the Board.
Section 8. Special Meetings. Special meetings of the Board of Directors
may be called at any time and for any purpose permitted by law, by the Chairman
of the Board or the President and shall be called by the Chairman of the Board
or the President on the written request of any one member of the Board, which
meeting shall be held at the time and place designated by the person or persons
calling the meeting. Notice of the time and place and purpose of any such
meeting shall be given to the directors by the Secretary, or in the case of
his absence, refusal or inability to act, by any other officer. Any such notice
must be given to each director, personally or by mail, by telegram, or by
telephone or by any thereof as to different Directors, at least forty-eight
hours before the time of the meeting.
Section 9. Quorum. At all meetings of the Board of Directors the
presence of a majority of the whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board, except as may be otherwise specifically provided by
applicable law or the Certificate of Incorporation or these Bylaws. Any meeting
of the Board may be adjourned to meet again at a stated day and hour. Even
though no quorum is present, as required in this Section, a majority of the
directors present at any meeting of the Board, either regular or special, may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum be had, but may not adjourn such meeting to a
time later than the time fixed for the next regular meeting of the Board.
Section 10. Action Without a Meeting. Unless otherwise restricted by
applicable law, the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting, if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
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<PAGE> 6
Section 11. Meetings by Telephonic Communication. Unless otherwise
restricted by the Certificate of Incorporation, applicable law or these Bylaws,
members of the Board of Directors or any committee thereof may participate in
the meeting of such Board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this Section shall constitute presence in person at such meeting.
Section 12. Appointment of Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors and to the extent permitted by law, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
No such committee shall have any power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all of or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 13. Keeping Committee Minutes. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 14. Authority to Fix Compensation. Unless otherwise
restricted by the Certificate of
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<PAGE> 7
Incorporation, the Board of Directors shall have authority to fix the
compensation of the directors.
Section 15. Payment of Expenses and Salary. The directors may be
paid their expenses, if any, incurred on behalf of the Corporation or in
connection with attendance at meetings of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, as the Board of Directors may from time to time determine.
No such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
ARTICLE IV
Officers
Section 1. Appointment by the Board of Directors. The officers of
the Corporation shall be chosen by the Board of Directors and shall be a
President, a Secretary and a Treasurer. The Board of Directors may also appoint
one or more Vice-Presidents, and one or more Assistant Secretaries, Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article. Any number of offices may be held by
the same person, unless the Certificate of Incorporation or these Bylaws or
applicable law otherwise provides.
Section 2. Initial Meeting. The Board of Directors at its first
meeting after each annual meeting of stockholders shall appoint a President, a
Secretary and a Treasurer.
Section 3. Appointment of Other Officers. The Board of Directors
may appoint such other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such power and perform
such duties as shall be determined from time to time by the Board.
Section 5. Term. The officers of the Corporation shall hold office
until their successors are chosen and qualified. Any officer elected or
appointed by the Board of Directors may be removed, either with or without
cause, at any time by the affirmative vote of the majority of the Board of
Directors at any regular or special meeting. Any officer may resign at any time
by giving written notice to the Corporation. Any such resignation shall take
effect at
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<PAGE> 8
the date of receipt of such notice or at any later time specified therein; and
unless otherwise specified in such notice, the acceptance of the resignation
shall not be necessary to make it effective. Any vacancy occurring in any
office of the Corporation, by death, resignation, removal or otherwise, shall
be filled by the Board of Directors.
Section 6. The President. The President shall be the chief
executive officer of the Corporation, and he shall have supervision over and
may exercise general executive powers concerning all of the business and other
officers of the Corporation with the authority from time to time to delegate to
other officers such executive and other powers and duties as he may deem
advisable. He shall have such other powers and duties as may be assigned to him
from time to time by the Board or prescribed by the Bylaws.
Section 7. The Vice-President. In the absence of the President or
in the event of his inability or refusal to act, the Vice-President (or if
there be more than one Vice-President, the Vice-Presidents in the order of
their rank or, if of equal rank, then in the order designated by the Board of
Directors or the President or, in the absence of any designation, then in the
order of their appointment) shall perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all restriction upon
the President. The Vice-Presidents shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe.
Section 8. The Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
committees when required. He shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of Directors. He
shall have custody of the corporate seal of the Corporation and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature. The Secretary shall perform such other
duties and have such other powers as the Board of Directors or the President
may from time to time prescribe.
Section 9. The Assistant Secretary. The Assistant Secretary (or if
there be more than one Assistant
8
<PAGE> 9
Secretary, the Assistant Secretaries in the order designated by the Board of
Directors or the President or, in the absence of any designation, then in the
order of their appointment) shall, in the absence of the Secretary or in the
event of his inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors or the President may from time to time
prescribe.
Section 10. The Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors. The Treasurer may disburse the funds of the Corporation as may be
ordered by the Board of Directors or the President, taking proper vouchers for
such disbursements, and shall render to the Chairman of the Board and the Board
of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. The Treasurer shall perform such other duties and
have such other powers as the Board or the President may from time to time
prescribe.
Section 11. The Assistant Treasurer. The Assistant Treasurer (or
if there be more than one Assistant Treasurer, the Assistant Treasurers in the
order designated by the Board of Directors or the President, or if there be no
such designation, then in the order of their appointment) shall, in the absence
of the Treasurer or in the event of his inability or refusal to act, perform
the duties and exercise the powers of the Treasurer. The Assistant Treasurer
shall perform such other duties and have such other powers as the Board of
Directors or the President may from time to time prescribe.
Section 12. Bonds. If required by the Board of Directors, the
Treasurer and Assistant Treasurers shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of their respective
offices and for the restoration to the Corporation in case of their death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in their possession or under their
control belonging to the Corporation.
9
<PAGE> 10
ARTICLE V
Certificates of Stock
Section 1. Form of Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the President or a Vice-President and the Secretary or an
Assistant Secretary of the Corporation, and sealed with the seal of the
Corporation, certifying the number of shares owned by him in the Corporation.
Section 2. Facsimile. Any of or all the signatures on the
certificate may be facsimiles and the seal may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 3. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, it its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation on account of the alleged loss, theft or destruction of
any such certificate of the issuance of such new certificate.
Section 4. Transfers of Stock. Upon surrender to the Corporation
or the transfer agent of the Corporation, if the Board of Directors has
appointed a transfer agent, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue and such transfer
agent to deliver a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
Section 5. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to
10
<PAGE> 11
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
the State of Delaware.
ARTICLE VI
Record Date
In order that the Corporation may determine the stockholders who are,
and who shall be the only stockholders who are, entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect to any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to any such other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
General Provisions
Section 1. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officers or officers or such other persons
as the Board of Directors may from time to time designate.
Section 2. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 3. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. Except as otherwise required
by law, it shall not be necessary to the validity of any instrument executed by
an authorized officer or officers of the Corporation, that the execution of such
11
<PAGE> 12
instrument be evidenced by the corporate seal, and all documents, instruments,
contracts and writings of all kinds signed on behalf of the Corporation by any
authorized officer or officers thereof shall be as effectual and binding on the
Corporation without the corporate seal, as if the execution of the same had
been evidenced by affixing the corporate seal thereto.
Section 4. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 5. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meeting contingencies, or for equalizing
dividends, or for repairing or maintaining property of the Corporation, or for
such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
ARTICLE VIII
Notices
Section 1. Manner of Notice. Whenever under the provisions of any
applicable law or the Certificate of Incorporation or these Bylaws notice is
required to be given to any director, or any committee member, officer or
stockholder, it shall not be construed to mean personal notice, but such notice
may be given, in the case of stockholders, in writing, by mail, by depositing
the same in the post office or letterbox, in a postage-prepaid, sealed wrapper,
addressed to such stockholder, at such address as it appears on the records of
the Corporation, or by telegram to such address, and, in the case of directors,
committee members and officers, by telephone, or by mail or by telegram to the
last business address made known to the Secretary of the Corporation of such
persons, and such notice shall be deemed to be given at the time when the same
shall be thus mailed or telegraphed or telephoned.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of any
12
<PAGE> 13
applicable law or the Certificate of Incorporation or these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE IX
Indemnification
The Corporation shall indemnify its officers, directors, employees and
agents to the extent permitted by the General Corporation Law of Delaware.
ARTICLE X
Amendments
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by the stockholders or the Board of Directors at any regular meeting of
the stockholders or the Board of Directors, at any special meeting of the
stockholders or the Board of Directors if notice of such alteration, amendment,
repeal or adoption of the new Bylaws be contained in the notice of such special
meeting, or by action without a meeting taken pursuant to these Bylaws.
13
<PAGE> 1
Exhibit 4(a)
EXECUTION COPY
================================================================================
INDENTURE
Between
GST ACQUISITION CORP.
AND
MANUFACTURERS AND TRADERS TRUST COMPANY
Dated as of May 6, 1997
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
<S> <C> <C>
310(a)(1) ............................................. 7.10
(a)(2) ............................................. 7.10
(a)(3) ............................................. N.A.
(a)(4) ............................................. N.A.
(a)(5) ............................................. N.A.
(b) ............................................. 7.8; 7.10
(c) ............................................. N.A.
311(a) ............................................. 7.11
(b) ............................................. 7.11
(c) ............................................. N.A.
312(a) ............................................. 2.5
(b) ............................................. 11.3
(c) ............................................. 11.3
313(a) ............................................. 7.6
(b)(1) ............................................. N.A.
(b)(2) ............................................. 7.6
(c) ............................................. 11.2
(d) ............................................. 7.6
314(a) ............................................. 4.2
4.9; 11.2
(b) ............................................. N.A.
(c)(1) ............................................. 11.4
(c)(2) ............................................. 11.4
(c)(3) ............................................. N.A.
(d) ............................................. N.A.
(e) ............................................. 11.5
(f) ............................................. 4.9
315(a)(1) ............................................. 7.1
315(a)(2) ............................................. 7.1
(b) ............................................. 7.5; 11.2
(c) ............................................. 7.1
(d) ............................................. 7.1
(e) ............................................. 6.11
316(a)(last sentence) ............................................. 11.6
(a)(1)(A) ............................................. 6.5
(a)(1)(B) ............................................. 6.4
(a)(2) ............................................. N.A.
(b) ............................................. 6.7
(c) ............................................. 6.10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
317(a)(1) ............................................................ 6.8
(a)(2) ............................................................ 6.9
(b) ............................................................ 2.4
318(a) ............................................................ 11.1
N.A. means Not Applicable.
</TABLE>
- ----------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
Definitions and Incorporation by Reference............. 1
SECTION 1.1. Definitions................................................... 1
SECTION 1.2. Other Definitions............................................. 27
SECTION 1.3. Incorporation by Reference of
Trust Indenture Act...................................... 28
SECTION 1.4. Rules of Construction......................................... 28
ARTICLE 2
The Securities........................................... 29
SECTION 2.1. Form and Dating............................................... 29
SECTION 2.2. Execution and Authentication.................................. 31
SECTION 2.3. Registrar and Paying Agent.................................... 32
SECTION 2.4. Paying Agent To Hold Money in
Trust.................................................... 32
SECTION 2.5. Securityholder Lists.......................................... 33
SECTION 2.6. Transfer and Exchange......................................... 33
SECTION 2.7. Replacement Securities........................................ 41
SECTION 2.8. Outstanding Securities........................................ 41
SECTION 2.9. Temporary Securities.......................................... 42
SECTION 2.10. Cancellation.................................................. 42
SECTION 2.11. Defaulted Interest............................................ 42
SECTION 2.12. CUSIP Numbers................................................. 42
ARTICLE 3
Redemption............................................... 43
SECTION 3.1. Notices to Trustee............................................ 43
SECTION 3.2. Selection of Securities To Be
Redeemed................................................. 43
SECTION 3.3. Notice of Redemption.......................................... 43
SECTION 3.4. Effect of Notice of Redemption................................ 44
SECTION 3.5. Deposit of Redemption Price................................... 44
SECTION 3.6. Securities Redeemed in Part................................... 45
SECTION 3.7. Optional Redemption........................................... 45
ARTICLE 4
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Covenants........................................... 46
SECTION 4.1. Payment of Securities......................................... 46
SECTION 4.2. SEC Reports................................................... 46
SECTION 4.3. Limitation on Indebtedness.................................... 46
SECTION 4.4. Limitation on Restricted Payments............................. 51
SECTION 4.5. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries............................................. 56
SECTION 4.6. Limitation on Sales of Assets................................. 58
SECTION 4.7. Limitation on Transactions with
Affiliates.................................................... 60
SECTION 4.8. Change of Control............................................ 62
SECTION 4.9. Compliance Certificate; Notice of
Default.................................................. 63
SECTION 4.10. [Intentionally omitted]....................................... 64
SECTION 4.11. Limitation on Liens........................................... 64
SECTION 4.12. Additional Note Guarantors.................................... 64
SECTION 4.13. Limitation on the Sale or Issuance
of Preferred Stock of Restricted
Subsidiaries............................................. 65
SECTION 4.14. Limitation on Layering........................................ 65
ARTICLE 5
Successor Company........................................ 65
SECTION 5.1. When Company May Merge or Transfer
Assets................................................... 65
ARTICLE 6
Defaults and Remedies.................................... 67
SECTION 6.1. Events of Default............................................. 67
SECTION 6.2. Acceleration.................................................. 68
SECTION 6.3. Other Remedies................................................ 68
SECTION 6.4. Waiver of Past Defaults....................................... 68
SECTION 6.5. Control by Majority........................................... 70
SECTION 6.6. Limitation on Suits........................................... 70
SECTION 6.7. Rights of Holders to Receive
Payment.................................................. 70
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 6.8. Collection Suit by Trustee.................................... 71
SECTION 6.9. Trustee May File Proofs of Claim.............................. 71
SECTION 6.10. Priorities.................................................... 71
SECTION 6.11. Undertaking for Costs......................................... 71
SECTION 6.12. Waiver of Stay or Extension Laws.............................. 72
ARTICLE 7
Trustee............................................. 72
SECTION 7.1. Duties of Trustee............................................. 72
SECTION 7.2. Rights of Trustee............................................. 73
SECTION 7.3. Individual Rights of Trustee.................................. 75
SECTION 7.4. Trustee's Disclaimer.......................................... 75
SECTION 7.5. Notice of Defaults............................................ 75
SECTION 7.6. Reports by Trustee to Holders................................. 75
SECTION 7.7. Compensation and Indemnity.................................... 76
SECTION 7.8. Replacement of Trustee........................................ 77
SECTION 7.9. Successor Trustee by Merger................................... 78
SECTION 7.10. Eligibility; Disqualification................................. 78
SECTION 7.11. Preferential Collection of Claims
Against Company.......................................... 78
SECTION 7.12. Not Responsible for Recitals or
Issuance of Securities................................... 78
ARTICLE 8
Discharge of Indenture; Defeasance.................. 79
SECTION 8.1. Discharge of Liability on
Securities; Defeasance................................... 79
SECTION 8.2. Conditions to Defeasance...................................... 80
SECTION 8.3. Application of Trust Money.................................... 81
SECTION 8.4. Repayment to Company.......................................... 81
SECTION 8.5. Indemnity for Government
Obligations.............................................. 81
SECTION 8.6. Reinstatement................................................ 82
ARTICLE 9
Amendments.......................................... 82
SECTION 9.1. Without Consent of Holders.................................... 82
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 9.2. With Consent of Holders....................................... 83
SECTION 9.3. Compliance with Trust Indenture
Act...................................................... 84
SECTION 9.4. Effect of Amendment; Revocation
and Effect of Consents and Waivers....................... 84
SECTION 9.5. Notation on or Exchange of
Securities............................................... 85
SECTION 9.6. Trustee To Sign Amendments.................................... 85
SECTION 9.7. Payment for Consent........................................... 85
ARTICLE 10
Subordination....................................... 86
SECTION 10.1. Agreement To Subordinate...................................... 86
SECTION 10.2. Liquidation, Dissolution,
Bankruptcy............................................... 86
SECTION 10.3. Default on Senior Indebtedness................................ 86
SECTION 10.4. Acceleration a Payment of
Securities............................................... 87
SECTION 10.5. When a Distribution Must Be Paid
Over..................................................... 87
SECTION 10.6. Subrogation................................................... 88
SECTION 10.7. Relative Rights............................................... 88
SECTION 10.8. Subordination May Not Be Impaired
by Company............................................... 88
SECTION 10.9. Rights of Trustee and Paying
Agent.................................................... 88
SECTION 10.10. Distribution or Notice to
Representative........................................... 89
SECTION 10.11. Article 10 Not To Prevent Events
of Default or Limit Right To
Accelerate............................................... 89
SECTION 10.12. Trust Moneys Not Subordinated................................. 89
SECTION 10.13. Trustee Entitled To Rely...................................... 89
SECTION 10.14. Trustee To Effectuate
Subordination............................................ 90
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness................................... 90
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions............................................... 90
SECTION 10.17. Trustee's Compensation Not
</TABLE>
-iv-
<PAGE> 8
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Prejudiced............................................... 90
ARTICLE 11
Miscellaneous............................................ 91
SECTION 11.1. Trust Indenture Act Controls.................................. 91
SECTION 11.2. Notices....................................................... 91
SECTION 11.3. Communication by Holders with
Other Holders............................................ 92
SECTION 11.4. Certificate and Opinion as to
Conditions Precedent..................................... 92
SECTION 11.5. Statements Required in Certificate
or Opinion............................................... 92
SECTION 11.6. When Securities Disregarded................................... 93
SECTION 11.7. Acts of Holders; Rules by Trustee,
Paying Agent and Registrar............................... 93
SECTION 11.8. Legal Holidays................................................ 94
SECTION 11.9. Governing Law................................................. 94
SECTION 11.10. No Recourse Against Others.................................... 94
SECTION 11.11. Successors.................................................... 94
SECTION 11.12. Multiple Originals............................................ 94
SECTION 11.13. Table of Contents; Headings................................... 94
SECTION 11.14. Separability.................................................. 94
SECTION 11.15. Benefits of Indenture......................................... 94
EXHIBIT A Form of Initial Security
EXHIBIT B Form of Exchange Security
EXHIBIT C Transferee Letter of Representation
EXHIBIT D Form of First Supplemental Indenture (Assignment and
Assumption)
EXHIBIT E Form of Supplemental Indenture (Guarantee)
</TABLE>
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<PAGE> 9
Exhibit 4A
INDENTURE dated as of May 6, 1997, between GST Acquisition
Corp., a Delaware corporation ("GST"), and Manufacturers and Traders Trust
Company, a New York trust company (the "Trustee").
For good and valuable consideration, the receipt of which is
hereby acknowledged, each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the
Company's 10 1/2% Senior Subordinated Notes due 2007 (the "Initial Securities")
and, when and if issued as provided in the Exchange and Registration Rights
Agreement of even date herewith, the Company's 10 1/2% Senior Subordinated Notes
due 2007, Series A (the "Exchange Securities", and together with the Initial
Securities, the "Securities").
ARTICLE I.
Definitions and Incorporation by Reference
SECTION A. Definitions.
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock of
any Person that at such time is a Restricted Subsidiary, acquired from a third
party; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Security at any
Redemption Date, the greater of (i) 1.0% of the then outstanding principal
amount of such Security and (ii) the excess of (A) the present value of all
remaining required interest and principal payments due on such Security,
computed using a discount rate equal to the Treasury Rate plus 75 basis points,
over (B) the then-outstanding principal amount of such Security.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares, or (in the case of a Foreign Subsidiary) to the
extent required by applicable law), property
<PAGE> 10
or other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Restricted Subsidiary, (ii) a
disposition of inventory, equipment, obsolete assets or surplus personal
property in the ordinary course of business, (iii) the sale of Temporary Cash
Investments or Cash Equivalents in the ordinary course of business, (iv)
dispositions with a fair market value not exceeding $500,000 in the aggregate in
any fiscal year, (v) the sale or discount (with or without recourse, and on
commercially reasonable terms) of accounts receivable or notes receivable
arising in the ordinary course of business, or the conversion or exchange of
accounts receivable for notes receivable, (vi) the licensing of intellectual
property in the ordinary course of business, (vii) for purposes of Section 4.6
only, a disposition subject to Section 4.4 or (viii) a disposition of property
or assets that is governed by Section 5.1.
"Assumption" means the assumption by the Company of all of the
obligations of Holdings (as successor by Merger to GST) under the Indenture and
the Securities pursuant to the First Supplemental Indenture among Telex,
Holdings (as successor by Merger to GST) and the Trustee.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate assumed in making calculations in accordance with FAS 13) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Bank Indebtedness" means any and all amounts, whether
outstanding on the Issue Date or thereafter incurred, payable under or in
respect of the Senior Credit Facility, including without limitation principal,
premium (if any), interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company or
any Restricted Subsidiary whether or not a claim for post-
2
<PAGE> 11
filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees, other monetary obligations of any nature
and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, at any time of determination, the
Borrowing Base as defined in the Senior Credit Agreement.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banking institutions are authorized or required by
law to close in New York City.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Capitalized Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease.
"Cash Equivalents" means any of the following: (a) securities
issued or fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof, (b) time deposits, certificates of deposit or
bankers' acceptances of (i) any lender under the Senior Credit Agreement or (ii)
any commercial bank having capital and surplus in excess of $500.0 million and
the commercial paper of the holding company of which is rated at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (or if at such time neither is issuing ratings, then a comparable rating
of another nationally recognized rating agency), (c) commercial paper rated at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's (or if at such time neither is issuing ratings, then a
comparable rating of another nationally recognized rating agency) and (d)
investments in money market funds complying with the risk limiting conditions of
Rule 2a-7 or any successor rule of
3
<PAGE> 12
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended.
"Change of Control" means the occurrence of any of the
following events:
(i) prior to the first public offering of Voting Stock
of the Company, either (x) Permitted Holders cease to be the
"beneficial owner" or "beneficial owners" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of more than
35% of the total voting power of the Voting Stock of the Company, or
(y) Permitted Holders cease to be entitled by voting power, contract or
otherwise to elect or cause the election of directors of the Company
having a majority of the total voting power of the Board of Directors,
in each case, whether as a result of issuance of securities of the
Company, any merger, consolidation, liquidation or dissolution of the
Company, any direct or indirect transfer of securities by any Permitted
Holder or otherwise (for purposes of this clause (i) and clause (ii)
below, Permitted Holders shall be deemed to beneficially own any Voting
Stock of an entity (the "specified entity" held by any other entity
(the "parent entity") so long as the Permitted Holders beneficially own
(as so defined), directly or indirectly, a majority of the Voting Stock
of the parent entity);
(ii) following the first public offering of Voting Stock
of the Company, any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in clause (i)
above, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire
within one year), directly or indirectly, of more than 35% of the
Voting Stock of the Company, provided that the Permitted Holders
beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of
the Company than such other Person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders
of the Company was approved by a vote of a majority of the directors of
the Company then still in office who were either directors at the
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beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" (i) means GST until the merger of GST with and into
Holdings in connection with the Recapitalization, (ii) thereafter, means
Holdings until the execution of the First Supplemental Indenture by Holdings,
Telex and the Trustee and (iii) thereafter, means Telex and any successor
thereto.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA of the Company and its
Restricted Subsidiaries for the period of the most recent four consecutive
fiscal quarters ending prior to the date of such determination for which
consolidated financial statements of the Company are available to (ii)
Consolidated Interest Expense for such four fiscal quarters (in each case,
determined, for each fiscal quarter (or portion thereof) of the four fiscal
quarters ending prior to the Issue Date, on a pro forma basis to give effect to
the Recapitalization as if it had occurred at the beginning of such four-quarter
period); provided, however, that:
(1) if the Company or any Restricted Subsidiary (x) has
Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is
an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred on
the first day of such period (except that in making such computation,
the amount of Indebtedness under any revolving credit facility
outstanding on the date of such calculation shall be computed based on
(A) the average daily balance of such Indebtedness during such four
fiscal quarters or such shorter period for which such facility was
outstanding or (B) if such facility was created after the end of such
four fiscal quarters, the average daily balance of such Indebtedness
during the period from the date of creation of such facility to the
date of such calculation) and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds
of such new Indebtedness as if such discharge had occurred on the first
day of such period, or (y) has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the
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<PAGE> 14
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio involves a discharge of
Indebtedness (in each case other than Indebtedness Incurred under any
revolving credit facility unless such Indebtedness has been permanently
repaid), EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such
discharge of such Indebtedness, including with the proceeds of such new
Indebtedness, as if such discharge had occurred on the first day of
such period,
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition of any
company or any business or any group of assets constituting an
operating unit of a business, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets that are the subject of such Asset
Disposition for such period or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the
Company and is continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (and, if the Capital Stock of
any Restricted Subsidiary is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale),
(3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary,
or otherwise acquired any company or any business or any group of
assets constituting an operating unit of a business, including any such
acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro
forma effect thereto (including the Incurrence of any Indebtedness) as
if such Investment or acquisition occurred on the first day of such
period, and
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<PAGE> 15
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant
to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or
acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is
to be given to an Asset Disposition, Investment or acquisition of assets, or any
transaction governed by the provisions of Article 5, or the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred or repaid, repurchased, defeased or
otherwise discharged in connection therewith, the pro forma calculations in
respect thereof shall be as determined in good faith by a responsible financial
or accounting Officer of the Company, based on reasonable assumptions. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term as at the
date of determination in excess of 12 months). If any Indebtedness bears, at the
option of the Company or a Restricted Subsidiary, a fixed or floating rate of
interest and is being given pro forma effect, the interest expense on such
Indebtedness shall be computed by applying, at the option of the Company or such
Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness
which is being given pro forma effect was Incurred under a revolving credit
facility, the interest expense on such Indebtedness shall be computed based upon
the average daily balance of such Indebtedness during the applicable period.
"Consolidated Interest Expense" means, for any period, the
total consolidated interest expense of the Company and its Restricted
Subsidiaries, the Company and its consolidated Restricted Subsidiaries,
determined in accordance with GAAP, minus, to the extent included in such
interest expense, amortization or write-off of financing costs, and plus, to the
extent incurred by the Company and its Restricted Subsidiaries in such period
but not included in such interest expense, without duplication, (i) interest
expense attributable to Capitalized Lease Obligations and the interest component
of rent expense associated with Attributable Debt in respect of the relevant
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<PAGE> 16
lease giving rise thereto, determined as if such lease were a capitalized lease,
in accordance with GAAP, (ii) amortization of debt discount, (iii) interest in
respect of Indebtedness of any other Person that has been Guaranteed by the
Company or any Restricted Subsidiary, but only to the extent that such interest
is actually paid by the Company or any Restricted Subsidiary, (iv) non-cash
interest expense, (v) net costs associated with Hedging Obligations, (vi) the
product of (A) Preferred Stock dividends in respect of all Preferred Stock of
Domestic Subsidiaries of the Company and Disqualified Stock of the Company held
by Persons other than the Company or a Restricted Subsidiary multiplied by (B) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
the Company, expressed as a decimal, in each case, determined on a consolidated
basis in accordance with GAAP; and (vii) the cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are used
by such plan or trust to pay interest to any Person (other than the Company or
any Restricted Subsidiary) on Indebtedness Incurred by such plan or trust;
provided, however, that there shall be excluded therefrom any such interest
expense of any Unrestricted Subsidiary to the extent the related Indebtedness is
not Guaranteed or paid by the Company or any Restricted Subsidiary. For purposes
of the foregoing, gross interest expense shall be determined after giving effect
to any net payments made or received by the Company and its Subsidiaries with
respect to Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the
consolidated net income (loss) of the Company and its Restricted Subsidiaries,
determined in accordance with GAAP; provided, however, that there shall not be
included in such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not
a Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and (B)
the Company's equity in the net loss of such Person shall be included
to the extent of the aggregate Investment of the Company or any of its
Restricted Subsidiaries in such Person,
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<PAGE> 17
(ii) any net income (loss) of any Person acquired by the
Company or a Restricted Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary if
such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions
by such Restricted Subsidiary, directly or indirectly, to the Company,
except that (A) subject to the limitations contained in clause (iv)
below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the
case of a dividend that could have been made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the net
loss of such Restricted Subsidiary shall be included to the extent of
the aggregate Investment of the Company or any of its other Restricted
Subsidiaries in such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other
disposition of any asset of the Company or its consolidated Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction)
that is not sold or otherwise disposed of in the ordinary course of
business,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in accounting
principles.
"Consolidated Tangible Assets" means, as of any date of
determination, the total assets, less goodwill and other intangibles (other than
patents, trademarks, copyrights, licenses and other intellectual property),
shown on the balance sheet of the Company and its Restricted Subsidiaries as of
the most recent date for which such a balance sheet is available, determined on
a consolidated basis in accordance with GAAP.
"Consolidation" means the consolidation of the accounts of
each of the Restricted Subsidiaries with those of the Company in accordance with
GAAP; provided, however, that "Consolidation" will not include consolidation of
the accounts of any Unrestricted Subsidiary, but the interest of the Company or
any Unrestricted Subsidiary
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<PAGE> 18
will be accounted for as an investment. The term "Consolidated" has a
correlative meaning.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangements (including derivative agreements or arrangements) as to which such
Person is a party or a beneficiary.
"Default" means any event or condition that is, or after
notice or passage of time or both would be, an Event of Default as defined in
Section 6.1.
"Definitive Securities" means Securities that are
substantially in the form of Exhibit A or Exhibit B attached hereto that do not
include the information called for by footnote 1 thereof.
"Depository" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.3
as the Depository with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depository" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness which, at the date of
determination, has an aggregate principal amount to or under which, at the date
of determination, the holders thereof are committed to lend up to, at least
$10.0 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock (other than Management Stock) that by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable or
exercisable) or upon the happening of any event (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the 91st day after the Stated Maturity of the Securities.
"Domestic Subsidiary" means any Restricted Subsidiary of the
Company other than a Foreign Subsidiary.
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"EBITDA" means, for any period, the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization of intangibles and
other non-cash charges or non-cash losses.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange and Registration Rights Agreement" means the
Exchange and Registration Rights Agreement dated May 6, 1997, by and between the
Initial Purchasers and the Company, as such agreement may be amended, modified,
or supplemented from time to time in accordance with the terms thereof.
"First Supplemental Indenture" means the First Supplemental
Indenture dated May 6, 1997, among Telex, Holdings (as successor by Merger to
GST) and the Trustee by which Telex will assume all of the obligations of
Holdings (as successor by Merger to GST) under the Indenture and the Securities,
as amended or supplemented from time to time.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of
the Company that is not organized under the laws of the United States of America
or any state thereof or the District of Columbia and (b) any Restricted
Subsidiary of the Company that has no material assets other than securities of
one or more Foreign Subsidiaries, and other assets relating to an ownership
interest in any such securities or Subsidiaries.
"G-II" means Greenwich II, LLC, a Delaware limited liability
company, and any successor in interest thereto.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect on the Issue Date (for purposes of the
definitions of the terms "Consolidated Coverage Ratio," "Consolidated Interest
Expense," "Consolidated Net Income" and "EBITDA," all defined terms in the
Indenture to the extent used in or relating to any of the foregoing definitions,
and all ratios and computations based on any of the foregoing definitions) and
as in effect from time to time (for all other purposes of the Indenture),
including those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the
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<PAGE> 20
accounting profession all ratios and computations based on GAAP contained in the
Indenture shall be computed in conformity with GAAP.
"Global Security" means a Security that is substantially in
the form of Exhibit A or Exhibit B hereto that includes the information called
for by footnote 1 thereof.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GST" means GST Acquisition Corp., a Delaware corporation, and
any successor thereto.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
nonfinancial obligation of any other Person, including any such obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or such other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means the following
obligations, whether outstanding on the date of the Indenture or thereafter
issued, without duplication: (i) any Guarantee of the Bank Indebtedness by such
Note Guarantor and all other Guarantees by such Note Guarantor of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness for any other Note
Guarantor; and (ii) all obligations consisting of the principal of and premium,
if any, and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Note Guarantor regardless of whether postfiling interest is allowed in such
proceeding) on, and fees and other amount owing in respect of, all other
Indebtedness of the Note Guarantor, unless, in the instrument creating or
evidencing the same or pursuant
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<PAGE> 21
to which the same is outstanding, it is expressly provided that the obligations
in respect of such Indebtedness are not senior in right of payment to the
obligations of such Note Guarantor under the Note Guarantee; provided, however,
that Guarantor Senior Indebtedness shall not include (1) any obligations of such
Note Guarantor to the Note Guarantor or any other Subsidiary of the Note
Guarantor, (2) any liability for Federal, state, local, foreign or other taxes
owed or owing by such Note Guarantor, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Note Guarantor that is expressly subordinate in right
of payment to any of the Indebtedness of such Note Guarantor, including any
Guarantor Senior Subordinated Indebtedness and Guarantor Subordinated
Obligations of such Note Guarantor or (5) any Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means, with
respect to a Note Guarantor, the obligations of such Note Guarantor under the
Note Guarantee and any other Indebtedness of such Note Guarantor that
specifically provides that such Indebtedness is to rank pari passu in right of
payment with the obligations of such Note Guarantor under the Note Guarantee and
is not expressly subordinated by its terms in right of payment to any
Indebtedness of such Note Guarantor which is not Guarantor Senior Indebtedness
of such Note Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Note Guarantor, any Indebtedness of such Note Guarantor (whether outstanding on
the Issue Date or thereafter Incurred) which is expressly subordinate in right
of payment to the obligations of such Note Guarantor under its Note Guarantee
pursuant to a written agreement.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered in the Register.
"Holdings" means Telex Communications Group, Inc., a Delaware
corporation, and any successor in interest thereto.
"Incur" means issue, assume, enter into any Guarantee of,
incur or otherwise become liable for; provided, however, that any Indebtedness
or Capital Stock of
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<PAGE> 22
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. Any Indebtedness issued
at a discount (including Indebtedness on which interest is payable through the
issuance of additional Indebtedness) shall be deemed incurred at the time of
original issuance of the Indebtedness at the initial accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed
money,
(ii) the principal of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person (including
reimbursement obligations) in respect of letters of credit or other
similar instruments (the amount of such obligations being equal at any
time to the aggregate then undrawn and unexpired amount of such letters
of credit or other instruments plus the aggregate amount of drawings
thereunder that have not then been reimbursed),
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except Trade Payables),
which purchase price is due more than one year after the date of
placing such property in final service or taking final delivery and
title thereto or the completion of such services,
(v) all Capitalized Lease Obligations and Attributable Debt of
such Person,
(vi) the redemption, repayment or other repurchase amount of
such Person with respect to any Disqualified Stock or (if such Person
is a Subsidiary of the Company) any Preferred Stock of such Subsidiary,
but excluding, in each case, any accrued dividends (the amount of such
obligation to be equal at any time to the maximum fixed involuntary
redemption, repayment or repurchase price for such Capital Stock, or if
such Capital Stock has no such fixed price, to the involuntary
redemption, repayment or repurchase price therefor calculated in
accordance with the terms thereof as if then redeemed, repaid or
repurchased, and
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<PAGE> 23
if such price is based upon or measured by the fair market value of
such Capital Stock, such fair market value shall be as determined in
good faith by the Board of Directors or the board of directors of the
issuer of such Capital Stock),
(vii) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed
by such Person; provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such
asset at such date of determination and (B) the amount of such
Indebtedness of such other Persons,
(viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, and
(ix) to the extent not otherwise included in this definition,
net Hedging Obligations of such Person (the amount of any such
obligation to be equal at any time to the termination value of such
agreement or arrangement giving rise to such Hedging Obligation that
would be payable by such Person at such time).
The amount of Indebtedness of any Person at any date shall be
determined as set forth above or otherwise provided in this Indenture, or
otherwise in accordance with GAAP.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Initial Purchasers" means Chase Securities Inc., Morgan
Stanley & Co. Incorporated and Smith Barney Inc.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement (including derivative agreements or
arrangements) as to which such Person is party or a beneficiary.
"Investment" in any Person by any other Person means any
direct or indirect advance, loan or other extension of credit (other than to
customers, directors, officers or employees of any Person in the ordinary course
of business) or capital contribution (by means of any transfer of cash or other
property to others or any payment
15
<PAGE> 24
for property or services for the account or use of others) to, or any purchase
or acquisition of Capital Stock, Indebtedness or other similar instruments
issued by, such Person. For purposes of the definition of "Unrestricted
Subsidiary" and Section 4.4, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Investors" means Greenwich Street Capital Partners, L.P.,
Greenwich Street Capital Offshore Fund, Ltd., The Travelers Insurance Company,
The Travelers Life and Annuity Company, TRV Employees Fund, L.P. and the parties
that purchased equity interests in the Company on the date of the
Recapitalization.
"Issue Date" means the date on which the Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Management Agreements" means, collectively, the Consulting
Agreement, the Fee Agreement and the Indemnification Agreement, each between the
Company and Greenwich Street Capital Partners, Inc. (and its permitted
successors and assigns thereunder), as each may be amended, supplemented, waived
or otherwise modified from time to time in accordance with the terms thereof and
of the Indenture.
"Management Investors" means the officers, directors,
employees and other members of the management of Holdings, the Company or any of
their respective Subsidiaries, or family members or relatives thereof, or trusts
for the benefit of any of the foregoing, or any of their heirs, executors,
successors and legal representatives, who at
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<PAGE> 25
any date beneficially own or have the right to acquire, directly or indirectly,
Capital Stock of the Company, Holdings or G-II.
"Management Stock" means Capital Stock of the Company,
Holdings or G-II, or options, warrants or other rights in respect thereof, held
by any of the Management Investors.
"Merger" means the merger of GST with and into Holdings, with
Holdings the surviving corporation on the date of the Recapitalization.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring person of Indebtedness or other
obligations relating to the properties or assets that are the subject of such
Asset Disposition or received in any other noncash form) therefrom, in each case
net of (i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made, and all
installment payments required to be made, on any Indebtedness that is secured by
any assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon such assets, or that must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Disposition, or to any other Person
(other than the Company or a Restricted Subsidiary) owning a beneficial interest
in the assets disposed of in such Asset Disposition and (iv) appropriate amounts
to be provided as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of
any securities of the Company or any Subsidiary by the Company or any
Subsidiary, or any capital contribution, means the cash proceeds of such
issuance, sale or contribution net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or
17
<PAGE> 26
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance, sale or contribution and net of taxes paid or
payable as a result thereof.
"Note Guarantee" means any guarantee that may from time to
time be executed and delivered by a Subsidiary of the Company pursuant to
Section 4.12.
"Note Guarantor" means any Subsidiary that has issued a Note
Guarantee.
"Officer" means the President, Chief Financial Officer, any
Vice President, Controller or Treasurer of the Company.
"Officer's Certificate" means a certificate signed by one
Officer.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"Permitted Holder" means any of the following: (i) any of the
Investors, Smith Barney Holdings Inc. and their respective Affiliates; (ii) any
investment fund or vehicle managed, sponsored or advised by Greenwich Street
Capital Partners, Inc., The Travelers Insurance Company, The Travelers Life and
Annuity Company, Smith Barney Holdings Inc. or any of their respective
Affiliates; (iii) any limited or general partners of, or other investors in, any
of the Investors and their respective Affiliates, or any such investment fund or
vehicle; and (iv) any Person acting in the capacity of an underwriter in
connection with a public or private offering of Capital Stock of the Company,
Holdings or G-II.
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company or a Person that
will, upon the making of such Investment, become a Restricted
Subsidiary;
(ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary;
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(iii) Temporary Cash Investments or Cash Equivalents;
(iv) receivables owing to the Company or any Restricted
Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary
trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances;
(v) securities or other Investments received as consideration
in sales or other dispositions of property or assets, including Asset
Dispositions made in compliance with Section 4.6;
(vi) securities or other Investments received in settlement of
debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary, or as a result of foreclosure,
perfection or enforcement of any Lien, or in satisfaction of judgments,
including in connection with any bankruptcy proceeding or other
reorganization of another Person;
(vii) Investments in existence or made pursuant to legally
binding written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and
related Hedging Obligations, which obligations are Incurred in
compliance with Section 4.3;
(ix) pledges or deposits (x) with respect to leases or
utilities provided to third parties in the ordinary course of business
or (y) otherwise described in the definition of "Permitted Liens"; and
(x) other Investments in an aggregate amount outstanding at
any time not to exceed the greater of (A) $7.0 million and (B) 7% of
Consolidated Tangible Assets.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges
not yet delinquent or the nonpayment of which in the aggregate would
not reasonably be expected to have a material adverse effect on the
Company and its Restricted Subsidiaries, or that are being contested in
good faith and by appropriate
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proceedings if adequate reserves with respect thereto are maintained on
the books of the Company or a Subsidiary thereof, as the case may be,
in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business in respect of obligations that are not overdue for a
period of more than 60 days, or that are bonded or that are being
contested in good faith and by appropriate proceedings;
(c) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and
other similar legislation or other insurance related obligations
(including, without limitation, pledges or deposits securing liability
to insurance carriers under insurance or self-insurance arrangements);
(d) pledges, deposits or Liens to secure the performance of
bids, tenders, trade, government or other contracts (other than for
borrowed money), obligations for utilities, leases, licenses, statutory
obligations, surety, judgment and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(e) easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations, restrictions, encroachments,
changes, and other similar encumbrances or title defects incurred, or
leases or subleases granted to others, in the ordinary course of
business, which do not in the aggregate materially interfere with the
ordinary conduct of the business of the Company and its Subsidiaries,
taken as a whole;
(f) Liens existing on, or provided for under written
arrangements existing on, the Issue Date, or (in the case of any such
Liens securing Indebtedness of the Company or any of its Subsidiaries
existing or arising under written arrangements existing on the Issue
Date) securing any Refinancing Indebtedness in respect of such
Indebtedness so long as the Lien securing such Refinancing Indebtedness
is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or under such written arrangements could
secure) the original Indebtedness;
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(g) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by
any developer, landlord or other third party on property over which the
Company or any Restricted Subsidiary of the Company has easement rights
or on any leased property and subordination or similar agreements
relating thereto and (ii) any condemnation or eminent domain
proceedings affecting any real property;
(h) Liens securing Hedging Obligations Incurred in compliance
with Section 4.3;
(i) Liens arising out of judgments, decrees, orders or awards
in respect of which the Company shall in good faith be prosecuting an
appeal or proceedings for review, which appeal or proceedings shall not
have been finally terminated, or if the period within which such appeal
or proceedings may be initiated shall not have expired;
(j) leases, subleases, licenses or sublicenses to third
parties;
(k) Liens securing (x) Indebtedness Incurred in compliance
with clause (b)(i), (b)(ii), (b)(v) or (b)(vii) of Section 4.3, or
clause (b)(iv) thereof (other than Refinancing Indebtedness Incurred in
respect of Indebtedness described in paragraph (a) thereof) or (y) Bank
Indebtedness;
(l) Liens securing commercial bank indebtedness;
(m) Liens on properties or assets (1) of the Company or any
Note Guarantor securing Senior Indebtedness or Guarantor Senior
Indebtedness, (2) of any Wholly Owned Subsidiary that is not a Note
Guarantor securing Indebtedness of any Wholly Owned Subsidiary that is
not a Note Guarantor or (3) of any Restricted Subsidiary that is not a
Note Guarantor securing its Indebtedness;
(n) Liens existing on property or assets of a Person at the
time such Person becomes a Subsidiary of the Company (or at the time
the Company or a Restricted Subsidiary acquires such property or
assets); provided, however, that such Liens are not created in
connection with, or in contemplation of, such other Person becoming
such a Subsidiary (or such acquisition of such property or assets), and
that such Liens are limited to all or part of the same property or
assets (plus improvements, accessions, proceeds or dividends or
distributions in respect
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thereof) that secured (or, under the written arrangements under which
such Liens arose, could secure) the obligations to which such Liens
relate;
(o) Liens on Capital Stock of an Unrestricted Subsidiary that
secure Indebtedness or other obligations of such Unrestricted
Subsidiary;
(p) any encumbrance or restriction (including, but not limited
to, put and call agreements) with respect to Capital Stock of any joint
venture or similar arrangement pursuant to any joint venture or similar
agreement;
(q) Liens securing the Securities; and
(r) Liens securing Refinancing Indebtedness Incurred in
respect of any Indebtedness secured by, or securing any refinancing,
refunding, extension, renewal or replacement (in whole or in part) of
any other obligation secured by, any other Permitted Liens, provided
that any such new Lien is limited to all or part of the same property
or assets (plus improvements, accessions, proceeds or dividends or
distributions in respect thereof) that secured (or, under the written
arrangements under which the original Lien arose, could secure) the
obligations to which such Liens relate.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any
corporation means Capital Stock of any class or classes (however designated)
that is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security that is due or overdue or is
to become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company, Holdings or G-II pursuant to an
effective registration
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statement under the Securities Act (whether alone or in conjunction with any
secondary public offering), the proceeds of which, if issued by Holdings or
G-II, are contributed to the Company.
"Public Market" means any time after a Public Equity Offering
has been consummated and either (x) at least 10% of the total issued and
outstanding common stock (or equivalent equity interests) of the Company,
Holdings or G-II has been distributed by means of an effective registration
statement under the Securities Act or (y) an established public trading market
otherwise exists for any such common stock or equivalent equity interests.
"Purchase Agreement" means the Agreement, dated April 29,
1997, among GST, Telex and the Initial Purchasers, providing for the purchase by
the Initial Purchasers of $125.0 million principal amount of the Company's
10 1/2% Senior Subordinated Notes due 2007.
"Recapitalization" means the recapitalization of Holdings
pursuant to the Recapitalization Agreement and Plan of Merger, dated as of March
4, 1997, among GST, G-II and Holdings, whereby GST will be merged with and into
Holdings, with Holdings being the surviving corporation.
"Redemption Date" means the date on which the Securities are
optionally redeemed pursuant to Section 3.7.
"Refinancing Indebtedness" means Indebtedness that is Incurred
to refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," "refinanced" and
"refinancing" as used in the Indenture shall have a correlative meaning) any
Indebtedness existing on the date of the Indenture or Incurred in compliance
with the Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in the
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and (iii)
such Refinancing Indebtedness is Incurred in an aggregate principal amount (or
if issued with original issue discount, an aggregate issue
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price) that is equal to or less than the sum of (x) the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being refinanced, plus (y) fees,
underwriting discounts, premiums and other costs and expenses incurred in
connection with such Refinancing Indebtedness; provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary that is not a Note Guarantor that refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary.
"Registered Exchange Offer" shall have the meaning set forth
in the Exchange and Registration Rights Agreement.
"Related Business" means those businesses in which the Company
or any of its Subsidiaries is engaged on the date of the Indenture, or that are
reasonably related, complementary or incidental thereto.
"Representative" means the trustee, agent or representative
(if any) for an issue of Senior Indebtedness.
"Restricted Securities Legend" means the legend set forth in
Section 2.6(g) hereof.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit
facility under the Senior Credit Facility (which may include any swing line or
letter of credit facility or subfacility thereunder).
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or such Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases (x) between the Company and a Restricted
Subsidiary or between or (y) required to be classified and accounted for as
capitalized leases for financial reporting purposes in accordance with GAAP.
"SEC" means the Securities and Exchange Commission.
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"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
"Securities Custodian" means the custodian with respect to the
Global Security (as appointed by the Depository), or any successor entity
thereto and shall initially be the Trustee.
"Senior Credit Agreement" means the credit agreement dated as
of May 6 , 1997, among the Company (after giving effect to the Merger and the
Assumption), the banks and other financial institutions party thereto from time
to time, Morgan Stanley Senior Funding, Inc., as documentation agent, and The
Chase Manhattan Bank, as administrative agent, as such agreement may be assumed
by any successor in interest, and as such agreement may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the
Senior Credit Agreement, any Loan Documents (as defined therein), any notes and
letters of credit issued pursuant thereto and any guarantee and collateral
agreement, patent and trademark security agreement, mortgages, letter of credit
applications and other security agreements and collateral documents, and other
instruments and documents, executed and delivered pursuant to or in connection
with any of the foregoing, in each case as the same may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Senior Credit Agreement or otherwise). Without limiting the generality
of the foregoing, the term "Senior Credit Facility" shall include any agreement
(i) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness
incurred thereunder or available to be borrowed thereunder or (iv) otherwise
altering the terms and conditions thereof.
"Senior Indebtedness" means the following obligations, whether
outstanding on the date of the Indenture or thereafter issued, without
duplication: (i) all obligations consisting of Bank Indebtedness; and (ii) all
obligations consisting of the
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principal of and premium, if any, and accrued and unpaid interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company regardless of whether post-filing
interest is allowed in such proceeding) on, and fees and other amounts owing in
respect of, all other Indebtedness of the Company, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is expressly provided that the obligations in respect of such Indebtedness are
not senior in right of payment to the Notes; provided, however, that Senior
Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for Federal, state, foreign, local or other taxes
owed or owing by the Company, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of the
Company (or Guarantee by the Company of any Indebtedness) that is expressly
subordinate in right of payment to any other Indebtedness of the Company (or
Guarantee by the Company of any Indebtedness) or (5) any Capital Stock. If any
Designated Senior Indebtedness is disallowed, avoided or subordinated pursuant
to the provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Designated Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" means the Securities and
any other Indebtedness of the Company that (i) specifically provides that such
Indebtedness is to rank pari passu with the Securities or is otherwise entitled
"Senior Subordinated" Indebtedness and (ii) is not expressly subordinated by its
terms in right of payment to any Indebtedness of the Company that is not Senior
Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC, as in effect on the Issue
Date.
"S&P" means Standard & Poor's Ratings Service, a division of
The McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
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"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the date of the Indenture or thereafter
Incurred) which is expressly subordinate in right of payment to the Securities
pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person
or (ii) one or more Subsidiaries of such Person.
"Tax Sharing Agreement" means the Tax Sharing Agreement
between the Company and Holdings, as the same may be amended, supplemented,
waived or otherwise modified from time to time in accordance with the terms
thereof and of the Indenture.
"Telex" means Telex Communications, Inc., a Delaware
corporation which upon the Assumption will become the primary obligor of the
Securities.
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations (x) of the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or any
agency thereof or (y) of any foreign country recognized by the United States of
America rated at least "A" by S&P or "A-1" by Moody's, (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust
company that is organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
having capital and surplus aggregating in excess of $250.0 million (or the
foreign currency equivalent thereof) and whose long-term debt is rated "A" by
S&P or "A-1" by Moody's, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i) or
(ii) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not more than
270 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any Investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P,
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(v) Investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's, (vi)
any money market deposit accounts issued or offered by a domestic commercial
bank or a commercial bank organized and located in a country recognized by the
United States of America, in each case, having capital and surplus in excess of
$250.0 million (or the foreign currency equivalent thereof), or investments in
money market funds complying with the risk limiting conditions of Rule 2a-7 or
any short-term successor rule) of the SEC, under the Investment Company Act of
1940, as amended, and (vii) similar short-term investments approved by the Board
of Directors in the ordinary course of business.
"Term Loan Facility" means the term loan facilities provided
under the Senior Credit Facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Transactions" means, collectively, the Recapitalization, the
Merger, the Assumption, the initial equity investment by the Investors, the
offering of the Initial Securities, the initial borrowings under the Senior
Credit Facility, and all other transactions relating to the Recapitalization or
the financing thereof.
"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.6(g) hereof.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two Business Days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to the Stated Maturity; provided, however, that
if the period from the Redemption Date to the Stated Maturity is
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not equal to the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such yields
are given, except that if the period from the Redemption Date to the Stated
Maturity is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trustee" means the party named as such in the Indenture until
a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in any relevant jurisdiction.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $1,000 or less or (B) if such
Subsidiary has consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.4. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could incur
at least $1.00 of additional Indebtedness under Section 4.3(a) and (y) no
Default shall have occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Company's Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
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"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of an entity means all classes of Capital Stock
of such entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying shares,
or (in the case of any Foreign Subsidiary) to the extent required by applicable
law) is owned by the Company or another Wholly Owned Subsidiary.
SECTION B. Other Definitions.
Defined in
Term Section
---- ----------
"Affiliate Transaction" .............................................. 4.7
"Bankruptcy Law" ..................................................... 6.1
"Blockage Notice" .................................................... 10.3
"covenant defeasance option" ......................................... 8.1(b)
"Custodian" .......................................................... 6.1
"Event of Default" ................................................... 6.1
"Excess Proceeds" .................................................... 4.6
"Fairness Opinion" ................................................... 4.7
"legal defeasance option" ............................................ 8.1(b)
"Legal Holiday" ...................................................... 11.8
"Offer" .............................................................. 4.6
"Offer Period" ....................................................... 4.6
"pay the Securities" ................................................. 10.3
"Paying Agent" ....................................................... 2.3
"Payment Blockage Period" ............................................ 10.3
"Register"............................................................ 2.3
"Registrar"........................................................... 2.3
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"Restricted Payment" ................................................. 4.4
"Securities Act" ..................................................... 2.1
"Successor Company" .................................................. 5.1
SECTION C. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION D. Rules of Construction. 1. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) as used herein, accounting terms relating to the Company
and its Subsidiaries not defined in Section 1.1, and accounting terms
partly defined in Section 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP. All computations
determining compliance with financial covenants or terms, including
definitions used therein, shall be prepared in accordance with
generally accepted accounting principles in effect at the Issue Date,
as and to the extent provided in the definition of the term "GAAP." If
at any
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time the computations for determining compliance with such financial
covenants or provisions relating thereto utilize generally accepted
accounting principles different than those in effect at the Issue Date,
the financial statements within which such computations are delivered
shall be accompanied by a reconciliation statement with respect to such
computations;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
2. Unsecured Indebtedness is not deemed to be subordinate or
junior to Secured Indebtedness merely because it is unsecured, and Indebtedness
that is not guaranteed by a particular Person is not deemed to be subordinate or
junior to Indebtedness that is so guaranteed merely because it is not so
guaranteed.
ARTICLE II.
The Securities
SECTION A. Form and Dating. The Initial Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. Any Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in Exhibit A and B are part of the terms of this Indenture.
1. Global Securities. The Initial Securities are being offered
and sold by the Company pursuant to the Purchase Agreement.
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Initial Securities offered and sold to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) ("QIBs") in accordance with Rule 144A under
the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be
issued initially in the form of a single, permanent Global Security in
definitive, fully registered form without interest coupons with the legend
called for by footnote 1 to Exhibit A hereto (the "Restricted Global Security"),
which shall be deposited on behalf of the Initial Purchasers of the Initial
Securities represented thereby with the Trustee, as Securities Custodian for the
Depository, and registered in the name of Cede & Co., as nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Restricted Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as Securities Custodian, and the Depository or its
nominee as hereinafter provided.
2. Book-Entry Provisions. This Section 2.1(b) shall apply only
to Global Securities deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (ii)
shall be held by the Trustee as custodian for the Depository. After the issuance
of Exchange Securities under a Registered Exchange Offer, the Trustee shall have
no duty to hold any Global Security as custodian for the Depository or any other
Security registered in the name of the Depository or a nominee of the
Depository.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under such Global Security, and the Depository
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
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3. Certificated Securities. Except as otherwise provided
herein, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of certificated Securities. Purchasers of Initial
Securities who are not QIBs (referred to herein as the "Non-Global Purchasers")
will receive certificated Initial Securities bearing the Restricted Securities
Legend ("Restricted Certificated Securities"); provided, however, that upon
transfer of such Restricted Certificated Securities to a QIB, such Restricted
Certificated Securities will, unless the relevant Global Security has previously
been exchanged, be exchanged for an interest in a Global Security pursuant to
the provisions of Section 2.6 hereof. Certificated Securities will include the
Restricted Securities Legend unless removed in accordance with this Section
2.1(c) or Section 2.6(g) hereof.
After a transfer of any Initial Securities during the period
of the effectiveness of, and pursuant to, a Shelf Registration Statement with
respect to the Initial Securities, all requirements pertaining to legends on
such Initial Securities will cease to apply, the requirements requiring that any
such Initial Securities issued to certain Holders be issued in global form will
cease to apply, and certificated Initial Securities without legends will be made
available to the Holders of such Initial Securities. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Securities pursuant to
which Holders of Initial Securities are offered Exchange Securities in exchange
for their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in global
form will cease to apply and certificated Initial Securities with the Restricted
Securities Legend will be available to Holders of such Initial Securities that
do not exchange their Initial Securities, and Exchange Securities in
certificated form will be available to Holders that exchange such Initial
Securities in such Registered Exchange Offer.
SECTION B. Execution and Authentication. One Officer shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
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The Trustee shall authenticate and make available for delivery
(1) Initial Securities for original issue in an aggregate principal amount of
$125.0 million, and (2) Exchange Securities for issue only in a Registered
Exchange Offer, pursuant to the Exchange and Registration Rights Agreement, for
Initial Securities for a like principal amount of Initial Securities exchanged
pursuant thereto, in each case upon a written order of the Company signed by one
Officer. Such order shall specify the amount of the Securities to be
authenticated, the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding at
any time may not exceed $125.0 million except as provided in Section 2.7.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate the Securities. Any such appointment shall be
evidenced by an instrument in writing signed by a Trust Officer, a copy of which
instrument shall be promptly furnished to the Company. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION C. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange (the
"Register"). The ownership of Securities shall be proved by such Register. The
Company may have one or more co registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Company or any of its Wholly Owned Subsidiaries that is a Domestic Subsidiary
may act as Paying Agent, Registrar, co-registrar or transfer agent.
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The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
The Company initially appoints The Depository Trust Company to
act as Depository with respect to the Global Securities.
SECTION D. Paying Agent To Hold Money in Trust. On or prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall, on or
immediately prior to each due date of the principal and interest on any
Security, segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and to account for any funds disbursed by
the Paying Agent. Upon complying with this Section, the Paying Agent shall have
no further liability for the money delivered to the Trustee.
Any money deposited with the Trustee or any Paying Agent in
trust for the payment of principal and interest on any Security and remaining
unclaimed for two years after such principal and interest has become due and
payable shall be paid to the Company at its request; and the Holder of such
Security shall thereafter look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease.
SECTION E. Securityholder Lists. The Trustee shall preserve in
as current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of principal or interest on
any Security and remaining unclaimed for two years after such principal and
interest has become due and
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payable shall be paid to the Company at its request, or, if then held by the
Company, shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease.
SECTION F. Transfer and Exchange. 1. Transfer and Exchange of
Definitive Securities. When Definitive Securities are presented to the Registrar
or a co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(a) shall be duly endorsed or accompanied by a written
instrument of transfer in form and substance reasonably satisfactory to
the Company and the Registrar or co-registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(b) in the case of Transfer Restricted Securities that
are Definitive Securities, are being transferred or exchanged pursuant
to an effective registration statement under the Securities Act or
pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are
being delivered to the Registrar by a Holder for registration
in the name of such Holder, without transfer, a certification
from such Holder to that effect (in substantially the form set
forth on the reverse of the Security); or
(B) if such Transfer Restricted Securities are
being transferred to the Company or to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the
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Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the
Security); or
(C) if such Transfer Restricted Securities are
being transferred (w) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under
the Securities Act; or (x) to an institutional "accredited
investor" within the meaning of Rules 501(a)(1), (2), (3) or
(7) under the Securities Act that is acquiring the security
for its own account, or for the account of such an
institutional accredited investor, with respect to which it
exercises sole discretion, in each case in a minimum principal
amount of the Securities of $250,000 for investment purposes
and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act; or
(y) in reliance on another exemption from the registration
requirements of the Securities Act: (i) a certification to
that effect (in substantially the form set forth on the
reverse of the Security), (ii) if the Company or Registrar so
requests, an Opinion of Counsel reasonably acceptable to the
Company and to the Registrar to the effect that such transfer
is in compliance with the Securities Act and (iii) in the case
of clause (x), a signed letter substantially in the form of
Exhibit C hereto.
2. Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form and substance satisfactory to the Trustee and the Company,
together with:
(a) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the
reverse of the Security, that such Definitive Security is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under the
Securities Act; and
(b) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to
make, or to direct the Securities Custodian to make, an adjustment on
its books and records with respect
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to such Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officer's Certificate, a new Global Security in
the appropriate principal amount.
3. Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor.
4. Transfer of a Beneficial Interest in a Global Security for
a Definitive Security.
(a) Any person having a beneficial interest in a Global
Security that is being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant
to clause (A),(B) or (C) below may upon request, and if accompanied by
the information specified below, exchange such beneficial interest for
a Definitive Security of the same aggregate principal amount. Upon
receipt by the Trustee of written instructions or such other form of
instructions as is customary for the Depository from the Depository or
its nominee on behalf of any Person having a beneficial interest in a
Global Security and upon receipt by the Trustee of a written order or
such other form of instructions as is customary for the Depository or
the Person designated by the Depository as having such a beneficial
interest in a Transfer Restricted Security only, the following
additional information and documents:
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as being the owner
of a beneficial interest in a Global Security, a certification
from such Person to that effect (in substantially the form set
forth on the reverse of the Security); or
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(B) if such beneficial interest is being transferred
to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the
Security); or
(C) if such beneficial interest is being transferred
(w) pursuant to an exemption from registration in accordance
with Rule 144 or Regulation S under the Securities Act; or (x)
to an institutional "accredited investor" within the meaning
of Rules 501(a)(1), (2), (3) and (7) under the Securities Act
that is acquiring the security for its own account, or for the
account of such an institutional accredited investor, with
respect to which it exercises sole discretion, in each case in
a minimum principal amount of the Securities of $250,000 for
investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the
Securities; or (y) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a
certification to that effect from the transferee or transferor
(in substantially the form set forth on the reverse of the
Security), (ii) if the Company or Registrar so requests, an
Opinion of Counsel from the transferee or transferor
reasonably acceptable to the Company and to the Registrar to
the effect that such transfer is in compliance with the
Securities Act, and (iii) in the case of clause (x), a signed
letter substantially in the form of Exhibit C hereto,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities
Custodian, the aggregate principal amount of the Global Security to be
reduced on its books and records and, following such reduction, the
Company will execute and the Trustee will authenticate and make
available for delivery to the transferee a Definitive Security.
(b) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall make such Definitive Securities available for delivery to the
persons in whose names such Securities are so registered in accordance
with the instructions of the Depository.
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5. Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
6. Authentication of Definitive Securities in Absence of
Depository. If at any time:
(a) the Depository for the Securities notifies the Company
that the Depository is unwilling or unable to continue as Depository
for the Global Securities and a successor Depository for the Global
Securities is not appointed by the Company within 90 days after
delivery of such notice; or
(b) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive
Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officer's
Certificate requesting the authentication and delivery of Definitive Securities
to the Persons designated by the Company, will authenticate and make available
for delivery Definitive Securities, in an aggregate principal amount equal to
the principal amount of Global Securities, in exchange for such Global
Securities.
7. Legend.
(a) Except as permitted by the following paragraph (ii),
each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor
or substitution thereof) shall bear a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE
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ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES,
ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR
WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY)
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, IN
A TRANSACTION COMPLYING WITH THE REQUIREMENTS OF RULE 144A, TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULES 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF
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THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE
FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."
(b) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a Definitive Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) any such Transfer Restricted Security represented
by a Global Security shall not be subject to the provisions
set forth in clause (i) of this Section 2.6(g) (such sales or
transfers being subject only to the provisions of Section
2.6(c) hereof); provided, however, that with respect to any
request for an exchange of a Transfer Restricted Security that
is represented by a Global Security for a Definitive Security
that does not bear a legend, which request is made in reliance
upon Rule 144, the Holder thereof shall certify in writing to
the Registrar that such request is being made pursuant to Rule
144 (such certification to be substantially in the form set
forth on the reverse of the Security).
8. Cancellation and/or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or canceled, such Global
Security shall be returned to
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the Depository for cancellation or retained and canceled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a Global Security
is exchanged for Definitive Securities, redeemed, repurchased or canceled, the
principal amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) or the
Securities Custodian with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
9. Obligations with Respect to Transfers and Exchanges of
Securities.
(a) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar's or co-registrar's
request.
(b) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith.
(c) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article 3,
except the unredeemed portion of any Definitive Security being redeemed
in part, or (b) any Security for a period beginning 15 Business Days
before the mailing of a notice of an offer to repurchase or redeem
Securities or 15 Business Days before an interest payment date.
(d) Prior to the due presentation for registration of
transfer of any Security, each of the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar may deem and treat the person
in whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar and any co-registrar shall be
affected by notice to the contrary.
(e) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the
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same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
10. No Obligation of the Trustee. (a) The Trustee shall have
no responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
the accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Securities shall be
given or made only to or upon the order of the registered Holders (which shall
be the Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security in global form shall be exercised
only through the Depository subject to the applicable rules and procedures of
the Depository. The Trustee may conclusively rely and shall be fully protected
in relying upon information furnished by the Depository with respect to its
members, participants and any beneficial owners.
(b) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including, without limitation, any
transfers between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.
SECTION G. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Article 8 of the Uniform Commercial Code and any other applicable law are met,
and if the Holder (i) satisfies the Company and the Trustee, within a reasonable
time after such Holder has notice thereof, with respect to such loss,
destruction or wrongful taking and the Registrar does not register a transfer
prior to receiving such notification, (ii) so requests the Company or the
Trustee prior to the Security being acquired by a bona fide purchaser and (iii)
satisfies any
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other reasonable requirements of the Company and the Trustee. Such Holder shall
furnish an indemnity bond sufficient in the judgment of the Company and the
Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and
any co-registrar from any loss that any of them may suffer if a Security is
replaced. The Company and the Trustee may charge the Holder for their expenses
in replacing a Security (including amounts necessary to pay taxes or other
governmental charges associated with such replacement).
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section 2.7 shall (to the extent
lawful) be exclusive and preclude all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION H. Outstanding Securities. Securities outstanding at
any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION I. Temporary Securities. Until definitive Securities
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall
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<PAGE> 55
prepare and the Trustee shall authenticate definitive Securities and make them
available for delivery in exchange for temporary Securities.
SECTION J. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
deliver canceled Securities to the Company. The Company may not issue new
Securities to replace Securities it has delivered to the Trustee for
cancellation. The Trustee shall not authenticate Securities in place of canceled
Securities other than pursuant to the terms of this Indenture.
SECTION K. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION L. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
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<PAGE> 56
ARTICLE III.
Redemption
SECTION A. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for
in this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officer's
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not less than 15 days after the
date of notice to the Trustee. Any such notice may be canceled at any time prior
to notice of such redemption being mailed to any Holder and shall thereby be
void and of no effect.
SECTION B. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed on a pro rata basis, by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers, in its sole discretion, fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them the Trustee selects shall be
in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
in writing of the Securities or portions of Securities to be redeemed.
SECTION C. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
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<PAGE> 57
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the certificate numbers and principal amounts of the
particular Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities
(or portion thereof) called for redemption ceases to accrue on and
after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION D. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided that if the redemption date is after a regular record date and on
or prior to the interest payment date, the accrued interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant
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<PAGE> 58
record date. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION E. Deposit of Redemption Price. On or prior to 10:00
a.m. on the redemption date, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which have been delivered by the
Company to the Trustee for cancellation, and from and after such date (unless
the Company defaults in making such redemption payment) interest on such
Securities shall cease to accrue.
SECTION F. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
SECTION G. Optional Redemption. 1. Except as set forth in this
Section 3.7, the Securities may not be redeemed pursuant to this Section 3.7(a)
at the option of the Company prior to May 1, 2002. On and after that date, the
Company may redeem the Securities in whole at any time or in part from time to
time at the following redemption prices (expressed in percentages of principal
amount), plus accrued interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the related interest payment date) if redeemed during the 12-month period
beginning on or after May 1 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
......................................................... 2002
......................................................... 105.250%
......................................................... 2003
......................................................... 103.500%
......................................................... 2004
......................................................... 101.750%
......................................................... 2005 and thereafter
......................................................... 100.000%
</TABLE>
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<PAGE> 59
2. Notwithstanding the foregoing, at any time and from time to
time prior to May 1, 2000, the Company may redeem in the aggregate up to 33 1/3%
of the original aggregate principal amount of the Securities with the proceeds
of one or more Public Equity Offerings by the Company following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount) of 110.5% plus accrued interest, if any, to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided, however, that at
least 66 2/3% of the original aggregate principal amount of the Securities must
remain outstanding after each such redemption.
3. At any time on or prior to May 1, 2002, the Securities may
be redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event more than 180 days after the occurrence of such Change of
Control) mailed by first-class mail to each Holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued but unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
ARTICLE IV.
Covenants
SECTION A. Payment of Securities. The Company shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and interest
shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION B. SEC Reports. Notwithstanding that the Company may
not be required to be or remain subject to the reporting requirements of Section
13 or 15(d) of
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the Exchange Act, the Company will file (if then permitted to do so) with the
SEC and provide (whether or not so filed with the SEC) the Trustee and
Securityholders and prospective Securityholders (upon request) with the annual
reports and the information, documents and other reports, which are specified in
Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the
other provisions of TIA Section 314(a).
SECTION C. Limitation on Indebtedness. 1. The Company will
not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness;
provided, however, that the Company and the Note Guarantors may Incur
Indebtedness if on the date of the Incurrence of such Indebtedness the
Consolidated Coverage Ratio would be greater than (i) 2.00:1.00, if such
Indebtedness is Incurred on or prior to the second anniversary of the Issue
Date, and (ii) 2.25:1.00 if such Indebtedness is Incurred thereafter.
2. Notwithstanding Section 4.3(a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(a) Indebtedness Incurred pursuant to the Senior Credit
Facility in a maximum principal amount not to exceed at any time (A) an
aggregate principal amount of $115.0 million under the Term Loan
Facility less the aggregate amount of all scheduled repayments of
principal, or mandatory prepayments of principal with Net Available
Cash from Asset Dispositions, applied to permanently reduce the
Indebtedness outstanding under the Term Loan Facility, plus (in the
case of any refinancing thereof) the aggregate amount of fees,
underwriting discounts, premiums and other costs and expenses incurred
in connection with such refinancing, and (B) an aggregate principal
amount outstanding at any time under the Revolving Credit Facility not
to exceed the greater of (x) $25.0 million less the amount of all
mandatory prepayments of principal with Net Available Cash from Asset
Dispositions, applied to permanently reduce the commitments under the
Revolving Credit Facility plus (in the case of any refinancing thereof)
the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing,
and (y) the Borrowing Base;
(b) (ii) Indebtedness of Foreign Subsidiaries for working
capital purposes and any Guarantees in respect thereof, the aggregate
principal amount of which Indebtedness outstanding at any time does not
exceed, as to all such Foreign Subsidiaries, the greater of (the
"Foreign Subsidiary Amount") (A) $10.0 million and (B) an amount equal
to 10% of Consolidated Tangible Assets;
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<PAGE> 61
provided, however, that the principal amount of such Indebtedness may
exceed the Foreign Subsidiary Amount by an amount not to exceed the
amount of Indebtedness permitted to be Incurred by clause 4.3(b)(i)(B)
as of such date but the principal amount of Indebtedness permitted to
be Incurred by clause 4.3(b)(i)(B) above shall be reduced by the amount
by which such Indebtedness exceeds the Foreign Subsidiary Amount;
(c) Indebtedness (A) of the Company to any Restricted
Subsidiary and (B) of any Wholly Owned Subsidiary to the Company or any
Restricted Subsidiary; provided, however, that any subsequent issuance
or transfer of any Capital Stock or any other event that results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or
any other subsequent transfer of any such Indebtedness (except to the
Company or a Wholly Owned Subsidiary) will be deemed, in each case, an
Incurrence of Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(d) Indebtedness represented by the Securities, any
Indebtedness (other than the Indebtedness described in clause
4.3(b)(i), (ii) or (iii) above) outstanding on the date of the
Indenture and any Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause 4.3(b)(iv) or Section 4.3(a)
above;
(e) Indebtedness of the Company or any Restricted Subsidiary
to finance or refinance the deferred purchase price of newly acquired
property of the Company and its Subsidiaries used in the ordinary
course of business of the Company and its Subsidiaries (provided such
purchase money financing is entered into within six months of the
acquisition of such property), and any Refinancing Indebtedness with
respect thereto, in an amount (based on the remaining balance of the
obligations therefor on the books of the Company and its Restricted
Subsidiaries) which shall not exceed the greater of (A) $7.0 million
and (B) an amount equal to 7% of Consolidated Tangible Assets in the
aggregate at any one time outstanding;
(f) Indebtedness of the Company or any Restricted Subsidiary
(which may comprise Bank Indebtedness) in an aggregate principal amount
at any one time outstanding not in excess of the greater of (A) $7.0
million and (B) an amount equal to 7% of Consolidated Tangible Assets;
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<PAGE> 62
(g) Indebtedness of the Company or any Restricted Subsidiary
in the form of Capitalized Lease Obligations or Attributable Debt, and
any Refinancing Indebtedness with respect thereto, in an aggregate
amount not in excess of the greater of (A) $7.0 million and (B) an
amount equal to 7% of Consolidated Tangible Assets at any one time
outstanding; provided, however, that all Indebtedness Incurred by one
or more Restricted Subsidiaries that are not Note Guarantors pursuant
to clause 4.3(b)(v) or (vi) above or this clause 4.3(b)(vii) shall not
exceed the greater of (A) $7.0 million and (B) an amount equal to 7% of
Consolidated Tangible Assets in aggregate principal amount at any one
time outstanding;
(h) Indebtedness represented by the Note Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause 4.3(b)(i) or
(iii) above;
(i) Guarantees (A) by any Note Guarantor of Senior
Indebtedness, (B) by the Company or any Note Guarantor of Guarantor
Senior Indebtedness or (C) by any Wholly Owned Subsidiary that is not a
Note Guarantor of Indebtedness of any Wholly Owned Subsidiary that is
not a Note Guarantor;
(j) Indebtedness (A) arising by reason of any Lien created or
permitted to exist by Section 4.11, including any Indebtedness of any
Note Guarantor arising by reason of any Lien granted by such Person to
secure Senior Indebtedness, or of the Company or any Note Guarantor
arising by reason of any Lien granted by such Person to secure
Guarantor Senior Indebtedness, or (B) of any Restricted Subsidiary that
is not a Note Guarantor arising by reason of any Lien granted by such
Person to secure Indebtedness of any Restricted Subsidiary that is not
a Note Guarantor;
(k) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring of a check, draft or similar instrument of
such Person drawn against insufficient funds, provided that such
Indebtedness is extinguished within five Business Days of its
incurrence;
(l) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities, or obligations in respect of
purchase price adjustments, in connection with the acquisition or
disposition of assets, including pursuant to the Recapitalization;
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<PAGE> 63
(m) Indebtedness in respect of (A) commercial letters of
credit, or other letters of credit or other similar instruments or
obligations, issued in connection with liabilities incurred in the
ordinary course of business (including those issued to governmental
entities in connection with self-insurance under applicable workers'
compensation statutes), or (B) surety, judgment, appeal, performance
and other similar bonds, instruments or obligations provided in the
ordinary course of business;
(n) Indebtedness under Hedging Obligations; provided, however,
that such Hedging Obligations are entered into for bona fide hedging
purposes of the Company or any Restricted Subsidiary and are in the
ordinary course of business;
(o) Indebtedness (A) of the Company consisting of Guarantees
of up to an aggregate principal amount of $4.0 million of borrowings by
Management Investors in connection with the purchase of Capital Stock
of the Company, Holdings or G-II by such Management Investors or (B) of
the Company or any Restricted Subsidiary consisting of guarantees in
respect of loans or advances made to officers or employees of Holdings,
the Company or any Restricted Subsidiary, or guarantees otherwise made
on their behalf, (1) in respect of travel, entertainment and
moving-related expenses incurred in the ordinary course of business, or
(2) in the ordinary course of business not exceeding $500,000 in the
aggregate outstanding at any time;
(p) Indebtedness of any Restricted Subsidiary that is
Indebtedness of another Person assumed by such Restricted Subsidiary in
connection with its acquisition of assets from such Person (other than
Indebtedness Incurred in connection with, or in contemplation of, such
acquisition) and any Refinancing Indebtedness with respect thereto;
provided, however, that at the time of such acquisition of assets the
Company shall have been able to Incur at least an additional $1.00 of
Indebtedness under Section 4.3(a) above after giving effect to such
acquisition; and
(q) Indebtedness of a Restricted Subsidiary issued and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred (A) as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company or
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<PAGE> 64
(B) otherwise in connection with, or in contemplation of, such
acquisition) and any Refinancing Indebtedness with respect thereto;
provided, however, that on the date of any such acquisition the Company
shall have been able to Incur at least $1.00 of Indebtedness under
Section 4.3(a) above after giving effect to such acquisition.
3. Notwithstanding the foregoing, the Company will not Incur
any Indebtedness pursuant to any provision of Section 4.3(b) above that permits
Refinancing Indebtedness in respect of Indebtedness constituting Subordinated
Obligations, if the proceeds of such Refinancing Indebtedness are used, directly
or indirectly, to refinance such Subordinated Obligations, unless such
Refinancing Indebtedness will be subordinated to the Securities to at least the
same extent as such Subordinated Obligations.
4. For purposes of determining compliance with, and the
outstanding principal amount of any particular Indebtedness Incurred pursuant to
and in compliance with, this covenant, (i) any other obligation of the obligor
on such Indebtedness arising under any Guarantee, Lien or letter of credit
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit secures the principal amount of such
Indebtedness; (ii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in any clause of Section 4.3(b)
above, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses; and (iii) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in accordance with GAAP.
5. For purposes of determining compliance with any
Dollar-denominated restriction on the Incurrence of Indebtedness denominated in
a foreign currency, the Dollar-equivalent principal amount of such Indebtedness
Incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such Indebtedness was Incurred, in the
case of term debt, or first committed, in the case of revolving credit debt,
provided that (x) the Dollar-equivalent principal amount of any such
Indebtedness outstanding on the Issue Date shall be calculated based on the
relevant currency exchange rate in effect on the Issue Date and (y) if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable
Dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such Dollar-
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<PAGE> 65
denominated restriction shall be deemed not to have been exceeded so long as the
principal amount of such refinancing Indebtedness does not exceed the principal
amount of such Indebtedness being refinanced. The principal amount of any
Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
SECTION D. Limitation on Restricted Payments. 1. The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except (x) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (y) dividends or distributions payable to the Company or any
Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or
distribution is not a Wholly Owned Subsidiary, to its other shareholders on no
more than a pro rata basis, measured by value), (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company held by Persons
other than the Company or another Restricted Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase, redemption or
other acquisition of Subordinated Obligations in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment") if
at the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) the Company could not incur at least an additional $1.00
of Indebtedness under Section 4.3(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Company's Board of
Directors whose
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determination shall be conclusive and evidenced by a resolution of the
Company's Board of Directors) declared or made subsequent to the date
of the Indenture would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the end of
the most recent fiscal quarter ending prior to the Issue Date
to the end of the most recent fiscal quarter ending prior to
the date of such Restricted Payment for which consolidated
financial statements of the Company are available (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of
such deficit);
(B) the aggregate Net Cash Proceeds received by the
Company either (x) as capital contributions to the Company
after the Issue Date or (y) from the issuance or sale of its
Capital Stock (other than Disqualified Stock) subsequent to
the Issue Date (other than an issuance or sale to a Restricted
Subsidiary of the Company), provided that in the event such
issuance or sale is to an employee stock ownership plan or
other trust established by the Company or any of its
Subsidiaries for the benefit of their employees, to the extent
the purchase by such plan or trust is financed by Indebtedness
of such plan or trust for which the Company is liable as
Guarantor or otherwise, such aggregate amount of Net Cash
Proceeds shall be limited to the aggregate amount of principal
payments made by such plan or trust with respect to such
Indebtedness;
(C) the amount by which Indebtedness of the Company
is reduced on the Company's balance sheet upon the conversion
or exchange (other than by a Restricted Subsidiary of the
Company) subsequent to the Issue Date, of any Indebtedness of
the Company or its Restricted Subsidiaries convertible or
exchangeable for Capital Stock (other than Disqualified Stock)
of the Company (less the amount of any cash, or other property
(other than Capital Stock), distributed by the Company upon
such conversion or exchange), plus the amount of any cash or
other property received by the Company or any Restricted
Subsidiary upon such conversion or exchange;
(D) the amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from (i)
repayments of the principal of
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loans or advances or other transfers of assets to the Company
or any Restricted Subsidiary from any Unrestricted Subsidiary
or (ii) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in
the definition of "Investment"), not to exceed in the case of
any such Unrestricted Subsidiary the aggregate amount of
Investments (other than Permitted Investments) made by the
Company or any Restricted Subsidiary in such Unrestricted
Subsidiary after the Issue Date; and
(E) in the case of disposition or repayment of any
Investment constituting a Restricted Payment (without
duplication of any amount deducted in calculating the amount
of Investments at any time outstanding included in the amount
of Restricted Payments), an amount equal to the lesser of the
return of capital or repayment with respect to
such Investment and the initial amount of such Investment, in
either case, less the cost of the disposition of such
Investment.
2. The provisions of Section 4.4(a) will not prohibit:
(a) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Capital Stock of the Company or
Subordinated Obligations made by exchange (including any such exchange
pursuant to the exercise of a conversion right or privilege in
connection with which cash is paid in lieu of the issuance of
fractional shares) for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries) or a
substantially concurrent capital contribution to the Company; provided,
however, that (A) such purchase, redemption, repurchase, defeasance,
retirement or other acquisition shall be excluded in subsequent
calculations of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale or capital contribution shall be excluded in
subsequent calculations under clause (B) of Section 4.4(a);
(b) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Company that is permitted to
be Incurred pursuant to Section 4.3; provided,
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however, that such purchase, redemption, repurchase, defeasance,
retirement or other acquisition shall be excluded in subsequent
calculations of the amount of Restricted Payments;
(c) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.6; provided,
however, that such purchase, redemption, repurchase, defeasance,
retirement or other acquisition shall be excluded in subsequent
calculations of the amount of Restricted Payments;
(d) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Subordinated Obligations upon a
Change of Control to the extent required by the agreement governing
such Subordinated Obligations but only if the Company shall have
complied with Section 4.8 and purchased all Securities tendered
pursuant to the offer to repurchase all the Securities required
thereby, prior to purchasing or repaying such Subordinated Obligations;
provided, however, that (A) the purchase price (stated as a percentage
of principal amount or issue price plus accrued original issue
discount, if less) of such Subordinated Obligations shall not be
greater than the price (stated as a percentage of principal amount) of
the Securities pursuant to any such offer to repurchase the Securities
in the event of a Change of Control, and (B) any such purchase,
redemption, repurchase, defeasance, retirement or other acquisition
shall be included in subsequent calculations of the amount of
Restricted Payments;
(e) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with Section 4.4(a); provided, however, that such
dividends shall be included in subsequent calculations of the amount of
Restricted Payments;
(f) loans, advances, dividends or distributions by the Company
to Holdings or G-II to permit Holdings or G-II, as the case may be, to
repurchase or otherwise acquire its Capital Stock or options, warrants
or other rights in respect thereof, or payments by the Company to
repurchase or otherwise acquire Capital Stock or options, warrants or
other rights in respect thereof, in each case from Management
Investors, such payments, loans, advances, dividends or distributions
not to exceed an amount (net of repayments of any such loans or
advances) equal to $500,000 in any fiscal year and $2.0 million in the
aggregate (plus the Net Cash Proceeds received by the Company since the
Issue Date as a capital contribution
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from the sale to Management Investors of Capital Stock or options,
warrants or other rights in respect thereof); provided, however, that
such payments, loans, advances, dividends or distributions will be
included in subsequent calculations of the amount of Restricted
Payments;
(g) loans, advances, dividends or distributions by the Company
or any Restricted Subsidiary to Holdings or G-II not to exceed an
amount necessary to permit Holdings or G-II to (A) pay its costs
(including all professional fees and expenses) incurred to comply with
its reporting obligations under federal or state laws or under the
Indenture, including any reports filed with respect to the Securities
Act, Exchange Act or the respective rules and regulations promulgated
thereunder, (B) make payments in respect of its indemnification
obligations owing to directors, officers, employees or other Persons
under its charter or by-laws or pursuant to written agreements with any
such Person, to the extent such payments relate to the Company and its
Subsidiaries, (C) pay all reasonable fees and expenses payable by it in
connection with the Transactions, or (D) pay its other operational
expenses (other than taxes) incurred in the ordinary course of business
and not exceeding $500,000 in any fiscal year; provided, however, that
such loans, advances, dividends or distributions will be excluded in
subsequent calculations of the amount of Restricted Payments;
(h) payments by the Company or any Restricted Subsidiary to
Holdings (A) to satisfy or permit Holdings to satisfy its obligations
under the Management Agreements, (B) pursuant to the Tax Sharing
Agreement, (C) to pay or permit Holdings to pay any taxes, charges or
assessments, including but not limited to sales, use, transfer, rental,
ad valorem, value-added, stamp, property, consumption, franchise,
license, capital, net worth, gross receipts, excise, occupancy,
intangibles or similar taxes, charges or assessments (other than
federal, state or local taxes measured by income and federal, state or
local withholding imposed on payments made by Holdings), required to be
paid by Holdings by virtue of its being incorporated or having capital
stock outstanding (but not by virtue of owning stock of any corporation
other than the Company or any of its Subsidiaries), or being a holding
company parent of the Company or receiving dividends from or other
distributions in respect of the stock of the Company, or having
guaranteed any obligations of the Company or any Subsidiary thereof, or
having made any payment in respect of any of the items for which the
Company is permitted to make payments to Holdings pursuant to this
covenant, or (D) to pay or permit Holdings to pay any other federal,
state, foreign,
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provincial or local taxes measured by income for which Holdings is
liable up to an amount not to exceed with respect to such federal taxes
the amount of any such taxes which the Company would have been required
to pay on a separate company basis or on a consolidated basis if the
Company had filed a consolidated return on behalf of an affiliated
group (as defined in Section 1504 of the Internal Revenue Code of 1986,
as amended, or an analogous provision of state, local or foreign law)
of which it were the common parent, or with respect to state and local
taxes, on a combined basis if the Company had filed a combined return
on behalf of an affiliated group consisting only of the Company and its
Subsidiaries; provided, however, that such payments will be excluded in
subsequent calculations of the amount of Restricted Payments;
(i) the payment by the Company of, or loans, advances,
dividends or distributions by the Company to Holdings or G-II to pay,
dividends on the common stock of the Company, Holdings or G-II, as
applicable, following an initial public offering of such common stock,
in an amount not to exceed in any fiscal year 6% of the net proceeds
received by the Company, in or from such public offering; provided,
however, that such payments, loans, advances, dividends or
distributions will be included in subsequent calculations of the amount
of Restricted Payments; and
(j) loans, advances, dividends or distributions by the
Company or any Restricted Subsidiary in an aggregate amount not to
exceed $10.0 million; provided, however, that (A) the Company or any
Restricted Subsidiary shall not be permitted to make Restricted
Payments under this clause (x) unless, after giving effect thereto
(including the Incurrence of any Indebtedness to fund such Restricted
Payment), the Consolidated Coverage Ratio of the Company would be at
least equal to 2.25:1.00 and (B) such loans, advances, dividends or
distributions will be included in subsequent calculations of the amount
of Restricted Payments; and
provided, further, that in the case of clauses 4.4(b) (vii), (ix) and (x) no
Default or Event of Default shall have occurred or be continuing at the time of
such payment after giving effect thereto.
SECTION E. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
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effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to the
Company, (ii) make any loans or advances to the Company or (iii) transfer any of
its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the date of the Indenture (including,
without limitation, the Senior Credit Facility);
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary (x) pursuant to an agreement relating to any
Indebtedness Incurred by a Restricted Subsidiary prior to the date on
which such Restricted Subsidiary was acquired by the Company, or of
another Person that is assumed by the Company or a Restricted
Subsidiary in connection with the acquisition of assets from, or merger
or consolidation with, such Person (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company, or such
acquisition of assets, merger or consolidation) and outstanding on the
date of such acquisition, merger or consolidation or (y) pursuant to
any agreement (not relating to any Indebtedness) in existence when a
Person becomes a Subsidiary of the Company or when such agreement is
acquired by the Company or any Subsidiary thereof, that is not created
in contemplation of such Person becoming such a Subsidiary or such
acquisition (for purposes of this clause (2), if another Person is the
Successor Company, any Subsidiary or agreement thereof shall be deemed
acquired or assumed, as the case may be, by the Company when such
Person becomes the Successor Company);
(iii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement (a "Refinancing
Agreement") effecting a refinancing of Indebtedness Incurred pursuant
to, or that otherwise extends, renews, refinances or replaces, an
agreement referred to in clause (1) or (2) of this Section 4.5 or this
clause (3) (an "Initial Agreement") or contained in any amendment to an
Initial Agreement; provided, however, that the encumbrances and
restrictions contained in any such Refinancing Agreement or amendment
are no less favorable to the Holders of the Securities taken as a whole
than encumbrances and restrictions contained in the Initial Agreement
or Initial Agreements to which such
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Refinancing Agreement or amendment relates (as conclusively determined
in good faith by the Board of Directors);
(iv) any encumbrance or restriction (A) that restricts in a
customary manner the subletting, assignment or transfer of any property
or asset that is subject to a lease, license or similar contract, or
the assignment or transfer of any lease, license or other contract, (B)
by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or
any Restricted Subsidiary not otherwise prohibited by the Indenture,
(C) contained in mortgages, pledges or other security agreements
securing Indebtedness of a Restricted Subsidiary to the extent such
encumbrance or restrictions restrict the transfer of the property
subject to such mortgages, pledges or other security agreements or (D)
pursuant to customary provisions restricting dispositions of real
property interests set forth in any reciprocal easement agreements of
the Company or any Restricted Subsidiary;
(v) any restriction with respect to a Restricted Subsidiary
(or any of its property or assets) imposed pursuant to an agreement
entered into for the direct or indirect sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted
Subsidiary (or the property or assets that are subject to such
restriction) pending the closing of such sale or disposition;
(vi) any encumbrance or restriction on the transfer of
property or assets required by any regulatory authority having
jurisdiction over the Company or any Restricted Subsidiary or any of
their businesses; and
(vii) any encumbrance or restriction pursuant to an agreement
relating to any Indebtedness incurred, or any sale of receivables, by a
Foreign Subsidiary.
SECTION F. Limitation on Sales of Assets. 1. The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless
(a) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person
assuming responsibility for, any liabilities, contingent or otherwise)
at the time of such Asset Disposition at least equal to the fair market
value of the shares and assets subject to such Asset Disposition, as
such fair market value may be determined (and shall be determined, to
the extent such Asset Disposition or any series of related Asset
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Dispositions involves aggregate consideration in excess of $1.0
million) in good faith by the Board of Directors, whose determination
shall be conclusive (including as to the value of all noncash
consideration),
(b) at least 80% of the consideration therefor (excluding, in
the case of an Asset Disposition of assets, any consideration by way of
relief from, or by any other Person assuming responsibility for, any
liabilities, contingent or otherwise, which are not Indebtedness)
received by the Company or such Restricted Subsidiary is in the form of
cash, and
(c) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) as follows:
(A) first, to the extent the Company elects (or is
required by the terms of any Senior Indebtedness or Indebtedness
(other than Preferred Stock) of a Restricted Subsidiary), to
prepay, repay or purchase Senior Indebtedness or such
Indebtedness of a Restricted Subsidiary (in each case other than
Indebtedness owed to the Company or a Restricted Subsidiary)
within 365 days after the date of such Asset Disposition;
(B) second, to the extent of the balance of Net Available
Cash after application in accordance with clause (A) above, to
the extent the Company or such Restricted Subsidiary elects, to
reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with
Net Available Cash received by the Company or another Restricted
Subsidiary) within 365 days from the date of such Asset
Disposition, or, if such reinvestment in Additional Assets is a
project authorized by the Board of Directors that will take
longer than such 365 days to complete, the period of time
necessary to complete such project;
(C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A)
and (B) above (such balance, the "Excess Proceeds"), to make an
offer to purchase Securities and (to the extent required by the
terms thereof) any other Senior Subordinated Indebtedness,
pursuant and subject to the conditions of the Indenture and the
agreements governing such other Indebtedness, at a
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purchase price of 100% of the principal amount thereof (or
accreted value, as applicable) plus accrued and unpaid interest
to the purchase date; and
(D) fourth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A),
(B) and (C) above, to fund (to the extent consistent with any
other applicable provision of the Indenture) any general
corporate purpose (including the repayment of any Subordinated
Obligations);
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary will retire such Indebtedness and will cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions of this covenant, the Company and the Restricted Subsidiaries shall
not be required to apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions that is not applied in accordance with this covenant exceeds $5.0
million. If the aggregate principal amount (or accreted value, as applicable) of
Securities and Senior Subordinated Indebtedness validly tendered and not
withdrawn in connection with an offer pursuant to clause (C) above exceeds the
Excess Proceeds, the Excess Proceeds will be apportioned between the Securities
and such Senior Subordinated Indebtedness, with the portion of the Excess
Proceeds payable in respect of the Securities to equal the lesser of (x) the
Excess Proceeds amount multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Securities and the denominator of which is
the sum of the outstanding principal amount of the Securities and the
outstanding principal amount (or accreted value, as applicable) of the relevant
Senior Subordinated Indebtedness, and (y) the aggregate principal amount of
Securities validly tendered and not withdrawn.
For the purposes of this covenant, the following are deemed to
be cash: (v) Cash Equivalents, (w) the assumption of Indebtedness of the Company
(other than Disqualified Stock of the Company) or any Restricted Subsidiary and
the release of the Company or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition, (x) Indebtedness of
any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result
of such Asset Disposition, to the extent that the Company and each other
Restricted Subsidiary is released from any Guarantee of such Indebtedness in
connection with such Asset Disposition, (y) securities received by the Company
or any Restricted Subsidiary from the transferee that are
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promptly converted by the Company or such Restricted Subsidiary into cash, and
(z) consideration consisting of Indebtedness of the Company or any Restricted
Subsidiary.
2. In the event of an Asset Disposition that requires the
purchase of Securities pursuant to clause 4.6(a)(iii)(C) above, the Company will
be required to purchase Securities tendered pursuant to an offer by the Company
for the Securities (the "Offer") at a purchase price of 100% of their principal
amount plus accrued and unpaid interest to the Purchase Date in accordance with
the procedures (including prorating in the event of oversubscription) set forth
in the Indenture. If the aggregate purchase price of the Securities tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Securities, the remaining Net Available Cash will be available
to the Company for use in accordance with clause 4.6(a)(iii)(C) above (to repay
Senior Subordinated Indebtedness) or clause 4.6(a)(iii)(D) above. The Company
shall not be required to make an Offer for Securities pursuant to this covenant
if the Net Available Cash available therefor (after application of the proceeds
as provided in clauses 4.6(a)(iii)(A) and 4.6(a)(iii)(B) above) is less than
$5.0 million for any particular Asset Disposition (which lesser amounts shall be
carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
3. The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 4.6 by virtue
thereof.
SECTION G. Limitation on Transactions with Affiliates. 1. The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction or series of transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") on terms (i) that taken as a whole are less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transaction in arm's-length dealings with a
Person who is not such an Affiliate and (ii) that, in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, are not in
writing and (x) have not been approved by a majority of the members of the Board
of Directors having no
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material personal financial interest in such Affiliate Transaction, or (y) in
the event there are no such members, as to which the Company has not obtained a
Fairness Opinion (as hereinafter defined). In addition, any transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $10.0 million will also require an opinion
(a "Fairness Opinion") from an independent investment banking firm or appraiser,
as appropriate, of national prominence, to the effect that the terms of such
transaction taken as a whole are either (i) no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not an Affiliate or (ii) fair to the Company or such Restricted
Subsidiary, as the case may be, from a financial point of view.
2. The provisions of Section 4.7(a) shall not prohibit (i) any
Restricted Payment permitted by Section 4.4, any Permitted Investment, or any
other transaction specifically excluded from the definition of the term
"Restricted Payment," (ii) the performance of the Company's or Restricted
Subsidiary's obligations under any employment contract, collective bargaining
agreement, employee benefit plan, related trust agreement or any other similar
arrangement heretofore or hereafter entered into in the ordinary course of
business, (iii) payment of compensation, performance of indemnification or
contribution obligations, or any issuance, grant or award of stock, options or
other securities, to employees, officers or directors in the ordinary course of
business, (iv) maintenance in the ordinary course of business of benefit
programs or arrangements for employees, officers or directors, including
vacation plans, health and the insurance plans, deferred compensation plans, and
retirement or savings plans and similar plans, (v) any transaction between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries, (vi)
loans or advances made to directors, officers or employees of Holdings, the
Company or any Restricted Subsidiary, or guarantees in respect thereof or
otherwise made on their behalf (including any payments under such guarantees),
(A) in respect of travel, entertainment or moving-related expenses incurred in
the ordinary course of business, or (B) in the ordinary course of business not
exceeding $500,000 in the aggregate outstanding at any time, (vii) guarantees of
borrowings by Management Investors in connection with the purchase of Capital
Stock of the Company, Holdings or G-II by such Management Investors, which
guarantees are permitted by Section 4.3, and payments thereunder, (viii) the
Transactions and the incurrence and payment of all fees and expenses payable in
connection therewith, (ix) any other transaction arising out of agreements in
existence on the Issue Date, (x) execution, delivery and performance of the Tax
Sharing Agreement and the Management Agreements, including the initial payment
of a fee of $2.5 million to GSCP and the ongoing payment of fees to GSCP of up
to $1.75
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million per year plus reasonable out of pocket expenses, (xi) any commercial or
other business transaction in the ordinary course of business with any Permitted
Holder or any Affiliate thereof, on terms that taken as a whole are no less
favorable to the Company and its Restricted Subsidiaries than those that could
be obtained at the time in arm's-length dealings with a Person who is not an
Affiliate of the Company and (xii) any transaction in the ordinary course of
business, or approved by a majority of the members of the Board of Directors
having no material personal financial interest in such transaction, between the
Company or any Restricted Subsidiary and any Affiliate of the Company controlled
by the Company that is a joint venture or similar entity primarily engaged in a
Related Business.
SECTION H. Change of Control. 1. Upon the occurrence of a
Change of Control, each Securityholder shall have the right to require the
Company to repurchase all or any part of such Holder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), provided, however, that notwithstanding the
occurrence of a Change of Control, the Company shall not be obligated to
purchase the Securities pursuant to this Section 4.8 in the event that it has
exercised its right to redeem all the Securities under Section 3.7 hereof.
In the event that at the time of such Change of Control the
terms of the Bank Indebtedness restrict or prohibit the repurchase of Securities
pursuant to this Section, then prior to the mailing of the notice to Holders
provided for in Section 4.8(b) below but in any event within 30 days following
any Change of Control (unless the Company has exercised its right to redeem all
the Securities under Section 3.7 hereof), the Company shall (i) repay in full
all Bank Indebtedness or offer to repay in full all Bank Indebtedness and repay
the Bank Indebtedness of each lender who has accepted such offer or (ii) obtain
the requisite consent under the agreements governing the Bank Indebtedness to
permit the repurchase of the Securities as provided for in Section 4.8(b) below.
2. Unless the Company has exercised its right to redeem all
the Securities under Section 3.7 hereof, within 30 days following any Change of
Control (or at the Company's option, prior to such Change of Control but after
the public announcement thereof) (except as provided in the proviso to the first
sentence of Section 4.8(a)), the Company shall mail a notice to each Holder with
a copy to the Trustee stating: (1) that a Change of Control has occurred or will
occur and that such Holder has (or upon such occurrence will have) the right to
require the Company to purchase such Holder's
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Securities at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
on the relevant interest payment date); (2) the circumstances and relevant facts
and financial information regarding such Change of Control; (3) the repurchase
date (which shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed); (4) the instructions determined by the Company,
consistent with this Section, that a Holder must follow in order to have its
Securities purchased and (5) that if such offer is made prior to such Change of
Control, payment is conditioned on the occurrence of such Change of Control.
3. Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
4. On the purchase date, all Securities purchased by the
Company under this Section shall be delivered to the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
5. The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.8. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.8 by virtue
thereof.
SECTION I. Compliance Certificate; Notice of Default. The
Company shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Company an Officer's Certificate signed by the principal
executive, principal financial or principal accounting officer of the Company
complying with Section 314(a)(4) of the TIA and stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officer with a view to
determining whether the Company has kept, observed, performed and fulfilled its
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obligations under this Indenture and further stating, as to each Officer signing
such certificate, whether or not the signer knows of any failure by the Company
or any Subsidiary of the Company to comply with any conditions or covenants in
this Indenture, and, if such signer does know of such a failure to comply, the
certificate shall describe such failure with particularity and describe what
actions, if any, the Company proposes to take with respect to such failure. The
Company shall file with the Trustee written notice of the occurrence of any
Default or Event of Default within five Business Days of its becoming aware of
any such Default or Event of Default.
SECTION J. [Intentionally omitted.]
SECTION K. Limitation on Liens. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien (other than Permitted Liens) on any of its property or
assets (including Capital Stock of any other Person), whether owned on the date
of the Indenture or thereafter acquired, securing any Indebtedness that is not
Senior Indebtedness or Guarantor Senior Indebtedness (the "Initial Lien"),
unless contemporaneously therewith effective provision is made to secure the
Indebtedness due under the Indenture and the Securities or, in respect of Liens
on any Restricted Subsidiary's property or assets, any Note Guarantee of such
Restricted Subsidiary, equally and ratably with such obligation for so long as
such obligation is so secured by such Initial Lien. Any such Lien thereby
created in favor of the Securities or any such Note Guarantee will be
automatically and unconditionally released and discharged upon (i) the release
and discharge of the Initial Lien to which it relates, or (ii) any sale,
exchange or transfer to any Person not an Affiliate of the Company of the
property or assets secured by such Initial Lien, or of all of the Capital Stock
held by the Company or any Restricted Subsidiary in, or all or substantially all
the assets of, any Restricted Subsidiary creating such Lien.
SECTION L. Additional Note Guarantors. 1. If the Company or
any of its Domestic Subsidiaries shall acquire or create another Domestic
Subsidiary that is a Significant Subsidiary, then the Company, the Trustee and
such newly acquired or created Domestic Subsidiary shall execute and deliver a
supplemental indenture evidencing such Note Guarantee and deliver an Opinion of
Counsel, in accordance with the terms of this Indenture. The Company will also
have the right to cause any Restricted Subsidiary so to become a Note Guarantor.
Each Note Guarantee will be limited to an amount not to exceed the maximum
amount that can be Guaranteed by that Subsidiary without rendering the Note
Guarantee, as it relates to such Subsidiary, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the
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rights of creditors generally. Such Note Guarantee may be substantially in the
form of Exhibit D hereto or in such other form as may be reasonably satisfactory
to the Trustee and the Company.
2. Except as provided in the applicable Note Guarantee, no
Note Guarantor may consolidate or merge with into (whether or not such Note
Guarantor is the surviving Person) another Person unless (i) the Person formed
by or surviving any such consolidation or merger (if other than a Note Guarantor
or the Company) assumes all the obligations of such Note Guarantor under the
Note Guarantee and the Indenture pursuant to a supplemental indenture, in form
reasonably satisfactory to the Trustee, and (ii) if such merger or consolidation
is with a Person other than the Company or a Restricted Subsidiary, (x)
immediately after such transaction, no Default or Event of Default exists and
(y) the Company will, at the time of such transaction after giving pro forma
effect thereto, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to Section 4.3(a).
SECTION M. Limitation on the Sale or Issuance of Preferred
Stock of Restricted Subsidiaries. The Company will not sell any shares of
Preferred Stock of a Restricted Subsidiary, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of its Preferred
Stock to any Person (other than to the Company or a Restricted Subsidiary, or to
directors as directors' qualifying shares, or (in the case of any Foreign
Subsidiary) to the extent required by applicable law); provided, however, that
(a) the Company or any Restricted Subsidiary is permitted to sell Preferred
Stock of a Subsidiary in compliance with the terms of Section 4.6 and (b) any
such Preferred Stock may be issued or sold if Incurred by any Restricted
Subsidiary in compliance with Section 4.3.
SECTION N. Limitation on Layering. The Company shall not incur
any Indebtedness if such Indebtedness is expressly subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is contractually subordinated in right of payment
to Senior Subordinated Indebtedness. No Note Guarantor shall incur any
Indebtedness if such Indebtedness is expressly subordinate in right of payment
to any Guarantor Senior Indebtedness of such Note Guarantor unless such
Indebtedness is Guarantor Senior Subordinated Indebtedness of such Note
Guarantor or is contractually subordinated in right of payment to Guarantor
Senior Subordinated Indebtedness of such Note Guarantor.
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ARTICLE V.
Successor Company
SECTION A. When Company May Merge or Transfer Assets. The
Company shall not consolidate with or merge with or into, or convey, transfer or
lease all or substantially all its assets to, any Person, unless:
(a) the resulting, surviving or transferee Person (the
"Successor Company") will be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia and the Successor Company (if not the Company) will
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Securities and
the Indenture; (ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Restricted Subsidiary as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction), no Default will
have occurred and be continuing; (iii) immediately after giving effect
to such transaction, the Consolidated Coverage Ratio of the Successor
Company would be at least equal to the greater of (A) 1.75:1.00 and (B)
a ratio equal to 75% of the actual Consolidated Coverage Ratio of the
Company as of such date of determination; and (iv) each Note Guarantor
(other than any party to any such merger) shall have delivered a
written instrument in form and substance reasonably satisfactory to the
Trustee confirming its Note Guarantee; and (v) the Company will have
delivered to the Trustee an Officer's Certificate and an Opinion of
Counsel, each to the effect that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture;
provided that (x) in giving such opinion such counsel may rely on such
Officer's Certificate as to any matters of fact (including without
limitation as to compliance with the foregoing clauses (ii) and (iii)),
and (y) no Opinion of Counsel will be required for a consolidation,
merger or transfer described in the last paragraph of this Section 5.1.
Any Indebtedness that becomes an obligation of the Company or any
Restricted Subsidiary (or that is deemed to be Incurred by any
Restricted Subsidiary that becomes a Restricted Subsidiary) as a result
of such transaction undertaken in compliance with this covenant, and
any Refinancing Indebtedness with respect thereto, shall be deemed to
have been Incurred in compliance with Section 4.3.
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The Successor Company will succeed to, and be substituted for,
and may exercise every right and power of, the Company under the
Indenture, and thereafter the predecessor Company shall be relieved of
all obligations and covenants under this Agreement, except that, in the
case of a conveyance, transfer or lease of all or substantially all its
assets, the predecessor Company will not be released from the
obligation to pay the principal of and interest on the Securities.
Notwithstanding Section 5.1(ii) and (iii), (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (2) the Company may merge with an
Affiliate incorporated or organized for the purpose of reincorporating or
reorganizing the Company in another jurisdiction to realize tax or other
benefits. Notwithstanding the foregoing, the Company may enter into, perform and
consummate the Transactions.
ARTICLE VI.
Defaults and Remedies
SECTION A. Events of Default. An "Event of Default" occurs if:
(i) the Company defaults in any payment of interest on any
Security when the same becomes due and such default continues for a
period of 30 days;
(ii) the Company defaults in the payment of the principal of
any Security when the same becomes due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article
10;
(iii) the Company fails to comply with Section 5.1;
(iv) the Company fails to comply with Section 4.2, 4.3, 4.4,
4.5, 4.6, 4.7, 4.8, 4.11, 4.12, 4.13 or 4.14 (other than a failure to
purchase Securities when required under Section 4.6 or 4.8) and such
failure continues for 30 days after the notice specified below;
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(v) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(vi) any Note Guarantor fails to comply with its obligations
under any Note Guarantee to which such Note Guarantor is a party, after
any applicable grace period;
(vii) Indebtedness of the Company or any Significant
Subsidiary is not paid within any applicable grace period after final
maturity or the acceleration by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated
exceeds $5.0 million or its foreign currency equivalent at the time;
(viii) the Company or any Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law (as defined below):
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(ix) any judgment or decree for the payment of money (net of
any insurance or indemnity payments actually received in respect
thereof prior to or within 90 days from the entry thereof, or to be
received in respect thereof in the event any appeal thereof shall be
unsuccessful) in excess of $5.0 million or its foreign currency
equivalent at the time is entered against the Company or any
Significant Subsidiary that is not discharged, or bonded or insured by
a third Person and either (A) an enforcement proceeding has been
commenced upon such judgment or decree or (B) there is a period of 90
days following the entry of such
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judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed; or
(x) any Note Guarantee by a Note Guarantor which is a
Significant Subsidiary shall cease to be in full force and effect
(except as contemplated by the terms thereof or of this Indenture) or
any such Note Guarantor shall deny or disaffirm its obligations in
writing under this Indenture or any Note Guarantee and such Default
continues for 10 days after the notice specified below.
The foregoing shall constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4) or (5) above is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities notify the Company of the Default and the Company
does not cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officer's Certificate
of any Event of Default under clause (6) above and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9) above, its status and what action the Company is taking
or proposes to take with respect thereto.
SECTION B. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.1(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least a majority in principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(7) or (8) with
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respect to the Company occurs and is continuing, the principal of and interest
on all the Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Securityholders. The Holders of a majority in principal amount of the
outstanding Securities by notice to the Trustee may rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION C. Other Remedies. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION D. Waiver of Past Defaults. The Holders of a majority
in principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.2 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION E. Control by Majority. The Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any
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action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
SECTION F. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(ii) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(v) the Holders of a majority in principal amount of the
outstanding Securities do not give the Trustee a direction inconsistent
with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION G. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and premium (if any) and interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION H. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
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SECTION I. Trustee May File Proofs of Claim. The Trustee may
file such proofs of claim and other papers or documents and take such other
actions, including participating as a member, voting or otherwise, of any
committee of creditors appointed in the matter, as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, any Subsidiary or Note
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements
and-advances of the Trustee, its agents and its counsel, and any other amounts
due the Trustee under Section 7.7.
SECTION J. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to holders of Senior Indebtedness to the extent
required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Trustee shall mail to each Securityholder and the Company
a notice that states the record date, the payment date and amount to be paid.
SECTION K. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its
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discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section does not apply to a suit by the Company, a suit by the Trustee, a suit
by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in
principal amount of the Securities.
SECTION L. Waiver of Stay or Extension Laws. The Company (to
the extent it may lawfully do so) shall not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE VII.
Trustee
SECTION A. Duties of Trustee. 1. If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
2. Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
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furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
3. The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
4. Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.1.
5. The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
6. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
7. No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
8. Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION B. Rights of Trustee. Subject to Section 7.1: 1. The
Trustee may rely on any document believed by it to be genuine and to have been
signed or
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presented by the proper person. The Trustee need not investigate any fact or
matter stated in the document.
2. Before the Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officer's Certificate or Opinion of Counsel.
3. The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
4. The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
5. The Trustee may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
6. The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in principal amount of the Securities
at the time outstanding, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney, during reasonable business
hours and subject to executing a confidentiality undertaking in customary form
with respect to confidential and/or proprietary information of the Company;
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expense or liability
as a condition to so proceeding.
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7. The Trustee shall not be deemed to have knowledge of any
default or fact the occurrence of which requires the Trustee to take any action
(other than a payment default hereunder) unless a Trust Officer actually knows
of such default or fact.
8. The Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably believed by
it to be authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
9. The Trustee shall not be deemed to have notice of any Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such an Event of
Default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Securities and this Indenture.
10. Upon request of the Trustee, the Company shall make
reasonable efforts to execute and deliver such further instruments and do such
further acts as may be reasonably necessary to carry out more effectively the
purpose of this Indenture. The parties hereto agree that the purpose of this
provision shall be for administrative purposes only.
SECTION C. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION D. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION E. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Trust Officer of the Trustee, the Trustee
shall mail to each Securityholder notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of principal of or premium
(if any) or interest on any Security (including payments pursuant to the
mandatory redemption provisions of such Security, if
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any), the Trustee may withhold the notice if and so long as a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION F. Reports by Trustee to Holders. As promptly as
practicable after each March 15 beginning with the March 15 following the date
of this Indenture (and in any event prior to May 15 in each year), but only upon
the occurrence within the previous 12 months of any events specified in TIA
Section 313(a), the Trustee shall mail to each Securityholder a brief report
dated as of March 15 that complies with TIA Section 313(a). The Trustee shall
also comply with TIA Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION G. Compensation and Indemnity. The Company shall pay
to the Trustee, Paying Agent and Registrar from time to time such compensation
as shall be agreed in writing between the Company and the Trustee for its
services. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee, Paying Agent, Registrar, and
each of their officers, directors, agents and employees (each in their
respective capacities), for and hold each of them harmless against any and all
loss, demand, claim, liability or expense (including reasonable attorneys' fees
and expenses) incurred by them without negligence or bad faith on their part in
connection with the acceptance or administration of this trust and the
performance of their duties hereunder. The Trustee, Paying Agent and Registrar
shall notify the Company of any claim for which they may seek indemnity promptly
upon obtaining actual knowledge thereof; provided that any failure so to notify
the Company shall not relieve the Company of its indemnity obligations hereunder
except to the extent the Company shall have been adversely affected thereby. The
Company shall defend the claim and the indemnified party shall provide
reasonable cooperation at the Company's expense in the defense. Such indemnified
parties may have separate counsel and the Company shall pay the fees and
expenses of such counsel; provided that the Company shall not be required to pay
such
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fees and expenses if it assumes such indemnified parties' defense and, in such
indemnified parties' reasonable judgment, there is no conflict of interest
between the Company and such parties in connection with such defense. The
Company need not pay for any settlement made without its written consent. The
Company need not reimburse any expense or indemnify against any loss, liability
or expense incurred by an indemnified party through any indemnified party's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture or the resignation or removal of
the Trustee. When the Trustee, Paying Agent or Registrar incurs expenses after
the occurrence of a Default specified in Section 6.1(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION H. Replacement of Trustee. The Trustee may resign at
any time by so notifying the Company in writing. The Holders of a majority in
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee and may appoint a successor Trustee with
the consent of the Company, which shall not be unreasonably withheld. The
Company shall remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the outstanding Securities and such
Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy
exists in the office of
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Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the outstanding Securities may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section 7.8, the Company's obligations under Section 7.7 shall continue for
the benefit of the retiring Trustee.
SECTION I. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is
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anywhere in the Securities or in this Indenture provided that the certificate of
the Trustee shall have.
SECTION J. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $50.0 million as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION K. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION L. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. The Trustee
or any Authenticating Agent shall not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
ARTICLE VIII.
Discharge of Indenture; Defeasance
SECTION A. Discharge of Liability on Securities; Defeasance.
1. When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.7) for cancellation or
(ii) all outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article 3
hereof and the Company irrevocably deposits with the Trustee funds or U.S.
Government Obligations on which payment of principal and interest when due will
be sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than
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Securities replaced pursuant to Section 2.7), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Section 8.1(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officer's Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
2. Subject to Sections 8.1(c) and 8.2, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.2 (subject
to any requirement of the TIA), 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.11, 4.12, 4.13,
4.14, 5.1 (iii) and the operation of Sections 6.1(4), 6.1(6), 6.1(7) (with
respect to Subsidiaries of the Company only), 6.1(8) (with respect to
Subsidiaries of the Company only) and 6.1(9) ("covenant defeasance option"). The
Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.1(4),
6.1(6), 6.1(7), 6.1(8) (but only with respect to certain bankruptcy events of a
Significant Subsidiary), 6.1(9) or 6.1(10) or because of the failure of the
Company to comply with (iii) of Section 5.1. If the Company exercises its legal
defeasance option or its covenant defeasance option, each Note Guarantor will be
automatically and unconditionally released and discharged from all of its
obligations under its Note Guarantee.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
3. Notwithstanding clauses (a) and (b) above, Sections 2.3,
2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive until the
Securities have been paid in full. Thereafter, Sections 7.7, 8.4 and 8.5 shall
survive.
SECTION B. Conditions to Defeasance. The Company may exercise
its legal defeasance option or its covenant defeasance option only if:
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(i) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Securities to maturity or
redemption, as the case may be;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case
may be;
(iii) 90 days pass after the deposit is made and during the
90-day period no Default specified in Section 6.1(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(iv) the deposit does not constitute a material default under
any other material agreement binding on the Company and is not
prohibited by Article 10;
(v) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(vi) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
(vii) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Securityholders will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal
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income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(viii) the Company delivers to the Trustee an Officer's
Certificate and an Opinion of Counsel, each to the effect that all
conditions precedent under this Section 8.2 to the defeasance and
discharge of the Securities as contemplated by this Article 8 have been
complied with; provided that in giving such opinion such counsel may
rely on such Officer's Certificate as to any matters of fact (including
without limitation as to compliance with the foregoing clauses (1),
(2), (3) and (4)).
Either defeasance option may be exercised to any redemption
date or to the maturity date for the Securities. Before or after a deposit, the
Company may make arrangements reasonably satisfactory to the Trustee for the
redemption of Securities at a future date in accordance with Article 3.
SECTION C. Application of Trust Money. The Trustee shall hold
in trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and securities
so held in trust are not subject to Article 10.
SECTION D. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon written request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request any money
held by them for the payment of principal or interest that remains unclaimed for
two years, and, thereafter, Securityholders entitled to the money must look to
the Company for payment as general unsecured creditors and all liability of the
Trustee or the Paying Agent with respect to such trust money shall thereupon
cease.
SECTION E. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest
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received on such U.S. Government Obligations other than any tax, fee or other
charge that by law is for the account of the Securityholders.
SECTION F. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX.
Amendments
SECTION A. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5, or otherwise to provide for the
assumption by a successor of the obligations of the Company under the
Indenture;
(iii) to provide for uncertificated Securities in addition to
or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(iv) to provide that any Indebtedness that becomes or will
become an obligation of the Successor Company pursuant to a transaction
governed by the
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provisions of Article 5 (and that is not a Subordinated Obligation) is
Senior Subordinated Indebtedness for the purposes of this Indenture;
(v) to add Guarantees with respect to the Securities;
(vi) to secure the Securities;
(vii) to add to the covenants of the Company for the benefit
of the Holders or to surrender any right or power herein conferred upon
the Company;
(viii) to comply with any requirements of the SEC in
connection with qualifying this Indenture under the TIA;
(9) to enter into the First Supplemental Indenture; or
(10) to make any change that does not adversely affect the
rights of any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION B. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the consent of, and compliance with any provision of
this Indenture or the Securities may be waived by, the Holders of at least a
majority in principal amount of the outstanding Securities. However, without the
consent of each Securityholder affected, an amendment may not:
(i) reduce the amount of Securities whose Holders must consent
to an amendment;
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(ii) reduce the rate of or extend the time for payment of
interest on any Security;
(iii) reduce the principal of or extend the Stated Maturity of
any Security;
(iv) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(v) make any Security payable in money other than that stated
in the Security;
(vi) make any change in Article 10 that adversely affects the
rights of any Securityholder;
(vii) impair the right of any Holder to receive payment of
principal of and interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities; or
(viii) make any change to the second sentence of this Section.
In addition, without the consent of the Securityholders
holding 90% in principal amount of the Securities then outstanding, no amendment
may release any Note Guarantor that is a Significant Subsidiary from any of its
obligations under its Note Guarantee or this Indenture, except in compliance
with the terms thereof or of this Indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
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After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION C. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION D. Effect of Amendment; Revocation and Effect of
Consents and Waivers. Upon the execution of any amendment under this Article 9,
this Indenture shall be modified in accordance therewith, and such amendment
shall form a part of this Indenture for all purposes. A consent to an amendment
or a waiver by a Holder of a Security shall bind the Holder and every subsequent
Holder of that Security or portion of the Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent or waiver
is not made on the Security. However, any such Holder or subsequent Holder may
revoke the consent or waiver as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
instrument providing for the amendment or waiver is signed by the parties
thereto. After an amendment or waiver becomes effective, it shall bind every
Securityholder. An amendment or waiver becomes effective once the requisite
number of consents are received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 180 days after such record date.
SECTION E. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company so determines, the Company in exchange for
the Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the
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appropriate notation or to issue a new Security shall not affect the validity of
any amendment or waiver.
SECTION F. Trustee To Sign Amendments. The Trustee shall sign
any amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officer's Certificate and an Opinion of Counsel each to the effect that
such amendment is authorized or permitted by this Indenture and complies with
the provisions hereof (including Section 9.3); provided that in giving such
opinion such counsel may rely on such Officer's Certificate as to any matters of
fact.
SECTION G. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame, and subject to the terms and conditions, set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE X.
Subordination
SECTION A. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full
(when due) of all existing and future Senior Indebtedness and that the
subordination is for the benefit of and enforceable by the holders of Senior
Indebtedness. The Securities shall in all respects rank pari passu with all
other Senior Subordinated Indebtedness of the Company and only Indebtedness of
the Company that is Senior Indebtedness shall rank senior to the Securities in
accordance with the provisions set forth herein. For purposes of these
subordination provisions, the Indebtedness evidenced by the Securities is deemed
to include the liquidated damages
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payable pursuant to the provisions set forth in the Securities and the Exchange
and Registration Rights Agreement. All provisions of this Article 10 shall be
subject to Section 10.12.
SECTION B. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company upon a total or partial
liquidation or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(i) holders of Senior Indebtedness shall be entitled to
receive payment in full of the Senior Indebtedness before
Securityholders shall be entitled to receive any payment of principal
of or interest on the Securities; and
(ii) until the Senior Indebtedness is paid in full, any
payment or distribution to which Securityholders would be entitled but
for this Article 10 shall be made to holders of Senior Indebtedness as
their interests may appear.
SECTION C. Default on Senior Indebtedness. The Company may not
pay the principal of, or premium (if any) or interest on the Securities or make
any deposit pursuant to Section 8.1 and may not purchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if (i) any Senior
Indebtedness is not paid when due in cash or Cash Equivalents or (ii) any other
default on Senior Indebtedness occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such acceleration has been
rescinded in writing or (y) such Senior Indebtedness has been paid in full in
cash or Cash Equivalents; provided, however, that the Company may pay the
Securities without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of the
Designated Senior Indebtedness with respect to which either of the events in
clause (i) or (ii) of this sentence has occurred and is continuing. In addition,
during the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Securities for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier
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if such Payment Blockage Period is terminated (i) by written notice to the
Trustee and the Company from the Person or Persons who gave such Blockage
Notice, (ii) by repayment in full of such Designated Senior Indebtedness or
(iii) because the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Securities after the end of such Payment Blockage Period. Not more than
one Blockage Notice may be given in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
(other than Bank Indebtedness), the Representative of Bank Indebtedness may give
another Blockage Notice within such period; provided further, however, that in
no event may the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
SECTION D. Acceleration a Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representative) of the acceleration. If any Designated Senior
Indebtedness is outstanding, the Company may not pay the Securities until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Securities only if this Article 10 otherwise permits payment at that time.
SECTION E. When a Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of the provisions of
Article 10 should not have been made to them, the Securityholders who receive
the distribution shall hold it in trust for holders of Senior Indebtedness and
pay it over to them as their interests may appear.
SECTION F. Subrogation. After all Senior Indebtedness is paid
in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article 10 to holders of Senior Indebtedness which otherwise would have been
made to Securityholders is not, as
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between the Company and Securityholders, a payment by the Company on Senior
Indebtedness.
SECTION G. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness prior to
the Subordination Termination Date. Nothing in this Indenture shall:
(i) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(ii) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION H. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION I. Rights of Trustee and Paying Agent. The Company
shall give prompt written notice to the Trustee of any fact known to the Company
which would prohibit the making of any payment to or by the Trustee in respect
of the Securities. Failure to give such notice shall not affect the
subordination of the Securities to Senior Indebtedness. Notwithstanding Section
10.3, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness may give the notice; provided,
however, that, if an issue of Senior Indebtedness has a Representative, only the
Representative may give the notice. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Senior Indebtedness (or a Representative of such holder) to
establish that such notice has been given by a holder of such Senior
Indebtedness or Representative thereof.
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The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
SECTION J. Distribution or Notice to Representative. Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION K. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION L. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION M. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article
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10. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article 10, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
Person under this Article 10, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment. The provisions of Sections
7.1 and 7.2 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article 10.
SECTION N. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION O. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 10 or otherwise. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article 10 and no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION P. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
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SECTION Q. Trustee's Compensation Not Prejudiced. Nothing in
this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE XI.
Miscellaneous
SECTION A. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION B. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
c/o Telex Communications, Inc.
9600 Aldrich Avenue South
Bloomington, Minnesota 55240
Attention of: John Palleschi
with a copy to:
Greenwich Street Capital Partners
388 Greenwich St., 36th Floor
New York, New York 10013
Attention of: Nicholas E. Somers
and:
Debevoise & Plimpton
875 Third Avenue
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<PAGE> 110
New York, New York 10022
Attention of: David Brittenham
if to the Trustee:
Manufacturers and Traders Trust
Company
One M&T Plaza, 7th Floor
Buffalo, New York 14203
Attention of: Russell T. Whitley
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
All notices and communications shall be deemed to be duly
given: at the time delivered, if personally delivered, or five Business Days
after being deposited into the mail, if mailed. All notices may be waived by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice for all purposes of this
Indenture. Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION C. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and their agents shall have
the protection of TIA Section 312(c).
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<PAGE> 111
SECTION D. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(i) an Officer's Certificate in form and substance reasonably
satisfactory to the Trustee to the effect that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee to the effect that, in the opinion of such
counsel, all such conditions precedent have been complied with,
provided that in giving such opinion such counsel may rely on any
Officer's Certificate or certificate of a public official as to any
matters of fact; and
provided, further, that, in the case of any such application or request as to
which the furnishing of any Officer's Certificate or Opinion of Counsel is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
SECTION E. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(i) a statement to the effect that the individual or counsel
making such certificate or opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement to the effect that, in the opinion of such
individual or counsel, such individual or counsel has made such
examination or investigation as is necessary to enable such individual
or counsel to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of such
individual or counsel, such covenant or condition has been complied
with;
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<PAGE> 112
provided that an Opinion of Counsel can rely as to matters of fact on an
Officer's Certificate or certificates of public officials.
SECTION F. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION G. Acts of Holders; Rules by Trustee, Paying Agent and
Registrar. Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by a
specified percentage in principal amount of the Holders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such specified percentage of Holders in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. The Trustee
may make reasonable rules for action by or a meeting of Securityholders not
inconsistent with the foregoing. The Registrar and the Paying Agent may make
reasonable rules for their functions.
SECTION H. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which commercial banking institutions (including, without
limitation, the Federal Reserve System) are authorized or required by law to
close in New York City. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION I. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION J. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or a Note Guarantor shall not
have any liability for any obligations of the Company or any Note Guarantor
under the Securities, this
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<PAGE> 113
Indenture or any Note Guarantee or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
shall be part of the consideration for the issue of the Securities.
SECTION K. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION L. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION M. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION N. Separability. In case any provision of this
Indenture, the Securities or the Note Guarantees shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION O. Benefits of Indenture. Nothing in this Indenture,
the Securities or any Note Guarantee, expressed or implied, shall give to any
Person, other than the parties hereto and their successors hereunder and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
GST ACQUISITION CORP.
By:
-----------------------------
Name:
Title:
105
<PAGE> 114
MANUFACTURERS AND TRADERS
TRUST COMPANY
By:
-----------------------------
Name:
Title:
106
<PAGE> 115
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.(1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS
OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
- --------
(1) This paragraph should only be added if the Security is issued in global
form.
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<PAGE> 116
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, IN A TRANSACTION
COMPLYING WITH THE REQUIREMENTS OF RULE 144A, TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULES 501 (A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO COMPANY AND THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP No.________
$[ ]
[GST ACQUISITION CORP.,] a Delaware corporation, promises to pay to
[ ], or registered assigns, the principal sum of $[ ] on May 1, 2007.
Interest Payment Dates: May 1 and November 1.
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<PAGE> 117
Record Dates: April 15 and October 15.
3
<PAGE> 118
Additional provisions of this Security are set forth on the other side
of this Security.
[Seal] [GST ACQUISITION CORP.]
by
___________________________________
Dated: May [ ], 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
MANUFACTURERS AND
TRADERS TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture
by
______________________,
Authorized Signatory
4
<PAGE> 119
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10 1/2% Senior Subordinated Note due 2007
1. Interest
[GST ACQUISITION CORP.], a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will use its
best efforts to have the Exchange Offer Registration Statement and, if
applicable, a Shelf Registration Statement (each a "Registration Statement")
declared effective by the Commission as promptly as practicable after the filing
thereof. If (i) the Exchange Offer Registration Statement is not filed with the
Commission on or prior to 60 days after the Issue Date; (ii) the Exchange Offer
Registration Statement is not declared effective within 150 days after the Issue
Date; (iii) the Exchange Offer is not consummated on or prior to 165 days after
the Issue Date; (iv) the Shelf Registration Statement is not filed with the
Commission within 60 days after the Shelf Notice is required to be delivered or
is not declared effective within 150 days after such date or (v) the Shelf
Registration Statement is filed and declared effective within 150 days after the
date the Shelf Notice is required to be delivered but shall thereafter cease to
be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
or amended Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (v), a "Registration Default"), the Company
will pay liquidated damages to each holder of Transfer Restricted Securities,
during the period of such Registration Default, in an amount equal to $0.192 per
week per $1,000 principal amount of the Securities constituting Transfer
Restricted Securities held by such holder until the applicable Registration
Statement is filed or declared effective, the Exchange Offer is consummated or
the Shelf Registration Statement again becomes effective, as the case may be.
All accrued liquidated damages shall be paid to holders in the same manner as
interest payments on the Securities on semi-annual payment dates which
correspond to interest payment dates for the Securities. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages.
The Company will pay interest semiannually on May 1, and November 1 of
each year. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 6, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at
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<PAGE> 120
the rate borne by the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the April 15 or October 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may, at its option, pay principal
and interest (i) by check payable in such money or (ii) by wire transfer of
immediately available funds to such account as may be designated by a Holder and
as specified in the books of the Registrar. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, Manufacturers and Traders Trust Company, a New York trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of May
6, 1997 (as amended or supplemented from time to time, "Indenture"), between the
Company and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on
the date of the Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $125.0 million aggregate principal amount at any one time outstanding
(subject to Section 2.7 of the Indenture). This Security is one of the Initial
Securities referred to in the Indenture. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for the
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<PAGE> 121
Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the issuance of debt by
the Company, the payment of dividends and other distributions and acquisitions
or retirements of the Company's Capital Stock and Subordinated Obligations, the
incurrence by the Company and its Restricted Subsidiaries of Liens on its
property and assets which do not equally and ratably secure the Securities, the
sale or transfer of assets and Subsidiary Stock, investments by the Company,
consolidations, mergers and transfers of all or substantially all of the
Company's assets and transactions with Affiliates. In addition, the Indenture
limits the ability of the Company and its Restricted Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities may not
be redeemed pursuant to this paragraph 5 at the option of the Company prior to
May 1, 2002. On and after that date, the Company may redeem the Securities in
whole at any time or in part from time to time at the following redemption
prices (expressed in percentages of principal amount), plus accrued interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date), if redeemed during the 12-month period beginning on or after May 1 of the
years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
<S> <C>
2002................................................ 105.250%
2003................................................ 103.500%
2004................................................ 101.750%
2005 and thereafter................................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time and from time to time prior
to May 1, 2000, the Company may redeem in the aggregate up to 33 1/3% of the
original aggregate principal amount of the Securities with the proceeds of one
or more Public Equity Offerings by the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.5% plus accrued interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the
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<PAGE> 122
relevant interest payment date); provided, however, that at least 66 2/3% of the
original aggregate principal amount of the Securities must remain outstanding
after each such redemption.
At any time on or prior to May 1, 2002, the Securities may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control, upon not less than 30 nor more than 60 days' prior notice (but in no
event more than 180 days after the occurrence of such Change of Control) mailed
by first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued but unpaid interest, if any, to, the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Securities
to be repurchased plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security
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<PAGE> 123
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give effect to such provisions and appoints the
Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or any Securities for a period of 15
days before a selection of Securities to be redeemed or 15 days before an
interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes, subject to provisions for record dates with respect to
payment of interest.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal of and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
default or noncompliance with any provision
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<PAGE> 124
may be waived with the consent of the Holders of a majority in principal amount
outstanding of the Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add Guarantees with respect to the Securities, or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company, or to provide that any Indebtedness that
becomes or will become an obligation of the Successor Company pursuant to
Article 5 (and that is not a Subordinated Obligation) is Senior Subordinated
Indebtedness for the purposes of the Indenture, or to comply with any request of
the SEC in connection with qualifying the Indenture under the TIA, or to make
any other change that does not adversely affect the rights of any
Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) a default in any
payment of interest on any Security when due, continued for 30 days, (ii) a
default in the payment of principal of any Security when due at its Stated
Maturity, upon optional redemption, upon required repurchase, upon declaration
or otherwise, whether or not such payment is prohibited by Article 10 of the
Indenture, (iii) the failure by the Company to comply with its obligations under
Section 5.1 of the Indenture, (iv) the failure by the Company to comply for 30
days after notice with certain of its obligations under Article 4 of the
Indenture (in each case, other than a failure to purchase Securities), (v) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Securities or the Indenture, (vi) the failure by any
Note Guarantor to comply with its obligations under any Note Guarantee to which
such Note Guarantor is a party, after any applicable grace period, (vii) the
failure by the Company or any Significant Subsidiary to pay any Indebtedness
within any applicable grace period after final maturity or the acceleration of
any such Indebtedness by the holders thereof because of a default if the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million or its
foreign currency equivalent (the "cross acceleration provision"), (viii) certain
events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (ix) the rendering of any
judgment or decree for the payment of money in an amount (net of any insurance
or indemnity payments actually received in respect thereof prior to or within 90
days from the entry thereof, or to be received in respect thereof in the event
any appeal thereof shall be unsuccessful) in excess of $5.0 million or its
foreign currency equivalent against the Company or a Significant Subsidiary that
is not discharged, or bonded or insured by a third Person, if (A) an enforcement
proceeding thereon is commenced or (B) such judgment or decree remains
outstanding for a period of 90 days following such judgment or decree and is not
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<PAGE> 125
discharged, waived or stayed (the "judgment default provision") or (x) the
failure of any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary to be in full force and effect (except as contemplated by the terms
thereof or of the Indenture) or the denial or disaffirmation in writing by any
such Note Guarantor of its obligations under the Indenture or any Note Guarantee
if such Default continues for 10 days. If an Event of Default (other than a
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company) occurs and is continuing, the Trustee or the Holders of at least
a majority in principal amount of the outstanding Securities may declare the
principal of and accrued but unpaid interest on all the Securities to be due and
payable immediately. Certain events of bankruptcy, insolvency, or reorganization
are Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if and so long as
a committee of its Trust Officers in good faith determines that withholding
notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or a Note Guarantor shall not have any liability for any obligations of the
Company or any Note Guarantor under the Securities, the Indenture or any Note
Guarantee or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
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<PAGE> 126
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
GST ACQUISITION CORP.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
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<PAGE> 127
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date:____________________ Your Signature:_______________________________________
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
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<PAGE> 128
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $________ principal amount of Securities held in
(check applicable space) _____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
/ / has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
(1) / / acquired for the undersigned's own account, without transfer
(in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture); or
(2) / / transferred to the Company; or
(3) / / transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
(4) / / transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933, as amended; or
(5) / / transferred to an institutional "accredited investor" (as
defined in Rules 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as
14
<PAGE> 129
amended), that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form
of which letter appears as Exhibit C to the Indenture; or
(6) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933, as
amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Trustee or the Company may require, prior to registering any
such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended, such as the exemption provided by Rule 144
under such Act.
------------------------------
Signature
Signature Guarantee:
- ------------------------------ ------------------------------
Signature
(Signature must be guaranteed
by a participant in a signature
guarantee medallion program)
15
<PAGE> 130
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount: $
Date:__________ Your Signature:_________________________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
16
<PAGE> 131
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.(1)
TELEX COMMUNICATIONS, INC.
10 1/2% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
No. CUSIP No.________
$[ ]
TELEX COMMUNICATIONS, INC., a Delaware corporation, promises to pay to
[ ], or registered assigns, the principal sum of $[ ] on May 1, 2007.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
- --------
(1) This paragraph should only be added if the Security is issued in global
form.
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<PAGE> 132
Additional provisions of this Security are set forth on the other side
of this Security.
[Seal] TELEX COMMUNICATIONS, INC.
by
___________________________________
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
The ________________________
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture
by
_____________________________________________
Authorized Signatory
2
<PAGE> 133
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
10 1/2% Senior Subordinated Note due 2007, Series A
1. Interest
Telex Communications, Inc., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will pay
interest semiannually on May 1 and November 1 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from May 6, 1997. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. The Company shall pay
interest on overdue principal at the rate borne by the Securities, and it shall
pay interest on overdue installments of interest at the same rate to the extent
lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the March 1 or September 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may, at its option, pay principal
and interest (i) by check payable in such money or (ii) by wire transfer of
immediately available funds to such account as may be designated by the Holder
and as specified in the books of the Registrar. It may mail an interest check to
a Holder's registered address.
3. Paying Agent and Registrar
Initially, Manufacturers and Traders Trust Company, a New York trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
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<PAGE> 134
The Company issued the Securities under an Indenture dated as of May
6, 1997 (as amended or supplemented from time to time, "Indenture"), between the
Company and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on
the date of the Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $125.0 million aggregate principal amount at any one time outstanding
(subject to Section 2.7 of the Indenture). This Security is one of the Exchange
Securities referred to in the Indenture. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture. The Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the issuance of debt by the Company,
the payment of dividends and other distributions and acquisitions or retirements
of the Company's Capital Stock and Subordinated Obligations, the incurrence by
the Company and its Restricted Subsidiaries of Liens on its property and assets
which do not equally and ratably secure the Securities, the sale or transfer of
assets and Subsidiary Stock, investments by the Company, consolidations, mergers
and transfers of all or substantially all of the Company's assets and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and its Restricted Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities may not
be redeemed pursuant to this paragraph 5 at the option of the Company prior to
May 1, 2002. On and after that date, the Company may redeem the Securities in
whole at any time or in part from time to time at the following redemption
prices (expressed in percentages of principal amount), plus accrued interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date), if redeemed during the 12-month period beginning on or after May 1 of the
years set forth below:
4
<PAGE> 135
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002......................................................... 105.250%
2003......................................................... 103.500%
2004......................................................... 101.750%
2005 and thereafter.......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time and from time to time prior
to May 1, 2000, the Company may redeem in the aggregate up to 33 1/3% of the
original aggregate principal amount of the Securities with the proceeds of one
or more Public Equity Offerings by the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.5% plus accrued interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that at least 66 2/3%
of the original aggregate principal amount of the Securities must remain
outstanding after each such redemption.
At any time on or prior to May 1, 2002, the Securities may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control, upon not less than 30 nor more than 60 days prior notice (but in no
event more than 180 days after the occurrence of such Change of Control) mailed
by first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued but unpaid interest, if any, to, the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
5
<PAGE> 136
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Securities
to be repurchased plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give effect to such
provisions and appoints the Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or any Securities for a period of 15
days before a selection of Securities to be redeemed or 15 days before an
interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes, subject to the provisions for record dates with respect to
payment of interest.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
6
<PAGE> 137
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal of and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
default or noncompliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
Guarantees with respect to the Securities, or to secure the Securities, or to
add additional covenants or surrender rights and powers conferred on the
Company, or to provide that any Indebtedness that becomes or will become an
obligation of the Successor Company pursuant to Article 5 of the Indenture (and
that is not a Subordinated Obligation) is Senior Subordinated Indebtedness for
the purposes of the Indenture or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) a default in any
payment of interest on any Security when due, continued for 30 days, (ii) a
default in the payment of principal of any Security when due at its Stated
Maturity, upon optional redemption, upon required repurchase, upon declaration
or otherwise, whether or not such payment is prohibited by Article 10 of the
Indenture, (iii) the failure by the Company to comply with its obligations under
Section 5.1 of the Indenture, (iv) the failure by the Company to comply for 30
days after notice with certain of its obligations under Article 4 of the
Indenture (in each case, other than a failure to purchase Securities), (v) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Securities or the Indenture, (vi) the failure by any
Note Guarantor to comply with its obligations under any Note Guarantee to which
such Note
7
<PAGE> 138
Guarantor is a party, after any applicable grace period, (vii) the failure by
the Company or any Significant Subsidiary to pay any Indebtedness within any
applicable grace period after final maturity or the acceleration of any such
Indebtedness by the holders thereof because of a default if the total amount of
such Indebtedness unpaid or accelerated exceeds $5.0 million or its foreign
currency equivalent (the "cross acceleration provision"), (viii) certain events
of bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary (the "bankruptcy provisions"), (ix) the rendering of any judgment or
decree for the payment of money in an amount (net of any insurance or indemnity
payments actually received in respect thereof prior to or within 90 days from
the entry thereof, or to be received in respect thereof in the event any appeal
thereof shall be unsuccessful) in excess of $5.0 million or its foreign currency
equivalent against the Company or a Significant Subsidiary that is not
discharged, or bonded or insured by a third Person, if (A) an enforcement
proceeding thereon is commenced or (B) such judgment or decree remains
outstanding for a period of 90 days following such judgment or decree and is not
discharged, waived or stayed (the "judgment default provision") or (x) the
failure of any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary to be in full force and effect (except as contemplated by the terms
thereof or of the Indenture) or the denial or disaffirmation in writing by any
such Note Guarantor of its obligations under the Indenture or any Note Guarantee
if such Default continues for 10 days. If an Event of Default (other than a
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company) occurs and is continuing , the Trustee or the Holders of at
least a majority in principal amount of the outstanding Securities may declare
the principal of and accrued but unpaid interest on all the Securities to be due
and payable immediately. Certain events of bankruptcy, insolvency, or
reorganization are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if and so long as
a committee of its Trust Officers in good faith determines that withholding
notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of the Securities and may otherwise deal with and collect obligations
owed to it by the Company or its Affiliates and
8
<PAGE> 139
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or a Note Guarantor shall not have any liability for any obligations of the
Company or any Note Guarantor under the Securities, the Indenture or any Note
Guarantee or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
9
<PAGE> 140
TELEX COMMUNICATIONS, INC.
9600 ALDRICH AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55240
(612) 884-4051
10
<PAGE> 141
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date:_______________ Your Signature:____________________________________________
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
11
<PAGE> 142
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount: $
Date:_______________ Your Signature:____________________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
12
<PAGE> 143
EXHIBIT C
Transferee Letter of Representation
Telex Communications, Inc.
Dear Sirs:
This certificate is delivered to request a transfer of $ principal amount
of the 10 1/2% Senior Subordinated Notes due 2007 (the "Securities") of Telex
Communications, Inc. (the "Company").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rules
501(a)(1), (2), (3) and (7) under the Securities Act of 1933, as amended
(the "Securities Act")), purchasing for our own account or for the account
of such an institutional "accredited investor" at least $250,000 principal
amount of the Notes, and we are acquiring the Notes not with a view to, or
for offer or sale in connection with, any distribution in violation of the
Securities Act. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes and invest in or purchase securities similar to the
Notes in the normal course of our business. We and any accounts for which
we are acting are each able to bear the economic risk of our or its
investment.
2. We understand that the Securities have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing the Securities
to offer, sell or otherwise transfer such Securities prior to the date
which is two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the
owner of such Securities (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective
1
<PAGE> 144
under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB and
to whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of Rules 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing for its own
account or for the account of such an institutional "accredited investor,"
in each case in a minimum principal amount of the Securities of $250,000,
or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases
to any requirement of law that the disposition of our property or the
property of such investor account or accounts be at all times within our or
their control and in compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the
Resale Restriction Termination Date. If any resale or other transfer of the
Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter
from the transferee substantially in the form of this letter to the Company
and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of
Rules 501 (a)(1), (2), (3) or (7) under the Securities Act and that it is
acquiring such Securities for investment purposes and not for distribution
in violation of the Securities Act. Each purchaser acknowledges that the
Company and the Trustee reserve the right prior to the offer, sale or other
transfer prior to the Resale Termination Date of the Securities pursuant to
clause (d), (e) or (f) above to require the delivery of an opinion of
counsel, certifications or other information satisfactory to the Company
and the Trustee.
TRANSFEREE:
BY:
2
<PAGE> 145
EXHIBIT D
FORM OF FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE dated as of May 6, 1997, among TELEX
COMMUNICATIONS GROUP, INC. (as successor by merger to GST Acquisition Corp.
("GST")), a Delaware corporation ("Holdings"), TELEX COMMUNICATIONS, INC., a
Delaware corporation ("Telex"), and MANUFACTURERS AND TRADERS TRUST
COMPANY, a New York trust company, as trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, GST and the Trustee have heretofore executed and
delivered a certain indenture dated as of May 6, 1997 (the
"Indenture"), providing for the issuance of an aggregate principal
amount of $125,000,000 of 10 1/2% Senior Subordinated Notes
due 2007 of GST (the "Securities");
WHEREAS, immediately after the execution of the Indenture and
the issuance of the Securities, GST was merged with and into
Holdings, with Holdings as the surviving
corporation (the "Merger") and succeeding to the obligations of GST as
primary obligor under the Indenture and the Securities;
WHEREAS, in consideration of a capital contribution being made on
the date hereof by Holdings to Telex and the receipt of certain other
items of value, Telex has agreed to assume all the obligations
of Holdings (as successor by Merger to GST) under the Indenture and the
Securities;
WHEREAS, Section 9.1(9) of the Indenture provides that without the
consent of any holders of Securities, Holdings and the Trustee may
enter into this Supplemental Indenture, in form satisfactory to
the Trustee, for the purpose of evidencing the assumption by Telex of the
obligations of Holdings under the Indenture and the Securities;
WHEREAS, Telex and Holdings desire and have requested that the
Trustee join in the execution of this First Supplemental Indenture
for the purpose of evidencing such assumption;
WHEREAS, upon execution of this First Supplemental Indenture,
Holdings will be released and discharged from its
obligations under the Indenture and the Securities;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by Board Resolutions of the Boards
of Directors of Telex and Holdings; and
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WHEREAS, all conditions precedent and requirements necessary
to make this First Supplemental Indenture a valid and legally
binding instrument in accordance with its terms have been complied
with, performed and fulfilled and the execution and delivery hereof
have been in all respects duly authorized;
NOW, THEREFORE, in consideration of the premises and intending
to be legally bound hereby, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all holders of the
Securities, as follows:
ARTICLE ONE
REPRESENTATIONS OF TELEX AND HOLDINGS
Each of Telex and Holdings represents and warrants to the Trustee as
follows:
SECTION 1.1. It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
SECTION 1.2. The execution, delivery and performance by it of this
First Supplemental Indenture have been authorized and approved by all necessary
corporate action on the part of it.
ARTICLE TWO
ASSUMPTION AND AGREEMENTS
SECTION 2.1. Telex hereby expressly assumes all of the obligations of
Holdings under the Indenture and the Securities, including, but not limited to,
(i) the due and punctual payment of the principal of (and premium, if any) and
interest on all the Securities when due, whether at maturity, by acceleration,
by optional redemption, by mandatory prepayment or otherwise, and all other
monetary obligations of Holdings under the Indenture and the Securities and (ii)
the full and punctual performance of every covenant of and all other obligations
under the Indenture on the part of Holdings to be performed or observed under
the Indenture and the Securities.
SECTION 2.2. Telex shall succeed to and be substituted for Holdings
under the Indenture and the Securities, with the same effect as if Telex had
been named as the "Company" therein.
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SECTION 2.3. The Securities shall bear (a) the name "Telex
Communications, Inc." as obligor thereunder or (b) a notation concerning the
assumption of the Indenture and the Securities by Telex.
ARTICLE THREE
RELEASE
SECTION 3.1. In connection with the assumption by Telex of all the
obligations of Holdings under the Indenture and the Securities pursuant to
Article Two hereof, Holdings is hereby released and discharged from its
obligations under the Indenture and the Securities.
ARTICLE FOUR
MISCELLANEOUS
SECTION 4.1. The Trustee accepts the modification of the Indenture
effected by this First Supplemental Indenture, but only upon the terms and
conditions set forth in the Indenture. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of Telex and
Holdings. The Trustee makes no representation and shall have no responsibility
as to the validity and sufficiency of this First Supplemental Indenture or the
proper authorization or the due execution hereof by Holdings and Telex.
SECTION 4.2. If and to the extent that any provision of this First
Supplemental Indenture limits, qualifies or conflicts with another provision
included in this First Supplemental Indenture, or in the Indenture, which is
required to be included in this First Supplemental Indenture or the Indenture by
any of the provisions of Sections 310 to 317, inclusive, of the Trust Indenture
Act of 1939, as amended, such required provision shall control.
SECTION 4.3. Except as expressly amended by the First Supplemental
Indenture and hereby, the Indenture is in all respects ratified and confirmed by
the parties hereto and all the terms, conditions and provisions thereof shall
remain in full force and effect. This First supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
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SECTION 4.3. Nothing in this First Supplemental Indenture is intended
to or shall provide any rights to any parties other than those expressly
contemplated by this First Supplemental Indenture.
SECTION 4.4. Capitalized terms not otherwise defined herein shall have
the meaning set forth in the Indenture.
SECTION 4.5. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.6. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
SECTION 4.7. This First Supplemental Indenture shall become effective
as of the effective time of the Merger.
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IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
TELEX COMMUNICATIONS
GROUP, INC.
By__________________________
Name:
Title:
TELEX COMMUNICATIONS, INC.
By__________________________
Name:
Title:
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By__________________________
Name:
Title:
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<PAGE> 150
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
This Supplemental Indenture, dated as of [__________] (this
"Supplemental Indenture" or "Guarantee"), among [name of Note Guarantor] (the
"Guarantor"), [Company] (together with its successors and assigns, the
"Company"), [each other then existing Note Guarantor under the Indenture
referred to below,] and [Trustee], as Trustee under the Indenture referred to
below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed and
delivered an Indenture, dated as of May 6, 1997 (as amended, supplemented,
waived or otherwise modified, the "Indenture"), providing for the issuance of an
aggregate principal amount of $125.0 million of 10 1/2% Senior Subordinated
Notes due 2007 of the Company (the "Securities");
WHEREAS, Section 4.12 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's obligations under the
Securities pursuant to a Note Guarantee on the terms and conditions set forth
herein; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and the
Company are authorized to execute and deliver this Supplemental Indenture to
amend the Indenture, without the consent of any Securityholder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor, the Company[, the other Note Guarantors] and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
ARTICLE I
Definitions
SECTION 1.1 Defined Terms. As used in this Guarantee, terms defined in
the Indenture or in the preamble or recital hereto are used herein as therein
defined, except that the term "Holders" in this Guarantee shall refer to the
term "Holders" as defined in the Indenture and
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the Trustee acting on behalf or for the benefit of such holders. The words
"herein," "hereof" and "hereby" and other words of similar import used in
this Supplemental Indenture refer to this Supplemental Indenture as a whole
and not to any particular section hereof.
ARTICLE II
Guarantee
SECTION 2.1 Guarantee. The Guarantor hereby fully, unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety, jointly and
severally with each other Note Guarantor, to each Holder of the Securities (a)
the full and punctual payment when due, whether at Stated Maturity, by
acceleration, by redemption or otherwise, of principal of and interest on the
Securities and all other monetary obligations of the Company under the Indenture
and the Securities and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Company under the Indenture and
the Securities (all the foregoing being hereinafter collectively called the
"Obligations"). The Guarantor further agrees (to the extent permitted by law)
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from it, and that it will remain bound under this
Article II notwithstanding any extension or renewal of any Obligation.
To the extent permitted by applicable law, (i) the Guarantor waives
presentation to, demand of payment from and protest to the Company of any of the
Obligations and also waives notice of protest for nonpayment (ii), the Guarantor
waives notice of any default under the Securities or the Obligations and (iii)
the obligations of the Guarantor hereunder shall not be affected by (a) the
failure of any Holder to assert any claim or demand or to enforce any right or
remedy against the Company or any other person under the Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of the Indenture, the Securities or any other agreement; or
(d) the failure of any Holder to exercise any right or remedy against any other
Guarantor of the Obligations.
The Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and, to the extent permitted by applicable law, waives any right
to require that any resort be had by any Holder to any security held for payment
of the Obligations.
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Except as otherwise provided herein or under applicable law, the
obligations of the Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than payment of the
Obligations in full), including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Obligations or otherwise.
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, the obligations of the Guarantor herein shall not be discharged
or impaired or otherwise affected by the failure of any Holder to assert any
claim or demand or to enforce any remedy under the Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Guarantor or would otherwise operate as a discharge of the Guarantor as a
matter of law or equity.
The Guarantor further agrees that, subject to Section 2.2(b) hereof,
its Guarantee herein shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder has at law or in equity against the Guarantor by virtue
hereof, upon the failure of the Company to pay the principal of or interest on
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, the Guarantor hereby promises to and will, upon receipt of written
demand by the Trustee or the Holders of a majority in principal amount of the
then outstanding Securities (the "Majority Securityholders"), forthwith pay, or
cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the
unpaid principal amount of such Obligations then due and owing, (ii) accrued and
unpaid interest on such Obligations then due and owing (but only to the extent
not prohibited by law) and (iii) all other monetary Obligations of the Company
to the Holders then due and owing.
The Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guarantied
hereby until payment in full of all Obligations. The Guarantor further agrees
(to the extent permitted by applicable law) that, as between such Guarantor, on
the one hand, and the Holders, on the other hand, (x) the maturity of the
Obligations guarantied hereby may be accelerated for the purposes of such
Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such
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acceleration in respect of the Obligations guarantied hereby, and (y) in the
event of any declaration of acceleration of such Obligations, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Guarantor for the purposes of this Section.
The Guarantor also agrees to pay any and all reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or the
Holders in enforcing any rights under this Section.
SECTION 2.2 Limitation on Liability; Termination, Release and
Discharge. (a) Any term or provision of this Guarantee to the contrary
notwithstanding, the maximum aggregate amount of the Obligations guarantied
hereunder by the Guarantor shall not exceed the maximum amount that can be
hereby guarantied without rendering this Guarantee, as it relates to such
Guarantor, voidable under applicable law, including without limitation
applicable law relating to fraudulent conveyance or fraudulent transfer or
affecting the rights or remedies of creditors generally.
(b) This Guarantee shall terminate and be of no further force or
effect, and the Guarantor shall automatically and unconditionally be released
and discharged from all liabilities and obligations in respect hereof, upon (w)
payment in full of the principal amount of all outstanding Securities (whether
by payment at maturity, purchase, redemption, defeasance, retirement or other
acquisition) and all other monetary Obligations then due and owing, (x) the
merger or consolidation of the Guarantor with and into the Company or another
Note Guarantor that is the surviving Person in such merger or consolidation, or
(y) the exercise by the Company of its legal defeasance option or its covenant
defeasance option, or (z) the sale or other transfer (i) by the Guarantor of all
or substantially all of its assets or (ii) by the Company or a Restricted
Subsidiary of all of the capital stock or other equity interests in the
Guarantor held by the Company or such Restricted Subsidiary, to a Person that is
not an Affiliate of the Company; provided, however, that, in the case of this
clause (z), (1) any such sale or transfer is made in accordance with the terms
of the Indenture (including Section 4.6 thereof), and (2) all obligations of the
Guarantor under, and all of its guarantees of, and all of its pledges of assets
or other security interests which secure, any Bank Indebtedness of the Company
shall also terminate upon such release, sale or transfer (other than with
respect to any such Indebtedness that is assumed by any Person that is not an
Affiliate of the Company). Upon notice to the Trustee that any such payment,
merger, consolidation, exercise, sale or transfer has occurred or is occurring,
the Trustee shall execute all agreements and instruments confirming and
acknowledging such termination, release and discharge as may be reasonably
requested by the Guarantor, and the Trustee shall return the original Guarantee
to the Guarantor.
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<PAGE> 154
ARTICLE III
Subordination
SECTION 3.1 Subordination. The Guarantor agrees, and each
Securityholder by accepting a Security agrees, that (a) the obligations of the
Guarantor under this Guarantee are subordinated in right of payment to the prior
payment in full (when due) of all existing and future Guarantor Senior
Indebtedness of the Guarantor, including without limitation any Guarantee by the
Guarantor of the Bank Indebtedness or of any Senior Indebtedness of the Company
or of any Guarantor Senior Indebtedness of any other Note Guarantor, to the
extent and in the matter provided in Article 10 of the Indenture (as if the
Guarantor were the Company for purposes of such Article 10 and all defined terms
used therein, and the Guarantor Senior Indebtedness of the Guarantor were Senior
Indebtedness), and this Guarantor is made subject to such provisions (which are
hereby incorporated herein by reference), and (b) such subordination is for the
benefit of and enforceable by the holders of Guarantor Senior Indebtedness of
the Guarantor.
ARTICLE IV
Miscellaneous
SECTION 4.1 Notices. All notices and other communications pertaining
to this Guarantee or any Security shall be in writing and shall be deemed to
have been duly given upon the receipt thereof. Such notices shall be delivered
by hand, or mailed, certified or registered mail with postage prepaid (a) if to
the Guarantor, at its address set forth below, with a copy to the Company as
provided in the Indenture for notices to the Company, and (b) if to the Holders
or the Trustee, as provided in the Indenture. The Guarantor by notice to the
Trustee may designate additional or different addresses for subsequent notices
to or communications with the Guarantor.
SECTION 4.2 Parties. Nothing expressed or mentioned in this Guarantee
is intended or shall be construed to give any Person, firm or corporation, other
than the Holders and the Trustee and the holders of any Guarantor Senior
Indebtedness, any legal or equitable right, remedy or claim under or in respect
of this Guarantee or any provision herein contained.
SECTION 4.3 Governing Law. This Agreement shall be governed by the
laws of the State of New York.
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SECTION 4.4 Severability Clause. In case any provision in this
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and such provision shall be ineffective only to the extent of
such invalidity, illegality or unenforceability.
SECTION 4.5 Waivers and Remedies. Neither a failure nor a delay on the
part of the Holders or the Trustee in exercising any right, power or privilege
under this Guarantee shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Holders and the
Trustee herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Guarantee or at
law, in equity, by statute or otherwise.
SECTION 4.6 Successors and Assigns. Subject to Section 2.2(b) hereof,
(a) this Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Trustee, any other parties hereto, the Holders and their
respective successors and assigns and (b) in the event of any transfer or
assignment of rights by any Holder, the rights and privileges conferred upon
that party in this Guarantee and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Guarantee and the Indenture.
SECTION 4.7 Modification, etc. Subject to the provisions of, and
except as otherwise provided in, Article 9 of the Indenture (including without
limitation Section 9.1 thereof), no modification, amendment or waiver of any
provision of this Guarantee, nor the consent to any departure by the Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and consented to by the Majority Securityholders, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given. No notice to or demand on the Guarantor in any case shall
entitle such Guarantor or any other guarantor to any other or further notice or
demand in the same, similar or other circumstances.
SECTION 4.8 Entire Agreement. This Guarantee is intended by the
parties to be a final expression of their agreement in respect of the subject
matter contained herein and, together with the Indenture, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION 4.9 Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and
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effect. This Supplemental Indenture shall form a part of the Indenture for all
purposes, and every holder of Securities heretofore or hereafter authenticated
and delivered shall be bound hereby. The Trustee makes no representation or
warranty as to the validity or sufficiency of this Supplemental Indenture.
SECTION 4.10 Counterparts. The parties hereto may sign one or more
copies of this Supplemental Indenture in counterparts, all of which together
shall constitute one and the same agreement.
SECTION 4.11 Headings. The headings of the Articles and the sections
in this Guarantee are for convenience of reference only and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR],
By:
___________________________________
Name:
Title:
Address:
[COMPANY]
By:
___________________________________
Name:
Title:
[Add signature block for any other
existing Note Guarantor]
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<PAGE> 157
[TRUSTEE]
By:
___________________________________
Name:
Title:
8
<PAGE> 1
EXECUTION COPY
Exhibit 4(b)
====================================
FIRST SUPPLEMENTAL INDENTURE
Dated as of May 6, 1997
to
INDENTURE
Dated as of May 6, 1997
by and among
TELEX COMMUNICATIONS GROUP, INC.,
TELEX COMMUNICATIONS, INC.
AND
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
====================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of May 6, 1997, among
TELEX COMMUNICATIONS GROUP, INC. (as successor by merger to GST Acquisition
Corp. ("GST")), a Delaware corporation ("Holdings"), TELEX COMMUNICATIONS, INC.,
a Delaware corporation ("Telex"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a
New York trust company, as trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, GST and the Trustee have heretofore executed and
delivered a certain indenture dated as of May 6, 1997 (the "Indenture"),
providing for the issuance of an aggregate principal amount of $125,000,000 of
10 1/2% Senior Subordinated Notes due 2007 of GST (the "Securities");
WHEREAS, immediately after the execution of the Indenture and
the issuance of the Securities, GST was merged with and into Holdings, with
Holdings as the surviving corporation (the "Merger") and succeeding to the
obligations of GST as primary obligor under the Indenture and the Securities;
WHEREAS, in consideration of a capital contribution being made
on the date hereof by Holdings to Telex and the receipt of certain other items
of value, Telex has agreed to assume all the obligations of Holdings (as
successor by Merger to GST) under the Indenture and the Securities;
WHEREAS, Section 9.1(9) of the Indenture provides that without
the consent of any holders of Securities, Holdings and the Trustee may enter
into this Supplemental Indenture, in form satisfactory to the Trustee, for the
purpose of evidencing the assumption by Telex of the obligations of Holdings
under the Indenture and the Securities;
WHEREAS, Telex and Holdings desire and have requested that the
Trustee join in the execution of this First Supplemental Indenture for the
purpose of evidencing such assumption;
WHEREAS, upon execution of this First Supplemental Indenture,
Holdings will be released and discharged from its obligations under the
Indenture and the Securities;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by Board Resolutions of the Boards of Directors of
Telex and Holdings; and
<PAGE> 3
WHEREAS, all conditions precedent and requirements necessary
to make this First Supplemental Indenture a valid and legally binding instrument
in accordance with its terms have been complied with, performed and fulfilled
and the execution and delivery hereof have been in all respects duly authorized;
NOW, THEREFORE, in consideration of the premises and intending
to be legally bound hereby, it is mutually covenanted and agreed, for the equal
and proportionate benefit of all holders of the Securities, as follows:
ARTICLE ONE
REPRESENTATIONS OF TELEX AND HOLDINGS
Each of Telex and Holdings represents and warrants to the
Trustee as follows:
SECTION 1.1. It is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
SECTION 1.2. The execution, delivery and performance by it of
this First Supplemental Indenture have been authorized and approved by all
necessary corporate action on the part of it.
ARTICLE TWO
ASSUMPTION AND AGREEMENTS
SECTION 2.1. Telex hereby expressly assumes all of the
obligations of Holdings under the Indenture and the Securities, including, but
not limited to, (i) the due and punctual payment of the principal of (and
premium, if any) and interest on all the Securities when due, whether at
maturity, by acceleration, by optional redemption, by mandatory prepayment or
otherwise, and all other monetary obligations of Holdings under the Indenture
and the Securities and (ii) the full and punctual performance of every covenant
of and all other obligations under the Indenture on the part of Holdings to be
performed or observed under the Indenture and the Securities.
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<PAGE> 4
SECTION 2.2. Telex shall succeed to and be substituted for
Holdings under the Indenture and the Securities, with the same effect as if
Telex had been named as the "Company" therein.
SECTION 2.3. The Securities shall bear (a) the name "Telex
Communications, Inc." as obligor thereunder or (b) a notation concerning the
assumption of the Indenture and the Securities by Telex.
3
<PAGE> 5
ARTICLE THREE
RELEASE
SECTION 3.1. In connection with the assumption by Telex of all
the obligations of Holdings under the Indenture and the Securities pursuant to
Article Two hereof, Holdings is hereby released and discharged from its
obligations under the Indenture and the Securities.
ARTICLE FOUR
MISCELLANEOUS
SECTION 4.1. The Trustee accepts the modification of the
Indenture effected by this First Supplemental Indenture, but only upon the terms
and conditions set forth in the Indenture. Without limiting the generality of
the foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of Telex and
Holdings. The Trustee makes no representation and shall have no responsibility
as to the validity and sufficiency of this First Supplemental Indenture or the
proper authorization or the due execution hereof by Holdings and Telex.
SECTION 4.2. If and to the extent that any provision of this
First Supplemental Indenture limits, qualifies or conflicts with another
provision included in this First Supplemental Indenture, or in the Indenture,
which is required to be included in this First Supplemental Indenture or the
Indenture by any of the provisions of Sections 310 to 317, inclusive, of the
Trust Indenture Act of 1939, as amended, such required provision shall control.
SECTION 4.3. Except as expressly amended by the First
Supplemental Indenture and hereby, the Indenture is in all respects ratified and
confirmed by the parties hereto and all the terms, conditions and provisions
thereof shall remain in full force and effect. This First supplemental Indenture
shall form a part of the Indenture for all purposes, and every holder of
Securities heretofore or hereafter authenticated and delivered shall be bound
hereby.
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<PAGE> 6
SECTION 4.3. Nothing in this First Supplemental Indenture is
intended to or shall provide any rights to any parties other than those
expressly contemplated by this First Supplemental Indenture.
SECTION 4.4. Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Indenture.
SECTION 4.5. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.6. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
SECTION 4.7. This First Supplemental Indenture shall become
effective as of the effective time of the Merger.
5
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
TELEX COMMUNICATIONS
GROUP, INC.
By__________________________
Name:
Title:
TELEX COMMUNICATIONS, INC.
By__________________________
Name:
Title:
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By__________________________
Name:
Title:
6
<PAGE> 1
EXECUTION COPY
Exhibit 4(c)
GST ACQUISITION CORP.
$125,000,000
10 1/2% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
April 29, 1997
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
SMITH BARNEY INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
Ladies and Gentlemen:
GST Acquisition Corp., a Delaware corporation ("GST"),
proposes to issue and sell to each of the initial purchasers named in Schedule I
hereto (the "Initial Purchasers"), $125,000,000 aggregate principal amount of
its 10 1/2% Senior Subordinated Notes due 2007 (the "Securities"). The
Securities will be issued pursuant to an Indenture to be dated as of May 6, 1997
(the "Indenture") between GST and Manufacturers and Traders Trust Company and
Agency Services, as trustee (the "Trustee"). GST hereby confirms its agreement
with the Initial Purchasers concerning the purchase of the Securities from GST
by the Initial Purchasers.
GST was organized by Greenwich Street Capital Partners, L.P.
to effect the recapitalization (the "Recapitalization") of Telex Communications
Group, Inc., a Delaware corporation ("Holdings") through the merger (the
"Merger") of GST with and into Holdings, with Holdings as the surviving
corporation of the Merger pursuant to the Recapitalization Agreement and Plan of
Merger, dated as of March 4, 1997 (the "Recapitalization Agreement"), among
Greenwich II LLC, a Delaware limited liability company, GST, and Holdings, as
amended. Simultaneously with the consummation of the Recapitalization and
Merger, the obligations of Holdings under the Securities will be assigned to and
assumed (the "Assignment and Assumption") by Telex Communications, Inc., a
wholly owned subsidiary of Holdings (the "Company"). In addition, as a condition
<PAGE> 2
to and in connection with the Recapitalization, the Company is making (i) a
tender offer (the "Tender Offer") to repurchase all of the $100 million
aggregate outstanding principal amount of the 12% Senior Notes due 2004 of the
Company (the "Telex Notes") and (ii) a solicitation of consents with respect to
certain amendments to the indenture pursuant to which the Telex Notes were
issued.
On the Closing Date (as defined in Section 3), (i) GST will be
merged with and into Holdings, with Holdings as the surviving corporation in the
Merger and (ii) the Company and the Trustee will enter into a supplemental
indenture to the Indenture (the "Supplemental Indenture") providing for the
express assumption by the Company of the covenants, agreements and undertakings
of Holdings, as successor by the Merger to GST, in the Indenture and under the
Securities. In addition, the Company shall not be a signatory to this Agreement
until following the effective time of the Merger (the "Effective Time") on the
Closing Date, at which time the Company shall become a party to this Agreement
by execution and delivery of a counterpart hereof. References to the Indenture
as of or after the Effective Time will refer to the Indenture as supplemented by
the Supplemental Indenture. The Recapitalization, the Merger, the Offering, the
Tender Offer and the Assignment and Assumption are collectively referred to
herein as the "Transactions".
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. GST and the
Company have prepared a preliminary offering memorandum dated April 16, 1997
(the "Preliminary Offering Memorandum") and will prepare an offering memorandum
dated the date hereof (the "Offering Memorandum") setting forth information
concerning the Company and the Securities. Copies of the Preliminary Offering
Memorandum have been, and copies of the Offering Memorandum will be, delivered
by GST and the Company to the Initial Purchasers pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. GST and the Company hereby confirm that they
have authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers
and their direct and indirect transferees) will be entitled to the benefits of
an Exchange and Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
which the Company will agree to file with the Securities and Exchange Commission
(the "Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an
2
<PAGE> 3
issue of senior subordinated notes of the Company (the "Exchange Securities")
which are identical in all material respects to the Securities (except that the
Exchange Securities will not contain terms with respect to transfer
restrictions) and (ii) under certain circumstances, a shelf registration
statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement").
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of GST and the
Company. GST and, upon the execution and delivery by the Company of this
Agreement, the Company represents and warrants to, and agrees with, the Initial
Purchasers on and as of the date hereof and the Closing Date that:
(a) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and on the
Closing Date the Offering Memorandum will not, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that GST and, upon the execution and delivery
by the Company of this Agreement, the Company make no representation or
warranty as to information contained in or omitted from the Preliminary
Offering Memorandum or the Offering Memorandum in reliance upon and in
conformity with written information relating to the Initial Purchasers
furnished to GST by or on behalf of any Initial Purchaser specifically
for use therein (the "Initial Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, contains all of the
information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective
purchaser pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 2 and their
compliance with the agreements set forth therein, it is not necessary,
in connection with the issuance and sale of the Securities to the
Initial Purchasers and the offer, resale and delivery of the Securities
by the Initial Purchasers in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
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<PAGE> 4
(d) The Company and each of its subsidiaries (i) have been
duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, (ii) are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and (iii) have all
power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged,
except, in the case of clauses (ii) and (iii), where the failure to so
qualify or have such power or authority would not, singularly or in the
aggregate, have a material adverse effect on the condition (financial
or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole (a "Material Adverse
Effect").
(e) Each of Holdings and GST (i) has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the State of Delaware, (ii) is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction
in which its ownership or lease of property or the conduct of its
businesses requires such qualification, and (iii) has all power and
authority necessary to own or hold its properties and to conduct the
businesses in which it is engaged, except, in the case of clauses (ii)
and (iii), where the failure to so qualify or have such power or
authority would not, singularly or in the aggregate, have a Material
Adverse Effect.
(f) The Company has an authorized capitalization as set forth
in the Offering Memorandum under the heading "Ownership of Capital
Stock"; all of the outstanding shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable; and the capital stock of the Company conforms in all
material respects to the description thereof contained in the Offering
Memorandum. All of the outstanding shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly or
indirectly by the Company (or are owned by nominees of the Company or
directors of its subsidiaries), free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party, except for the pledge of stock of
the Company by Holdings pursuant to the Credit Agreement, dated as of
May 6, 1997, among the Company and the several lenders from time to
time parties thereto, Morgan Stanley Senior Funding, Inc., as
Documentation Agent, and The Chase Manhattan Bank, as Administrative
Agent.
(g) GST, Holdings, the Company and each subsidiary of the
Company party to one or more of the Transaction Documents referred to
below has full
4
<PAGE> 5
right, power and authority to execute and deliver this Agreement, the
Indenture, the Supplemental Indenture, the Registration Rights
Agreement, the Securities, and the Recapitalization Documents (as
defined in Section 15(d) hereto) (collectively, the "Transaction
Documents"), to the extent it is a party thereto, and to perform its
obligations hereunder and thereunder; and all corporate action required
to be taken for the due and proper authorization, execution and
delivery of each of the Transaction Documents and the consummation of
the transactions contemplated thereby have been duly and validly taken.
(h) This Agreement has been duly authorized, executed and
delivered by GST (which pursuant to Section 2 will issue and sell the
Securities hereunder) and following the Effective Time on the Closing
Date will have been duly authorized, executed and delivered by the
Company (which will assume all the obligations of Holdings, as
successor by the Merger to GST, under the Securities following the
Effective time on the Closing Date) and constitutes a valid and legally
binding agreement of GST and upon execution and delivery thereof by the
Company, will constitute a valid and legally binding agreement of the
Company, enforceable against GST and the Company, as the case may be,
in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law).
(i) Following the Effective Time on the Closing Date, the
Registration Rights Agreement will have been duly authorized by the
Company and, when duly executed and delivered in accordance with its
terms by each of the parties thereto will constitute a valid and
legally binding agreement of the Company enforceable against the
Company in accordance with its terms, except (i) to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or
at law) or (ii) insofar as rights to indemnification and contribution
contained therein may be limited by Federal or state securities laws or
public policy.
(j) The Indenture has been duly authorized by GST and,
following the Effective Time on the Closing Date, will have been duly
authorized by the Company. The Indenture when duly executed and
delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of GST and,
following the Effective Time on the Closing Date when the Supplemental
Indenture is executed by the Company (assuming the due
5
<PAGE> 6
authorization, execution and delivery by the Trustee), the Company,
enforceable against GST and, following the Effective Time on the
Closing Date, the Company in accordance with its terms, except to the
extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding
in equity or at law). Following the Effective Time on the Closing Date,
the Indenture will conform in all material respects to the requirements
of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
(k) The Securities have been duly authorized by GST and,
following the Effective Time on the Closing Date, will have been duly
authorized by the Company and, when duly executed, authenticated,
issued and delivered as provided in the Indenture and paid for as
provided herein, will be duly and validly issued and outstanding and
will constitute valid and legally binding obligations of GST, and upon
the execution of the Supplemental Indenture, the Company entitled to
the benefits of the Indenture and enforceable against GST and the
Company, as the case may be, in accordance with their terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding
in equity or at law).
(l) Each Transaction Document conforms in all material
respects to the description thereof contained in the Offering
Memorandum.
(m) The execution, delivery and performance by GST, Holdings,
the Company and each subsidiary of the Company of each of the
Transaction Documents to which it is a party, the issuance,
authentication, sale and delivery of the Securities and compliance by
GST, Holdings, the Company and each subsidiary of the Company with the
terms thereof and the consummation of the Transactions and the other
transactions contemplated by the Transaction Documents (i) will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of GST, Holdings, the Company or any of its subsidiaries
pursuant to, any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which GST,
Holdings, the Company or any of its subsidiaries is a party or by which
GST, Holdings, the Company or any of its subsidiaries is bound or to
which any of the property or assets of GST, Holdings, the Company or
any
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<PAGE> 7
of its subsidiaries is subject, nor (ii) will such actions result in
(a) any violation of the provisions of the charter or by-laws of GST,
Holdings, the Company or any of its subsidiaries or (b) any statute or
any judgment, order, decree, rule or regulation of any court or
arbitrator or governmental agency or body having jurisdiction over GST,
Holdings, the Company or any of its subsidiaries or any of their
properties or assets except, in the case of clauses (i) and (ii) (b),
for such actions as would not, individually or in the aggregate, have a
Material Adverse Effect and would not have a material adverse effect on
GST's, Holdings' or the Company's ability to perform its respective
obligations under the Transaction Documents; and no consent, approval,
authorization or order of, or filing or registration with, any such
court or arbitrator or governmental agency or body under any such
statute, judgment, order, decree, rule or regulation is required for
the execution, delivery and performance by GST, Holdings, the Company
and each subsidiary of the Company of each of the Transaction Documents
to which it is a party, the issuance, authentication, sale and delivery
of the Securities and compliance by GST, Holdings, the Company and each
subsidiary of the Company with the terms thereof and the consummation
of the transactions contemplated by the Transaction Documents, except
for such consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to the
Closing Date and (ii) as may be required to be obtained or made under
the Securities Act and applicable state securities laws as provided in
the Registration Rights Agreement.
(n) To the best knowledge of GST and the Company, each of
Ernst & Young LLP and Arthur Andersen LLP are independent certified
public accountants with respect to the Company and its subsidiaries
within the meaning of Rule 101 of the Code of Professional Conduct of
the American Institute of Certified Public Accountants ("AICPA") and
its interpretations and rulings thereunder. The historical financial
statements (including the related notes) contained in the Offering
Memorandum comply in all material respects with the requirements
applicable to a registration statement on Form S-1 under the Securities
Act (except that certain supporting schedules are omitted); such
financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods covered thereby and fairly present the financial position of
the entities purported to be covered thereby at the respective dates
indicated and the results of their operations and their cash flows for
the respective periods indicated; and the financial information
contained in the Offering Memorandum under the headings "Summary
Historical and Pro Forma Financial Information," "Capitalization,"
"Selected Historical and Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Management--Executive
7
<PAGE> 8
Compensation" and "Management-- Stock Option Grants" are derived from
the accounting records of the Company and its subsidiaries and fairly
present the information purported to be shown thereby. The pro forma
financial information contained in the Offering Memorandum has been
prepared on a basis consistent with the historical financial statements
contained in the Offering Memorandum (except for the pro forma
adjustments specified therein), includes all material adjustments to
the historical financial information required by Rule 11-02 of
Regulation S-X under the Securities Act and the Exchange Act to reflect
the transactions described in the Offering Memorandum, gives effect to
assumptions made on a reasonable basis and fairly presents the
historical and proposed transactions contemplated by the Offering
Memorandum and the Transaction Documents. The other historical
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, fairly presented.
(o) Except as described in the Offering Memorandum under
"Business-- Legal Proceedings", there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property or assets of the Company or any of its
subsidiaries is the subject which, singularly or in the aggregate, if
determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect; and to the
best knowledge of GST or the Company and its subsidiaries, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others.
(p) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency
or body which prevents the issuance of the Securities or suspends the
sale of the Securities in any jurisdiction; no injunction, restraining
order or order of any nature by any federal or state court of competent
jurisdiction has been issued with respect to GST, Holdings, the Company
or any of its subsidiaries which would prevent or suspend the issuance
or sale of the Securities or the use of the Preliminary Offering
Memorandum or the Offering Memorandum in any jurisdiction; no action,
suit or proceeding is pending against or, to the best knowledge of GST
or the Company and its subsidiaries, threatened against or affecting
GST, Holdings, the Company or any of its subsidiaries before any court
or arbitrator or any governmental agency, body or official, domestic or
foreign, which could reasonably be expected to interfere with or
adversely affect the issuance of the Securities or in any manner draw
into question the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and GST,
Holdings, the Company and its subsidiaries have complied with any and
all
8
<PAGE> 9
requests by any securities authority in any jurisdiction for additional
information to be included in the Preliminary Offering Memorandum and
the Offering Memorandum.
(q) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound
or to which any of its property or assets is subject or (iii) in
violation in any material respect of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets
may be subject.
(r) The Company and each of its subsidiaries possess all
material licenses, certificates, authorizations and permits issued by,
and have made all material declarations and filings with, the
appropriate federal, state or foreign regulatory agencies or bodies
which are necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses as described
in the Offering Memorandum, except where the failure to possess or make
the same would not, singularly or in the aggregate, have a Material
Adverse Effect, and neither GST, the Company nor any of its
subsidiaries has received notification of any revocation or
modification of any such license, certificate, authorization or permit
or has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course.
(s) The Company and each of its subsidiaries have filed all
federal, state, local and foreign income and franchise tax returns
required to be filed through the date hereof and have paid all taxes
due thereon, and no tax deficiency has been determined adversely to the
Company or any of its subsidiaries which has had (nor does GST, the
Company or any of its subsidiaries have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have) a Material Adverse
Effect.
(t) Neither GST, the Company nor any of its subsidiaries is
(i) an "investment company" or a company "controlled by" an investment
company within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
of the Commission thereunder or (ii) a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
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<PAGE> 10
(u) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) The Company and each of its subsidiaries have insurance
covering their respective properties, operations, personnel and
businesses, adequate and suitable for its business and comparable to
insurance customarily carried by comparable companies similarly
situated and carrying on the same or similar business. Neither the
Company nor any of its subsidiaries has received notice from any
insurer or agent of such insurer that material capital improvements or
other material expenditures are required or necessary to be made in
order to continue such insurance.
(w) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures)
necessary for the conduct of their respective businesses; except where
the failure to own or possess such rights or use such intellectual
properties would not individually or in the aggregate, have a Material
Adverse Effect; and the conduct of their respective businesses will not
conflict in any material respect with, and GST, the Company and its
subsidiaries have not received any notice of any claim of conflict
with, any such rights of others where such claim would not
individually, or together with other claims, have a Material Adverse
Effect.
(x) The Company and each of its subsidiaries have good and (in
the case of real property) marketable title in fee simple to, or have
valid rights to lease or otherwise use, all items of real and personal
property which are material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances,
claims and defects and imperfections of title except such as (i) do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries or (ii) could not
reasonably be expected to have a Material Adverse Effect.
10
<PAGE> 11
(y) No material labor disturbance by or dispute with the
employees of the Company or any of its subsidiaries exists or, to the
best knowledge of GST or the Company, is contemplated or threatened.
(z) No "prohibited transaction" (as defined in Section 406 of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code")) or "accumulated funding
deficiency" (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan of
the Company or any of its subsidiaries which could reasonably be
expected to have a Material Adverse Effect; each such employee benefit
plan is in compliance in all material respects with applicable law,
including ERISA and the Code; the Company and each of its subsidiaries
have not incurred and do not expect to incur liability under Title IV
of ERISA with respect to the termination of, or withdrawal from, any
pension plan for which the Company or any of its subsidiaries would
have any liability; and for each such pension plan that is intended to
be qualified under Section 401(a) of the Code there is an application
pending with the Internal Revenue Service for such qualification and
the Company will use its best efforts to take all actions to so qualify
such plans.
(aa) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release of
any kind of toxic or other wastes or other hazardous substances by, due
to or caused by the Company or any of its subsidiaries (or, to the best
knowledge of GST or the Company, any other entity (including any
predecessor) for whose acts or omissions the Company or any of its
subsidiaries is or could reasonably be expected to be liable) upon any
of the property now or previously owned or leased by the Company or any
of its subsidiaries, or upon any other property, in violation of any
statute or any ordinance, rule, regulation, order, judgment, decree or
permit or which would, under any statute or any ordinance, rule
(including rule of common law), regulation, order, judgment, decree or
permit, give rise to any liability, except for any violation or
liability that could not reasonably be expected to have, singularly or
in the aggregate with all such violations and liabilities, a Material
Adverse Effect; and there has been no disposal, discharge, emission or
other release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which the Company has knowledge,
except for any such disposal, discharge, emission or other release of
any kind which could not reasonably be expected to have,
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<PAGE> 12
singularly or in the aggregate with all such discharges and other
releases, a Material Adverse Effect.
(bb) Neither the Company nor, to the best knowledge of GST or
the Company, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company has (i) used any
corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or
is in violation of any provision of the Foreign Corrupt Practices Act
of 1977; or (iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment, except for any such use, payment or
violation that, individually or in the aggregate, would not have a
Material Adverse Effect.
(cc) On and immediately after the Closing Date, the Company
(after giving effect to the issuance and assumption of the Securities
and to the other transactions related thereto as described in the
Offering Memorandum) will be Solvent. As used in this paragraph, the
term "Solvent" means, with respect to a particular date, that on such
date (i) the present fair market value (or present fair saleable value)
of the assets of the Company is not less than the total amount required
to pay the probable liabilities of the Company on its total existing
debts and liabilities (including contingent liabilities) as they become
absolute and matured, (ii) the Company is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations
and commitments as they mature and become due in the normal course of
business, (iii) assuming the sale and assumption of the Securities as
contemplated by this Agreement and the Offering Memorandum, the Company
is not incurring debts or liabilities beyond its ability to pay as such
debts and liabilities mature and (iv) the Company is not engaged in any
business or transaction, and is not about to engage in any business or
transaction, for which its property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which the Company is engaged. In computing the amount
of such contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in the light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
(dd) Except as described in the Offering Memorandum, there are
no outstanding subscriptions, rights, warrants, calls or options to
acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of,
any shares of capital stock of or other equity or other ownership
interest in the Company or any of its subsidiaries.
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(ee) Neither the Company nor any of its subsidiaries owns any
"margin securities" as that term is defined in Regulations G and U of
the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), and none of the proceeds of the sale of the Securities
will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the
Securities to be considered a "purpose credit" within the meanings of
Regulation G, T, U or X of the Federal Reserve Board.
(ff) Neither GST, Holdings, the Company nor any of its
subsidiaries is a party to any contract, agreement or understanding
with any person that would give rise to a valid claim against GST,
Holdings, the Company or the Initial Purchasers for a brokerage
commission, finder's fee or like payment in connection with the
offering and sale of the Securities, other than the fees payable to the
Initial Purchasers in connection with the Offering and sale of the
Securities.
(gg) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(hh) Neither GST, the Company nor any of its affiliates has,
directly or through any agent, sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as such
term is defined in the Securities Act), which is or will be integrated
with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.
(ii) None of GST, the Company or any of its affiliates or any
other person acting on its or their behalf has engaged, in connection
with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act.
(jj) Except for the Telex Notes, there are no securities of
the Company registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or listed on a national securities
exchange or quoted in a U.S. automated inter dealer quotation system.
(kk) None of GST, the Company or the Company's affiliates has
taken and will not take, directly or indirectly, any action prohibited
by Regulation M under the Exchange Act in connection with the offering
of the Securities.
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<PAGE> 14
(ll) None of GST, the Company or any of its subsidiaries does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Florida Statutes Section 517.075.
(mm) Since the date as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (i) there has
been no material adverse change or any development involving a
prospective material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, management or business
prospects of the Company, whether or not arising in the ordinary course
of business, (ii) the Company has not incurred any material liability
or obligation, direct or contingent, other than in the ordinary course
of business, (iii) the Company has not entered into any material
transaction other than in the ordinary course of business and (iv)
there has not been any change in the capital stock or long-term debt of
the Company, or any dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
(nn) Prior to the Closing Date, the Recapitalization and
Merger will have been authorized by GST and Holdings and their
respective shareholders.
(oo) No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Preliminary Offering Memorandum or the Offering
Memorandum has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith.
2. Purchase and Resale of the Securities. (a) On the basis of
the representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, GST agrees to issue and sell to each
of the Initial Purchasers, severally and not jointly, and each of the Initial
Purchasers, severally and not jointly, agrees to purchase from GST, the
principal amount of Securities set forth opposite the name of such Initial
Purchaser on Schedule 1 hereto at a purchase price equal to 97% of the principal
amount thereof. GST shall not be obligated to deliver any of the Securities
except upon payment for all of the Securities to be purchased as provided
herein.
(b) The Initial Purchasers have advised GST and the Company
that they propose to offer the Securities for resale upon the terms and subject
to the conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents and warrants to, and agrees
with, GST and the Company that (i) it is purchasing the Securities pursuant to a
private sale exempt from registration under the Securities Act, (ii) it has not
solicited offers for, or offered or sold, and will not solicit
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<PAGE> 15
offers for, or offer or sell, the Securities by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act ("Regulation D") or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (iii) it has solicited and will solicit offers for the Securities only
from, and has offered or sold and will offer, sell or deliver the Securities, as
part of its initial offering, only to persons whom it reasonably believes to be
qualified institutional buyers ("Qualified Institutional Buyers") as defined in
Rule 144A under the Securities Act, or if any such person is buying for one or
more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to it that each such account is a
Qualified Institutional Buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A and in each case, in
transactions in accordance with Rule 144A. Each Initial Purchaser, severally and
not jointly, agrees that, prior to or simultaneously with the confirmation of
sale by such Initial Purchaser to any purchaser of any of the Securities
purchased by such Initial Purchaser from GST pursuant hereto, such Initial
Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and
any amendment or supplement thereto that GST shall have furnished to such
Initial Purchaser prior to the date of such confirmation of sale). In addition
to the foregoing, each Initial Purchaser acknowledges and agrees that the
Company and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Sections 5(d), (e) and (f), counsel for the Company and
for the Initial Purchasers, respectively, may rely upon the accuracy of the
representations and warranties of the Initial Purchasers and their compliance
with their agreements contained in this Section 2, and each Initial Purchaser
hereby consents to such reliance.
(c) GST and the Company acknowledge and agree that the Initial
Purchasers may sell Securities to any affiliate of an Initial Purchaser and that
any such affiliate may sell Securities purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of
and payment for the Securities shall be made at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York 10022 or at such other place as
shall be agreed upon by the Initial Purchasers, GST and the Company, at 10:00
A.M., New York City time, on May 6, 1997, or at such other time or date, not
later than seven full business days thereafter, as shall be agreed upon by the
Initial Purchasers, GST and the Company (such date and time of payment and
delivery being referred to herein as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to GST by wire or book-entry transfer of same-day funds
to such account or accounts as GST shall specify prior to the Closing Date or by
such other means as the parties hereto shall agree prior to the Closing Date
against delivery to the Initial
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<PAGE> 16
Purchasers of the certificates evidencing the Securities. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligations of the Initial Purchasers hereunder.
Upon delivery, the Securities shall be in global form, registered in such names
and in such denominations as the Initial Purchasers shall have requested in
writing not less than two full business days prior to the Closing Date. GST
agrees to make one or more global certificates evidencing the Securities
available for inspection by the Initial Purchasers in New York, New York at
least 24 hours prior to the Closing Date.
4. Further Agreements of GST and the Company. GST and, upon
execution and delivery by the Company of this Agreement, the Company agree with
each of the Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if
requested, confirm such advice in writing, of the happening of any
event which makes any statement of a material fact made in the Offering
Memorandum untrue or which requires the making of any additions to or
changes in the Offering Memorandum (as amended or supplemented from
time to time) in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; to advise
the Initial Purchasers promptly of any order preventing or suspending
the use of the Preliminary Offering Memorandum or the Offering
Memorandum, of any suspension of the qualification of the Securities
for offering or sale in any jurisdiction and of the initiation or
threatening of any proceeding for any such purpose; and to use its best
efforts to prevent the issuance of any such order preventing or
suspending the use of the Preliminary Offering Memorandum or the
Offering Memorandum or suspending any such qualification and, if any
such suspension is issued, to obtain the lifting thereof at the
earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum (and
any amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the
Offering Memorandum, to furnish a copy thereof to each of the Initial
Purchasers and counsel for the Initial Purchasers and not to effect any
such amendment or supplement to which the Initial Purchasers shall
reasonably object by notice to the Company after a reasonable period to
review;
(d) if, at any time prior to completion of the distribution of
the Securities by the Initial Purchasers, any event shall occur or
condition exist as a result of
16
<PAGE> 17
which it is necessary, in the opinion of counsel for the Initial
Purchasers or counsel for the Company, to amend or supplement the
Offering Memorandum in order that the Offering Memorandum will not
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement
the Offering Memorandum to comply with applicable law, to promptly
prepare such amendment or supplement as may be necessary to correct
such untrue statement or omission or so that the Offering Memorandum,
as so amended or supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request
of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, unless the Company is then subject to and in compliance
with Section 13 or 15(d) of the Exchange Act (the foregoing agreement
being for the benefit of the holders from time to time of the
Securities and prospective purchasers of the Securities designated by
such holders);
(f) for so long as the Securities are outstanding, to furnish
to the Initial Purchasers copies of any annual reports, quarterly
reports and current reports filed by the Company with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company to the Trustee or to
the holders of the Securities pursuant to the Indenture or the Exchange
Act or any rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the
Initial Purchasers may reasonably request to qualify the Securities for
offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may designate and to continue
such qualifications in effect for so long as required for the resale of
the Securities; and to arrange for the determination of the eligibility
for investment of the Securities under the laws of such jurisdictions
as the Initial Purchasers may reasonably request; provided that the
Company and its subsidiaries shall not be obligated to qualify as
foreign corporations in any jurisdiction in which they are not so
qualified or to subject itself to taxation in respect to doing business
in any jurisdiction in which it is not otherwise so subject or to file
a general consent to service of process in any jurisdiction;
17
<PAGE> 18
(h) to assist the Initial Purchasers in arranging for the
Securities to be designated Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL
Market and for the Securities to be eligible for clearance and
settlement through the Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as such term is defined in the Securities Act) which
could be integrated with the sale of the Securities in a manner which
would require registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person acting on their behalf to,
solicit any offer to buy or offer to sell the Securities by means of
any form of general solicitation or general advertising within the
meaning of Regulation D or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act; and not to
offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
contract or disposition would cause the exemption afforded by Section
4(2) of the Securities Act to cease to be applicable to the offering
and sale of the Securities as contemplated by this Agreement and the
Offering Memorandum;
(k) for a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement
for, or announce any offer, sale, contract for sale of or other
disposition of any debt securities issued or guaranteed by the Company
or any of its subsidiaries (other than the Securities) without the
prior written consent of the Initial Purchasers;
(l) during the period from the Closing Date until two years
after the Closing Date, without the prior written consent of the
Initial Purchasers, not to, and not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the
Securities that have been reacquired by them, except for Securities (i)
purchased by the Company or any of its affiliates (other than Smith
Barney Inc.) and resold in a transaction registered under the
Securities Act or (ii) purchased by Smith Barney Inc. and resold in a
transaction registered under or exempt from the Securities Act;
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<PAGE> 19
(m) not to, for so long as the Securities are outstanding, be
or become, or be or become owned by, an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act, and to not be or become, or be or become owned by, a closed-end
investment company required to be registered, but not registered
thereunder;
(n) in connection with the offering of the Securities, until
Chase Securities Inc. ("CSI"), on behalf of the Initial Purchasers,
shall have notified the Company of the completion of the resale of the
Securities, not to, and to cause its affiliated purchasers (as defined
in Regulation M under the Exchange Act) (other than Smith Barney Inc.)
not to, either alone or with one or more other persons, bid for or
purchase, for any account in which such purchasers has a beneficial
interest, any Securities, or attempt to induce any person to purchase
any Securities; and not to, and to cause its affiliated purchasers
(including Smith Barney Inc.) not to, make bids or purchase for the
purpose of creating actual, or apparent, active trading in or of
raising the price of the Securities;
(o) in connection with the offering of the Securities, to make
its officers, employees, independent accountants and legal counsel
reasonably available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date
hereof a copy of the independent accountants' report included in the
Offering Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior
to or after the Closing Date, and to use its best efforts to satisfy
all conditions precedent contained herein on its part to the delivery
of the Securities;
(r) to not take any action prior to the execution and delivery
of the Indenture and the Supplemental Indenture which, if taken after
such execution and delivery, would have violated any of the covenants
contained in the Indenture;
(s) to use its best efforts to not take any action prior to
the Closing Date which would require the Offering Memorandum to be
amended or supplemented pursuant to Section 4(d);
(t) prior to the Closing Date, not to issue any press release
or other communication directly or indirectly or hold any press
conference with respect to
19
<PAGE> 20
the Company, its condition, financial or otherwise, or earnings,
business affairs or business prospects (except for routine oral
marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the
Initial Purchasers are notified), without the prior written consent of
the Initial Purchasers, unless in the judgment of the Company and its
counsel, and after notification to the Initial Purchasers, such press
release or communication is required by law; and
(u) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of
Proceeds".
5. Conditions of Initial Purchasers' Obligations. The
respective obligations of the several Initial Purchasers hereunder are subject
to the accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of GST and the Company contained herein, to the
accuracy of the statements of the Company and its officers made in any
certificates delivered pursuant hereto, to the performance by GST and the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial
Purchasers may agree; and no stop order suspending the sale of the
Securities in any jurisdiction shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the
Initial Purchasers, is material or omits to state any fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction
Documents and the Offering Memorandum, and all other legal matters
relating to the Transaction Documents and the transactions contemplated
thereby (including the Transactions), shall be satisfactory in all
material respects to the Initial Purchasers, and GST and the Company
shall have furnished to the Initial
20
<PAGE> 21
Purchasers all documents and information that they or their counsel may
reasonably request to enable them to pass upon such matters.
(d) Debevoise & Plimpton shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed
to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex B-1 hereto.
(e) John Palleschi, Esq. shall have furnished to the Initial
Purchasers, as General Counsel of the Company, his written opinion
addressed to the Initial Purchasers and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex B-2 hereto.
(f) Richards, Layton & Finger shall have furnished to the
Initial Purchasers, as special Delaware counsel of the Company, its
written opinion as to the validity of the Merger addressed to the
Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers.
(g) The Initial Purchasers shall have received from Simpson
Thacher & Bartlett, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Initial Purchasers may reasonably require, and the Company shall have
furnished to such counsel such documents and information as they
request for the purpose of enabling them to pass upon such matters.
(h) The Company shall have furnished to the Initial Purchasers
(i) a letter of Ernst & Young LLP, addressed to the Initial Purchasers
and dated the date hereof, in form and substance satisfactory to the
Initial Purchasers, and (ii) a letter of Arthur Andersen LLP, addressed
to the Initial Purchasers and dated the date hereof in form and
substance satisfactory to the Initial Purchasers (the "Initial
Letters").
(i) The Company shall have furnished to the Initial Purchasers
letters (the "Bring-Down Letters") of each of Ernst & Young LLP, and
Arthur Andersen LLP, addressed to the Initial Purchasers and dated the
Closing Date (i) confirming that they are independent public
accountants with respect to the Company and its subsidiaries within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA
and its interpretations and rulings thereunder, (ii) stating, as of the
21
<PAGE> 22
date of such respective Bring-Down Letter (or, with respect to matters
involving changes or developments since the respective dates as of
which specified financial information is given in the Offering
Memorandum, as of a date not more than three business days prior to the
date of such Bring-Down Letters), that the conclusions and findings of
such accountants with respect to the financial information and other
matters covered by the Initial Letters are accurate and (iii)
confirming in all material respects the conclusions and findings set
forth in the Initial Letters. In addition, the Company shall have
received letters from Ernst & Young LLP consenting to the use, in
connection with the offering of the Securities, of the audited
financial statements of the Company prepared by such accountants and
included in the Offering Memorandum.
(j) The Company shall have furnished to the Initial Purchasers
a certificate, dated the Closing Date, of its chief executive officer
and its chief financial officer stating that (A) such officers have
carefully examined the Offering Memorandum, (B) in their opinion, the
Offering Memorandum, as of its date, did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue
statement of a material fact and would not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and (C) as of the Closing Date, the
representations and warranties of the Company in this Agreement are
true and correct in all material respects, the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, and
subsequent to the date of the most recent financial statements
contained in the Offering Memorandum, there has been no material
adverse change in the financial position or results of operation of the
Company or any of its subsidiaries, or any change, or any development
including a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects
of the Company and its subsidiaries taken as a whole, except as set
forth in the Offering Memorandum.
(k) The Initial Purchasers shall have received a counterpart
of the Registration Rights Agreement which shall have been executed and
delivered by a duly authorized officer of the Company.
22
<PAGE> 23
(l) The Indenture and the Supplemental Indenture shall have
been duly executed and delivered by GST, Holdings and, following the
Effective Time on the Closing Date, the Company, as the case may be,
and the Trustee, and the Securities shall have been duly executed and
delivered by GST and, following the Effective Time on the Closing Date,
the Company and duly authenticated by the Trustee.
(m) The Company shall have entered into the Senior Credit
Facilities and the Company shall have satisfied, or ensured the
satisfaction of, all conditions precedent to initial funding under the
Senior Credit Facilities.
(n) At the Closing Date, after giving effect to the
consummation of the transactions contemplated by the Transaction
Documents (including, without limitation, the Transactions), there
shall exist no default or event of default under the Indenture and the
Senior Credit Facilities.
(o) The Initial Purchasers shall have received (i) copies of
each of the Recapitalization Documents (and any amendments thereto and
there shall have been no material amendments, alterations,
modifications or waivers of any provisions of the Recapitalization
Agreement since the date of this Agreement), and the documentation
evidencing the Senior Credit Facilities (and any amendments thereto)
(the "Bank Documents"), in each case certified by the secretary of the
Company or GST, as the case may be, as being true, complete and correct
and (ii) evidence, reasonably satisfactory to them, that (A) each of
the Transactions shall have been or is being consummated in accordance
with the terms of the Recapitalization Documents and (B) the initial
funding shall have occurred or is occurring under the Bank Documents
and the Company shall have received or is receiving approximately $140
million in gross cash proceeds therefrom. The Bank Documents and the
Recapitalization Documents shall be in form and substance reasonably
satisfactory to the Initial Purchasers.
(p) The Company shall have received valid tenders from Holders
of the requisite amount of Telex Notes as specified in and in
accordance with the Tender Offer Documents (as defined in Section 15(e)
hereto).
(q) Following the Effective Time on the Closing Date, the
Initial Purchasers shall have received a counterpart to this Agreement
executed by the Company.
(r) The Certificate of Merger with respect to the Merger shall
have been filed with the Secretary of State of Delaware.
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<PAGE> 24
(s) The Initial Purchasers shall have received a solvency
opinion, dated the Closing Date, of Valuation Research Corp., addressed
to the Initial Purchasers as to the solvency of Holdings and the
Company immediately after the consummation of the Transactions and
otherwise in form and substance reasonably satisfactory to the Initial
Purchasers.
(t) The Securities shall have been approved by the NASD for
trading in the PORTAL Market.
(u) If any event shall have occurred that requires GST or the
Company, as the case may be, under Section 4(d) to prepare an amendment
or supplement to the Offering Memorandum, such amendment or supplement
shall have been prepared, the Initial Purchasers shall have been given
a reasonable opportunity to comment thereon, and copies thereof shall
have been delivered to the Initial Purchasers reasonably in advance of
the Closing Date.
(v) There shall not have occurred any invalidation of Rule
144A under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act
or the Exchange Act by the Commission or any amendment or proposed
amendment thereof by the Commission which in the judgment of the
Initial Purchasers would materially impair the ability of the Initial
Purchasers to purchase, hold or effect resales of the Securities as
contemplated hereby.
(w) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the
Offering Memorandum (exclusive of any amendment or supplement thereto),
there shall not have been any change in the capital stock or long-term
debt or any change, or any development involving a prospective change,
in or affecting the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries
taken as a whole, the effect of which, in any such case described
above, is, in the judgment of the Initial Purchasers, so material and
adverse as to make it impracticable or inadvisable to proceed with the
sale or delivery of the Securities on the terms and in the manner
contemplated by this Agreement and the Offering Memorandum (exclusive
of any amendment or supplement thereto).
(x) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prevent the issuance or sale of the Securities; and no injunction,
restraining order or order of any other nature by any
24
<PAGE> 25
federal or state court of competent jurisdiction shall have been issued
as of the Closing Date which would prevent the issuance or sale of the
Securities.
(y) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of the Company's other debt securities or preferred
stock by any "nationally recognized statistical rating organization",
as such term is defined by the Commission for purposes of Rule
436(g)(2) of the rules and regulations of the Commission under the
Securities Act and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its
rating of the Securities or any of the Company's other debt securities
or preferred stock.
(z) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market shall have been suspended or
limited, or minimum prices shall have been established on any such
exchange or market by the Commission, by any such exchange or by any
other regulatory body or governmental authority having jurisdiction, or
trading in any securities of the Company on any exchange or in the
over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared by
federal or New York state authorities or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a
national emergency or war or (iv) a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) the effect of which, in the case of this clause (iv),
is, in the judgment of the Initial Purchasers, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or
the delivery of the Securities on the terms and in the manner
contemplated by this Agreement and in the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(aa) The Company shall have furnished to the Initial
Purchasers such additional documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties,
or the fulfillment of any of the conditions, herein contained.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions
25
<PAGE> 26
hereof only if they are in form and substance reasonably satisfactory to counsel
for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers, in their absolute
discretion, by notice given to and received by GST prior to delivery of and
payment for the Securities if, prior to that time, any of the events described
in Section 5(v), (w), (x), (y) or (z) shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date,
any Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Securities which such defaulting Purchaser agreed but failed to
purchase by other persons satisfactory to GST and the non-defaulting Initial
Purchasers, but if no such arrangements are made within 36 hours after such
default, this Agreement shall terminate without liability on the part of the
non-defaulting Initial Purchasers, GST or the Company, except that GST and the
Company will continue to be liable for the payment of expenses to the extent set
forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10
shall not terminate and shall remain in effect. As used in this Agreement, the
term "Initial Purchasers" includes, for all purposes of this Agreement unless
the context otherwise requires, any party not listed in Schedule 1 hereto that,
pursuant to this Section 7, purchases Securities which a defaulting Initial
Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to GST or any non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Securities of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchasers or GST may postpone the Closing
Date for up to seven full business days in order to effect any changes that in
the opinion of counsel for the Company or counsel for the Initial Purchasers may
be necessary in the Offering Memorandum or in any other document or arrangement,
and GST agrees to promptly prepare any amendment or supplement to the Offering
Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6, (b) GST shall fail
to tender the Securities for delivery to the Initial Purchasers for any reason
permitted under this Agreement or (c) the Initial Purchasers shall decline to
purchase the Securities for any reason permitted under this Agreement, GST
agrees to reimburse the Initial Purchasers for such out-of-pocket expenses
(including reasonable fees and disbursements of counsel) as shall have been
reasonably incurred by the Initial Purchasers in connection with this Agreement
and the proposed purchase and resale of the Securities. If this Agreement is
26
<PAGE> 27
terminated pursuant to Section 7 by reason of the default of one or more of the
Initial Purchasers, GST shall not be obligated to reimburse any defaulting
Initial Purchaser on account of such expenses.
9. Indemnification. (a) GST and, following the execution and
delivery of this Agreement by the Company, the Company shall indemnify and hold
harmless each Initial Purchaser, its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(a) and
Section 10 as an Initial Purchaser), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of the Securities), to which that Initial Purchaser may
become subject under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto or in any information provided by the Company
pursuant to Section 4(e) or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and shall reimburse each Initial Purchaser promptly
upon demand for any legal or other expenses reasonably incurred by that Initial
Purchaser in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that neither GST nor the Company shall be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Initial Purchasers' Information; and
provided, further, that with respect to any such untrue statement in or omission
from the Preliminary Offering Memorandum, the indemnity agreement contained in
this Section 9(a) shall not inure to the benefit of any such Initial Purchaser
to the extent that the sale to the person asserting any such loss, claim,
damage, liability or action was an initial resale by such Initial Purchaser and
any such loss, claim, damage, liability or action of or with respect to such
Initial Purchaser results from the fact that both (A) to the extent required by
applicable law, a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of such Securities to
such person and (B) the untrue statement in or omission from the Preliminary
Offering Memorandum was corrected in the Offering Memorandum unless, in either
case, such failure to deliver the Offering Memorandum was a result of
non-compliance by GST or the Company with Section 4(b).
27
<PAGE> 28
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless GST, the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls GST or the Company within the meaning of the Securities Act or
the Exchange Act (collectively referred to for purposes of this Section 9(b) and
Section 10 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any Initial
Purchasers' Information, and shall reimburse the Company promptly upon demand
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other
28
<PAGE> 29
charges of such counsel for the indemnified party will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) a conflict or
potential conflict exists (based upon advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (3) the indemnifying party has not
in fact employed counsel reasonably satisfactory to the indemnified party to
assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the reasonable
fees, disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending proceeding in
respect of which any indemnified party is a party and indemnity has been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
The obligations of GST, the Company and the Initial Purchasers
in this Section 9 and in Section 10 are in addition to any other liability that
GST, the Company or the Initial Purchasers, as the case may be, may otherwise
have, including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
10. Contribution. If the indemnification provided for in
Section 9 is unavailable or insufficient to hold harmless an indemnified party
under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by GST and the Company on the
29
<PAGE> 30
one hand and by the Initial Purchasers on the other hand from the offering of
the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of GST and the Company on the one hand and the Initial Purchasers on the
other hand with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by GST
or the Company on the one hand and the Initial Purchasers on the other hand with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities purchased under this
Agreement (before deducting expenses) received by or on behalf of the Company,
on the one hand, and the total discounts and commissions received by the Initial
Purchasers with respect to the Securities purchased under this Agreement, on the
other hand, bear to the total gross proceeds from the sale of the Securities
under this Agreement, in each case as set forth in the table on the cover page
of the Offering Memorandum. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to the Company or information supplied by GST and the Company on the one
hand or to any Initial Purchasers' Information on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. GST, the Company and the
Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 10, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchaser with respect to the Securities
purchased by it under this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute as provided in this Section 10 are several in
proportion to their respective purchase obligations and not joint.
31
<PAGE> 31
11. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, GST,
and, after the execution and delivery of this Agreement, the Company and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except as provided in Sections 9 and
10 with respect to affiliates, officers, directors, employees, representatives,
agents and controlling persons of the Initial Purchasers, GST, and, after the
execution and delivery of this Agreement, the Company and in Section 4(e) with
respect to holders and prospective purchasers of the Securities. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 11, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
12. Expenses. GST and, upon the execution and delivery of this
Agreement by the Company, the Company jointly and severally agree with the
Initial Purchasers to pay (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distribution
of the Preliminary Offering Memorandum, the Offering Memorandum and any
amendments or supplements thereto; (c) the costs of reproducing and distributing
each of the Transaction Documents; (d) the costs incident to the preparation,
printing and delivery of the certificates evidencing the Securities, including
stamp duties and transfer taxes, if any, payable upon issuance of the
Securities; (e) the fees and expenses of the Company's counsel and independent
accountants; (f) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(h) and of
preparing, printing and distributing Blue Sky Memoranda (including related fees
and expenses of counsel for the Initial Purchasers); (g) any fees charged by
rating agencies for rating the Securities; (h) the fees and expenses of the
Trustee and any paying agent (including related fees and expenses of any counsel
to such parties); (i) all expenses and application fees incurred in connection
with the application for the inclusion of the Securities on the PORTAL Market
and the approval of the Securities for book-entry transfer by DTC; and (j) all
other costs and expenses incident to the performance of the obligations of GST
and the Company under this Agreement which are not otherwise specifically
provided for in this Section 12; provided, however, that except as provided in
this Section 12 and Section 8, the Initial Purchasers shall pay their own costs
and expenses, including counsel's fees and expenses.
13. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of GST, the Company and
the Initial Purchasers contained in this Agreement or made by or on behalf of
GST or the Company or the Initial Purchasers pursuant to this Agreement or any
certificate delivered pursuant hereto shall survive the delivery of and payment
for the Securities and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any
31
<PAGE> 32
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
14. Notices, etc.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent
by mail or telecopy transmission to Chase Securities Inc., 270 Park
Avenue, New York, New York 10017, Attention: David Fass (telecopier
no.: (212) 270-0994); or
(b) if to GST or the Company, shall be delivered or sent by
mail or telecopy transmission to the address of the Company set forth
in the Offering Memorandum, Attention: John Palleschi (telecopier no.:
(612) 887-5588) with a copy to: Debevoise & Plimpton, 875 Third Ave,
New York, New York 10022, Attention: Andrew L. Sommer (telecopier no.:
(212) 909-6836); and Greenwich Street Capital Partners, L.P., 388
Greenwich Street, 36th Floor, New York, New York, 10013, Attention:
Nicholas E. Somers (telecopier no.: (212) 816- 0166);
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act, (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act,
(d) "Recapitalization Documents" means the collective reference to the
Recapitalization Agreement and each of the other agreements to be executed and
delivered on or prior to the Closing Date pursuant thereto or in connection
therewith and (e) "Tender Offer Documents" means the collective reference to the
Telex Notes and any other documents necessary to consummate the Tender Offer.
16. Initial Purchasers' Information. The parties hereto
acknowledge and agree that the Initial Purchasers' Information consists solely
of the following information in the Preliminary Offering Memorandum and the
Offering Memorandum: (i) the last paragraph on the front cover page concerning
the terms of the offering by the Initial Purchasers; (ii) the legend on the
inside front cover page concerning over-allotment and trading activities by the
Initial Purchasers; and (iii) the statements concerning the Initial
32
<PAGE> 33
Purchasers contained in the last three paragraphs under the heading "Plan of
Distribution" and the paragraph under the heading "Related
Transactions--Relationships Between GSCP and the Initial Purchasers."
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
20. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
33
<PAGE> 34
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among GST and, following the
execution and delivery by the Company of this Agreement on the Closing Date, the
Company and the several Initial Purchasers in accordance with its terms.
Very truly yours,
GST ACQUISITION CORP.
By______________________________
Name:
Title:
TELEX COMMUNICATIONS, INC.
By______________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By_______________________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
34
<PAGE> 35
MORGAN STANLEY & CO. INCORPORATED
By______________________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
1585 Broadway
New York, New York 10036
Attention: Legal Department
SMITH BARNEY INC.
By___________________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Legal Department
35
<PAGE> 36
SCHEDULE 1
<TABLE>
<CAPTION>
Principal Amount
Initial Purchasers of Securities
------------------ ----------------
<S> <C>
Chase Securities Inc. $ 75,000,000
Morgan Stanley & Co. Incorporated 25,000,000
Smith Barney Inc. 25,000,000
------------
Total $125,000,000
============
</TABLE>
<PAGE> 37
ANNEX A
[Form of Exchange and Registration Rights Agreement]
<PAGE> 38
ANNEX B-1
Form of Opinion of Debevoise & Plimpton, Counsel for the Company
Debevoise & Plimpton shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth
below:
(i) each of GST and the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of Delaware, is duly qualified to do business and is in good
standing as a foreign corporation in _______________________, which
jurisdictions are all of the domestic jurisdictions identified by
management of the Company to such counsel in which the Company or its
domestic subsidiaries own property or have significant operations and
has all requisite corporate power and authority necessary to own or
hold its properties and to conduct the businesses in which it is
engaged (except where the failure to so qualify or have such power or
authority would not, singularly or in the aggregate, have a Material
Adverse Effect);
(ii) the Company has an authorized capitalization as set
forth in the Offering Memorandum, and all of the outstanding shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; and the capital stock of
the Company conforms in all material respects to the description
thereof contained in the Offering Memorandum;
(iii) the statements in the Offering Memorandum under the
heading "Certain Federal Income Tax Considerations", insofar as such
statements purport to summarize the Federal laws of United States,
fairly summarize such provisions described therein in all material
respects; and such counsel does not have actual knowledge of any
current or pending legal or governmental actions, suits or proceedings
which would be required to be described in the Offering Memorandum if
the Offering Memorandum were a prospectus included in a registration
statement on Form S-1 which are not described as so required;
(iv) the Indenture, as supplemented by the Supplemental
Indenture conforms, in all material respects with the requirements of
the Trust Indenture Act and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder;
<PAGE> 39
(v) each of GST and the Company has full right, power and
authority to execute and deliver each of the Transaction Documents to
which it is a party and to perform its obligations thereunder; and all
corporate action required to be taken for the due and proper
authorization, execution and delivery of each of the Transaction
Documents and the consummation of the transactions contemplated thereby
have been duly and validly taken;
(vi) each of the Purchase Agreement and the Registration
Rights Agreement has been duly authorized, executed and delivered by
GST and the Company, as the case may be, and constitutes a valid and
legally binding agreement of GST and the Company enforceable against
GST and the Company in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and
to general equity principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing,
the possible judicial application of foreign laws or foreign
governmental or judicial action affecting creditors' rights and, in the
case of indemnification and contribution provisions therein,
considerations of public policy;
(vii) each of the Indenture and the Supplemental Indenture
has been duly authorized, executed and delivered by GST, Holdings and
the Company, as the case may be, and, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes a valid and
legally binding agreement of GST and the Company enforceable against
GST and the Company in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and
to general equity principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing,
the possible judicial application of foreign laws or foreign
governmental or judicial action affecting creditors' rights and, in the
case of indemnification and contribution provisions therein,
considerations of public policy;
(viii) the Securities have been duly authorized and issued by
GST and the Company and, assuming due authentication thereof by the
Trustee in accordance with the terms of the Indenture and upon payment
and delivery in accordance with the Purchase Agreement and the
Indenture (as supplemented by the Supplemental Indenture), will
constitute valid and legally binding obligations of GST and the Company
entitled to the benefits of the Indenture and enforceable against GST
and the Company in accordance with their terms, except as may be
2
<PAGE> 40
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and
to general equity principles (whether considered in a proceeding in
equity or at law), an implied covenant of good faith and fair dealing,
the possible judicial application of foreign laws or foreign
governmental or judicial action affecting creditors' rights and, in the
case of indemnification and contribution provisions therein,
considerations of public policy;
(ix) The Recapitalization and Merger have been duly
consummated in accordance with the terms of the Recapitalization
Agreement and all applicable requirements of law; the Recapitalization
Agreement has been duly authorized, executed and delivered by GST and
Holdings and constitutes a valid and legally binding agreement of GST
and Holdings enforceable against GST [and Holdings] in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law);
(x) each Transaction Document, to the extent described in
the Offering Memorandum, conforms in all material respects to the
description thereof contained in the Offering Memorandum;
(xi) the execution, delivery and performance by GST, Holdings
and the Company, as the case may be, of each of the Purchase Agreement,
the Indenture, the Supplemental Indenture, the Registration Rights
Agreement and the Recapitalization Agreement, the compliance by GST,
Holdings and the Company, as the case may be, with the terms thereof,
the consummation of the transactions contemplated by such documents and
the issuance, authentication, sale and delivery of the Securities will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any of the
agreements and instruments listed on Exhibit A hereto (which agreements
and instruments have been certified by GST, Holdings and the Company to
such counsel to constitute all the material agreements or instruments
to which the Issuer, Holdings, the Obligor or any of its domestic
subsidiaries is a party or by which the Issuer, Holdings, the Obligor
or any of its domestic subsidiaries is bound or to which any of the
property or assets of the Issuer, Holdings, the Obligor or any of its
domestic subsidiaries is subject and which relate to the transactions
contemplated by the Transaction Documents (other than the Transaction
Documents)), nor will such actions result in any violation of the
provisions of the charter or by-laws of GST, Holdings, the Company or
any of its
3
<PAGE> 41
subsidiaries or any existing Federal or New York State, statute, rule
or regulation or, to the knowledge of counsel, any judgment, order,
decree of any Federal or New York State court or arbitrator or
governmental agency or body having jurisdiction over GST, Holdings, the
Company or any of its subsidiaries or any of their properties or
assets; and no consent, approval, authorization or order of, or filing
or registration with, any such court or arbitrator or governmental
agency or body under any such statute, judgment, order, decree, rule or
regulation is required for the execution, delivery and performance by
GST, Holdings and the Company, as the case may be, of each of the
Purchase Agreement, the Indenture, the Supplemental Indenture, the
Registration Rights Agreement [or the Recapitalization Agreement], the
issuance, authentication, sale and delivery of the Securities and
compliance by GST, Holdings and the Company, as the case may be, with
the terms thereof and the consummation of the transactions contemplated
by the Transaction Documents, except for such consents, approvals,
authorizations, filings, registrations or qualifications (i) which have
been obtained or made prior to the Closing Date, (ii) as may be
required under state securities or Blue Sky laws in connection with the
purchase and resale of the Securities by the Initial Purchasers, and
(iii) as may be required under the Securities Act of 1933, as amended
(the "Act"), the Trust Indenture Act of 1939, as amended, or state
securities or Blue Sky laws in connection with the Exchange Offer
contemplated in the Offering Memorandum;
(xii) to the best knowledge of such counsel, and other than
as set forth or contemplated in the Offering Memorandum there are no
pending actions or suits or judicial, arbitral, rule-making,
administrative or other proceedings to which GST, the Company or any of
its subsidiaries is a party or of which any property or assets of GST,
the Company or any of its subsidiaries is the subject which question
the validity or enforceability of any of the Transaction Documents or
any action taken or to be taken pursuant thereto; and to the best
knowledge of such counsel, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xiii) neither GST, the Company nor any of its subsidiaries is
in violation of its charter or by-laws;
(xiv) neither GST, the Company nor any of its subsidiaries is
(A) an "investment company" or a company "controlled by" an investment
company within the meaning of the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder,
without taking account of any exemption under the Investment Company
Act arising out of the number of holders of GST's or the Company's
securities or (B) a "holding company" or a
4
<PAGE> 42
"subsidiary company" of a holding company or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935,
as amended;
(xv) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of the
Federal Reserve Board;
(xvi) assuming the accuracy of the representations,
warranties and agreements of GST, the Company and of the Initial
Purchasers contained in the Purchase Agreement, the issuance, offer and
sale of the Securities to the Initial Purchasers and the initial resale
and delivery of the Securities in the manner contemplated by the
Purchase Agreement and the Offering Memorandum are exempt from the
registration requirements of the Securities Act, and it is not
necessary to qualify the Indenture (as supplemented by the Supplemental
Indenture) under the Trust Indenture Act; and
(xvii) The descriptions in the Offering Memorandum of statutes
and contracts and other documents are accurate in all material respects
and fairly present, as to such statutes and contracts and other
documents described therein, the information that would be required to
be presented with respect thereto if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 under the
Securities Act.
Such counsel shall also state that they themselves have not
checked the accuracy or completeness of, or otherwise verified, and are not
passing upon and assume no responsibility for the accuracy or completeness of,
the information contained or incorporated by reference in the Offering
Memorandum, except to the limited extent stated in paragraphs (ii), (iii) and
(ix) above. In the course of such counsel's review, such counsel has
participated in conferences with certain officers and other representatives of
the Company, representatives of its independent public accountants and
representatives of the Initial Purchasers, at which the contents of the Offering
Memorandum were discussed, and in the course of that review and discussion, but
without independent check or verification, no facts have come to such counsel's
attention that have caused such counsel to believe that any part of the Offering
Memorandum contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; it being understood that such counsel shall express no opinion as to
the financial statements or other financial, accounting or statistical data
included in an of the documents mentioned in this paragraph.
5
<PAGE> 43
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials which are furnished to the Initial
Purchasers.
6
<PAGE> 44
ANNEX B-2
[Form of Opinion of General Counsel]
<PAGE> 1
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
among
TELEX COMMUNICATIONS, INC.,
(successor by assumption to GST Acquisition
Corp.)
THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO,
MORGAN STANLEY SENIOR FUNDING, INC.,
as Documentation Agent
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of May 6, 1997
CHASE SECURITIES INC.,
as Arranger
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS.................................................................. 2
1.1 Defined Terms.................................................................. 2
1.2 Other Definitional Provisions.................................................. 31
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.............................................. 31
2.1 Revolving Credit Commitments................................................... 31
2.2 Revolving Credit Notes......................................................... 31
2.3 Procedure for Revolving Credit Borrowing....................................... 32
2.4 Termination or Reduction of Revolving Credit Commitments....................... 32
2.5 Swing Line Commitment.......................................................... 33
2.6 Term Loans..................................................................... 35
2.7 Tranche A Term Notes........................................................... 35
2.8 Tranche B Term Notes........................................................... 36
2.9 Procedure for Term Loan Borrowing.............................................. 37
2.10 Repayment of Loans............................................................ 38
SECTION 3. LETTERS OF CREDIT............................................................ 38
3.1 L/C Commitment................................................................. 38
3.2 Procedure for Issuance of Letters of Credit.................................... 39
3.3 Fees, Commissions and Other Charges............................................ 39
3.4 L/C Participations............................................................. 40
3.5 Reimbursement Obligation of the Borrower....................................... 41
3.6 Obligations Absolute........................................................... 41
3.7 Letter of Credit Payments...................................................... 42
3.8 Application.................................................................... 42
SECTION 4. GENERAL PROVISIONS APPLICABLE
TO LOANS AND LETTERS OF CREDIT........................................................... 43
4.1 Interest Rates and Payment Dates............................................... 43
4.2 Conversion and Continuation Options............................................ 43
4.3 Minimum Amounts of Sets........................................................ 44
4.4 Optional and Mandatory Prepayments and Commitment Reductions................... 44
4.5 Commitment Fees................................................................ 47
4.6 Computation of Interest and Fees............................................... 47
4.7 Inability to Determine Interest Rate........................................... 47
4.8 Pro Rata Treatment and Payments................................................ 48
4.9 Illegality..................................................................... 49
4.10 Requirements of Law........................................................... 50
4.11 Taxes......................................................................... 51
</TABLE>
i
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4.12 Indemnity..................................................................... 53
4.13 Certain Rules Relating to the Payment of Additional Amounts................... 54
SECTION 5. REPRESENTATIONS AND WARRANTIES............................................... 55
5.1 Financial Condition............................................................ 56
5.2 No Change; Solvent............................................................. 56
5.3 Corporate Existence; Compliance with Law....................................... 56
5.4 Corporate Power; Authorization; Enforceable Obligations........................ 57
5.5 No Legal Bar................................................................... 57
5.6 No Material Litigation......................................................... 58
5.7 No Default..................................................................... 58
5.8 Ownership of Property; Liens................................................... 58
5.9 Intellectual Property.......................................................... 58
5.10 No Burdensome Restrictions.................................................... 58
5.11 Taxes......................................................................... 58
5.12 Federal Regulations........................................................... 59
5.13 ERISA......................................................................... 59
5.14 Collateral.................................................................... 59
5.15 Investment Company Act; Other Regulations..................................... 60
5.16 Subsidiaries.................................................................. 60
5.17 Purpose of Loans.............................................................. 60
5.18 Environmental Matters......................................................... 61
5.19 No Material Misstatements..................................................... 62
5.20 Delivery of the Transaction Documents......................................... 62
5.21 Representations and Warranties Contained in the Transaction Documents......... 62
5.22 Labor Matters................................................................. 62
SECTION 6. CONDITIONS PRECEDENT......................................................... 63
6.1 Conditions to Initial Extension of Credit...................................... 63
6.2 Conditions to Each Other Extension of Credit................................... 68
SECTION 7. AFFIRMATIVE COVENANTS........................................................ 69
7.1 Financial Statements........................................................... 69
7.2 Certificates; Other Information................................................ 70
7.3 Payment of Obligations......................................................... 71
7.4 Conduct of Business and Maintenance of Existence............................... 71
7.5 Maintenance of Property; Insurance............................................. 71
7.6 Inspection of Property; Books and Records; Discussions......................... 72
</TABLE>
ii
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7.7 Notices....................................................................... 73
7.8 Environmental Laws............................................................ 74
7.9 After-Acquired Real Property and Fixtures..................................... 75
7.10 Certain Post-Closing Matters................................................. 76
SECTION 8. NEGATIVE COVENANTS.......................................................... 77
8.1 Financial Condition Covenants................................................. 78
8.2 Limitation on Indebtedness.................................................... 80
8.3 Limitation on Liens........................................................... 82
8.4 Limitation on Guarantee Obligations........................................... 84
8.5 Limitation on Fundamental Changes............................................. 85
8.6 Limitation on Sale of Assets.................................................. 86
8.7 Limitation on Restricted Payments............................................. 86
8.8 Limitation on Capital Expenditures............................................ 87
8.9 Limitation on Investments, Loans and Advances................................. 88
8.10 Limitation on Transactions with Affiliates................................... 89
8.11 Limitation on Sale and Leaseback Transactions................................ 91
8.12 Limitation on Optional Payments and Modifications of Debt Instruments
and Other Documents....................................................... 91
8.13 Limitation on Changes in Fiscal Year......................................... 92
8.14 Limitation on Negative Pledge Clauses........................................ 92
8.15 Limitation on Lines of Business; Creation of Subsidiaries.................... 92
8.16 Limitations on Currency and Commodity Hedging Transactions................... 92
8.17 Holding Company Status of TCI Holding........................................ 93
8.18 Payment of Special Bonuses to Management..................................... 93
SECTION 9. EVENTS OF DEFAULT........................................................... 93
SECTION 10. THE ADMINISTRATIVE AGENT AND THE OTHER
REPRESENTATIVES................................................................ 97
10.1 Appointment.................................................................. 97
10.2 Delegation of Duties......................................................... 97
10.3 Exculpatory Provisions....................................................... 97
10.4 Reliance by Administrative Agent............................................. 98
10.5 Notice of Default............................................................ 98
10.6 Acknowledgements and Representations by Lenders.............................. 98
10.7 Indemnification.............................................................. 99
</TABLE>
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10.8 Administrative Agent and Other Representatives in Their Individual
Capacity.................................................................. 100
10.9 Successor Administrative Agent............................................... 100
10.10 Swing Line Lender........................................................... 100
10.11 Assumption Agreement........................................................ 100
10.12 Release of Liens on Excluded Foreign Accounts............................... 100
SECTION 11. MISCELLANEOUS.............................................................. 101
11.1 Amendments and Waivers....................................................... 101
11.2 Notices...................................................................... 102
11.3 No Waiver; Cumulative Remedies............................................... 103
11.4 Survival of Representations and Warranties................................... 104
11.5 Payment of Expenses and Taxes................................................ 104
11.6 Successors and Assigns; Participations and Assignments....................... 105
11.7 Adjustments; Set-off......................................................... 108
11.8 Counterparts................................................................. 108
11.9 Severability................................................................. 109
11.10 Integration................................................................. 109
11.11 GOVERNING LAW............................................................... 109
11.12 Submission To Jurisdiction; Waivers......................................... 109
11.13 Acknowledgements............................................................ 110
11.14 WAIVER OF JURY TRIAL........................................................ 110
11.15 Confidentiality............................................................. 110
</TABLE>
iv
<PAGE> 6
SCHEDULES
I Commitments and Addresses
II Applicable Margin and Commitment Fee Step-Downs
III Reserved
IV Borrower's Past Practices Regarding the Inclusion of Custom-Made
Parts in Raw Materials
5.2(a) Material Adverse Effect Disclosure
5.4 Consents Required
5.6 Litigation
5.8 Mortgaged Properties
5.9 Intellectual Property Claims
5.14 Filing Jurisdictions and Lien Searches
5.16 Subsidiaries
6.1(o) Local Counsel Jurisdictions
8.2(g) Permitted Indebtedness
8.3(j) Permitted Liens
8.4(a) Permitted Guarantee Obligations
8.9(c) Permitted Investments
8.10 Permitted Transactions with Affiliates
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Tranche A Term Note
A-3 Form of Tranche B Term Note
A-4 Form of Swing Line Note
B Guarantee and Collateral Agreement
C Form of Patent and Trademark Security Agreement
D Form of Mortgage
E Form of Solvency Opinion
F Form of Opinion of Debevoise & Plimpton
G Form of U.S. Tax Compliance Certificate
H Form of Assignment and Acceptance
I Form of Borrowing Certificate
J Form of Borrowing Base Certificate
K Form of Landlord Waiver
L Reserved
M Form of Telex Assumption Agreement
v
<PAGE> 7
Exhibit 4D
CREDIT AGREEMENT, dated as of May 6, 1997, among GST ACQUISITION CORP.,
a Delaware corporation ("Acquisition Co."), the several banks and other
financial institutions from time to time parties to this Agreement
(collectively, the "Lenders"; individually, a "Lender"), MORGAN STANLEY SENIOR
FUNDING, INC., as documentation agent for the Lenders hereunder (in such
capacity, the "Documentation Agent"), and THE CHASE MANHATTAN BANK ("Chase"), a
New York banking corporation, as administrative agent for the Lenders hereunder
(in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, Acquisition Co. is a newly formed Delaware corporation
organized by Greenwich Street Capital Partners, Inc., a Delaware corporation
("GSCP"), and is wholly owned by Greenwich II LLC, a Delaware limited liability
company ("Greenwich II"); and
WHEREAS, Acquisition Co. will, at GSCP's option, be capitalized by
either (i) $103,100,000 of equity provided by GSCP and certain co-investors or
(ii) $83.3 million of equity provided by GSCP and certain co-investors and $25.2
million of proceeds provided by Acquisition Co.'s issuance of Subordinated
Debentures with Warrants (the "Subordinated Debentures With Warrants"; either
such capitalization, as reduced by any offsetting increase in the aggregate
value of the Management Equity Investment (as defined below), the "GSCP Equity
Investment"); and
WHEREAS, Telex Communications Group, Inc., a Delaware corporation
("Holdings"), owns all of the capital stock of Telex Communications, Inc., a
Delaware corporation ("Telex"); and
WHEREAS, Acquisition Co., Greenwich II and Holdings are parties to a
Recapitalization Agreement, dated as of March 4, 1997 (as amended, supplemented
or otherwise modified in accordance with terms of this Agreement, the
"Recapitalization Agreement"), providing for, among other things, the
recapitalization of Holdings (the "Recapitalization"); and
WHEREAS, the Recapitalization will be accomplished through the merger
(the "Merger") of Acquisition Co. with and into Holdings on the Effective Date
(as defined below), with Holdings continuing as the surviving corporation;
WHEREAS, under the Recapitalization Agreement (i) 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 Telex) will be converted in the Merger into the right
to receive an aggregate amount of cash equal to approximately $252.7 million, as
adjusted pursuant to the terms of the Recapitalization
<PAGE> 8
Agreement, and (ii) certain shares of Holdings Common Stock held by management
of Telex (the "Management Investors") and certain options to acquire additional
shares of Holdings Common Stock with an aggregate value of at least $21.1
million (or $26,500,000, if Acquisition Co. doesn't issue the Subordinated
Debentures With Warrants) will be retained by such managers (the "Management
Equity Investment"; collectively, with the GSCP Equity Investment, the "Equity
Investment"); and
WHEREAS, immediately upon consummation of the Recapitalization and the
Merger and on the Effective Date, Holdings will assign to Telex and Telex will
assume from Holdings (the "Telex Assumption") all of the obligations of
Holdings, as successor in interest to Acquisition Co., under this Agreement
whereupon Telex shall be the borrower hereunder for all purposes hereof; and
WHEREAS, in connection with the Recapitalization, Acquisition Co. will
issue not less than $125,000,000 in aggregate principal amount of senior
subordinated notes (the "Senior Subordinated Notes"), on terms and conditions
reasonably satisfactory to the Lenders and, upon the consummation of the
Recapitalization and the Merger, Holdings will assign to Telex and Telex will
assume from Holdings all of the obligations of Holdings, as successor in
interest to Acquisition Co., under the Senior Subordinated Notes; and
WHEREAS, in connection with the Recapitalization, Telex has commenced a
tender offer (the "Tender Offer") to repurchase all of the $100,000,000
aggregate outstanding principal amount of its 12% Senior Notes due 2004 (the
"Telex Notes") and has commenced a related consent solicitation to eliminate all
of the restrictive covenants relating to any Telex Notes that remain outstanding
after the Tender Offer; and
WHEREAS, in order to (i) finance a portion of the Recapitalization,
(ii) pay certain fees, taxes and expenses related to the Recapitalization and
(iii) finance the working capital and other business requirements of Telex and
its subsidiaries following the consummation of the Recapitalization and the
Merger, the Borrower (as defined below) has requested that the Lenders make the
loans and issue and participate in the letters of credit provided for herein;
and
WHEREAS, all the obligations of the Borrower hereunder shall be secured
and guaranteed by, among other things, (i) a perfected first lien on and
security interest in the collateral described in the Security Documents (as
hereinafter defined), (ii) a pledge of all the issued and outstanding capital
stock of Telex and each of its direct or indirect domestic subsidiaries, whether
now existing or subsequently organized or acquired and a pledge of 65% of the
issued and outstanding capital stock of each of the direct or indirect foreign
subsidiaries of Telex, whether now existing or subsequently organized or
acquired and (iii) unconditional guarantees by each of Holdings and such direct
or indirect domestic subsidiaries of Telex;
2
<PAGE> 9
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by Chase as its prime rate in effect at its principal office in New
York City (the Prime Rate not being intended to be the lowest rate of interest
charged by Chase in connection with extensions of credit to debtors); "Base CD
Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board of Governors of the Federal Reserve System (the "Board")
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it; and "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
3
<PAGE> 10
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
"Acceleration": as defined in Section 9(e).
"Account": as defined in the Uniform Commercial Code as in effect in
the State of New York.
"Acquisition Co." as defined in the Preamble hereto.
"Adjustment Date": each date on or after December 31, 1997 that is the
second Business Day following receipt by the Lenders of both (i) the financial
statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as
applicable, for the most recently completed fiscal period and (ii) the related
compliance certificate required to be delivered pursuant to subsection 7.2(b)
with respect to such fiscal period.
"Administrative Agent": as defined in the Preamble hereto.
"Affected Eurodollar Loans": as defined in subsection 4.9.
"Affected Eurodollar Rate": as defined in subsection 4.7.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Aggregate Outstanding Revolving Credit": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Credit Loans made by such Revolving Credit Lender then
outstanding and (b) such Revolving Credit Lender's Revolving Credit Commitment
Percentage of the L/C Obligations then outstanding and (c) such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the Swing Line Loans then
outstanding.
"Agreement": this Credit Agreement, as amended, supplemented, waived or
otherwise modified from time to time.
4
<PAGE> 11
"Alternative Currency": any freely available currency that is freely
transferrable and freely convertible into Dollars and requested by the Borrower
and acceptable to the Issuing Bank and the Administrative Agent.
"Alternative Currency L/C Exposure": at any time, the Assigned Dollar
Value of the aggregate undrawn amount of all outstanding Letters of Credit
denominated in an Alternative Currency at such time.
"Applicable Margin": during the period from the Effective Date until
the first Adjustment Date, the Applicable Margin shall equal (i) 1.50% per annum
with respect to Revolving Credit Loans and Tranche A Term Loans which are ABR
Loans, (ii) 2.00% per annum with respect to Tranche B Term Loans which are ABR
Loans, (iii) 2.50% per annum with respect to Revolving Credit Loans and Tranche
A Term Loans which are Eurodollar Loans and (iv) 3.00% per annum with respect to
Tranche B Term Loans which are Eurodollar Loans. The Applicable Margin for
Revolving Credit Loans, Tranche A Term Loans and Tranche B Term Loans will be
adjusted on each Adjustment Date to the applicable rate per annum set forth
under the heading "ABR Applicable Margin" or "Eurodollar Applicable Margin" on
Schedule II which corresponds to the achievement of certain performance criteria
determined from the financial statements and compliance certificate relating to
the end of the fiscal quarter immediately preceding such Adjustment Date;
provided that in the event that the financial statements required to be
delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the
related compliance certificate required to be delivered pursuant to subsection
7.2(b), are not delivered when due, then
(a) if such financial statements and compliance certificate are
delivered after the date such financial statements and compliance
certificate were required to be delivered (without giving effect to any
applicable cure period) and the Applicable Margin increases from that
previously in effect as a result of the delivery of such financial
statements, then the Applicable Margin in respect of the Revolving Credit
Loans, Tranche A Term Loans and Tranche B Term Loans during the period from
the date upon which such financial statements were required to be delivered
(without giving effect to any applicable cure period) until the date upon
which they actually are delivered shall, except as otherwise provided in
clause (c) below, be the Applicable Margin as so increased;
(b) if such financial statements and compliance certificate are
delivered after the date such financial statements and compliance
certificate were required to be delivered and the Applicable Margin
decreases from that previously in effect as a result of the delivery of
such financial statements, then such decrease in the Applicable Margin
shall not become applicable until the date upon which the financial
statements and certificate actually are delivered; and
5
<PAGE> 12
(c) if such financial statements and compliance certificate are not
delivered prior to the expiration of the applicable cure period, then,
effective upon such expiration, for the period from the date upon which
such financial statements and compliance certificate were required to be
delivered (after the expiration of the applicable cure period) until two
Business Days following the date upon which they actually are delivered,
the Applicable Margin in respect of the Loans shall be (i) 1.50% per annum
with respect to Revolving Credit Loans and Tranche A Term Loans which are
ABR Loans, (ii) 2.00% per annum with respect to Tranche B Term Loans which
are ABR Loans, (iii) 2.50% per annum with respect to Revolving Credit Loans
and Tranche A Term Loans which are Eurodollar Loans and (iv) 3.00% per
annum with respect to Tranche B Term Loans which are Eurodollar Loans (it
being understood that the foregoing shall not limit the rights of the
Administrative Agent and the Lenders set forth in Section 9).
"Application": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"Asset Sale": any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, through a Sale and Leaseback
Transaction) (a "Disposition") by the Borrower or any of its Subsidiaries, in
one or a series of related transactions, of any real or personal, tangible or
intangible, property (including, without limitation, Capital Stock) of the
Borrower or such Subsidiary to any Person (other than to Holdings or any of its
domestic Wholly Owned Subsidiaries).
"Assigned Dollar Value": (a) in respect of the undrawn amount of any
Letter of Credit denominated in an Alternative Currency, the Dollar Equivalent
thereof determined based upon the applicable Spot Exchange Rate as of (i) the
date of issuance of such Letter of Credit, until the first Calculation Date
thereafter and (ii) thereafter, the most recent Calculation Date and (b) in
respect of a Reimbursement Obligation denominated in an Alternative Currency,
the Dollar Equivalent thereof determined based upon the applicable Spot Exchange
Rate as of the date such Reimbursement Obligation was incurred.
"Assignee": as defined in subsection 11.6(c).
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) the amount of
such Revolving Credit Lender's Revolving Credit Commitment at such time over (b)
the sum of (i) the aggregate unpaid principal amount at such time of all
Revolving Credit Loans made by such Revolving Credit Lender and (ii) an amount
equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage
of the aggregate unpaid principal amount at such time of all Swing Line Loans,
provided that for purposes of calculating Available Revolving Credit Commitments
pursuant to subsection 4.5 such amount shall be zero, and (iii) an amount equal
to such
6
<PAGE> 13
Revolving Credit Lender's Revolving Credit Commitment Percentage of the
outstanding L/C Obligations at such time; collectively, as to all the Lenders,
the "Available Revolving Credit Commitments".
"Base CD Rate": as defined in the definition of the term "ABR" in this
subsection 1.1.
"Board": as defined in the definition of the term "ABR" in this
subsection 1.1.
"Borrower": initially, Acquisition Co., upon consummation of the
Merger, Holdings and, after giving effect to the Telex Assumption, Telex.
"Borrowing Base": at any date of determination thereof, an amount equal
to the sum of (i) 80% of the Eligible Accounts Receivable at such date minus the
Dilution Reserve at such date and (ii) 50% of the Eligible Inventory at such
date; provided that the amount represented by the Eligible Inventory shall at no
time be more than 50% of the Borrowing Base. The Borrowing Base shall be
determined from time to time by the Administrative Agent in its reasonable
judgment by reference to the Borrowing Base Certificate then most recently
delivered to it; provided that the information contained in such Borrowing Base
Certificate shall not be conclusive in calculating the Borrowing Base and, after
consultation with the Borrower, the Administrative Agent shall be entitled to
adjust the amounts and other information contained therein to the extent that it
believes in its reasonable credit judgment that such adjustment is appropriate
to cause the Borrowing Base (as so adjusted) to reflect the standards set forth
in the definitions of the terms "Eligible Accounts Receivable" and "Eligible
Inventory".
"Borrowing Base Certificate": a certificate executed and delivered by
the Borrower, substantially in the form of Exhibit J, delivered pursuant to
subsection 7.2(e).
"Borrowing Date": the Effective Date and any Business Day specified in
a notice pursuant to subsection 2.3, 2.5 or 3.2 as a date on which the Borrower
requests the Lenders to make Loans hereunder or the Issuing Lender to issue
Letters of Credit hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close, except that, when used in connection with a Eurodollar Loan, "Business
Day" shall mean, any Business Day on which dealings in Dollars between banks may
be carried on in London, England and New York, New York.
"Calculation Date": the last Business Day of each calendar month.
7
<PAGE> 14
"Capital Expenditures": with respect to any Person for any period, the
sum of the aggregate of all expenditures by such Person and its consolidated
Subsidiaries during such period which, in accordance with GAAP, are or should be
included in "capital expenditures".
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Equivalents": (a) securities issued or fully guaranteed or
insured by the United States Government or any agency or instrumentality
thereof, (b) time deposits, certificates of deposit or bankers' acceptances of
(i) any Lender or (ii) any commercial bank having capital and surplus in excess
of $500,000,000 and the commercial paper of the holding company of which is
rated at least A-2 or the equivalent thereof by Standard & Poor's Ratings Group
(a division of McGraw Hill Inc.) or any successor rating agency ("S&P") or at
least P-2 or the equivalent thereof by Moody's Investors Service, Inc. or any
successor rating agency ("Moody's") (or if at such time neither is issuing
ratings, then a comparable rating of such other nationally recognized rating
agency as shall be approved by the Administrative Agent in its reasonable
judgment), (c) commercial paper rated at least A-2 or the equivalent thereof by
S&P or at least P-2 or the equivalent thereof by Moody's (or if at such time
neither is issuing ratings, then a comparable rating of such other nationally
recognized rating agency as shall be approved by the Administrative Agent in its
reasonable judgment) and (d) investments in money market funds complying with
the risk limiting conditions of Rule 2a-7 or any successor rule of the
Securities and Exchange Commission under the Investment Company Act.
"C/D Assessment Rate": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member of the
Bank Insurance Fund classified as well-capitalized and within supervisory
subgroup "B" (or a comparable successor assessment risk classification) within
the meaning of 12 C.F.R. Section 327.4 (or any successor provision) to the
Federal Deposit Insurance Corporation (or any successor) for such Corporation's
(or such successor's) insuring time deposits at offices of such institution in
the United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board) in respect of
new non-personal time deposits in Dollars of $100,000 or more having a maturity
of 30 days or more.
"Change of Control": the occurrence of any of the following events: (i)
the GSCP Group shall in the aggregate beneficially, directly or indirectly, own
shares of Capital Stock having less than 51% of the total voting power of all of
the outstanding Capital Stock of
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<PAGE> 15
Holdings, (ii) one or more members of the GSCP Group shall not have the power
(whether or not exercised), by virtue of owning shares of the Capital Stock of
Holdings or by contract or otherwise, to elect or cause the election of a
majority of the board of directors of Holdings, (iii) Holdings shall cease to
own 100% of the Capital Stock of Telex or (iv) a "Change of Control" as defined
in the Senior Subordinated Indenture shall have occurred at a time when any
principal amount of Indebtedness is outstanding under the Senior Subordinated
Indenture.
"Chase": as defined in the preamble hereto.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
"Commercial Letter of Credit": as defined in subsection 3.1(a).
"Commitments": the collective reference to the Revolving Credit
Commitments, the Swing Line Commitment, the Term Loan Commitments and the L/C
Commitment; individually, a "Commitment".
"Commitment Percentage": as to any Lender, the percentage of the
aggregate Revolving Credit Commitments and Term Loan Commitments constituted by
such Lender's Revolving Credit Commitments and Term Loan Commitments or
following the Effective Date, the percentage representing a fraction the
numerator of which is the sum of (i) the aggregate principal amount of such
Lender's Term Loans then outstanding plus (ii) the Revolving Credit Commitment
of such Lender (or, following the termination or expiration of the Revolving
Credit Commitments, the sum of (x) the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding plus (y) such Lender's
Revolving Commitment Percentage of all L/C Obligations), and the denominator of
which is the sum of (i) the aggregate principal amount of Term Loans of all
Lenders then outstanding plus (ii) the aggregate Revolving Credit Commitments of
all Lenders (or, following the termination or expiration of the Revolving Credit
Commitments, the sum of (x) the aggregate principal amount of all Revolving
Credit Loans then outstanding plus (y) the aggregate principal amount of all L/C
Obligations then outstanding).
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with Holdings within the meaning of Section 4001
of ERISA or is part of a group which includes the Borrower and which is treated
as a single employer under Section 414(b) or (c) of the Code or, solely for
purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Sections 414(m) and (o) of the Code.
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<PAGE> 16
"Consolidated EBITDA": for any period, Consolidated Net Income for such
period adjusted to exclude the following items (without duplication) of income
or expense to the extent that such items are included in the calculation of
Consolidated Net Income: (a) Consolidated Interest Expense, (b) any non-cash
expenses and charges, (c) total income tax expense, (d) depreciation expense,
(e) the expense associated with amortization of intangible and other assets
(including amortization or other expense recognition of any costs associated
with asset write-ups in accordance with APB Nos. 16 and 17), (f) non-cash
provisions for reserves for discontinued operations, (g) any gain or loss
associated with the sale or write-down of assets not in the ordinary course of
business, (h) all cash expenses relating to the Transactions, (i) any income or
loss accounted for by the equity method of accounting (except in the case of
income to the extent of the amount of cash dividends or cash distributions paid
to the Borrower or any of its Subsidiaries by the entity accounted for by the
equity method of accounting), (j), except for purposes of calculating "Excess
Cash Flow", cash payments made to GSCP permitted by subsection 8.10(ii) hereof
for the rendering of management consulting or financial advisory services and
(k), except for purposes of calculating "Excess Cash Flow", cash payments made
to management in respect of special bonuses (to the extent not prohibited
pursuant to subsection 8.18) in accordance with the terms of their respective
employment agreements or otherwise.
"Consolidated Fixed Charges": for any period the sum of (without
duplication) (i) the aggregate amount of Consolidated Interest Expense for such
period plus (ii) the amount, if any, by which the aggregate principal amount of
Revolving Credit Loans outstanding at the beginning of such period shall exceed
the aggregate amount of the Revolving Credit Commitments scheduled to be in
effect at the end of such period after giving effect to any reductions of the
Revolving Credit Commitments scheduled to occur during such period (if any) plus
(iii) scheduled principal amortization of Term Loans during such period (whether
or not such payments are made), plus (iv) the aggregate amount of all
regularly-scheduled payments of principal of any other Indebtedness (including,
without limitation, the principal component of any obligations under Financing
Leases) made during such period plus (v) the aggregate amount paid, or required
to be paid, in cash in respect of income taxes during such period (net of tax
credits and benefits, including tax benefits from net operating losses) plus
(vi) the aggregate amount of all Capital Expenditures made during such period;
in each case of the Borrower and its consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges Ratio": at any date of determination
thereof, the ratio of (a) Consolidated EBITDA for the period of one year ending
on such date of determination to (b) Consolidated Fixed Charges for the period
of one year ending on such date of determination.
"Consolidated Funded Indebtedness": at the date of determination
thereof, all Indebtedness of the Borrower and its consolidated Subsidiaries
which by its terms matures more than one year after the date of calculation,
including, in any event, under this Agreement and the
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<PAGE> 17
Senior Subordinated Notes, and any such Indebtedness maturing within one year
from such date which is renewable or extendable at the option of the obligor to
a date more than one year from such date, including, in any event, the Term
Loans, the Revolving Credit Loans and the Swing Line Loans, in each case
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense": for any period, the sum of (a)
interest expense (accrued and paid or payable in cash for such period, and in
any event excluding any amortization or write-off of financing costs) on
Indebtedness of the Borrower and its consolidated Subsidiaries for such period
minus (b) interest income (accrued and received or receivable in cash for such
period) of the Borrower and its consolidated Subsidiaries for such period, in
each case determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income": for any period, net income of the Borrower
and its consolidated Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Tangible Assets": as of the any date of determination,
the total assets, less goodwill, deferred financing costs and other intangibles
(other than patents, trademarks, copyrights, licenses and other intellectual
property) less accumulated amortization, shown on the balance sheet of the
Borrower and its Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP. At December 31, 1996, on a pro forma basis giving effect
to the Transactions, the Consolidated Tangible Assets of the Borrower was $97.9
million.
"Contractual Obligation": as to any Person, any provision of any
material security issued by such Person or of any material agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its property is bound.
"CSI": Chase Securities Inc.
"Default": any of the events specified in Section 9, whether or not any
requirement for the giving of notice (other than, in the case of Section 9(e), a
Default Notice), the lapse of time, or both, or any other condition, has been
satisfied.
"Defaulted Account": any Account of the Borrower or its Subsidiaries
which has been or should have been charged-off as not collectable in conformity
with the accounting policies of the Borrower and its Subsidiaries as in effect
from time to time.
"Default Notice": as defined in Section 9(e).
"Dilution Factor": with respect to each quarterly period ended on March
31, June 30, September 30 and December 31 of each year, the product of (a) the
aggregate amount of all
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<PAGE> 18
deductions, negative contractual adjustments and other negative adjustments,
credit memos and write-offs with respect to Accounts during such quarterly
period to the extent not otherwise deducted in calculating the Eligible Accounts
Receivable to which such Dilution Reserve relates, net of any recoveries with
respect to Accounts during such quarterly period, divided by (b) the aggregate
gross revenues of the Borrower and its domestic Wholly Owned Subsidiaries
attributable to Accounts during such quarterly period. Notwithstanding the
foregoing, the Dilution Factor shall be 5% for the period from the Effective
Date through September 30, 1997.
"Dilution Reserve": as of any date, the product of (i) the Dilution
Factor for the immediately preceding quarterly period multiplied by (ii) the
Eligible Accounts Receivable on such date.
"Disposition": as defined in the definition of the term "Asset Sale" in
this subsection 1.1.
"Dollar Equivalent": with respect to an amount of any Alternative
Currency on any date, the amount of Dollars that may be purchased with such
amount of such Alternative Currency at the Spot Exchange Rate with respect to
such Alternative Currency on such date.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary": any Subsidiary of the Borrower which is not a
Foreign Subsidiary.
"Effective Date": the date on which all the conditions precedent set
forth in subsection 6.1 shall be satisfied or waived.
"Eligible Accounts Receivable": at any time, an amount equal to the
aggregate outstanding balance of all Accounts of the Borrower and its Domestic
Subsidiaries payable in the United States of America in Dollars, as set forth in
the aging reports of billed Accounts for the Borrower and its Domestic
Subsidiaries as of such time, provided that, unless otherwise approved in
writing by the Administrative Agent, no amount owing in respect of any Account
of the Borrower or any of its Domestic Subsidiaries shall be deemed to be
included in any calculation of Eligible Accounts Receivable if:
(a)(i) such Account is not a bona fide, valid and legally enforceable
obligation of the Obligor thereon arising from the actual sale and delivery
of goods to or rendition to and acceptance of services by such Obligor,
(ii) the goods giving rise to such Account have not been shipped and
delivered to the Obligor thereon or the services giving rise to such
Account have not been performed, (iii) such Account arises from a progress
billing or percentage of completion invoice, but only to the extent the
amount billed exceeds the
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<PAGE> 19
value of the goods sold and delivered or the services performed with
respect thereto, or (iv) such Account otherwise does not represent a final
sale or transfer of title to such Obligor;
(b) such Account has been adjusted to reflect the return or rejection
of, or any loss of or damage to, any of the Inventory giving rise to such
Account; provided that amounts owing in respect of such Account shall only
be excluded to the extent of such adjustment;
(c) such Account includes any material financing charges or late or
other fees; provided that amounts owing in respect of such Account shall
only be excluded to the extent of such charges or fees;
(d) the Obligor thereon is the Borrower or any Subsidiary or Affiliate
thereof or any employee, officer, sales representative, agent (other than
any such sales representative or agent which has an independent contractor
relationship with the Borrower or its Subsidiaries), director or
stockholder of the Borrower or any of its Subsidiaries or Affiliates or the
sale giving rise to such Account is to an Obligor in any jurisdiction
outside the United States or Canada unless the obligations of such Obligor
thereunder are backed by a letter of credit acceptable to the
Administrative Agent or guaranteed by a guarantor acceptable to the
Administrative Agent;
(e) the Obligor thereon is any Governmental Authority unless all
Requirements of Law relating to the creation and perfection of a Lien
thereon in favor of the Administrative Agent for the benefit of the Lenders
shall have been satisfied in all material respects, provided that Accounts
the Obligor with respect to which is The Library of Congress shall be
deemed to satisfy the requirements of this clause (e) for the period of 60
days after the Effective Date regardless of whether all such Requirements
of Law have been satisfied, but thereafter all such Accounts must satisfy
the requirements of this clause (e);
(f) such Account was, at the date of the original issuance of the
respective invoice therefor, payable more than 90 days after such date;
(g) such Account remains unpaid for more than 60 days after the date
set forth for payment in the invoice originally issued therefor; provided
that the aggregate Accounts of any Obligor with an original invoice date
more recent than 60 days prior to the date of determination shall be
reduced by the amount of net credit balances of such Obligor the dates of
which are earlier than 60 days prior to such date of determination;
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<PAGE> 20
(h) greater than 50% of the aggregate amount owing in respect of
Accounts by the Obligor thereon to the Borrower and its Subsidiaries remain
unpaid more than 60 days after the date set forth for payment in the
respective invoices originally issued therefor;
(i) such Account is a Defaulted Account, unless the obligations of the
Obligor under such Account are supported by a letter of credit issued by a
bank or other credit insurance reasonably acceptable to the Administrative
Agent;
(j) the Obligor thereon has been the Obligor in respect of Defaulted
Accounts at any time during the immediately preceding 12-month period
unless the payment of Accounts from such Obligor is secured in a manner
reasonably satisfactory to the Administrative Agent or, if the Account
arises subsequent to a decree or order for relief with respect to such
Obligor under the federal bankruptcy laws, as now or hereinafter in effect,
the timely payment and collection of such Account will not be impaired, as
determined by the Administrative Agent in its reasonable judgment;
(k) a proceeding under bankruptcy or similar laws has occurred and is
continuing with respect to the Obligor thereon unless the payment of
Accounts from such Obligor is secured in a manner reasonably satisfactory
to the Administrative Agent or, if the Account arises subsequent to a
decree or order for relief with respect to such Obligor under the federal
bankruptcy laws, as now or hereinafter in effect, the timely payment and
collection of such Account will not be impaired, as determined by the
Administrative Agent in its reasonable judgment;
(l) it is an Account which pursuant to any agreement between the
Borrower or any of its Domestic Subsidiaries, on the one hand, and the
Obligor thereon, on the other hand, may be set off or charged against (i)
any adverse security deposit or other similar deposit made by or for the
benefit of such Obligor or (ii) any trade payable, rebate obligation or
other similar liability owing to such Obligor; provided that amounts owing
in respect of such Account shall only be excluded to the extent of such
set-off or charge against such adverse security deposit, payable, rebate
obligation or other similar liability;
(m) if the aggregate amount owing in respect of Accounts by the Obligor
thereon to the Borrower and its Domestic Subsidiaries exceeds 20% of the
aggregate of all amounts owing in respect of all Accounts of the Borrower
and its Domestic Subsidiaries at such time; provided that amounts owing by
such Obligor in respect of Accounts shall only be excluded to the extent
such amounts exceed 20% of the aggregate of all amounts owing in respect of
all Accounts of the Borrower and its Domestic Subsidiaries at such time;
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<PAGE> 21
(n) such Account is the result of a chargeback, debit memo or a
reinvoice of a disputed Account or Defaulted Account;
(o) such Account arises from (i) the sale to the Obligor on a
bill-and-hold, guarantied sale, sale-or-return, sale on approval,
consignment, sample or trial basis, (ii) a sale subject to any retainages
or holdbacks of any type or (iii) any other sale to the Obligor made
pursuant to any other written agreement providing for repurchase or return;
provided that no amount owing in respect of such Account shall be excluded
pursuant to this clause solely as a result of customary quality warranties
or the general right to return goods provided by the Borrower or any of its
Domestic Subsidiaries;
(p) the Obligor thereon has disputed its liability on, or the Obligor
thereon has made any claim or defense with respect to, such Account or any
other Account due from such Obligor to any Loan Party, which has not been
resolved; provided that (x) amounts owing in respect of such Account shall
only be excluded to the extent of the amount owed by such Loan Party to the
Obligor thereon or the amount of such dispute, claim or defense, as
applicable, and (y) routine adjustments to an Account common in the
industry in which the Borrower and its Domestic Subsidiaries participate
and common to their businesses, such as for volume or quantity differences
or returned goods, will be deemed not to constitute a dispute, claim,
defense or set-off;
(q) such Account does not comply in all material respects with all
applicable legal requirements;
(r) such Account is not owned solely by the Borrower or any of its
Domestic Subsidiaries free and clear of all Liens or other rights or claims
of any other Person (except in favor of the Administrative Agent);
(s) except to the extent provided in the proviso to clause (e) above,
such Account is subject to any material restrictions on the transfer,
assignability or sale thereof, enforceable against the assignee, except
pursuant to any Loan Document or any other agreement or instrument
governing any Indebtedness of the Borrower or any of its Domestic
Subsidiaries which is permitted to be incurred by the Borrower or such
Domestic Subsidiary pursuant to this Agreement;
(t) except to the extent provided in the proviso to clause (e) above,
the Administrative Agent does not have a valid and perfected first priority
security interest in such Account for the benefit of the Lenders (except
for liens arising by operation of law, appropriate reserves for which have
been reasonably established for borrowing base purposes by the Borrower or
a Domestic Subsidiary) or such Account does not conform
15
<PAGE> 22
in all material respects to the representations and warranties
contained in this Agreement or any of the Security Documents; or
(u) such Account arose from a non-trade customer billing or non-trade
hearing aid billing.
"Eligible Inventory": at any time, an amount equal to the aggregate
value of all Inventory of the Borrower and its Domestic Subsidiaries as reported
per the perpetual inventory records, excluding (without duplication) (i) work in
process subassemblies included in raw materials, (ii) 100% of the aggregate
value of work in process, (iii) 100% of the aggregate value of supplies or
materials used or consumed in the business of the Borrower and its Domestic
Subsidiaries, (iv) manufacturing overhead for work in process and raw material
inventories (freight, scrap, obsolescence and shrink), (v) prepaid inventory,
(vi) preobsolescence inventory and (vii) custom-made parts included in raw
materials consistent with the past practices of the Borrower as described on
Schedule IV. In determining the amount to be so included, such Inventory shall
be valued at the standard cost maintained on a basis consistent with the
Borrower's or such Domestic Subsidiary's current and historical accounting
practice less reserves taken and adjustments made, if any, (i) on account of
physical inventory adjustments, (ii) for standard cost variances and shrinkage
accruals, (iii) for obsolete or slow moving goods as determined by Inventory
remaining unsold or not placed into production for a period of 52 weeks, (iv)
for goods returned or rejected by the Borrower's or such Domestic Subsidiary's
customers as damaged or defective, obsolete or otherwise nonsalable, (v) for
goods in transit to third parties that are not excluded pursuant to clause (a),
(b), (c) or (d) below, (vii) for Liens referred to in clause (c)(i) below and
(vii) for Liens referred to in clause (c)(ii) below as established by the
Administrative Agent in its sole discretion. Unless otherwise approved in
writing by the Administrative Agent, no amount with respect to any Inventory
shall be deemed to be included in any calculation of Eligible Inventory if:
(a) the Inventory is not owned solely by the Borrower or such Domestic
Subsidiary or is leased or on consignment or the Borrower or such Domestic
Subsidiary does not have good and valid title thereto;
(b) the Inventory is not located at property that is owned or leased by
the Borrower or such Domestic Subsidiary in the United States and that is
set forth on Schedule 5 to the Guarantee and Collateral Agreement;
(c) the Inventory is not subject to a perfected Lien in favor of the
Administrative Agent for the benefit of the Lenders prior to all other
Liens except (i) for Liens in favor of landlords with respect to which
either (x) a Landlord Lien Waiver has been obtained or (y) a Rent
Adjustment has been subtracted from the calculation of Eligible Inventory,
provided that if the Borrower or the respective Domestic Subsidiary
16
<PAGE> 23
fails to make all rental payments with respect to the property at which
such Inventory is located for a period of three consecutive months, such
Inventory shall not be included in the calculation of Eligible Inventory
and (ii) with respect to Eligible Inventory located at or in transit to
sites described in clause (b) above, for Liens for normal and customary
warehousing and transportation charges (appropriate reserves for which have
been reasonably established for Borrowing Base purposes by the Borrower or
such Domestic Subsidiary); or
(d) the Inventory does not conform in all material respects to the
representations and warranties contained in this Agreement or any of the
Security Documents.
"Environmental Costs": any and all costs or expenses (including,
without limitation, attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, fines,
penalties, damages, settlement payments, judgments and awards), of whatever kind
or nature, known or unknown, contingent or otherwise, arising out of, or in any
way relating to, any violation of, noncompliance with or liability under any
Environmental Laws or any orders, requirements, demands, or investigations of
any person related to any Environmental Laws. Environmental Costs include any
and all of the foregoing, without regard to whether they arise out of or are
related to any past, pending or threatened proceeding of any kind.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, and such requirements of any Governmental Authority properly
promulgated and having the force and effect of law or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as have been, or now or at any relevant time hereafter are, in effect.
"Environmental Permits": any and all permits, licenses, registrations,
notifications, exemptions and any other authorization required under any
Environmental Law.
"Environmental Program": as defined in subsection 7.8(c).
"Equity Investment": as defined in the recitals hereto.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined by the
Administrative Agent to
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<PAGE> 24
be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered
rates for deposits in Dollars with a term comparable to such Interest Period
that appears on the Telerate British Bankers Assoc. Interest Settlement Rates
Page (as defined below) at approximately 11:00 A.M., London time, on the second
full Business Day preceding the first day of such Interest Period; provided,
however, that if there shall at any time no longer exist a Telerate British
Bankers Assoc. Interest Settlement Rates Page, "Eurodollar Base Rate" shall
mean, with respect to each day during each Interest Period pertaining to a
Eurodollar Loan, the rate per annum equal to the rate at which Chase is offered
deposits in Dollars at approximately 11:00 A.M., London time, two Business Days
prior to the first day of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations in
respect of Dollars are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein and in an amount
comparable to the amount of its Eurodollar Loan to be outstanding during such
Interest Period. "Telerate British Bankers Assoc. Interest Settlement Rates
Page" shall mean the display designated as Page 3750 on the Telerate System
Incorporated Service (or such other page as may replace such page on such
service for the purpose of displaying the rates at which Dollar deposits are
offered by leading banks in the London interbank deposit market).
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
--------------------------------------
1.00 - Eurodollar Reserve Requirements
"Eurodollar Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurodollar funding (currently referred to as "Eurodollar Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Event of Default": any of the events specified in Section 9, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
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<PAGE> 25
"Excess Cash Flow": for any period, Consolidated EBITDA, minus (i) any
Capital Expenditures made in cash during such period, minus (ii) any principal
payments (other than principal payments during such period pursuant to
subsection 4.4(c) or (d) unless and to the extent that the event giving rise to
such mandatory prepayment causes an increase in Consolidated EBITDA) on the Term
Loans made during such period, minus (iii) any principal payments resulting in a
permanent reduction of any other Indebtedness of the Borrower or any of its
consolidated Subsidiaries made during such period, minus (iv) Consolidated
Interest Expense for such period, minus (v) any taxes paid or payable in cash
for such period, minus (vi) the Net Cash Proceeds from any Asset Sale to the
extent that such Net Cash Proceeds (A) (without duplication of clause (i) or
(vii) of this definition) consist of any Reinvested Amount and (B) are included
in the calculation of Consolidated EBITDA, minus (vii) (without duplication of
clause (i) of this definition) any Investment made in accordance with subsection
8.9(e), (g) or (i), minus (viii) the proceeds of any Sale and Leaseback
Transactions entered into by the Borrower or any of its Subsidiaries during such
period, plus (ix) the excess, if any, of Working Investment at the beginning of
such period over Working Investment at the end of such period (or minus the
excess, if any, of Working Investment at the end of such period over Working
Investment at the beginning such period).
"Exchange Act": the Securities Exchange Act of 1934, as amended from
time to time.
"Excluded Foreign Account": an Account the sale giving rise to which is
to an Obligor in any jurisdiction outside the United States or Canada.
"Extension of Credit": as to any Lender, the making of, or the issuance
of, or participation in, a Loan by such Lender or the issuance of, or
participation in, a Letter of Credit by such Lender.
"FIRREA": the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended from time to time.
"Federal Funds Effective Rate": as defined in the definition of the
term "ABR" in this subsection 1.1.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Foreign Subsidiary": any Subsidiary of the Borrower which is organized
and existing under the laws of any jurisdiction outside of the United States of
America, TCI Holding and the Foreign Subsidiary Holding Company.
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"Foreign Subsidiary Holding Company": as defined in subsection 7.10(b).
"Foreign Subsidiary Indebtedness Amount": as of any date of
determination, the greater of (x) $10,000,000 and (y) an amount equal to 10% of
Consolidated Tangible Assets as of such date.
"GAAP": with respect to the covenants contained in subsections 8.1, 8.2
and 8.8 and all defined terms relating thereto (including, without limitation,
the defined term "Consolidated Funded Indebtedness") and the defined term
"Excess Cash Flow", generally accepted accounting principles in the United
States of America in effect on the Effective Date and, for all other purposes
under this Agreement, generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, the European Union.
"Greenwich II": as defined in the recitals hereto.
"GSCP": as defined in the recitals hereto.
"GSCP Equity Investment": as defined in the recitals hereto.
"GSCP Group": Greenwich Street Capital Partners, L.P., Greenwich Street
Capital Offshore Fund, Ltd., The Travelers Insurance Company, The Travelers Life
and Annuity Company, TRV Employees Fund, Inc., Smith Barney Holdings Inc. and
their respective Affiliates; any other investment fund or vehicle managed or
sponsored by Greenwich Street Capital Partners, Inc., The Travelers Insurance
Company, The Travelers Life and Annuity Company, Smith Barney Holdings Inc. or
any of their respective Affiliates; and any limited or general partners of, or
other investors in, any member of the GSCP Group.
"Guarantee": as defined in the definition of "Guarantor".
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by Holdings, the Borrower, each Domestic
Subsidiary of the Borrower in existence on the Effective Date and the
Administrative Agent, substantially in the form of Exhibit B, as the same may be
amended, supplemented or otherwise modified from time to time.
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"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any such obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Guarantor": any Person which is now or hereafter a party to (a) the
Guarantee and Collateral Agreement or (b) any other guarantee (a "Guarantee")
hereafter delivered to the Administrative Agent guaranteeing the obligations and
liabilities of the Loan Parties hereunder or under any other Loan Documents.
"Holdings": as defined in the Recitals hereto.
"Indebtedness": of any Person at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) for purposes of subsection 8.2 and Section
9(e) only, all obligations of such Person in respect of interest rate protection
agreements, interest rate futures, interest rate options, interest rate caps and
any other interest rate hedge arrangements, (f) for purposes of subsection 8.2
only,
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all preferred stock issued by such person and (g) all indebtedness or
obligations of the types referred to in the preceding clauses (a) through (f)
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 5.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
February, May, August and November to occur while such Loan is outstanding and,
if such ABR Loan is a Term Loan, the date of each payment of principal thereof,
(b) as to any Eurodollar Loan having an Interest Period of three months or less,
the last day of such Interest Period, and (c) as to any Eurodollar Loan having
an Interest Period longer than three months, (x) each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period and (y)
the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the Borrower in
its notice of borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the Borrower by
irrevocable notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto;
provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;
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(2) any Interest Period that would otherwise extend beyond (a) the
Termination Date (in the case of Revolving Credit Loans) shall end on the
Termination Date (for all purposes other than subsection 4.12), (b) the
Tranche A Maturity Date (in the case of the Tranche A Term Loans) shall end
on the Tranche A Maturity Date (for all purposes other than subsection
4.12) and (c) the Tranche B Maturity Date (in the case of the Tranche B
Term Loans) shall end on the Tranche B Maturity Date (for all purposes
other than subsection 4.12);
(3) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to require a
scheduled payment of any Eurodollar Loan during an Interest Period for such
Loan.
"Interest Rate Protection Agreement": any interest rate protection
agreement, interest rate future, interest rate option, interest rate cap or
collar or other interest rate hedge arrangement with (i) any Lender or (ii) any
financial institution reasonably acceptable to the Administrative Agent, to or
under which the Borrower is a party or a beneficiary on the Effective Date or
becomes a party or a beneficiary after the Effective Date.
"Inventory": as defined in the Uniform Commercial Code as in effect in
the State of New York from time to time, and including, without limitation, raw
materials and all sub-assemblies held for sale.
"Investment Company Act": the Investment Company Act of 1940, as
amended from time to time.
"Investments": as defined in subsection 8.9.
"Issuing Lender": Chase or any of its Affiliates, in its capacity as
issuer of any Letter of Credit.
"Landlord Lien Waiver": a written agreement in substantially the form
of Exhibit K or otherwise reasonably acceptable to the Administrative Agent.
"L/C Fee Payment Date": with respect to any Letter of Credit, the last
day of each February, May, August and November to occur after the date of
issuance thereof and the first such day to occur on or after the date of expiry
thereof.
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"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5(a).
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"Lenders": as defined in the Preamble hereto.
"Letters of Credit": as defined in subsection 3.1(a).
"Leverage Ratio": at any date of determination, the ratio of (a)
Consolidated Funded Indebtedness at such date to (b) Consolidated EBITDA for the
period of one year ending on such date.
"Lien": any mortgage, pledge, hypothecation, assignment, security
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing).
"Loan": a Revolving Credit Loan, a Tranche A Term Loan, a Tranche B
Term Loan or a Swing Line Loan, as the context shall require; collectively, the
"Loans".
"Loan Documents": this Agreement, the Telex Assumption Agreement, any
Notes, the Applications, the Guarantees and the Security Documents, each as
amended, supplemented, waived or otherwise modified from time to time.
"Loan Parties": Holdings, the Borrower and each Subsidiary of the
Borrower which is a party to a Loan Document; individually, a "Loan Party".
"Management Equity Investment": as defined in the recitals hereto.
"Management Investors": as defined in the recitals hereto.
"Material Adverse Effect": a material adverse effect on (a) the
business, assets, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole, or (b) the
validity or enforceability as to any Loan Party thereto of
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this Agreement, any of the Notes or any of the other Loan Documents or the
rights and remedies of the Administrative Agent and the Lenders under the Loan
Documents taken as a whole.
"Materials of Environmental Concern": any gasoline or petroleum
(including, without limitation, crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances or materials or wastes defined or
regulated as such in or under or which may give rise to liability under any
applicable Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Merger": as defined in the recitals hereto.
"Mortgaged Properties": the collective reference to the real properties
owned in fee by the Loan Parties and described on Schedule 5.8, including,
without limitation, all buildings, improvements, structures and fixtures now or
subsequently located thereon and owned by any such Loan Party.
"Mortgages": (i) each of the mortgages executed and delivered by the
Borrower and its Subsidiaries encumbering each of the Mortgaged Properties,
substantially in the form of Exhibit D (with such modifications thereto as the
Administrative Agent on or before the Effective Date shall reasonably determine
is necessary in any state to create a valid and enforceable first mortgage Lien
securing the obligations and liabilities of the Borrower or any of its
Subsidiaries, as the case may be, under the Loan Documents) and (ii) each of the
mortgages and deeds of trust, if any, executed and delivered by the Borrower and
its Subsidiaries to the Administrative Agent pursuant to subsection 7.9, as the
same may be amended, supplemented, waived or otherwise modified from time to
time.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": with respect to any Asset Sale (including, without
limitation, any Sale and Leaseback Transaction permitted under subsection 8.11),
any sale or issuance of equity securities of the Borrower or any of its
Subsidiaries, the issuance of any debt securities or any borrowings by the
Borrower or any of its Subsidiaries (other than issuances and borrowings
permitted pursuant to subsection 8.2, except as otherwise specified), an amount
equal to the gross proceeds in cash and Cash Equivalents (including cash
payments received by way of deferred payment of principal pursuant to note,
installment receivable, purchase price adjustment or otherwise, but only when
such cash payments are received) of such Asset Sale, sale, issuance or
borrowing, net of (i) reasonable attorneys' fees, accountants' fees, brokerage,
consultant and other customary fees, underwriting commissions and other
reasonable fees and expenses actually incurred in connection with such Asset
Sale, sale, issuance or borrowing, (ii) taxes paid or reasonably estimated to be
payable as a result thereof, (iii) appropriate amounts provided or to be
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provided by the Borrower or any of its Subsidiaries as a reserve, in accordance
with GAAP, with respect to any liabilities associated with such Asset Sale and
retained by the Borrower or any such Subsidiary after such Asset Sale and other
appropriate amounts to be used by the Borrower or any of its Subsidiaries to
discharge or pay on a current basis any other liabilities associated with such
Asset Sale and (iv) in the case of a sale or Sale and Leaseback Transaction of
or involving an asset subject to a Lien securing any Indebtedness, payments made
and installment payments required to be made to repay such Indebtedness,
including, without limitation, payments in respect of principal, interest and
prepayment premiums and penalties.
"Non-Excluded Taxes": as defined in subsection 4.11.
"Notes": the collective reference to the Revolving Credit Notes and the
Term Notes.
"Obligor": with respect to an Account, the purchaser of the goods or
services giving rise to such Account or any other Person obligated to make
payment in respect of such purchase of such goods or services.
"Other Representatives": CSI, in its capacity as arranger of the
Commitments hereunder and the Issuing Lender, in its capacity as such.
"Participants": as defined in subsection 11.6(b).
"Patent and Trademark Security Agreement": the Patent and Trademark
Security Agreement executed and delivered by the Borrower and each of its
Domestic Subsidiaries, substantially in the form of Exhibit C, as the same may
be amended, supplemented, waived or otherwise modified from time to time.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor thereto).
"Permitted Hedging Arrangement": as defined in subsection 8.16.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA.
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"Prime Rate": as defined in the definition of the term "ABR" in this
subsection 1.1.
"Pro Forma Balance Sheet": as defined in subsection 5.1(b).
"Pro Forma Date": as defined in subsection 5.1(b).
"Recapitalization": as defined in the recitals hereto.
"Recapitalization Agreement": as defined in the recitals hereto.
"Recapitalization Documents": the collective reference to the
Recapitalization Agreement, any stock certificates, and any and all other
documents and certificates, necessary or advisable, in the reasonable judgement
of GSCP, to consummate the Recapitalization (including the Merger and the Telex
Assumption).
"Refunded Swing Line Loans": as defined in subsection 2.5(e).
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reimbursement Obligations": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.5(a) for amounts drawn
under Letters of Credit.
"Reinvested Amount": with respect to any Asset Sale permitted by
subsection 8.6(g) or (h), that portion of the Net Cash Proceeds thereof as
shall, according to a certificate of a Responsible Officer of the Borrower
delivered to the Administrative Agent within 30 days of such Asset Sale, be
reinvested in the business of the Borrower and its Subsidiaries in a manner
consistent with the requirements of subsection 8.15(a) and the other provisions
hereof within one year of the receipt of such Net Cash Proceeds or, if such
reinvestment is in a project authorized by the board of directors of the
Borrower that will take longer than one year to complete, the period of time
necessary to complete such project; provided that (i) if any such certificate of
a Responsible Officer is not delivered to the Administrative Agent on the date
of such Asset Sale, any Net Cash Proceeds of such Asset Sale shall be
immediately (x) deposited in a cash collateral account established at Chase to
be held as collateral in favor of the Administrative Agent for the benefit of
the Lenders on terms reasonably satisfactory to the Administrative Agent and
shall remain on deposit in such cash collateral account until such certificate
of a Responsible Officer is delivered to the Administrative Agent or (y) used to
make a prepayment of the Revolving Credit Loans in accordance with subsection
4.4(a); provided that, notwithstanding anything in this Agreement to the
contrary, the Borrower may not request any Extension of Credit under the
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Revolving Credit Commitments that would reduce the aggregate amount of the
Available Revolving Credit Commitments to an amount that is less than the amount
of any such prepayment until such certificate of a Responsible Officer is
delivered to the Administrative Agent and (ii) any Net Cash Proceeds not so
reinvested within one year or such later day, as applicable, shall be utilized
at the end of such period or to prepay the Loans pursuant to subsection 4.4(d).
"Rent Adjustment": with respect to any property leased by the Borrower
or any of its Domestic Subsidiaries where any Inventory is located which may
become subject to Liens in favor of the landlord thereof arising by operation of
law, an amount equal to six months' rent at such premises.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section
2615 or any successor regulation thereto.
"Required Lenders": at any time, Lenders the Total Credit Percentages
of which aggregate at least 51%.
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, statute, ordinance, code, decree, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
material property or to which such Person or any of its material property is
subject, including, without limitation, laws, ordinances and regulations
pertaining to zoning, occupancy and subdivision of real properties; provided
that the foregoing shall not apply to any non-binding recommendation of any
Governmental Authority.
"Responsible Officer": as to any Person, any of the following officers
of such Person: (i) the chief executive officer or the president of such Person
and, with respect to financial matters, the chief financial officer, the senior
vice president - finance, the treasurer or the controller of such Person, (ii)
any vice president of such Person or, with respect to financial matters, any
assistant treasurer or assistant controller of such Person, who has been
designated in writing to the Administrative Agent as a Responsible Officer by
such chief executive officer or president of such Person or, with respect to
financial matters, such chief financial officer of such Person, (iii) with
respect to subsection 7.7 and without limiting the foregoing, the general
counsel of such Person and (iv) with respect to ERISA matters, the senior vice
president - human resources (or substantial equivalent) of such Person.
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"Restricted Subsidiary": as defined in the Senior Subordinated
Indenture.
"Revolving Credit Commitment": as to any Revolving Credit Lender, its
obligation to make Revolving Credit Loans to, and/or make or participate in
Swing Line Loans made to, and/or issue or participate in Letters of Credit
issued on behalf of, the Borrower in an aggregate amount not to exceed at any
one time outstanding the amount set forth opposite such Revolving Credit
Lender's name in Schedule I under the heading "Revolving Credit Commitment" or,
in the case of any Lender that is an Assignee, the amount of the assigning
Lender's Revolving Credit Commitment assigned to such Assignee pursuant to
subsection 11.6(c) (in each case as such amount may be adjusted from time to
time as provided herein); collectively, as to all the Revolving Credit Lenders,
the "Revolving Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Revolving Credit
Lender, the percentage of the aggregate Revolving Credit Commitments constituted
by its Revolving Credit Commitment (or, if the Revolving Credit Commitments have
terminated or expired, the percentage which (i) the sum of (a) such Lender's
then outstanding Revolving Credit Loans plus (b) such Lender's interests in the
aggregate L/C Obligations and Swing Line Loans then outstanding then constitutes
of (ii) the sum of (a) the aggregate Revolving Credit Loans of all the Revolving
Credit Lenders then outstanding plus (b) the aggregate L/C Obligations and Swing
Line Loans then outstanding).
"Revolving Credit Commitment Period": the period from and including the
Effective Date to but not including the Termination Date, or such earlier date
as the Revolving Credit Commitments shall terminate as provided herein.
"Revolving Credit Lender": any Lender having a Revolving Credit
Commitment hereunder.
"Revolving Credit Loans": as defined in subsection 2.1.
"Revolving Credit Note": as defined in subsection 2.2.
"Sale and Leaseback Transaction": as defined in subsection 8.11.
"Securities Act": the Securities Act of 1933, as amended from time to
time.
"SEC": the Securities and Exchange Commission.
"Security Documents": the collective reference to the Mortgages, the
Guarantee and Collateral Agreement, the Patent and Trademark Security Agreement,
and all other similar security documents hereafter delivered to the
Administrative Agent granting a Lien on any asset
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or assets of any Person to secure the obligations and liabilities of the
Borrower hereunder, under any Notes and/or under any of the other Loan Documents
or to secure any guarantee of any such obligations and liabilities, including,
without limitation, any security documents executed and delivered or caused to
be delivered to the Administrative Agent pursuant to subsection 8.15(b) or
8.15(c).
"Senior Subordinated Indenture": the Indenture, dated as of May 2,
1997, between Acquisition Co. and Manufacturers and Traders Trust Company and
Agency Services, as trustee, as the same may be amended, supplemented or
otherwise modified in accordance with the terms of this Agreement, pursuant to
which the Senior Subordinated Notes are issued.
"Senior Subordinated Notes": as defined in the recitals hereto.
"Senior Subordinated Notes Documents": the collective reference to the
Senior Subordinated Notes and the Senior Subordinated Indenture and each of the
other instruments and documents executed and delivered pursuant to any of the
foregoing, as the same may be amended, supplemented, waived or otherwise
modified from time to time in accordance with subsection 8.12 to the extent
applicable; individually a "Senior Subordinated Note Document."
"Set": the collective reference to Eurodollar Loans, the then current
Interest Periods with respect to all of which begin on the same date and end on
the same later date (whether or not such Loans shall originally have been made
on the same day).
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Solvent" and "Solvency": with respect to any Person on a particular
date, the condition that, on such date, (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature, and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small amount of capital.
"Spot Exchange Rate": on any day, with respect to any Alternative
Currency, the spot rate at which Dollars are offered for such Alternative
Currency on such day by the Administrative Agent in London or in the interbank
market where its foreign currency exchange operations in respect of such
Alternative Currency are then being conducted at approximately
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11:00 a.m. (local time). Notwithstanding the foregoing, if for any reason at the
time of any determination of the Spot Exchange Rate as described above, no such
rate is being quoted, the Administrative Agent may use any reasonable method,
applied consistently, it deems appropriate to determine such rate, and such
determination shall be conclusive absent manifest error.
"Standby Letter of Credit": as defined in subsection 3.1(a).
"Subordinated Debentures With Warrants": as defined in the recitals
hereto.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrower.
"Swing Line Commitment": the Swing Line Lender's obligation to make
Swing Line Loans pursuant to subsection 2.5
"Swing Line Lender": Chase, in its capacity as provider of Swing Line
Loans.
"Swing Line Loan Participation Certificate": a certificate evidencing a
Revolving Credit Lender's participation in Swing Line Loans pursuant to
subsection 2.5(d) in form and substance reasonably satisfactory to the Swing
Line Lender.
"Swing Line Loans": as defined in subsection 2.5(a).
"Swing Line Note": as defined in subsection 2.5(b).
"Tax Sharing Agreement": the Tax Sharing Agreement, dated as of May 6,
1997, among Holdings and the Borrower and (and each of their permitted
successors and assigns thereunder) as the same may be amended, supplemented or
otherwise modified from to time.
"TCI Holding": TCI Holdings Corp., a Delaware corporation.
"Telex Assumption": as defined in the recitals hereto.
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"Telex Assumption Agreement": the Assignment and Assumption Agreement,
dated as of the Effective Date, among Holdings, Telex and the Administrative
Agent, in substantially the form of Exhibit M.
"Telex Notes": as defined in the recitals hereto.
"Tender Offer": as defined in the recitals hereto.
"Tender Offer Documents": the collective reference to any and all
documents (each as amended, supplemented or otherwise modified from time to
time), including the Telex Notes, necessary or advisable, in the reasonable
judgement of Telex to consummate the Tender Offer.
"Termination Date": November 6, 2002.
"Term Loan": as defined in subsection 2.6, collectively, the "Term
Loans".
"Term Loan Commitments": the collective reference to the Tranche A Term
Loan Commitments and the Tranche B Term Loan Commitments; collectively, as to
all the Term Loan Lenders, the "Term Commitments."
"Term Loan Lenders": the collective reference to the Tranche A Term
Loan Lenders and the Tranche B Term Loan Lenders.
"Term Note" and "Term Notes": as defined in subsection 2.8(a).
"Three Month Secondary CD Rate": as defined in the definition of the
term "ABR" in this subsection 1.1.
"Total Credit Percentage": as to any Lender, the percentage of the
aggregate Revolving Credit Commitments and Term Loan Commitments constituted by
such Lender's Revolving Credit Commitment and Term Loan Commitments, or
following the Effective Date, the percentage representing a fraction the
numerator of which is the sum of (i) the aggregate principal amount of such
Lender's Term Loans then outstanding plus (ii) the Revolving Credit Commitment
of such Lender (or, following the termination or expiration of the Revolving
Credit Commitments, the sum of (x) the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding plus (y) such Lender's
Revolving Commitment Percentage of all L/C Obligations then outstanding), and
the denominator of which is the sum of (i) the aggregate principal amount of
Term Loans of all Lenders then outstanding plus (ii) the aggregate Revolving
Credit Commitments of all Lenders (or, following the termination or expiration
of the Revolving Credit Commitments, the sum of (x) the aggregate principal
amount of all Revolving Credit
32
<PAGE> 39
Loans then outstanding plus (y) the aggregate principal amount of all L/C
Obligations then outstanding).
"Tranche A Maturity Date": November 6, 2002.
"Tranche A Term Loan Commitment": as to any Tranche A Term Loan Lender,
its obligation to make a Tranche A Term Loan to the Borrower pursuant to
subsection 2.5 in an aggregate amount equal to the amount set forth under such
Tranche A Term Loan Lender's name in Schedule I opposite the heading "Tranche A
Term Loan Commitment", collectively, the "Tranche A Term Loan Commitments".
"Tranche A Term Loan Commitment Percentage": as to any Tranche A Term
Loan Lender, the percentage of the aggregate Tranche A Term Loan Commitments
constituted by its Tranche A Term Loan Commitment or, following the Effective
Date, the percentage of the aggregate outstanding Tranche A Term Loans
constituted by its Tranche A Term Loan.
"Tranche A Term Loan Lender": any Lender having a Tranche A Term Loan
Commitment hereunder or that holds outstanding Tranche A Term Loans.
"Tranche A Term Loan": as defined in subsection 2.6.
"Tranche A Term Note": as defined in subsection 2.7(a).
"Tranche B Maturity Date": November 6, 2004.
"Tranche B Term Loan Commitment": as to any Tranche B Term Loan Lender,
its obligation to make a Tranche B Term Loan to the Borrower pursuant to
subsection 2.5 in an aggregate amount equal to the amount set forth under such
Tranche B Term Loan Lender's name in Schedule I opposite the heading "Tranche B
Term Loan Commitment" collectively, the "Tranche B Term Loan Commitments".
"Tranche B Term Loan Commitment Percentage": as to any Tranche B Term
Loan Lender, the percentage of the aggregate Tranche B Term Loan Commitments
constituted by its Tranche B Term Loan Commitment or, following the Effective
Date, the percentage of the aggregate outstanding Tranche B Term Loans
constituted by its Tranche B Term Loan.
"Tranche B Term Loan Lender": any Lender having a Tranche B Term Loan
Commitment hereunder or that holds outstanding Tranche B Term Loans.
"Tranche B Term Loan": as defined in subsection 2.6.
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<PAGE> 40
"Tranche B Term Note": as defined in subsection 2.8(a).
"Transactions": the collective reference to the Tender Offer, the
Recapitalization, the Merger, the Telex Assumption and the issuance of the
Senior Subordinated Notes.
"Transaction Documents": the collective reference to the
Recapitalization Documents, the Tender Offer Documents and the Senior
Subordinated Note Documents.
"Transferee": as defined in subsection 11.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.
"Underfunding": the excess of the present value of all accrued benefits
under a Plan (based on those assumptions used to fund such Plan), determined as
of the most recent annual valuation date, over the value of the assets of such
Plan allocable to such accrued benefits.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"U.S. Tax Compliance Certificate": as defined in subsection 4.11(b).
"Wholly Owned Subsidiary": as to any Person, any Subsidiary of such
Person of which such Person owns, directly or indirectly through one or more
Wholly Owned Subsidiaries, all of the Capital Stock of such Subsidiary other
than directors qualifying shares or shares held by nominees.
"Working Investment": at any date of determination thereof, (a) the sum
(determined without duplication for the Borrower and its Subsidiaries) of (i)
the unpaid face amount of all accounts receivable of the Borrower and its
Subsidiaries as at such date of determination, plus (ii) the aggregate amount of
prepaid expenses and other current assets (other than cash) of the Borrower and
its Subsidiaries as at such date of determination, minus (b) the sum (determined
without duplication for the Borrower and its Subsidiaries) of (i) the unpaid
amount of all accounts payable of the Borrower and its Subsidiaries as at such
date of determination, plus (ii) the aggregate amount of all accrued expenses of
the Borrower and its Subsidiaries as at such date of determination (but
excluding from accounts payable and accrued expenses, the current portion of
long-term debt and all accrued interest and taxes).
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Note, any other Loan Document or any certificate or other
document made or delivered pursuant hereto.
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<PAGE> 41
(b) As used herein and in any Note and any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the then outstanding L/C
Obligations and the then outstanding Swing Line Loans, does not exceed the
amount of such Lender's Revolving Credit Commitment then in effect. During the
Revolving Credit Commitment Period, the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof,
provided that not more than $7,200,000 in Revolving Credit Loans will be
available for borrowing on the Effective Date.
(b) The Revolving Credit Loans may be made from time to time in (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 2.3 and 4.2, provided that no Revolving Credit Loan shall be made as
a Eurodollar Loan after the day that is one month prior to the Termination Date.
2.2 Revolving Credit Notes. The Borrower agrees that, upon the request
to the Administrative Agent by any Revolving Credit Lender made on or prior to
the Effective Date or in connection with any assignment pursuant to subsection
11.6(c), in order to evidence such Lender's Revolving Credit Loans the Borrower
will execute and deliver to such Lender a promissory note substantially in the
form of Exhibit A-1, with appropriate insertions as to payee, date and principal
amount (each, as amended, supplemented, replaced or otherwise modified
35
<PAGE> 42
from time to time, a "Revolving Credit Note"), payable to the order of such
Lender and in a principal amount equal to the aggregate unpaid principal amount
of all Revolving Credit Loans made by such Lender to the Borrower. Each
Revolving Credit Note shall (x) be dated the Effective Date, (y) be stated to
mature on the Termination Date and (z) provide for the payment of interest in
accordance with subsection 4.1. A Revolving Credit Note may be assigned or
otherwise transferred only by registration of such assignment or transfer in the
Register (and each Revolving Credit Note shall expressly so provide). Any
assignment or transfer of a Revolving Credit Note shall be registered in the
Register only upon surrender for registration of assignment or transfer of the
Revolving Credit Note accompanied by an Assignment and Acceptance duly executed
by the assigning Lender, and thereupon a new Revolving Credit Note shall be
issued to the designated Assignee and the surrendered Revolving Credit Note
shall be returned by the Administrative Agent to the Borrower marked
"cancelled". No assignment of a Revolving Credit Note shall be effective unless
it shall have been recorded in the Register by the Administrative Agent as
provided in this subsection 2.2.
2.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:30 P.M., New York City time, at least (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans or (b) one
Business Day prior to the requested Borrowing Date, otherwise), specifying (i)
the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and
(iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths of the
initial Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of ABR Loans, except
any ABR Loan to be used solely to pay a like amount of outstanding Reimbursement
Obligations or Swing Line Loans, $1,000,000 or a whole multiple of $500,000 in
excess thereof (or, if the then Available Revolving Credit Commitments are less
than $1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$1,000,000 or a whole multiple of $500,000 in excess thereof. Upon receipt of
any such notice from the Borrower, the Administrative Agent shall promptly
notify each Revolving Credit Lender thereof. Subject to the satisfaction of the
conditions precedent specified in subsection 6.2, each Revolving Credit Lender
will make the amount of its pro rata share of each borrowing of Revolving Credit
Loans available to the Administrative Agent for the account of the Borrower
identified in such notice at the office of the Administrative Agent specified in
subsection 11.2 prior to 12:30 P.M. (or 10:00 A.M., in the case of the initial
borrowing hereunder), New York City time, or at such other office of the
Administrative Agent or at such other time as to which the Administrative Agent
shall notify such Revolving Credit Lender and the Borrower reasonably in advance
of the Borrowing Date with respect thereto on the Borrowing Date requested by
the Borrower and in funds immediately available to the Administrative Agent.
Such borrowing will
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<PAGE> 43
then be made available to the Borrower identified in the
notice by the Administrative Agent crediting the account of the Borrower on the
books of such office with the aggregate of the amounts made available to the
Administrative Agent by the Revolving Credit Lenders and in like funds as
received by the Administrative Agent.
2.4 Termination or Reduction of Revolving Credit Commitments. The
Borrower shall have the right, upon not less than three Business Days' notice to
the Administrative Agent (which will promptly notify the Lenders thereof), to
terminate the Revolving Credit Commitments or, from time to time, to reduce the
amount of the Revolving Credit Commitments; provided that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans and Swing Line Loans made on the
effective date thereof, the aggregate principal amount of the Revolving Credit
Loans then outstanding, when added to the then outstanding L/C Obligations and
the then outstanding Swing Line Loans, would exceed the Revolving Credit
Commitments then in effect. Any such reduction shall be in an amount equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce
permanently the Revolving Credit Commitments then in effect.
2.5 Swing Line Commitment. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"Swing Line Loan"; collectively, the "Swing Line Loans") to the Borrower from
time to time during the Revolving Credit Commitment Period in an aggregate
principal amount at any one time outstanding not to exceed $1,000,000, provided
that at no time may the sum of the then outstanding Swing Line Loans, Revolving
Credit Loans and L/C Obligations exceed the Revolving Credit Commitments then in
effect. Amounts borrowed by the Borrower under this subsection 2.5 may be repaid
and, through but excluding the Termination Date, reborrowed. All Swing Line
Loans shall be made as ABR Loans and shall not be entitled to be converted into
Eurodollar Loans. The Borrower shall give the Swing Line Lender irrevocable
notice (which notice must be received by the Swing Line Lender prior to 12:00
Noon, New York City time) on the requested Borrowing Date specifying (i) the
amount of the requested Swing Line Loan which shall be in a minimum amount of
$100,000 or whole multiples of $50,000 in excess thereof. The proceeds of the
Swing Line Loan will be made available by the Swing Line Lender to the Borrower
at the office of the Swing Line Lender by crediting the account of the Borrower
at such office with such proceeds in Dollars.
(b) The Borrower agrees that, upon the request to the Administrative
Agent by the Swing Line Lender made on or prior to the Effective Date or in
connection with any assignment pursuant to subsection 11.6(c), in order to
evidence the Swing Line Loans the Borrower will execute and deliver to the Swing
Line Lender a promissory note substantially in the form of Exhibit A-4, with
appropriate insertions (as the same may be amended, supplemented, replaced or
otherwise modified from time to time, the "Swing Line Note"), payable to the
order of the Swing Line Lender and representing the obligation of the Borrower
to
37
<PAGE> 44
pay the amount of the Swing Line Commitment or, if less, the unpaid principal
amount of the Swing Line Loans made to the Borrower, with interest thereon as
prescribed in subsection 4.1. The Swing Line Note shall (i) be dated the
Effective Date, (i) be stated to mature on the Termination Date and (iii)
provide for the payment of interest in accordance with subsection 4.1.
(c) The Swing Line Lender, at any time in its sole and absolute
discretion may, and, at any time as there shall be a Swing Line Loan outstanding
for more than seven Business Days, the Swing Line Lender shall, on behalf of the
Borrower (which hereby irrevocably directs and authorizes the Swing Line Lender
to act on its behalf), request each Revolving Credit Lender, including the Swing
Line Lender, to make a Revolving Credit Loan as an ABR Loan in an amount equal
to such Revolving Credit Lender's Revolving Credit Commitment Percentage of the
principal amount of all of the Swing Line Loans (the "Refunded Swing Line
Loans") outstanding on the date such notice is given; provided that the
provisions of this subsection shall not affect the obligations of the Borrower
to prepay Swing Line Loans in accordance with the provisions of subsection
4.4(g). Unless the Revolving Credit Commitments shall have expired or terminated
(in which event the procedures of paragraph (d) of this subsection 2.5 shall
apply), each Revolving Credit Lender will make the proceeds of its Revolving
Credit Loan available to the Administrative Agent for the account of the Swing
Line Lender at the office of the Administrative Agent prior to 12:00 Noon, New
York City time, in funds immediately available on the Business Day next
succeeding the date such notice is given. The proceeds of such Revolving Credit
Loans shall be immediately applied to repay the Refunded Swing Line Loans.
(d) If the Revolving Credit Commitments shall expire or terminate at
any time while Swing Line Loans are outstanding, each Revolving Credit Lender
shall, at the option of the Swing Line Lender exercised reasonably, either (i)
notwithstanding the expiration ortermination of the Revolving Credit
Commitments, make a Revolving Credit Loan as an ABR Loan (which Revolving Credit
Loan shall be deemed a "Revolving Credit Loan" for all purposes of this
Agreement and the other Loan Documents) or (ii) purchase an undivided
participating interest in such Swing Line Loans, in either case in an amount
equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage
determined on the date of, and immediately prior to, the expiration or
termination of the Revolving Credit Commitments of the aggregate principal
amount of such Swing Line Loans. Each Revolving Credit Lender will make the
proceeds of any Revolving Credit Loan made pursuant to the immediately preceding
sentence available to the Administrative Agent for the account of the Swing Line
Lender at the office of the Administrative Agent prior to 12:00 Noon, New York
City time, in funds immediately available on the Business Day next succeeding
the date on which the Revolving Credit Commitments expire or terminate. The
proceeds of such Revolving Credit Loans shall be immediately applied to repay
the Swing Line Loans outstanding on the date of termination or expiration of the
Revolving Credit Commitments. In the event that the Revolving Credit Lenders
purchase undivided participating interests pursuant to the first sentence of
this paragraph (d), each Revolving Credit Lender shall immediately transfer to
the Swing Line Lender, in immediately
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<PAGE> 45
available funds, the amount of its participation and upon receipt thereof the
Swing Line Lender will deliver to such Revolving Credit Lender a Swing Line Loan
Participation Certificate dated the date of receipt of such funds and in such
amount.
(e) Whenever, at any time after the Swing Line Lender has received from
any Revolving Credit Lender such Revolving Credit Lender's participating
interest in a Swing Line Loan, the Swing Line Lender receives any payment on
account thereof, the Swing Line Lender will distribute to such Revolving Credit
Lender its participating interest in such amount (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which such
Revolving Credit Lender's participating interest was outstanding and funded);
provided, however, that in the event that such payment received by the Swing
Line Lender is required to be returned, such Revolving Credit Lender will return
to the Swing Line Lender any portion thereof previously distributed by the Swing
Line Lender to it.
2.6 Term Loans. Subject to the terms and conditions hereof, each Term
Loan Lender severally agrees to make (i) a term loan (a "Tranche A Term Loan")
on the Effective Date in the principal amount set forth under such Lender's name
in Schedule I opposite the heading "Tranche A Term Loan Commitment" and/or (ii)
a term loan (a "Tranche B Term Loan" and together with the Tranche A Term Loans,
the "Term Loans") on the Effective Date in the principal amount set forth under
such Lender's name in Schedule I opposite the heading "Tranche B Term Loan
Commitment". The Term Loans may from time to time be (i) Eurodollar Loans, (ii)
ABR Loans or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with subsection 2.9 and 4.2.
Amounts paid on account of the Term Loans pursuant to subsections 2.7 or 2.8 may
not be reborrowed.
2.7 Tranche A Term Notes. (a) The Borrower agrees that, upon the
request to the Administrative Agent by any Tranche A Term Loan Lender made on or
prior to the Effective Date or in connection with any assignment pursuant to
subsection 11.6(c), to evidence such Lender's Tranche A Term Loan the Borrower
will execute and deliver to such Lender a promissory note substantially in the
form of Exhibit A-2 (each, as amended, supplemented, replaced or otherwise
modified from time to time, a "Tranche A Term Note"), with appropriate
insertions therein as to payee, date and principal amount, payable to the order
of such Tranche A Term Loan Lender and in a principal amount equal to the lesser
of (a) the amount set forth under such Tranche A Term Loan Lender's name on
Schedule I opposite the heading "Tranche A Term Loan Commitment" and (b) the
then unpaid principal amount of the Tranche A Term Loans made by such Tranche A
Term Loan Lender to the Borrower. Each Tranche A Term Note shall (i) be dated
the Effective Date, (ii) be payable as provided in subsection 2.7(b) and (iii)
provide for the payment of interest in accordance with subsection 4.1. A Tranche
A Term Note may be assigned or otherwise transferred only by registration of
such assignment or transfer in the Register (and each Tranche A Term Note shall
expressly so provide). Any assignment or transfer of a Tranche A Term Note shall
be registered in the Register only upon surrender for registration
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<PAGE> 46
of assignment or transfer of the Tranche A Term Note accompanied by an
Assignment and Acceptance duly executed by the assigning Tranche A Term Loan
Lender, and thereupon a new Tranche A Term Loan Note shall be issued to the
designated Assignee and the surrendered Tranche A term Loan Note shall be
returned by the Administrative Agent to the Borrower marked "cancelled". No
assignment of a Tranche A Term Loan Note shall be effective unless it shall have
been recorded in the Register by the Administrative Agent as provided in this
subsection 2.7(a).
(b) The Tranche A Term Loans shall be payable in 20 consecutive
quarterly installments, commencing on February 28, 1998, on the dates and in the
aggregate principal amount set forth below (together with all accrued interest
thereon) opposite the applicable installment date (or, if less, the aggregate
amount of the Tranche A Term Loans then outstanding):
<TABLE>
<CAPTION>
Installment Amount
----------- ------
<S> <C>
February 28, 1998 $1,750,000
May 31, 1998 $1,750,000
August 31, 1998 $2,000,000
November 30, 1998 $2,000,000
February 28, 1999 $2,000,000
May 31, 1999 $2,000,000
August 31, 1999 $2,000,000
November 30, 1999 $2,000,000
February 28, 2000 $2,000,000
May 31, 2000 $2,000,000
August 31, 2000 $2,250,000
November 30, 2000 $2,250,000
February 28, 2001 $2,250,000
May 31, 2001 $2,250,000
August 31, 2001 $3,250,000
November 30, 2001 $3,250,000
February 28, 2002 $3,250,000
May 31, 2002 $3,250,000
August 31, 2002 $4,250,000
Tranche A Maturity Date $4,250,000
</TABLE>
2.8 Tranche B Term Notes. (a) The Borrower agrees that, upon the
request to the Administrative Agent by any Tranche B Term Loan Lender made on or
prior to the Effective Date or in connection with any assignment pursuant to
subsection 11.6(c), to evidence such Lender's Tranche B Term Loan the Borrower
will execute and deliver to such Lender a promissory note substantially in the
form of Exhibit A-3 (each, as amended, supplemented,
40
<PAGE> 47
replaced or otherwise modified from time to time, a "Tranche B Term Note"; the
Tranche A Term Notes together with the Tranche B Term Notes, the "Term Notes"),
with appropriate insertions therein as to payee, date and principal amount,
payable to the order of such Tranche B Term Loan Lender and in a principal
amount equal to the lesser of (a) the amount set forth under such Tranche B Term
Loan Lender's name on Schedule I opposite the heading "Tranche B Term Loan
Commitment" and (b) the then unpaid principal amount of the Tranche B Term Loans
made by such Tranche B Term Loan Lender to the Borrower. Any Tranche B Term Note
shall (i) be dated the Effective Date, (ii) be payable as provided in subsection
2.8(b) and (iii) provide for the payment of interest in accordance with
subsection 4.1. A Tranche B Term Note may be assigned or otherwise transferred
only by registration of such assignment or transfer in the Register (and each
Tranche B Term Note shall expressly so provide). Any assignment or transfer of a
Tranche B Term Note shall be registered in the Register only upon surrender for
registration of assignment or transfer of the Tranche B Term Note accompanied by
an Assignment and Acceptance duly executed by the assigning Tranche B Term Loan
Lender, and thereupon a new Tranche B Term Loan Note shall be issued to the
designated Assignee and the surrendered Tranche B Term Loan Note shall be
returned by the Administrative Agent to the Borrower marked "cancelled". No
assignment of a Tranche B Term Loan Note shall be effective unless it shall have
been recorded in the Register by the Administrative Agent as provided in this
subsection 2.8(a).
(b) The Tranche B Term Loans shall be payable in 28 consecutive
quarterly installments, commencing on February 28, 1998, on the dates and in the
aggregate principal amount set forth below (together with all accrued interest
thereon) opposite the applicable installment date (or, if less, the aggregate
amount of the Tranche B Term Loans then outstanding):
<TABLE>
<CAPTION>
Installment Amount
----------- ------
<S> <C>
February 28, 1998 $ 125,000
May 31, 1998 $ 125,000
August 31, 1998 $ 125,000
November 30, 1998 $ 125,000
February 28, 1999 $ 125,000
May 31, 1999 $ 125,000
August 31, 1999 $ 125,000
November 30, 1999 $ 125,000
February 28, 2000 $ 125,000
May 31, 2000 $ 125,000
August 31, 2000 $ 125,000
November 30, 2000 $ 125,000
February 28, 2001 $ 125,000
May 31, 2001 $ 125,000
August 31, 2001 $ 125,000
November 30, 2001 $ 125,000
February 28, 2002 $ 125,000
May 31, 2002 $ 125,000
</TABLE>
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<PAGE> 48
<TABLE>
<S> <C>
August 31, 2001 $ 125,000
November 30, 2001 $ 125,000
February 28, 2002 $ 125,000
May 31, 2002 $ 125,000
August 31, 2002 $ 125,000
November 30, 2002 $ 125,000
February 28, 2003 $6,250,000
May 31, 2003 $6,250,000
August 31, 2003 $6,250,000
November 30, 2003 $6,250,000
February 28, 2004 $9,375,000
May 31, 2004 $9,375,000
August 31, 2004 $9,375,000
Tranche B Maturity Date $9,375,000
</TABLE>
2.9 Procedure for Term Loan Borrowing. The Borrower shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to 12:30 P.M., New York City time, at least (a)
three Business Days prior to the Effective Date, if all or any part of the Term
Loans are to be initially Eurodollar Loans or (b) one Business Day prior to the
Effective Date otherwise requesting that the Term Loan Lenders make the Term
Loans on the Effective Date and specifying (i) the amount to be borrowed, (ii)
whether the Term Loans are to be initially Eurodollar Loans, ABR Loans or a
combination thereof, and (iii) if the Term Loans are to be entirely or partly
Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Upon receipt of
such notice the Administrative Agent shall promptly notify each Term Loan Lender
thereof. Each Term Loan Lender will make the amount of its pro rata share of the
Term Loans available to the Administrative Agent for the account of the Borrower
at the office of the Administrative Agent specified in subsection 11.2 prior to
10:00 A.M., New York City time, on the Effective Date in Dollars and in funds
immediately available to the Administrative Agent. The Administrative Agent
shall on such date credit the account of the Borrower on the books of such
office of the Administrative Agent, c/o Loan and Agency Service Group, One Chase
Manhattan Plaza, 8th Floor, New York, New York 10081, with the aggregate of the
amounts made available to the Administrative Agent by the Term Loan Lenders and
in like funds as received by the Administrative Agent.
2.10 Repayment of Loans. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of:
(i) each Revolving Credit Lender, the then unpaid principal amount of each
Revolving Credit Loan of such Lender made to the Borrower, on the Termination
Date (or such earlier date on which the Revolving Credit Loans become due and
payable pursuant to Section 9); (ii) the Swing Line Lender, the then unpaid
principal amount of the Swing Line Loans made to Borrower, on the Termination
Date (or such earlier date on
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which the Swing Line Loans become due and payable pursuant to Section 9); (iii)
each Tranche A Term Loan Lender, the amounts specified in subsection 2.7(b) on
the dates specified in subsection 2.7(b) (or such earlier date on which the
Tranche A Term Loans become due and payable pursuant to Section 9) and (iii)
each Tranche B Term Loan Lender, the amounts specified in subsection 2.8(b) on
the dates specified in subsection 2.8(b) (or such earlier date on which the
Tranche B Term Loans become due and payable pursuant to Section 9). The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date of the making of the Loans
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 4.1.
(b) Each Lender (including the Swing Line Lender) shall
maintain in accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from each Loan of such
Lender from time to time, including, without limitation, the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof and each Interest Period, if any, applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.10(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Lender in accordance with the terms of this Agreement.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Revolving
Credit Lenders set forth in subsection 3.4(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Borrower on any Business Day during
the Revolving Credit Commitment Period in such form as may be approved from time
to time by the Issuing Lender; provided that the Issuing Lender shall not issue
any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed $10,000,000, (ii) the Aggregate Outstanding Revolving
Credit of all the Revolving
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Credit Lenders would exceed the lesser of (x) the Revolving Credit Commitments
of all the Revolving Credit Lenders and (y) the Borrowing Base then in effect or
(iii) the Alternate Currency L/C Exposure would exceed $10,000,000. Each Letter
of Credit shall be either (x) a standby letter of credit issued to support
obligations of the Borrower or any of its Subsidiaries, contingent or otherwise,
which finance the working capital and business needs of the Borrower and its
Subsidiaries incurred in the ordinary course of business (a "Standby Letter of
Credit"), or (y) a commercial letter of credit in respect of the purchase of
goods or services by the Borrower or any of its Subsidiaries in the ordinary
course of business (a "Commercial Letter of Credit"), (ii) expire on the earlier
of (i) one-year after the date of issuance and (ii) five Business Days prior to
the Termination Date, provided that a one-year Letter of Credit may be renewed
for additional one-year periods, but may not be extended beyond five days prior
to the Termination Date.
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Lender shall not at any time issue any Letter
of Credit hereunder if such issuance would conflict with, or cause the Issuing
Lender or any L/C Participant to exceed any limits imposed by, any applicable
Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender, at its address for notices specified
herein, an Application therefor, completed to the reasonable satisfaction of the
Issuing Lender, and such other certificates, documents and other papers and
information as the Issuing Lender may reasonably request. Upon receipt of any
Application, the Issuing Lender will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall the
Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof.
3.3 Fees, Commissions and Other Charges. (a) The Borrower
shall pay to the Administrative Agent, for the account of the Issuing Lender and
the L/C Participants, a letter of credit commission with respect to each Letter
of Credit, computed for the period from and including the date of issuance of
such Letter of Credit to the expiration date of such Letter of Credit, computed
at a rate per annum equal to the Applicable Margin then in effect for Eurodollar
Loans that are Revolving Credit Loans calculated on the basis of a 360-day year,
of the aggregate amount available to be drawn under such Letter of Credit,
payable quarterly in arrears on each
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L/C Fee Payment Date with respect to such Letter of Credit and on the
Termination Date or such earlier date as the Revolving Credit Commitments shall
terminate as provided herein. Such commission shall be payable to the
Administrative Agent for the account of the Revolving Credit Lenders to be
shared ratably among them in accordance with their respective Revolving Credit
Commitment Percentages. The Borrower shall also pay to the Administrative Agent,
for the account of the Issuing Lender, a fee equal to 1/4 of 1% per annum of the
aggregate amount available to be drawn under such Letter of Credit, payable
quarterly in arrears on each L/C Fee Payment Date with respect to such Letter of
Credit and on the Termination Date or such other date as the Revolving Credit
Commitments shall terminate. Such commissions and fees shall be nonrefundable.
(b) In addition to the foregoing commissions and fees, the
Borrower shall pay or reimburse the Issuing Lender for such normal and customary
costs and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(c) The Administrative Agent shall, promptly following its
receipt thereof, distribute to the Issuing Lender and the L/C Participants all
commissions and fees received by the Administrative Agent for their respective
accounts pursuant to this subsection.
3.4 L/C Participations. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Commitment Percentage (determined on the date of
issuance of the relevant Letter of Credit) in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in respect of such Letter or Credit in
accordance with subsection 3.5(a), such L/C Participant shall pay to the Issuing
Lender upon demand at the Issuing Lender's address for notices specified herein
an amount equal to such L/C Participant's Revolving Credit Commitment Percentage
of the amount of such draft, or any part thereof, which is not so reimbursed;
provided that nothing in this paragraph shall relieve the Issuing Lender of any
liability resulting from the gross negligence or willful misconduct of the
Issuing Lender, or otherwise affect any defense or other right that any L/C
Participant may have as a result of such gross negligence or willful misconduct.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender on demand by the Issuing Lender pursuant to subsection
3.4(a) in respect of any unreimbursed
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portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such demand
is made, such L/C Participant shall pay to the Issuing Lender on demand an
amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
subsection 3.4(a) is not in fact made available to the Issuing Lender by such
L/C Participant within three Business Days after the date such payment is due,
the Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to ABR Loans hereunder. A certificate of the Issuing
Lender submitted to any L/C Participant with respect to any amounts owing under
this subsection (which shall include calculations of any such amounts in
reasonable detail) shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection 3.4(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower in respect of such Letter of Credit or otherwise, including
proceeds of Collateral applied thereto by the Issuing Lender), or any payment of
interest on account thereof, the Issuing Lender will, if such payment is
received prior to 1:00 P.M., New York City time, on a Business Day, distribute
to such L/C Participant its pro rata share thereof prior to the end of such
Business Day and otherwise the Issuing Lender will distribute such payment on
the next succeeding Business Day; provided, however, that in the event that any
such payment received by the Issuing Lender shall be required to be returned by
the Issuing Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower
agrees to reimburse the Issuing Lender, upon receipt by the Borrower of notice
from the Issuing Lender of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender, for the amount of (i) such
draft so paid and (ii) any taxes, fees, charges or other costs or expenses
reasonably incurred by the Issuing Lender in connection with such payment. Each
such payment shall be made to the Issuing Lender, at its address for notices
specified herein in immediately available funds, on the date on which the
Borrower receives such notice, if received prior to 11:00 A.M., New York City
time, on a Business Day and otherwise on the next succeeding Business Day.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrower under this subsection (i) from the date the draft
presented under the affected Letter of
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Credit is paid to the date on which the Borrower is required to pay such amounts
pursuant to paragraph (a) above at the rate which would then be payable on any
outstanding ABR Loans that are Revolving Credit Loans and (ii) thereafter until
payment in full at the rate which would be payable on any outstanding ABR Loans
that are Tranche B Term Loans which were then overdue.
3.6 Obligations Absolute. (a) The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Lender, any
L/C Participant or any beneficiary of a Letter of Credit, provided that this
paragraph shall not relieve the Issuing Lender or any L/C Participant of any
liability resulting from the gross negligence or willful misconduct of the
Issuing Lender or such L/C Participant, or otherwise affect any defense or other
right that the Borrower may have as a result of any such gross negligence or
willful misconduct.
(b) The Borrower also agrees with the Issuing Lender that the
Issuing Lender and the L/C Participants shall not be responsible for, and the
Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be
affected by, among other things, (i) the validity or genuineness of documents or
of any endorsements thereon, even though such documents shall in fact prove to
be invalid, fraudulent or forged, or (ii) any dispute between or among such
Borrower and any beneficiary of any Letter of Credit or any other party to which
such Letter of Credit may be transferred or (iii) any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee, provided that this paragraph shall not relieve the Issuing Lender or
any L/C Participant of any liability resulting from the gross negligence or
willful misconduct of the Issuing Lender or such L/C Participant, or otherwise
affect any defense or other right that the Borrower may have as a result of any
such gross negligence or willful misconduct.
(c) Neither the Issuing Lender nor any L/C Participant shall
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions caused by
such Person's gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender or any L/C
Participant to the Borrower.
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3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Lender shall promptly notify
the Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in respect of any Letter of Credit in connection with any
draft presented for payment under such Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered under
such Letter of Credit in connection with such presentment are in conformity with
such Letter of Credit, provided that this paragraph shall not relieve the
Issuing Lender of any liability resulting from the gross negligence or willful
misconduct of the Issuing Lender, or otherwise affect any defense or other right
that the Borrower may have as a result of any such gross negligence or willful
misconduct.
3.8 Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. GENERAL PROVISIONS APPLICABLE
TO LOANS AND LETTERS OF CREDIT
4.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin in effect for such day.
(b) Each ABR Loan shall bear interest for each day that it is
outstanding at a rate per annum equal to the ABR for such day plus the
Applicable Margin in effect for such day.
(c) If all or a portion of (i) the principal amount of any
Loan, (ii) any interest payable thereon or (iii) any commitment fee, letter of
credit commission, letter of credit fee or other amount payable hereunder,
including Reimbursement Obligations, shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum which is (x) in the case of overdue principal, the
rate that would otherwise be applicable thereto pursuant to the relevant
foregoing provisions of this subsection plus 2.00% or (y) in the case of overdue
interest, fees, commissions or other amounts, the rate described in paragraph
(b) of this subsection for Tranche B Term Loans which are ABR Loans plus 2.00%,
in each case from the date of such non-payment until such amount is paid in full
(as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
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(e) It is the intention of the parties hereto to comply
strictly with applicable usury laws; accordingly, it is stipulated and agreed
that the aggregate of all amounts which constitute interest under applicable
usury laws, whether contracted for, charged, taken, reserved, or received, in
connection with the indebtedness evidenced by this Agreement or any Notes, or
any other document relating or referring hereto or thereto, now or hereafter
existing, shall never exceed under any circumstance whatsoever the maximum
amount of interest allowed by applicable usury laws.
4.2 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert outstanding Term Loans and Revolving Credit
Loans from Eurodollar Loans to ABR Loans by giving the Administrative Agent at
least two Business Days' prior irrevocable notice of such election, provided
that any such conversion of Eurodollar Loans may only be made on the last day of
an Interest Period with respect thereto. The Borrower may elect from time to
time to convert outstanding Term Loans and Revolving Credit Loans from ABR Loans
to Eurodollar Loans by giving the Administrative Agent at least three Business
Days' prior irrevocable notice of such election. Any such notice of conversion
to Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the Administrative
Agent shall promptly notify each affected Lender thereof. All or any part of
outstanding Eurodollar Loans and ABR Loans may be converted as provided herein,
provided that (i) (unless the Required Lenders otherwise consent) no Loan may be
converted into a Eurodollar Loan when any Default or Event of Default has
occurred and is continuing and, in the case of any Default, the Administrative
Agent has given notice to the Borrower that no such conversions may be made and
(ii) no Loan may be converted into a Eurodollar Loan after the date that is one
month prior to the Termination Date.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent of the length of the next
Interest Period to be applicable to such Loan, determined in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
provided that no Eurodollar Loan may be continued as such (i) (unless the
Required Lenders otherwise consent) when any Default or Event of Default has
occurred and is continuing and, in the case of any Default, the Administrative
Agent has given notice to the Borrower that no such continuations may be made or
(ii) after the date that is one month prior to the Termination Date. Upon
receipt of any such notice of continuation pursuant to this subsection 4.2(b),
the Administrative Agent shall promptly notify each affected Lender thereof.
4.3 Minimum Amounts of Sets. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the
Eurodollar Loans outstanding comprising each Set shall be equal to $1,000,000 or
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a whole multiple of $500,000 in excess thereof and so that there shall not be
more than 10 Sets at any one time outstanding.
4.4 Optional and Mandatory Prepayments and Commitment
Reductions. (a) The Borrower may at any time and from time to time prepay the
Loans made to it (including the Reimbursement Obligations in respect of Letters
of Credit issued for its account) and permanently reduce the Revolving Credit
Commitments, in whole or in part, without premium or penalty, upon at least
three Business Days' irrevocable notice by the Borrower to the Administrative
Agent (in the case of Eurodollar Loans and Reimbursement Obligations) and at
least one Business Day's irrevocable notice by the Borrower to the
Administrative Agent (in the case of ABR Loans other than Swing Line Loans) or
same day irrevocable notice by the Borrower to the Administrative Agent (in the
case of Swing Line Loans), specifying, in the case of any prepayment of Loans or
reduction of Revolving Credit Commitments, the date and amount of prepayment or
reduction, as the case may be, and whether such prepayment is (i) of Term Loans,
Revolving Credit Loans, Swing Line Loans, or a combination thereof, and (ii) of
Eurodollar Loans, ABR Loans or a combination thereof, and, in each case if a
combination thereof, the principal amount allocable to each and, in the case of
any prepayment of Reimbursement Obligations, the date and amount of prepayment,
the identity of the applicable Letter of Credit or Letters of Credit and the
amount allocable to each of such Reimbursement Obligations. Upon the receipt of
any such notice the Administrative Agent shall promptly notify each affected
Lender thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with (if a
Eurodollar Loan is prepaid other than at the end of the Interest Period
applicable thereto) any amounts payable pursuant to subsection 4.12 and, in the
case of prepayments of the Term Loans only, accrued interest to such date on the
amount prepaid. Partial prepayments of (i) the Term Loans pursuant to this
subsection shall be applied (x) pro rata (based on outstanding principal amount)
to the Tranche A Term Loans and the Tranche B Term Loans and (y) first, to the
first two installments thereof due on or after the date of such prepayment in
the order of their maturities and second, pro rata to the respective remaining
installments thereof, and (ii) the Revolving Credit Loans and the Reimbursement
Obligations pursuant to this subsection shall (unless the Borrower otherwise
directs) be applied, first, to payment of the Swing Line Loans then outstanding,
second, to payment of the Revolving Credit Loans then outstanding, third, to
payment of any Reimbursement Obligations then outstanding and, last, to cash
collateralize any outstanding L/C Obligation on terms reasonably satisfactory to
the Administrative Agent. Partial prepayments pursuant to this subsection 4.4(a)
shall be in an aggregate principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof. Amounts prepaid on account of Term Loans pursuant to
this subsection 4.4(a) may not be reborrowed.
(b) If, subsequent to the Effective Date, the Borrower or any
of its Subsidiaries shall incur any Indebtedness for borrowed money (other than
under the Senior Subordinated Indenture or evidenced by the Senior Subordinated
Notes and other Indebtedness permitted by
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subsection 8.2), then an amount equal to 100% of the Net Cash Proceeds thereof
shall on the first Business Day after receipt thereof be applied toward the
prepayment of the Loans and the permanent reduction of the Revolving Credit
Commitments in accordance with subsection 4.4(h).
(c) Commencing June 30, 1998, and on each June 30 thereafter,
the Borrower shall prepay, in accordance with subsection 4.4(h), the Loans and
cash collateralize the L/C Obligations in an amount equal to 75% of the
Borrower's Excess Cash Flow for the fiscal year ending on the preceding March
31.
(d) If subsequent to the Effective Date, the Borrower or any
of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sales or
dispositions permitted by subsections 8.6(g), 8.6(h) or 8.11 or not otherwise
permitted by subsection 8.6, then an amount equal to 100% of the Net Cash
Proceeds (less the Reinvested Amount applicable thereto) thereof shall on the
first Business Day after receipt thereof be applied toward the prepayment of the
Loans and the permanent reduction of the Revolving Credit Commitments in
accordance with subsection 4.4(h).
(e) If subsequent to the Effective Date, the Borrower shall
issue any Capital Stock (except for shares of Capital Stock of Holdings issued
or sold to directors, officers and employees of, or consultants to, Holdings or
any of its Subsidiaries), then an amount equal to 100% of the Net Cash Proceeds
thereof shall be applied toward the prepayment of the Loans and the permanent
reduction of the Revolving Credit Commitments in accordance with subsection
4.4(h).
(f) If, at any time the aggregate principal amount of the
Revolving Credit Loans, Swing Line Loans and L/C Obligations then outstanding
exceeds an amount equal to the lesser of (i) the Borrowing Base on such date and
(ii) the aggregate Revolving Credit Commitment on such date, the Borrower shall
first repay the Revolving Credit loans then outstanding; second pay any
Reimbursement Obligations then outstanding and, last, cash collateralize any
outstanding L/C Obligation in an amount equal to such excess.
(g) The Borrower shall prepay all Swing Line Loans then
outstanding simultaneously with each borrowing of Revolving Credit Loans.
(h) Prepayments pursuant to subsections 4.4(b), 4.4(c), 4.4(d)
and 4.4(e) shall be applied, first, to prepay Term Loans then outstanding,
second, to prepay Swing Line Loans then outstanding, third, to prepay Revolving
Credit Loans then outstanding, fourth, to pay any Reimbursement Obligations then
outstanding and, last, to cash collateralize any outstanding L/C Obligations on
terms reasonably satisfactory to the Administrative Agent. Prepayments of the
Term Loans pursuant to subsections 4.4(b), 4.4(c), 4.4(d) and 4.4(e) shall be
applied (x) pro rata
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(based on outstanding principal amount) to the Tranche A Term Loans and the
Tranche B Term Loans and (y) first, to the first two installments thereof due on
or after the date of such prepayment in the order of their maturities and
second, pro rata to the respective remaining installments thereof. Prepayments
of the Revolving Credit Loans and the Reimbursement Obligations pursuant to
subsections 4.4(b), 4.4(c), 4.4(d) and 4.4(e) shall (unless the Borrower
otherwise directs) be applied, first, to payment of the Revolving Credit Loans
then outstanding, second, to payment of any Reimbursement Obligations then
outstanding and, last, to cash collateralize any outstanding L/C Obligation on
terms reasonably satisfactory to the Administrative Agent. Amounts prepaid on
account of Term Loans pursuant to subsection 4.4(b), 4.4(c), 4.4(d) and 4.4(e)
may not be reborrowed. The Revolving Credit Commitments shall be permanently
reduced by the amount of all prepayments of Revolving Credit Loans, payments of
Reimbursement Obligations and cash collateral of L/C Obligations made under
subsections 4.4(b), 4.4(c), 4.4(d) and 4.4(e).
(i) Notwithstanding the foregoing provisions of this
subsection 4.4, if at any time any prepayment of the Loans pursuant to
subsection 4.4(b), 4.4(c), 4.4(d), 4.4(e) or 4.4(f) would result, after giving
effect to the procedures set forth in this Agreement, in the Borrower incurring
breakage costs under subsection 4.12 as a result of Eurodollar Loans being
prepaid other than on the last day of an Interest Period with respect thereto,
then, the Borrower may, so long as no Default or Event of Default shall have
occurred and be continuing, in its sole discretion, initially (x) deposit a
portion (up to 100%) of the amounts that otherwise would have been paid in
respect of such Eurodollar Loans with the Administrative Agent (which deposit
must be equal in amount to the amount of such Eurodollar Loans not immediately
prepaid) to be held as security for the obligations of the Borrower to make such
prepayment pursuant to a cash collateral agreement to be entered into on terms
reasonably satisfactory to the Administrative Agent, with such cash collateral
to be directly applied upon the first occurrence thereafter of the last day of
an Interest Period with respect to such Eurodollar Loans (or such earlier date
or dates as shall be requested by the Borrower) or (y) make a prepayment of the
Revolving Credit Loans in accordance with subsection 4.4(a) with an amount equal
to a portion (up to 100%) of the amounts that otherwise would have been paid in
respect of such Eurodollar Loans (which prepayment, together with any deposits
pursuant to clause (x) above, must be equal in amount to the amount of such
Eurodollar Loans not immediately prepaid); provided that, notwithstanding
anything in this Agreement to the contrary, the Borrower may not request any
Extension of Credit under the Revolving Credit Commitments that would reduce the
aggregate amount of the Available Revolving Credit Commitments to an amount that
is less than the amount of such prepayment until the related portion of such
Eurodollar Loans have been prepaid upon the first occurrence thereafter of the
last day of an Interest Period with respect to such Eurodollar Loans; provided
that, in the case of either clause (x) or (y), such unpaid Eurodollar Loans
shall continue to bear interest in accordance with subsection 4.1 until such
unpaid Eurodollar Loans or the related portion of such Eurodollar Loans, as the
case may be, have or has been prepaid.
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4.5 Commitment Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender, a
commitment fee for the period from and including the first day of the Revolving
Credit Commitment Period to the Termination Date, computed, initially, at a the
rate of 1/2 of 1% per annum and, after the first Adjustment Date, at the
applicable rate per annum set forth on Schedule II under the heading "Commitment
Fee" (determined on each Adjustment Date in the same manner as described in the
definition of "Applicable Margin") on the average daily amount of the Available
Revolving Credit Commitment of such Lender during the period for which payment
is made, payable quarterly in arrears on the last day of each February, May,
August and November and on the Termination Date or such earlier date as the
Revolving Credit Commitments shall terminate as provided herein, commencing on
the Effective Date.
4.6 Computation of Interest and Fees. (a) Interest and
commitment fees (other than interest based on the Prime Rate) shall be
calculated on the basis of a 360-day year for the actual days elapsed; and
interest based on the Prime Rate shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
affected Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the ABR, the Eurodollar
Reserve Requirements, the C/D Assessment Rate or the C/D Reserve Percentage
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as practicable
notify the Borrower and the affected Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower
or any Lender, deliver to the Borrower or such Lender a statement showing in
reasonable detail the calculations used by the Administrative Agent in
determining any interest rate pursuant to subsection 4.1, excluding any
Eurodollar Base Rate which is based upon the Telerate British Bankers Assoc.
Interest Settlement Rates Page and any ABR which is based upon the Prime Rate.
4.7 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period, the Administrative Agent shall have determined
(which determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate with respect to any
Eurodollar Loan (the "Affected Eurodollar Rate") for such Interest Period, the
Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans the rate of interest applicable to which is based
upon the Affected Eurodollar Rate requested to be
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made on the first day of such Interest Period shall be made as ABR Loans (to the
extent otherwise permitted by subsection 4.2), (y) any outstanding Loans that
were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Loans the rate of interest applicable to which is based
upon the Affected Eurodollar Rate shall be converted to or continued as ABR
Loans (to the extent otherwise permitted by subsection 4.2) and (z) any
outstanding Eurodollar Loans that were to have been converted on the first day
of such Interest Period to or continued as Eurodollar Loans the rate of interest
applicable to which is based upon the Affected Eurodollar Rate and that are not
otherwise permitted to be converted to or continued as ABR Loans by subsection
4.2 shall, upon demand by the Revolving Credit Lenders the Revolving Credit
Commitment Percentage of which aggregate at least 51%, be immediately repaid by
the applicable Borrower on the last day of the then current Interest Period with
respect thereto together with accrued interest thereon or otherwise, at the
option of the Borrower, shall remain outstanding and bear interest at a rate
which reflects, as to each of the Revolving Credit Lenders, such Revolving
Credit Lender's cost of funding such Eurodollar Loans, as reasonably determined
by such Revolving Credit Lender, plus the Applicable Margin hereunder. If any
such repayment occurs on a day which is not the last day of the then current
Interest Period with respect to such affected Eurodollar Loan, the Borrower
shall pay to each of the Revolving Credit Lenders such amounts, if any, as may
be required pursuant to subsection 4.12. Until such notice has been withdrawn by
the Administrative Agent, no further Eurodollar Loans the rate of interest
applicable to which is based upon the Affected Eurodollar Rate shall be made or
continued as such, nor shall the Borrower have the right to convert ABR Loans to
Eurodollar Loans the rate of interest applicable to which is based upon the
Affected Eurodollar Rate.
4.8 Pro Rata Treatment and Payments. (a) Each borrowing of
Revolving Credit Loans (other than Swing Line Loans) by the Borrower from the
Lenders hereunder shall be made, each payment by the Borrower on account of any
commitment fee in respect of the Revolving Credit Commitments hereunder shall be
allocated by the Administrative Agent, and any reduction of the Revolving Credit
Commitments of the Lenders shall be allocated by the Administrative Agent, pro
rata according to the relevant Revolving Credit Commitment Percentages of the
Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on any Revolving Credit Loans shall be allocated by
the Administrative Agent pro rata according to the respective outstanding
principal amounts of such Revolving Credit Loans then held by the Revolving
Credit Lenders. Each payment (including each prepayment) by the Borrower on
account of principal of and interest on any Tranche A Term Loans or Tranche B
Term Loans shall be allocated by the Administrative Agent pro rata according to
the respective outstanding principal amounts of such Tranche A Term Loans or
Tranche B Term Loans then held by the Term Loan Lenders. All payments (including
prepayments) to be made by the Borrower hereunder and under any Notes, whether
on account of principal, interest, fees, Reimbursement Obligations or otherwise,
shall be made without set-off or counterclaim and shall be made prior to 1:00
P.M., New York City time, on the due date thereof to the Administrative Agent,
for the account of the Lenders holding the relevant Loans or
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the L/C Participants, as the case may be, at the Administrative Agent's office
specified in subsection 11.2 in immediately available funds. Payments received
by the Administrative Agent after such time shall be deemed to have been
received on the next Business Day. The Administrative Agent shall distribute
such payments to such Lenders, if any such payment is received prior to 1:00
P.M., New York City time, on a Business Day, in like funds as received prior to
the end of such Business Day and otherwise the Administrative Agent shall
distribute such payment to such Lenders on the next succeeding Business Day. If
any payment hereunder (other than payments on the Eurodollar Loans) becomes due
and payable on a day other than a Business Day, the maturity of such payment
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day (and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension) unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Revolving Credit Commitment Percentage of such
borrowing available to the Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available to the Administrative
Agent, and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent, on demand, such
amount with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's Revolving
Credit Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall notify the Borrower of the failure of such
Lender to make such amount available to the Administrative Agent and the
Administrative Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to ABR Loans hereunder on demand, from
the Borrower.
4.9 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof occurring after the Effective Date shall make it unlawful
for any Lender to make or maintain any Eurodollar Loans as contemplated by this
Agreement ("Affected Eurodollar Loans"), (a) such Lender shall promptly give
written notice of such circumstances to the Borrower and the
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Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Affected Eurodollar Loans, continue Affected Eurodollar Loans as such and
convert an ABR Loan to an Affected Eurodollar Loan shall forthwith be cancelled
and, until such time as it shall no longer be unlawful for such Lender to make
or maintain such Affected Eurodollar Loans, such Lender shall then have a
commitment only to make an ABR Loan when an Affected Eurodollar Loan is
requested (to the extent otherwise permitted by subsection 4.2), (c) such
Lender's Loans then outstanding as Affected Eurodollar Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law (to the extent otherwise permitted by subsection 4.2)
and (d) such Lender's Loans then outstanding as Affected Eurodollar Loans, if
any, not otherwise permitted to be converted to ABR Loans by subsection 4.2
shall, upon notice to the Borrower, be prepaid with accrued interest thereon on
the last day of the then current Interest Period with respect thereto (or such
earlier date as may be required by any such Requirement of Law). If any such
conversion or prepayment of an Affected Eurodollar Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto, the
applicable Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 4.12.
4.10 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof
applicable to any Lender, or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the Effective Date
(or, if later, the date on which such Lender becomes a Lender):
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Application or any
Eurodollar Loans made by it or its obligation to make Eurodollar Loans,
or change the basis of taxation of payments to such Lender in respect
thereof (except for Non Excluded Taxes covered by subsection 4.11
(including Non-Excluded Taxes imposed solely by reason of any failure
of such Lender to comply with its obligations (if any) under subsection
4.11(b)) and changes in taxes measured by or imposed upon the overall
net income, or franchise taxes, or taxes measured by or imposed upon
overall capital or net worth, or branch taxes (in the case of such
capital, net worth or branch taxes, imposed in lieu of such net income
tax), of such Lender or its applicable lending office, branch, or any
affiliate thereof);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
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(iii) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Administrative Agent, in accordance herewith, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable with
respect to such Eurodollar Loans or Letters of Credit, provided that, in any
such case, the Borrower may elect to convert Eurodollar Loans made by such
Lender hereunder to ABR Loans (to the extent otherwise permitted by subsection
4.2) by giving the Administrative Agent at least one Business Day's notice of
such election, in which case such Borrower shall promptly pay to such Lender,
upon demand, without duplication, amounts theretofore required to be paid to
such Lender pursuant to this subsection 4.10(a) and such amounts, if any, as may
be required pursuant to subsection 4.12. If any Lender becomes entitled to claim
any additional amounts pursuant to this subsection, it shall provide prompt
notice thereof to the Borrower, through the Administrative Agent, certifying (x)
that one of the events described in this paragraph (a) has occurred and
describing in reasonable detail the nature of such event, (y) as to the
increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the
Administrative Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case, made subsequent to the Effective Date (or, if later,
the date on which such Lender becomes a Lender), does or shall have the effect
of reducing the rate of return on such Lender's or such corporation's capital as
a consequence of such Lender's obligations hereunder or under or in respect of
any Letter of Credit to a level below that which such Lender or such corporation
could have achieved but for such change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
within ten Business Days after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a written request therefor certifying (x)
that one of the events described in this paragraph (b) has occurred and
describing in reasonable detail the nature of such event, (y) as to the
reduction
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of the rate of return on capital resulting from such event and (z) as to the
additional amount or amounts demanded by such Lender or corporation and a
reasonably detailed explanation of the calculation thereof, the Borrower shall
pay to such Lender such additional amount or amounts as will compensate such
Lender or corporation for such reduction. Such a certificate as to any
additional amounts payable pursuant to this subsection submitted by such Lender,
through the Administrative Agent, to the Borrower shall be conclusive in the
absence of manifest error. This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
4.11 Taxes. (a) Except as provided below in this subsection,
all payments made by the Borrower under this Agreement and any Notes shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding taxes
measured by or imposed upon the overall net income of any Lender or its
applicable lending office, or any branch or affiliate thereof, and all franchise
taxes, branch taxes, taxes on doing business or taxes measured by or imposed
upon the overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending office,
branch or affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such jurisdiction is
located or any political subdivision thereof; or (ii) by reason of any
connection between the jurisdiction imposing such tax and such Lender,
applicable lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its obligations
under, or received payment under or enforced, this Agreement or any Notes. If
any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions
or withholdings ("Non-Excluded Taxes") are required to be withheld from any
amounts payable to the Administrative Agent or any Lender hereunder or under any
Notes, the amounts so payable to the Administrative Agent or such Lender shall
be increased to the extent necessary to yield to the Administrative Agent or
such Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and any Notes, provided, however, that the Borrower shall be entitled
to deduct and withhold any Non- Excluded Taxes and shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof, as the case may be if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
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for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b)(1) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(X)(i) on or before the date of any payment by the Borrower
under this Agreement or any Notes to such Lender, deliver to the
Borrower and the Administrative Agent (A) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, certifying that it is entitled to
receive payments under this Agreement and any Notes without deduction
or withholding of any United States federal income taxes and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be, certifying that it is entitled to an exemption from
United States backup withholding tax;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the
Borrower (for the benefit of the Borrower and the Administrative Agent)
that it is not a bank within the meaning of Section 881(c)(3)(A) of the
Code, (ii) agree to furnish to the Borrower on or before the date of
any payment by the Borrower, with a copy to the Administrative Agent,
(A) a certificate substantially in the form of Exhibit G (any such
certificate a "U.S. Tax Compliance Certificate") and (B) two accurate
and complete original signed copies of Internal Revenue Service Form
W-8, or successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Agreement and any Notes (and
to deliver to the Borrower and the Administrative Agent two further
copies of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the
Administrative Agent for filing and
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completing such forms), and (iii) agree, to the extent legally entitled
to do so, upon reasonable request by the Borrower, to provide to the
Borrower (for the benefit of the Borrower and the Administrative Agent)
such other forms as may be reasonably required in order to establish
the legal entitlement of such Lender to an exemption from withholding
with respect to payments under this Agreement and any Notes, provided
that in determining the reasonableness of a request under this clause
(iii) such Lender shall be entitled to consider the cost (to the extent
unreimbursed by the Borrower) which would be imposed on such Lender of
complying with such request;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Each Person that shall become a Lender or
a Participant pursuant to subsection 11.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms, certifications and
statements required pursuant to this subsection, provided that in the case of a
Participant the obligations of such Participant pursuant to this paragraph (b)
shall be determined as if such Participant were a Lender except that such
Participant shall furnish all such required forms, certifications and statements
to the Lender from which the related participation shall have been purchased.
4.12 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment or conversion of Eurodollar Loans after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a payment or prepayment of Eurodollar Loans or the conversion of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification may include an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the amount so
prepaid, or converted, or not so borrowed, converted or continued, for the
period from the date of such prepayment or conversion or of such failure to
borrow, convert or continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such Eurodollar Loans provided for herein
(excluding, however, the Applicable Margin included therein, if any) over (ii)
the amount of interest (as reasonably determined by such Lender) which would
have accrued to such Lender on such amount by placing such amount on deposit for
a comparable period with leading banks in the interbank eurodollar market. If
any Lender becomes entitled to claim any amounts under the indemnity contained
in this subsection 4.12, it shall provide prompt notice thereof to the Borrower,
through the Administrative Agent,
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certifying (x) that one of the events described in clause (a), (b) or (c) has
occurred and describing in reasonable detail the nature of such event, (y) as to
the loss or expense sustained or incurred by such Lender as a consequence
thereof and (z) as to the amount for which such Lender seeks indemnification
hereunder and a reasonably detailed explanation of the calculation thereof. Such
a certificate as to any indemnification pursuant to this subsection submitted by
such Lender, through the Administrative Agent, to the Borrower shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.13 Certain Rules Relating to the Payment of Additional
Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender
to which the Borrower is required to pay any additional amount pursuant to
subsection 4.10 or 4.11, and any Participant in respect of whose participation
such payment is required, shall reasonably afford the Borrower the opportunity
to contest, and reasonably cooperate with the Borrower in contesting, the
imposition of any Non-Excluded Tax giving rise to such payment; provided that
(i) such Lender shall not be required to afford the Borrower the opportunity to
so contest unless the Borrower shall have confirmed in writing to such Lender
its obligation to pay such amounts pursuant to this Agreement and (ii) the
Borrower shall reimburse such Lender for its reasonable attorneys' and
accountants' fees and disbursements incurred in so cooperating with the Borrower
in contesting the imposition of such Non-Excluded Tax; provided, however that
notwithstanding the foregoing no Lender shall be required to afford the Borrower
the opportunity to contest, or cooperate with the Borrower in contesting, the
imposition of any Non-Excluded Taxes, if such Lender in its sole discretion in
good faith determines that to do so would have an adverse effect on it.
(b) If a Lender changes its applicable lending office (other
than pursuant to paragraph (c) below) and the effect of such change, as of the
date of such change, would be to cause the Borrower to become obligated to pay
any additional amount under subsection 4.10 or 4.11, the Borrower shall not be
obligated to pay such additional amount.
(c) If a condition or an event occurs which would, or would
upon the passage of time or giving of notice, result in the payment of any
additional amount to any Lender by the Borrower pursuant to subsection 4.10 or
4.11, such Lender shall promptly notify the Borrower and the Administrative
Agent and shall take such steps as may reasonably be available to it to mitigate
the effects of such condition or event (which shall include efforts to rebook
the Loans held by such Lender at another lending office, or through another
branch or an affiliate, of such Lender); provided that such Lender shall not be
required to take any step that, in its reasonable judgment, would be materially
disadvantageous to its business or operations or would require it to incur
additional costs (unless such Borrower agrees to reimburse such Lender for the
reasonable incremental out-of-pocket costs thereof).
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(d) If the Borrower shall become obligated to pay additional
amounts pursuant to subsection 4.10 or 4.11 and any affected Lender shall not
have promptly taken steps necessary to avoid the need for payments under
subsection 4.10 or 4.11, the Borrower shall have the right, for so long as such
obligation remains, (x) with the assistance of the Administrative Agent, to seek
one or more substitute Lenders reasonably satisfactory to the Administrative
Agent and the Borrower to purchase the affected Loan, in whole or in part, at an
aggregate price no less than such Loan's principal amount plus accrued interest,
and assume the affected obligations under this Agreement, or (y) upon at least
four Business Days irrevocable notice to the Administrative Agent, to prepay the
affected Loan, in whole or in part, subject to subsection 4.12, without premium
or penalty. In the case of the substitution of a Lender, the Borrower, the
Administrative Agent, the affected Lender, and any substitute Lender shall
execute and deliver an appropriately completed Assignment and Acceptance
pursuant to subsection 11.6(c) to effect the assignment of rights to, and the
assumption of obligations by, the substitute Lender; provided that any fees
required to be paid by subsection 11.6(e) in connection with such assignment
shall be paid by the Borrower or the substitute Lender. In the case of a
prepayment of an affected Loan, the amount specified in the notice shall be due
and payable on the date specified therein, together with any accrued interest to
such date on the amount prepaid. In the case of each of the substitution of a
Lender and of the prepayment of an affected Loan, the Borrower shall first pay
the affected Lender any additional amounts owing under subsections 4.10, 4.11
and 4.12 (as well as any commitment fees and other amounts then due and owing to
such Lender, including, without limitation, any amounts under subsection 4.13)
prior to such substitution or prepayment.
(e) If the Administrative Agent or any Lender or any
Participant receives a refund directly attributable to taxes for which the
Borrower has made additional payments pursuant to subsection 4.10(a) or 4.11(a),
the Administrative Agent or such Lender, as the case may be, shall promptly pay
such refund (together with any interest with respect thereto received from the
relevant taxing authority) to the Borrower, provided, however, that the Borrower
agrees promptly to return such refund (together with any interest with respect
thereto due to the relevant taxing authority) (free of all Non-Excluded Taxes)
to the Administrative Agent or the applicable Lender, as the case may be, upon
receipt of a notice that such refund is required to be repaid to the relevant
taxing authority.
(f) The obligations of a Lender or Participant under this
subsection 4.13 shall survive the termination of this Agreement and the payment
of the Loans and all amounts payable hereunder.
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SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and each Lender to make the
Extensions of Credit requested to be made by it on the Effective Date and on
each Borrowing Date thereafter, the Borrower hereby represents and warrants, on
the Effective Date (both before and after giving effect to the Transactions),
and on every Borrowing Date thereafter, to the Administrative Agent and each
Lender that:
5.1 Financial Condition. (a) The audited consolidated balance
sheets of Holdings and its consolidated Subsidiaries as of March 31, 1994, March
31, 1995 and March 31, 1996 and the audited consolidated statements of earnings,
statements of shareholders' equity and statements of cash flows for the years
ended March 31, 1994, March 31, 1995 and March 31, 1996 have heretofore been
furnished to each Lender. Such financial statements (including the notes
thereto) (i) have been audited by Ernst & Young LLP, (ii) have been prepared in
accordance with GAAP consistently applied throughout the periods covered thereby
and (iii) present fairly, in all material respects, the consolidated financial
condition, results of operations and cash flows of Holdings and its consolidated
Subsidiaries as of such dates and for such periods. During the period from March
31, 1996 to and including the Effective Date, except as provided in the
Transaction Documents, there has been no sale, transfer or other disposition by
Holdings and its consolidated Subsidiaries of any material part of the business
or property of Holdings and its consolidated Subsidiaries, taken as a whole, and
no purchase or other acquisition by any of them of any business or property
(including any Capital Stock of any other Person) material in relation to the
consolidated financial condition of Holdings and its consolidated Subsidiaries,
taken as a whole, in each case, which is not reflected in the foregoing
financial statements or in the notes thereto and has not otherwise been
disclosed in a writing to the Lenders on or prior to the Effective Date.
(b) The pro forma balance sheet of Holdings and its
consolidated Subsidiaries (the "Pro Forma Balance Sheet"), copies of which have
heretofore been furnished to each Lender, is the balance sheet of Holdings and
its consolidated Subsidiaries as of December 31, 1996 (the "Pro Forma Date"),
adjusted to give effect (as if such events had occurred on such date) to the
matters referred to therein. The Pro Forma Balance Sheet was prepared in
accordance with Article 11 (Pro Forma Financial Information) of Regulation S-X
under the Securities Act.
5.2 No Change; Solvent. (a) Since March 31, 1996, except as
and to the extent disclosed on Schedule 5.2(a) hereto, there has been no
development or event relating to or affecting any Loan Party which has had or
would be reasonably expected to have a Material Adverse Effect (after giving
effect to the Transactions).
(b) As of the Effective Date, after giving effect to the
consummation of the Transactions, the Borrower is Solvent.
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5.3 Corporate Existence; Compliance with Law. Each of the Loan
Parties (a) is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (b) has the corporate power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, except to the extent that the failure to have such legal
right would not be reasonably expected to have a Material Adverse Effect, (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not be reasonably expected to have a Material Adverse Effect, and (d), except as
set forth on Schedule 2.2(j) to the Recapitalization Agreement, is in compliance
with all Requirements of Law, except to the extent that the failure to comply
therewith would not, in the aggregate, be reasonably expected to have a Material
Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents and the Transaction Documents to
which it is a party and, in the case of the Borrower, to obtain Extensions of
Credit hereunder, and each such Loan Party has taken all necessary corporate
action to authorize the execution, delivery and performance of the Loan
Documents and the Transaction Documents to which it is a party and, in the case
of the Borrower, to authorize the Extensions of Credit on the terms and
conditions of this Agreement, any Notes and the Applications. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Loan Party in connection with the execution,
delivery, performance, validity or enforceability of the Loan Documents or
Transaction Documents to which it is a party or, in the case of the Borrower,
with the Extensions of Credit hereunder, except for (i) consents,
authorizations, notices and filings described in Schedule 5.4, all of which have
been obtained or made prior to the Effective Date, (ii) filings to perfect the
Liens created by the Security Documents, (iii) filings pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727 et seq.),
in respect of Accounts Receivable of the Borrower and its Subsidiaries the
obligor in respect of which is the United States of America or any department,
agency or instrumentality thereof and (iv) consents, authorizations, notices and
filings which the failure to obtain or make would not reasonably be expected to
have a Material Adverse Effect. This Agreement has been duly executed and
delivered by the Borrower, and each other Loan Document and Transaction Document
to which any Loan Party is a party, has been, or will be duly executed and
delivered on behalf of such Loan Party. This Agreement constitutes a legal,
valid and binding obligation of the Borrower, and each other Loan Document and
Transaction Document to which any Loan Party is a party as executed and
delivered does constitute, or when executed and delivered, will constitute, a
legal, valid and binding obligation of such Loan Party, enforceable against such
Loan Party in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
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affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
5.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents and the Transaction Documents by any of the Loan Parties, the
Extensions of Credit hereunder and the use of the proceeds thereof (a) will not
violate any Requirement of Law or Contractual Obligation of such Loan Party in
any respect that would reasonably be expected to have a Material Adverse Effect
and (b) will not result in, or require, the creation or imposition of any Lien
(other than the Liens permitted by subsection 8.3) on any of its properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation.
5.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against Holdings or any of
its Subsidiaries or against any of their respective properties or revenues, (a)
except as described on Schedule 5.6 hereto or Schedule 2.2(h) to the
Recapitalization Agreement, which is so pending or threatened at any time on or
prior to the Effective Date and relates to any of the Loan Documents or the
Transaction Documents or any of the transactions contemplated hereby or thereby
or (b) which would be reasonably expected to have a Material Adverse Effect.
5.7 No Default. Neither the Borrower nor Holdings or any of
their respective Subsidiaries is in default under or with respect to any of its
Contractual Obligations including under the Senior Subordinated Notes in any
respect which would be reasonably expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8 Ownership of Property; Liens. Each of the Borrower,
Holdings and their Subsidiaries has good record and marketable title in fee
simple to, or a valid leasehold interest in, all its material real property, and
good title to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien, except for Liens
permitted by subsection 8.3.
5.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or has the legal right to use, all United States patents,
patent applications, trademarks, trademark applications, tradenames, copyrights,
technology, know-how and processes necessary for each of them to conduct its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. Except as provided on Schedule 5.9,
no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower know of
any such claim, and, to the knowledge of the Borrower the use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such
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claims and infringements which in the aggregate, would not be reasonably
expected to have a Material Adverse Effect.
5.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower, Holdings or any of their Subsidiaries
would be reasonably expected to have a Material Adverse Effect.
5.11 Taxes. To the knowledge of the Borrower, each of Holdings
and its Subsidiaries has filed or caused to be filed all United States federal
income tax returns and all other material tax returns which are required to be
filed and has paid (a) all taxes shown to be due and payable on such returns and
(b) all taxes shown to be due and payable on any assessments of which it has
received notice made against it or any of its property (including, without
limitation, the Mortgaged Properties) and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority and, except
as set forth on Schedule 2.2(j) to the Recapitalization Agreement, no tax Lien
has been filed, and no claim is being asserted, with respect to any such tax,
fee or other charge (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a Material
Adverse Effect or (ii) taxes, fees or other charges the amount or validity of
which are currently being contested in good faith by appropriate proceedings
diligently conducted and with respect to which reserves in conformity with GAAP
have been provided on the books of Holdings or its Subsidiaries, as the case may
be).
5.12 Federal Regulations. No part of the proceeds of any
Extensions of Credit will be used for any purpose which violates the provisions
of the Regulations of the Board, including, without limitation, Regulation G,
Regulation U, Regulation T or Regulation X of the Board. If requested by any
Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-1, FR Form U-1 or such other
similar form referred to in Regulation G, Regulation U, Regulation T or
Regulation X of the Board, as the case may be.
5.13 ERISA. During the five year period prior to each date as
of which this representation is made, or deemed made, with respect to any Plan
(or, with respect to (vi) or (viii) below, as of the date such representation is
made or deemed made), except as set forth on Schedule 2.2(j) to the
Recapitalization Agreement, none of the following events or conditions, either
individually or in the aggregate, has resulted or is reasonably likely to result
in a Material Adverse Effect: (i) a Reportable Event; (ii) an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA); (iii) any noncompliance with the applicable provisions of ERISA
or the Code; (iv) a termination of a Single Employer Plan (other than a standard
termination pursuant to Section 4041(b) of ERISA); (v) a Lien on the property of
the Borrower or its Subsidiaries in favor of the PBGC or a Plan; (vi) any
Underfunding with respect to any Single Employer Plan; (vii) a complete or
partial withdrawal from any
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Multiemployer Plan by the Borrower or any Commonly Controlled Entity; (viii) any
liability of the Borrower or any Commonly Controlled Entity under ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the annual valuation date most closely preceding
the date on which this representation is made or deemed made; or (ix) the
Reorganization or Insolvency of any Multiemployer Plan. There have been no
transactions that resulted or could result in any liability to the Borrower or
any Commonly Controlled Entity under Section 4069 of ERISA or Section 4212(c) of
ERISA.
5.14 Collateral. Except with respect to (i) Liens on equipment
constituting fixtures, (ii) any reserved rights of the United States government
as required under law, (iii) Liens upon Patents, Patent Licenses, Trademarks and
Trademark Licenses (as such terms are defined in the Guarantee and Collateral
Agreement) to the extent that (a) such Liens are not otherwise perfected by the
filing of financing statements under the Uniform Commercial Code or by the
filing and acceptance thereof in the United States Patent and Trademark Office
or (b) such Patents, Patent Licenses, Trademarks and Trademark Licenses are not,
individually or in the aggregate, material to the business of the Borrower and
its Subsidiaries taken as a whole, (iv) Liens on uncertificated securities, (v)
Liens on Collateral the perfection of which requires filings in or other actions
under the laws of jurisdictions outside of the United States of America, any
State, territory or dependency thereof or the District of Columbia (except to
the extent that such filings or other actions have been made or taken), (vi)
Liens on contracts or Accounts Receivable on which the United States of America
or any department, agency, or instrumentality thereof is the obligor, (vii)
Liens on Proceeds of Accounts Receivable and Inventory, until transferred to or
deposited in the Collateral Proceeds Account (if any), and (viii) claims of
creditors of Persons receiving goods included as Collateral for "sale or return"
within the meaning of Section 2-326 of the Uniform Commercial Code of the
applicable jurisdiction, upon filing of the financing statements delivered to
the Administrative Agent by the Borrower and its Subsidiaries on the Effective
Date in the jurisdictions listed on Part II of Schedule 5.14 (which financing
statements are in proper form for filing in such jurisdictions) and the
recording of the Mortgages (and the recording of the Patent and Trademark
Security Agreement, and the making of filings after the Effective Date in any
other jurisdiction as may be necessary under any Requirement of Law) and the
delivery to, and continuing possession by, the Administrative Agent of all
Instruments, Chattel Paper and Documents a security interest in which is
perfected by possession, the Liens created pursuant to each Security Document,
when executed and delivered, will constitute valid Liens on and, to the extent
provided therein, perfected security interests in the collateral referred to in
such Security Document (but as to the Copyrights and the Copyright Licenses (as
defined in the Guarantee and Collateral Agreement) and accounts arising
therefrom, only to the extent the Uniform Commercial Code of the relevant
jurisdiction, from time to time in effect, is applicable) in favor of the
Administrative Agent for the benefit of the Lenders, which Liens will be prior
to all other Liens of all other Persons, except for Liens permitted pursuant to
the Loan Documents (including, without limitation, those permitted to exist
pursuant to subsection 8.3), and which Liens are enforceable as such as against
all other Persons (except, with respect to goods only,
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buyers in the ordinary course of business to the extent provided in Section 9-
307(1) of the Uniform Commercial Code as from time to time in effect in the
applicable jurisdiction and except to the extent that recording of an assignment
or other transfer of title to the Administrative Agent in the United States
Patent and Trademark Office may be necessary for such enforceability), except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law). Notwithstanding any
other provision of this Agreement, capitalized terms which are used in this
subsection 5.14 and not defined in this Agreement are so used as defined in the
applicable Security Document.
5.15 Investment Company Act; Other Regulations. Neither
Holdings nor the Borrower is an "investment company", or a company "controlled"
by an entity required to be registered as an "investment company", within the
meaning of the Investment Company Act. Neither Holdings nor the Borrower is
subject to regulation under any Federal or State statute or regulation which
limits its ability to incur Indebtedness as contemplated hereby.
5.16 Subsidiaries. Schedule 5.16 sets forth all the
Subsidiaries of the Borrower at the Effective Date, the jurisdiction of their
incorporation and the direct or indirect ownership interest of the Borrower
therein.
5.17 Purpose of Loans. The proceeds of the Term Loans shall be
used to finance a portion of the Recapitalization and to pay related fees and
expenses. The proceeds of the Revolving Credit Loans shall be used to provide
for the working capital requirements of the Borrower and its operating
subsidiaries and for their general corporate purposes (including the financing
of a portion of the Recapitalization and the fees and expenses relating
thereto).
5.18 Environmental Matters. Other than exceptions to any of
the following that are set forth on Schedule 2.2(j) to the Recapitalization
Agreement or that are described in the Offering Memorandum for the Senior
Subordinated Notes or that would not, individually or in the aggregate,
reasonably be expected to give rise to a Material Adverse Effect:
(i) The Borrower and its Subsidiaries: (A) are, and within the
period of all applicable statutes of limitation have been, in
compliance with all applicable Environmental Laws; (B) hold all
Environmental Permits (each of which is in full force and effect)
required for any of their current operations or for any property owned,
leased, or otherwise operated by any of them and reasonably expect to
timely obtain without material expense all such Environmental Permits
required for planned operations; (C) are, and within the period of all
applicable statutes of limitation have been, in compliance with all of
their Environmental Permits; and (D) have no reason to believe that any
of their Environmental Permits will not be, or will not entail material
expense to be, timely
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renewed or complied with; any additional Environmental Permits that may
be required of any of them will not be, or will not entail material
expense to be, timely granted or complied with; or that compliance with
any Environmental Law that is applicable to any of them will not be, or
will not entail material expense to be, timely attained and maintained.
(ii) Materials of Environmental Concern have not been
transported, disposed of, emitted, discharged, or otherwise released or
threatened to be released, to or at any real property presently or
formerly owned, leased or operated by the Borrower or any of its
Subsidiaries or at any other location, which could reasonably be
expected to (A) give rise to liability of the Borrower or any of its
Subsidiaries under any applicable Environmental Law, or (B) interfere
with the Borrower's planned or continued operations, or (C) impair the
fair saleable value of any real property owned or leased by the
Borrower or any of its Subsidiaries.
(iii) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation)
under any Environmental Law to which the Borrower or any of its
Subsidiaries is, or to the knowledge of the Borrower or any of its
Subsidiaries will be, named as a party that is pending or, to the
knowledge of the Borrower or any of its Subsidiaries, threatened.
(iv) Neither the Borrower nor any of its Subsidiaries has
received any written request for information, or been notified that it
is a potentially responsible party, under the federal Comprehensive
Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or received any other written request for
information with respect to any Materials of Environmental Concern.
(v) Neither the Borrower nor any of its Subsidiaries has
entered into or agreed to any consent decree, order, or settlement or
other agreement, nor is subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral, or other
forum, relating to compliance with or liability under any Environmental
Law.
5.19 No Material Misstatements. The written information,
reports, financial statements, exhibits and schedules furnished by or on behalf
of Holdings, Acquisition Co., Telex or the Borrower to the Administrative Agent,
and the Lenders in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto, taken as a whole, did not
contain as of the Effective Date any material misstatement of fact. It is
understood that (x) no representation or warranty is made concerning the
forecasts, estimates, pro forma information, projections and statements as to
anticipated future performance or conditions, and the assumptions on which they
were based, contained in any such information, reports, financial statements,
exhibits or schedules, except that as of the date such forecasts, estimates, pro
forma
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information, projections and statements were generated, (i) such forecasts,
estimates, pro forma information, projections and statements were based on the
good faith assumptions of the management of the Borrower and (ii) such
assumptions were believed by such management to be reasonable and (y) such
forecasts, estimates, pro forma information and statements, and the assumptions
on which they were based, may or may not prove to be correct.
5.20 Delivery of the Transaction Documents. The Administrative
Agent has received for itself and for each Lender a complete photocopy of each
of the Transaction Documents (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof in any material respect.
5.21 Representations and Warranties Contained in the
Transaction Documents. Each of the Transaction Documents will have been duly
executed and delivered, by each of the Loan Parties which is a party thereto
prior to the Effective Date and, to the knowledge of the Borrower, all other
parties thereto, and is in full force and effect on the Effective Date. As of
the Effective Date, the representations and warranties of Holdings, the
Borrower, Acquisition Co., Greenwich II and GSCP and, to the knowledge of the
Borrower, and any of the other parties thereto contained in any of the
Transaction Documents (after giving effect to any amendments, supplements,
waivers or other modifications of any of the Transaction Documents prior to the
Effective Date in accordance with this Agreement) are true and correct in all
material respects except as otherwise disclosed to the Administrative Agent in
writing prior to the Effective Date.
5.22 Labor Matters. There are no strikes pending or, to the
knowledge of the Borrower, reasonably expected to be commenced against the
Borrower or any of its Subsidiaries which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. The hours worked
and payments made to employees of the Borrower and each of its Subsidiaries have
not been in violation of any applicable laws, rules or regulations, except where
such violations would not reasonably be expected to have a Material Adverse
Effect. The consummation of the Transactions will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower or any of its Subsidiaries
(or any predecessor) is a party or by which the Borrower or any of its
Subsidiaries (or any predecessor) is bound.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Initial Extension of Credit. This Agreement,
including, without limitation, the agreement of each Lender to make the initial
Extension of Credit requested to be made by it, shall become effective on the
date on which the following conditions precedent shall have been satisfied or
waived:
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(a) Loan Documents. The Administrative Agent shall have
received the following Loan Documents, executed and delivered as required below,
with a copy for each applicable Lender:
(i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower;
(ii) the Telex Assumption Agreement, executed and delivered by
a duly authorized officer of Holdings and Telex;
(iii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of each of Holdings, the
Borrower and each of the Domestic Subsidiaries of the Borrower;
(iv) The Patent and Trademark Security Agreement, executed and
delivered by a duly authorized officer of each of the Borrower and each
of the Domestic Subsidiaries of the Borrower;
(v) each of the Mortgages, executed and delivered by a duly
authorized officer of the Loan Party thereto; and
(vi) any Notes requested by the Lenders in accordance with
subsections 2.2, 2.7 and 2.8, executed by a duly authorized officer of
the Borrower.
(b) Subordinated Debt. The Borrower shall have received gross
proceeds of at least $125,000,000 in cash from the issuance of Senior
Subordinated Notes pursuant to the Senior Subordinated Indenture and each of the
Senior Subordinated Notes Documents have been executed and delivered on terms
and conditions reasonably satisfactory to the Administrative Agent.
(c) Corporate Structure. The corporate and capital structure
of each Loan Party after the Recapitalization, the Merger and the Telex
Assumption (including as to the ownership of the voting stock thereof and the
voting arrangements with respect to such stock) shall be reasonably satisfactory
in all respects to the Administrative Agent. The GSCP Equity Investment and the
Management Equity Investment shall have occurred. Holdings shall own all of the
Capital Stock of Telex.
(d) Transactions. The Recapitalization, the Merger and the
Telex Assumption shall have been consummated simultaneously with the closing
hereof and pursuant to the Recapitalization Documents. Each of the
Recapitalization Documents shall have been executed and delivered on terms and
conditions reasonably satisfactory to the Administrative Agent and no
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material provision thereof shall have been waived by Greenwich II or Acquisition
Co., amended, supplemented or otherwise modified (except as may be so reasonably
satisfactory to the Administrative Agent). The sources and uses of funds for the
Recapitalization shall be substantially as set forth in the Confidential
Information Memorandum dated April 1997. Telex shall have repurchased at least
90% of the Telex Notes under the Tender Offer and pursuant to the Tender Offer
Documents. The Borrower and its Subsidiaries have no (i) Indebtedness other than
as permitted pursuant to Section 8.2 or (ii) outstanding preferred stock other
than the preferred stock of the Borrower held by Telex Investments, Inc., a
wholly owned Subsidiary of the Borrower.
(e) Fees. The Administrative Agent and the Arranger shall have
received, simultaneously with the consummation of the Transactions, all fees and
expenses required, and as agreed to in writing, to be paid on the Effective
Date.
(f) Governmental Approvals. All governmental and third party
approvals (including landlords' and other consents) necessary or reasonably
advisable in connection with the Recapitalization, the Merger, the Telex
Assumption, the financing contemplated hereby and the continuing operations of
the Borrower and its subsidiaries shall have been obtained and be in full force
and effect, and all applicable waiting periods under applicable law shall have
expired without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose material adverse conditions on
the Recapitalization, the Merger, the Telex Assumption or the financing thereof.
(g) Financial Statements. The Lenders shall have received (i)
reasonably satisfactory audited consolidated financial statements of the
Borrower for the three most recent fiscal years ended prior to the Effective
Date accompanied by an audit report from Ernst & Young LLP or another accounting
firm reasonably satisfactory to the Lenders, (ii) reasonably satisfactory
unaudited interim consolidated financial statements of the Borrower for each
fiscal quarterly period ended subsequent to the date of the latest financial
statements delivered pursuant to clause (i) of this paragraph for which such
unaudited financial statements are available and (iii) reasonably satisfactory
unaudited monthly financial statements for the Borrower for each fiscal month
ended subsequent to the date of the date of quarterly financial statements
delivered pursuant to clause (ii) of this paragraph for which such unaudited
financial statements are available.
(h) Pro forma Balance Sheet. The Lenders shall have received a
reasonably satisfactory unaudited pro forma consolidated balance sheet of the
Borrower as of the most recent fiscal quarter-end prior to the Effective Date
for which quarterly financial statements of the Borrower are available, and
after giving effect to the consummation on the Effective Date of the
Recapitalization, the Merger, the Telex Assumption and the financings
contemplated hereby (including any related schedules required by the SEC). The
Lenders shall be reasonably satisfied
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with respect to all material and direct contingent liabilities of the Borrower
after the Recapitalization, the Merger and the Telex Assumption, including any
indebtedness or guarantees thereof and any tax and similar governmental
liabilities.
(i) EBITDA Report. The Lenders shall have received a report
from the Borrower, in a form consistent with the projections previously provided
to Chase, confirming that the Consolidated EBITDA of the Borrower for the twelve
months ended December 31, 1996 was at least $38,000,000 and the Lenders shall be
reasonably satisfied, based on the financial information then available and
projections provided by the Borrower, that the EBITDA of the Borrower for the
twelve months ending March 31, 1997 is estimated to be at least $40,000,000.
(j) Fees and Expenses. The Administrative Agent shall have
received reasonably satisfactory evidence that the fees and expenses, including
accrued interest on the Telex Notes, to be incurred by the Borrower in
connection with the Recapitalization and the financing thereof (including this
Agreement and the Senior Subordinated Notes) shall not exceed $38,200,000 in the
aggregate.
(k) Solvency. The Lenders shall have received a reasonably
satisfactory opinion as to the solvency of the Borrower after the consummation
of the Recapitalization, the Merger and the Telex Assumption and the other
transactions contemplated hereby, from Valuation Research Corp. or another firm
reasonably satisfactory to the Administrative Agent.
(l) No Material Change. Since the date of the most recent
financial statements provided to the Lenders prior to the date hereof, there
shall not have occurred or become known to any Lender any material adverse
condition or material adverse change in or affecting the business, operations,
property, condition (financial or otherwise) or prospects of the Borrower and
its subsidiaries taken as a whole.
(m) Lien Searches. The Administrative Agent shall have
received the results of a recent search by a Person reasonably satisfactory to
the Administrative Agent, of the Uniform Commercial Code, judgment and tax lien
filings which may have been filed with respect to personal property of the
Borrower and its Subsidiaries in any of the jurisdictions set forth in Part I of
Schedule 5.14, and the results of such search shall not reveal any liens other
than liens permitted by subsection 8.3.
(n) Legal Opinions. The Administrative Agent shall have
received, with a photocopy for each Lender, the following executed legal
opinions:
(i) the executed legal opinion of Debevoise & Plimpton,
special counsel to each of Acquisition Co., the Borrower and the other
Loan Parties, substantially in the form of Exhibit F;
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(ii) the executed legal opinions of special local counsel in
the jurisdictions set forth in Schedule 6.1(o) with respect to
collateral security matters, each in form and substance reasonably
satisfactory to the Administrative Agent; and
(iii) the executed legal opinion of Amster, Rothstein &
Ebenstein, special intellectual property counsel to the Lenders, in
form and substance reasonably satisfactory to the Administrative Agent.
(o) Actions to Perfect Liens. The Administrative Agent shall
have received evidence in form and substance reasonably satisfactory to it that
all filings, recordings, registrations and other actions, including, without
limitation, the filing of duly executed financing statements on Form UCC-1 in
each jurisdiction set forth on Schedule 5.14, necessary or, in the reasonable
opinion of the Administrative Agent, advisable to perfect the Liens created by
the Security Documents (other than the recording of the Mortgages with respect
to the Borrower's owned real property located in LeSueur, Minnesota and
Burnsville, Minnesota) shall have been completed or shall be ready to be
completed promptly following the Effective Date, and all agreements, statements
and other documents relating thereto shall be in form and substance reasonably
satisfactory to the Administrative Agent.
(p) Pledged Stock; Stock Powers; Pledged Notes; Endorsements.
The Administrative Agent shall have received:
(i) the certificates representing the Pledged Stock under (and
as defined in) the Guarantee and Collateral Agreement, together with an
undated stock power for each such certificate executed in blank by a
duly authorized officer of the pledgor thereof; and
(ii) the promissory notes representing each of the Pledged
Notes (if any) under (and as defined in) the Guarantee and Collateral
Agreement, duly endorsed as required by the Guarantee and Collateral
Agreement.
The Loan Parties shall have taken such other action as is reasonably
satisfactory to the Administrative Agent to perfect the security interests
created by the Guarantee and Collateral Agreement.
(q) Surveys. The Administrative Agent shall have received, and
the title insurance company issuing the policy referred to in subsection 6.1(s)
(the "Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of each of the Mortgaged Properties (other than the
real properties owned by the Borrower located in LeSueur, Minnesota and
Burnsville, Minnesota) certified to the Administrative Agent and the Title
Insurance Company in a manner reasonably satisfactory to them, dated a date
reasonably satisfactory to the Administrative Agent and the Title Insurance
Company by an independent
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professional licensed land surveyor reasonably satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats and
the surveys on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following: (i) the locations on such sites of all the buildings, structures and
other improvements and the established building setback lines; (ii) the lines of
streets abutting the sites and width thereof; (iii) all access and other
easements appurtenant to the sites necessary to use the sites; (iv) all
roadways, paths, driveways, easements, encroachments and overhanging projections
and similar encumbrances affecting the sites, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building structures and
improvements on the sites; and (vi) if the site is described as being on a filed
map, a legend relating the survey to said map.
(r) Title Insurance Policy. The Administrative Agent shall
have received in respect of each of the Mortgaged Properties (other than the
real properties owned by the Borrower located in LeSueur, Minnesota and
Burnsville, Minnesota) a mortgagee's title policy (or policies) or marked up
unconditional binder for such insurance dated the Effective Date. Each such
policy shall (i) be in an amount reasonably satisfactory to the Administrative
Agent; (ii) insure that the Mortgage insured thereby creates a valid first Lien
on the Mortgaged Property encumbered thereby free and clear of all defects and
encumbrances, except those permitted by subsection 8.3 and such as may be
approved by the Administrative Agent; (iii) name the Administrative Agent for
the benefit of the Lenders as the insured thereunder; (iv) be in the form of an
ALTA Loan Policy; (v) contain such endorsements and affirmative coverage as the
Administrative Agent may reasonably request; provided that, in the case of
zoning endorsements, if any, no additional premiums will be required in excess
of $2,000 per property, (vi) be issued by title companies reasonably
satisfactory to the Administrative Agent (including any such title companies
acting as reinsurers, at the option of the Administrative Agent) and (vii) be
issued at ordinary rates (other than with respect to affirmative insurance). The
Administrative Agent shall have received evidence reasonably satisfactory to it
that all premiums in respect of each such policy, and all charges for mortgage
recording tax, if any, have been paid. The Administrative Agent shall have also
received a copy of all recorded documents referred to, or listed as exceptions
to title in, the title policy or policies referred to in this subsection and a
copy, certified by such parties as the Administrative Agent may deem reasonably
appropriate, of all other documents affecting the property covered by each
Mortgage as shall have been reasonably requested by the Administrative Agent.
(s) Borrowing Certificate. The Administrative Agent shall have
received, with a photocopy for each Lender, (a)(i) a certificate of the
Borrower, dated the Effective Date, substantially in the
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form of Exhibit I and (ii) a Borrowing Base Certificate, substantially in the
form of Exhibit J, with appropriate insertions and attachments, reasonably
satisfactory in form and substance to the Administrative Agent, executed by a
Responsible Officer and the Secretary or any Assistant Secretary of the Borrower
and (b) a report on the accounts receivable and inventory of the Borrower from
the Administrative Agent's collateral review group (or an independent auditor
reasonably satisfactory to it) to be included within the Borrowing Base,
reasonably satisfactory in form and substance to the Administrative Agent (or,
if such a field audit cannot be completed prior to the Effective Date by reason
of the availability of such collateral review group, arrangements for the
completion thereof on or prior to the date that is one month thereafter shall
have been made).
(t) Corporate Proceedings of the Loan Parties. The
Administrative Agent shall have received, with a photocopy for each Lender, a
copy of the resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the board of directors of each Loan Party authorizing,
as applicable, (i) the execution, delivery and performance of this Agreement,
any Notes and the other Loan Documents and the Transaction Documents to which it
is or will be a party as of the Effective Date, (ii), in the case of the
Borrower, the Extensions of Credit to the Borrower and (iii) the granting by it
of the Liens to be created pursuant to the Security Documents to which it is or
will be a party as of the Effective Date, certified by the Secretary or an
Assistant Secretary of such Loan Party as of the Effective Date, which
certificate shall be in form and substance reasonably satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified have
not been amended, modified (except as any later resolution may modify any such
earlier resolution), revoked or rescinded and are in full force and effect.
(u) Incumbency Certificates of the Loan Parties. The
Administrative Agent shall have received, with a photocopy for each Lender, a
certificate of each Loan Party, dated the Effective Date, as to the incumbency
and signature of the officers of such Loan Party executing any Loan Document,
reasonably satisfactory in form and substance to the Administrative Agent,
executed by a Responsible Officer and the Secretary or any Assistant Secretary
of such Loan Party.
(v) Governing Documents. The Administrative Agent shall have
received, with a photocopy for each Lender, copies of the certificate or
articles of incorporation and by-laws (or other similar governing documents
serving the same purpose) of each Loan Party, certified as of the Effective Date
as complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Loan Party.
(w) Insurance. The Administrative Agent shall have received
evidence in form and substance reasonably satisfactory to it that all of the
requirements of subsection 7.5 of this Agreement and Section 5 of each Mortgage
shall have been satisfied.
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(x) Flood Insurance. With respect to any of the Mortgaged
Properties which is located in an area identified by the Secretary of Housing
and Urban Development as having special flood hazards, the Administrative Agent
shall have delivered notice(s) to, and received acknowledgement from, the
relevant Loan Party as required pursuant to Section 208.8(e)(3) of Regulation H
of the Board.
(y) Management Contracts. The Administrative Agent shall be
reasonably satisfied in all respects with the employment contracts with the
senior management of the Borrower.
The making of the initial Extensions of Credit by the Lenders
hereunder shall conclusively be deemed to constitute an acknowledgement by the
Administrative Agent and each Lender that each of the conditions precedent set
forth in this subsection 6.1 shall have been satisfied in accordance with its
respective terms or shall have been irrevocably waived by such Person.
6.2 Conditions to Each Other Extension of Credit. The
agreement of each Lender to make any Extension of Credit requested to be made by
it on any date (including, without limitation, the initial Extension of Credit
and each Swing Line Loan) is subject to the satisfaction or waiver of the
following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party pursuant to this Agreement
or any other Loan Document (or in any amendment, modification or supplement
hereto or thereto) to which it is a party, and each of the representations and
warranties contained in any certificate furnished at any time by or on behalf of
any Loan Party pursuant to this Agreement or any other Loan Document, shall,
except to the extent that they relate to a particular date, be true and correct
in all material respects on and as of such date as if made on and as of such
date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Extensions
of Credit requested to be made on such date.
(c) Letter of Credit Application. With respect to the issuance
of any Letter of Credit, the Issuing Lender shall have received an Application,
completed to its satisfaction, and such other certificates, documents and other
papers and information as the Issuing Lender may reasonably request.
Each borrowing by and Letter of Credit issued on behalf of any
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such
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borrowing or such issuance that the conditions contained in this subsection 6.2
have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, from and after the Effective
Date and so long as the Revolving Credit Commitments remain in effect, and
thereafter until payment in full of the Loans, all Reimbursement Obligations and
any other amount then due and owing to any Lender or the Administrative Agent
hereunder and under any Note and termination or expiration of all Letters of
Credit, the Borrower shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries to:
7.1 Financial Statements. Furnish to the Administrative Agent
for delivery to each Lender (and the Administrative Agent agrees to make and so
deliver such copies):
(a) as soon as available, but in any event not later than the
90th day following the end of each fiscal year of the Borrower ending on or
after the Effective Date, a copy of the consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such year and the
related consolidated statements of operations, changes in common stockholders'
equity and cash flows for such year, setting forth in each case, in comparative
form the figures for and as of the end of the previous year, reported on without
a "going concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Ernst & Young LLP or other independent
certified public accountants of nationally recognized standing not unacceptable
to the Administrative Agent in its reasonable judgment;
(b) as soon as available, but in any event not later than the
45th day following the end of each of the first three quarterly periods of each
fiscal year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of operations and cash flows of the
Borrower and its consolidated Subsidiaries for such quarter and the portion of
the fiscal year through the end of such quarter, setting forth, in comparative
form the budgeted figures (as adjusted consistent with past practice) for the
relevant period and the figures for the corresponding period of the previous
fiscal year, certified by a Responsible Officer of the Borrower as being fairly
stated in all material respects (subject to normal year-end audit and other
adjustments); and
(c) as soon as available, but in any event not later than the
30th day following the end of each fiscal month of each fiscal year of the
Borrower (or the 45th day in the case of any such month ending on the last day
of a fiscal quarter), an unaudited consolidated balance sheet for Borrower and
its consolidated Subsidiaries as at the end of such month and a related
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unaudited consolidated income statement, setting forth in comparative form the
figures as at the end of the corresponding fiscal month of the previous fiscal
year and, in the case of such income statement, in comparative form the figures
for the corresponding fiscal month of the previous fiscal year; all such
financial statements delivered pursuant to subsection 7.1(a) or (b) to be (and,
in the case of any financial statements delivered pursuant to subsection 7.1(b)
shall be certified by a Responsible Officer of the Borrower as being) complete
and correct in all material respects in conformity with GAAP and to be (and, in
the case of any financial statements delivered pursuant to subsection 7.1(b)
shall be certified by a Responsible Officer of the Borrower as being) prepared
in reasonable detail in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods that began on or after the
Effective Date (except as approved by such accountants or officer, as the case
may be, and disclosed therein, and except, in the case of any financial
statements delivered pursuant to subsection 7.1(b), for the absence of certain
notes).
7.2 Certificates; Other Information. Furnish to the
Administrative Agent for delivery to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in making
the audit necessary therefor no knowledge was obtained of any Default or Event
of Default insofar as the same relates to any financial accounting matters
covered by their audit, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
and reports referred to in subsections 7.1(a) and (b), a certificate signed by a
Responsible Officer of the Borrower (i) stating that, to the best of such
Responsible Officer's knowledge, the Borrower and its Subsidiaries during such
period has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement, any Notes or the other
Loan Documents to which it is a party to be observed, performed or satisfied by
it, and that such Responsible Officer has obtained no knowledge of any Default
or Event of Default, except, in each case, as specified in such certificate, and
(ii) setting forth the calculations required to determine (A) compliance with
all covenants set forth in subsection 8.1 (in the case of a certificate
furnished with the financial statements referred to in subsections 7.1(a) and
(b)), and (B) compliance with the covenant set forth in subsection 8.8 (in the
case of a certificate furnished with the financial statements referred to in
subsection 7.1(a));
(c) as soon as available, but in any event not later than the
90th day after the beginning of each fiscal year of the Borrower, a copy of the
projections by the Borrower of the operating budget and cash flow budget of the
Borrower and its Subsidiaries for such fiscal year, such projections to be
accompanied by a certificate of a Responsible Officer of the Borrower to
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the effect that such Responsible Officer believes such projections to have been
prepared on the basis of reasonable assumptions;
(d) within five Business Days after the same are sent, copies
of all financial statements and reports which the Borrower sends to its public
security holders, and within five Business Days after the same are filed, copies
of all financial statements and periodic reports which the Borrower may file
with the SEC or any successor or analogous Governmental Authority;
(e) on the 25th day of each calendar month (and at such other
times as the Administrative Agent reasonably may request), a Borrowing Base
Certificate, certified by a Responsible Officer of the Borrower as being true
and accurate in all material respects, setting forth the Borrower's calculation
of the Borrowing Base as of the date specified in such certificate (which, with
respect to the Borrowing Base Certificate delivered on the 25th day of a
calendar month, shall be as of the last Business Day of the prior calendar
month); and
(f) promptly, such additional financial and other information
as any Lender may from time to time reasonably request, including certificates
setting forth calculations showing that the Borrower is in compliance with
subsections 8.2(l), 8.3(j), 8.3(k), 8.4(j), 8.6(g), 8.7(a) and 8.11 of this
Agreement.
7.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings diligently conducted and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Borrower or any of its
Subsidiaries, as the case may be.
7.4 Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as conducted by the Borrower and
its Subsidiaries on the Effective Date, taken as a whole, and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of the business of the Borrower and its
Subsidiaries, taken as a whole, except as otherwise expressly permitted pursuant
to subsection 8.5, provided that the Borrower and its Subsidiaries shall not be
required to maintain any such rights, privileges or franchises, if the failure
to do so would not reasonably be expected to have a Material Adverse Effect; and
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith, in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
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7.5 Maintenance of Property; Insurance. Keep all property
useful and necessary in the business of the Borrower and its Subsidiaries, taken
as a whole, in good working order and condition; maintain with financially sound
and reputable insurance companies insurance on all property material to the
business of the Borrower and its Subsidiaries, taken as a whole, in at least
such amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to the Administrative Agent, upon written request,
information in reasonable detail as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books, records and accounts in which full, complete and correct
entries in conformity with GAAP and all material Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit representatives of any Lender to visit and inspect any of
its properties and examine and, to the extent reasonable, make abstracts from
any of its books and records and to discuss the business, operations, properties
and financial and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries and with its
independent certified public accountants, in each case at any reasonable time,
upon reasonable notice, and as often as may reasonably be desired.
(b) At any time upon the reasonable request of the
Administrative Agent, permit the Administrative Agent or its professionals
(including consultants, accountants and appraisers) retained by the
Administrative Agent to conduct evaluations and appraisals of (i) the Borrower's
practices in the computation of the Borrowing Base, (ii) the assets included in
the Borrowing Base, (iii) systems and procedures relating to the Borrowing Base
items, and (iv) other related procedures deemed necessary by the Administrative
Agent and pay the reasonable fees and expenses thereof in connection therewith
(including, without limitation, the fees and expenses associated with services
performed by the Administrative Agent's Specialized Due Diligence Department);
provided, however, that the Administrative Agent shall not be entitled to
conduct such evaluations and appraisals more frequently than once per year
unless (x) an Event of Default has occurred and is continuing or (y) the
Administrative Agent reasonably determines in consultation with the Borrower
that any material event or material change has occurred with respect to the Loan
Parties, their inventory practices or the performance of the Collateral and that
as a result of such event or change more frequent evaluations or appraisals are
required to effectively monitor the Borrowing Base, in which case the Borrower
will permit the Administrative Agent to conduct such evaluations and appraisals
at such reasonable times and as often as may be reasonably requested, in each
case so long as any Revolving Credit Loans, Swing Line Loans or Letters of
Credit shall be outstanding or shall have been requested by the Borrower
hereunder.
(c) In connection with any evaluation and appraisal relating
to the computation of the Borrowing Base, agree to make such adjustments to its
parameters for including Eligible
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Inventory and Eligible Accounts Receivable in the Borrowing Base as the
Administrative Agent shall reasonably require based upon the results of such
evaluation and appraisal, provided that the Administrative Agent shall specify
to the Borrower in writing the reasons for any such additional adjustments.
7.7 Notices. Promptly give notice to the Administrative Agent
and each Lender of:
(a) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, the occurrence of any Default
or Event of Default;
(b) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, any (i) default or event of
default under any Contractual Obligation of the Borrower or any of its
Subsidiaries, other than as previously disclosed in writing to the Lenders, or
(ii) litigation, investigation or proceeding which may exist at any time between
the Borrower or any of its Subsidiaries and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the case may be, would
reasonably be expected to have a Material Adverse Effect;
(c) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, the occurrence of any default
or event of default under the Senior Subordinated Notes Documents;
(d) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, any litigation or proceeding
affecting the Borrower or any of its Subsidiaries in which the amount involved
(not covered by insurance) is $1,000,000 or more or in which injunctive or
similar relief is sought that would reasonably be expected to have a Material
Adverse Effect;
(e) the following events, as soon as possible and in any event
within 30 days after a Responsible Officer of the Borrower or any of its
Subsidiaries knows or reasonably should know thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any Single Employer
Plan, a failure to make any required contribution to a Single Employer Plan or
Multiemployer Plan, the creation of any Lien on the property of the Borrower or
its Subsidiaries in favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan; (ii) the
institution of proceedings or the taking of any other formal action by the PBGC
or the Borrower or any of its Subsidiaries or any Commonly Controlled Entity or
any Multiemployer Plan which could reasonably be expected to result in the
withdrawal from, or the termination, Reorganization or Insolvency of, any Single
Employer Plan or Multiemployer Plan; provided, however, that no such notice will
be required under clause (i) or (ii) above unless the event giving rise to such
notice, when
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aggregated with all other such events under clause (i) or (ii) above, could be
reasonably expected to result in liability to the Borrower or its Subsidiaries
in an amount that would exceed $5,000,000; or (iii) the existence of an
Underfunding under a Single Employer Plan that exceeds 10% of the value of the
assets of such Single Employer Plan, in each case, determined as of the most
recent annual valuation date of such Single Employer Plan on the basis of the
actuarial assumptions used to determine the funding requirements of such Single
Employer Plan as of such date;
(f) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, any material adverse change in
the business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole;
(g) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, (i) any release or discharge
by the Borrower or any of its Subsidiaries of any Materials of Environmental
Concern required to be reported under applicable Environmental Laws to any
Governmental Authority, unless the Borrower reasonably determines that the total
Environmental Costs arising out of such release or discharge are unlikely to
exceed $2,000,000 or to have a Material Adverse Effect; (ii) any condition,
circumstance, occurrence or event not previously disclosed in writing to the
Administrative Agent that could result in liability under applicable
Environmental Laws unless the Borrower reasonably determines that the total
Environmental Costs arising out of such condition, circumstance, occurrence or
event are unlikely to exceed $2,000,000 or to have a Material Adverse Effect, or
could result in the imposition of any lien or other restriction on the title,
ownership or transferability of any facilities and properties owned, leased or
operated by the Borrower or any of its Subsidiaries; and (iii) any proposed
action to be taken by the Borrower or any of its Subsidiaries that would
reasonably be expected to subject the Borrower or any of its Subsidiaries to any
material additional or different requirements or liabilities under Environmental
Laws, unless the Borrower reasonably determines that the total Environmental
Costs arising out of such proposed action are unlikely to exceed $1,000,000 or
to have a Material Adverse Effect; and
(h) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, the failure to make any rental
payment when due and payable with respect to any property leased by the Borrower
or any of its Domestic Subsidiaries at which Inventory of the Borrower or any of
its Domestic Subsidiaries is located.
Each notice pursuant to this subsection shall be accompanied
by a statement of a Responsible Officer of the Borrower (and, if applicable, the
relevant Commonly Controlled Entity or Subsidiary) setting forth details of the
occurrence referred to therein and stating what action the Borrower (or, if
applicable, the relevant Commonly Controlled Entity or Subsidiary) proposes to
take with respect thereto.
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7.8 Environmental Laws. (a) (i) Comply substantially with, and
require substantial compliance by all tenants, subtenants, contractors, and
invitees with, all applicable Environmental Laws; (ii) obtain, comply
substantially with and maintain any and all Environmental Permits necessary for
its operations as conducted and as planned; and (iii) require that all tenants,
subtenants, contractors, and invitees obtain, comply substantially with and
maintain any and all Environmental Permits necessary for their operations as
conducted and as planned, with respect to any property leased or subleased from,
or operated by the Borrower or its Subsidiaries.
(b) Conduct and complete or cause to be conducted and
completed all investigations, studies, sampling and testing, and all remedial,
removal, and other actions required under applicable Environmental Laws; and
promptly comply with all orders and directives of all Governmental Authorities
regarding Environmental Laws, (i) except where non-compliance with any such
order or directive would not reasonably be expected to have a Material Adverse
Effect or (ii) other than any such order or directive as to which an appeal or
other appropriate contest is or has been timely and properly taken, is being
diligently pursued in good faith, and as to which appropriate reserves have been
established in accordance with GAAP, and, if the effectiveness of such order or
directive has not been stayed, the pendency of such appeal or other appropriate
contest does not give rise to a Material Adverse Effect.
(c) Maintain, update as appropriate, and implement in all
material respects an ongoing program to ensure that all the properties and
operations of the Borrower and its Subsidiaries are regularly and reasonably
reviewed by competent professionals to identify and promote compliance with and
to reasonably and prudently manage any liabilities or potential liabilities
under any Environmental Law that may affect the Borrower or any of its
Subsidiaries, including, without limitation, compliance and liabilities relating
to: discharges to air and water; acquisition, transportation, storage and use of
hazardous materials; waste disposal; repair, maintenance and improvement of
properties; employee health and safety; species protection; and recordkeeping
(the "Environmental Program").
7.9 After-Acquired Real Property and Fixtures. (a) With
respect to any owned real property or fixtures, in each case with a purchase
price or a fair market value of at least $500,000, in which the Borrower or any
of its Subsidiaries acquires ownership rights at any time after the Effective
Date, promptly grant to the Administrative Agent, for the benefit of the
Lenders, a Lien of record on all such owned real property and fixtures, upon
terms reasonably satisfactory in form and substance to the Administrative Agent
and in accordance with any applicable requirements of any Governmental Authority
(including, without limitation, any required appraisals of such property under
FIRREA); provided that (i) nothing in this subsection 7.9 shall defer or impair
the attachment or perfection of any security interest in any Collateral covered
by any of the Security Documents which would attach or be perfected pursuant to
the terms thereof without action by the Borrower, any of its Subsidiaries or any
other Person and (ii)
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no such Lien shall be required to be granted as contemplated by this subsection
7.9 on any owned real property or fixtures the acquisition of which is financed,
or is to be financed within any time period permitted by subsection 8.2(d) or
(e), in whole or in part through the incurrence of Indebtedness permitted by
subsection 8.2(d) or (e), until such Indebtedness is repaid in full (and not
refinanced as permitted by subsection 8.2(d) or (e)) or, as the case may be, the
Borrower determines not to proceed with such financing or refinancing. In
connection with any such grant to the Administrative Agent, for the benefit of
the Lenders, of a Lien of record on any such real property in accordance with
this subsection, the Borrower or such Subsidiary shall deliver or cause to be
delivered to the Administrative Agent any surveys, title insurance policies,
environmental reports and other documents in connection with such grant of such
Lien obtained by it in connection with the acquisition of such ownership rights
in such real property or as the Administrative Agent shall reasonably request
(in light of the value of such real property and the cost and availability of
such surveys, title insurance policies, environmental reports and other
documents and whether the delivery of such surveys, title insurance policies,
environmental reports and other documents would be customary in connection with
such grant of such Lien in similar circumstances).
(b) At its own expense, execute, acknowledge and deliver, or
cause the execution, acknowledgement and delivery of, and thereafter register,
file or record in an appropriate governmental office, any document or instrument
reasonably deemed by the Administrative Agent to be necessary or desirable for
the creation, perfection and priority and the continuation of the validity,
perfection and priority of the foregoing Liens or any other Liens created
pursuant to the Security Documents.
(c) At its own expense, request, and use reasonable efforts to
obtain, prior to entering into a lease of a facility located in the United
States in which Inventory will be located on or after the Effective Date (other
than any such facility for which there is not a lease of more than one year and
which the Borrower and its Subsidiaries intends to use as a seasonal storage
facility), a consent, substantially in the form of Exhibit K or such other form
as may be reasonably satisfactory to the Administrative Agent, from each
landlord of any such facility, in which such landlord acknowledges the
Administrative Agent's first priority security interest in the Inventory pledged
by each Loan Party to the Administrative Agent for the benefit of the Lenders.
7.10 Certain Post-Closing Matters. (a) If the Borrower has not
sold its real properties located in either LeSueur, Minnesota or Burnsville,
Minnesota within six months after the Effective Date or a Default or an Event of
Default shall occur and be continuing, the Borrower shall deliver to the
Administrative Agent:
(i) and the title insurance company issuing the policy
referred to in clause (ii) below (the "Title Insurance Company") maps
or plats of an as-built survey of each such
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unsold property or properties certified to the Administrative Agent and
the Title Insurance Company in a manner reasonably satisfactory to
them, dated a date reasonably satisfactory to the Administrative Agent
and the Title Insurance Company by an independent professional licensed
land surveyor reasonably satisfactory to the Administrative Agent and
the Title Insurance Company, which maps or plats and the surveys on
which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the American
Congress on Surveying and Mapping in 1992, and, without limiting the
generality of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (a) the locations on such sites
of all the buildings, structures and other improvements and the
established building setback lines; (b) the lines of streets abutting
the sites and width thereof; (c) all access and other easements
appurtenant to the sites necessary to use the sites; (d) all roadways,
paths, driveways, easements, encroachments and overhanging projections
and similar encumbrances affecting the sites, whether recorded,
apparent from a physical inspection of the sites or otherwise known to
the surveyor; (e) any encroachments on any adjoining property by the
building structures and improvements on the sites; and (f) if the site
is described as being on a filed map, a legend relating the survey to
said map; and
(ii) a mortgagee's title policy (or policies) or marked up
unconditional binder for such insurance dated the Effective Date.
Each such policy shall (a) be in an amount reasonably satisfactory to the
Administrative Agent; (b) insure that the Mortgage insured thereby creates a
valid first Lien on the Mortgaged Property encumbered thereby free and clear of
all defects and encumbrances, except those permitted by subsection 8.3 and such
as may be approved by the Administrative Agent; (c) name the Administrative
Agent for the benefit of the Lenders as the insured thereunder; (d) be in the
form of an ALTA Loan Policy; (e) contain such endorsements and affirmative
coverage as the Administrative Agent may reasonably request; provided that, in
the case of zoning endorsements, if any, no additional premiums will be required
in excess of $2,000 per property, (f) be issued by title companies reasonably
satisfactory to the Administrative Agent (including any such title companies
acting as reinsurers, at the option of the Administrative Agent) and (g) be
issued at ordinary rates (other than with respect to affirmative insurance). The
Administrative Agent shall have received evidence reasonably satisfactory to it
that all premiums in respect of each such policy, and all charges for mortgage
recording tax, if any, have been paid. The Administrative Agent shall have also
received a copy of all recorded documents referred to, or listed as exceptions
to title in, the title policy or policies referred to in this subsection and a
copy, certified by such parties as the Administrative Agent may deem reasonably
appropriate, of all other documents affecting the property covered by such
Mortgage as shall have been reasonably requested by the Administrative Agent.
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(b) Within 60 days after the Effective Date, the Borrower
shall either:
(i) contribute or otherwise transfer all of the Capital Stock
of Foreign Subsidiaries held by the Borrower and its Subsidiaries to
either (a) TCI Holding or (b) a newly-formed domestic Wholly Owned
Subsidiary of the Borrower (the "Foreign Subsidiary Holding Company"),
and pledge 65% of the issued and outstanding Capital Stock of the
Foreign Subsidiary Holding Company to the Administrative Agent pursuant
to the Guarantee and Collateral Agreement; or
(ii) deliver to the Administrative Agent an opinion of counsel
in the jurisdictions of formation of each Foreign Subsidiary reasonably
satisfactory to the Administrative Agent stating that the
Administrative Agent has a perfected first priority security interest
in the Capital Stock of such Foreign Subsidiary pursuant to the laws of
such jurisdiction and the Borrower shall deliver to such counsel all
documents required by such counsel in order to deliver such opinion.
The Borrower shall not permit the Foreign Subsidiary Holding Company to engage
in any business other than the owning of the Capital Stock of the Foreign
Subsidiaries and any business or other activities reasonably related to the
foregoing, or to incur any material liabilities other than liabilities
reasonably related to the foregoing or arising by operation of law. The Foreign
Subsidiary Holding Company shall be a "Foreign Subsidiary" under this Agreement
for all purposes hereof.
(c) Within 30 days after the Effective Date, the Borrower
shall deliver to the Administrative Agent the certificates representing 65% of
the Capital Stock of TCI Exports, Ltd., a corporation formed under the laws of
Barbados, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the Borrower.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the Effective
Date and so long as the Revolving Credit Commitments remain in effect, and
thereafter until payment in full of the Loans, all Reimbursement Obligations and
any other amount then due and owing to any Lender or the Administrative Agent
hereunder and under any Note and termination or expiration of all Letters of
Credit, the Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
8.1 Financial Condition Covenants. (a) Minimum Consolidated
EBITDA. Permit the Consolidated EBITDA of the Borrower for any period of four
consecutive fiscal
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<PAGE> 94
quarters of the Borrower ending on the dates set forth below to be less than the
amount set forth opposite such date below:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
June 30, 1997 $38,000,000
September 30, 1997 $38,000,000
December 31, 1997 $38,000,000
March 31, 1998 $38,000,000
June 30, 1998 $38,000,000
September 30, 1998 $39,000,000
December 31, 1998 $39,000,000
March 31, 1999 $42,000,000
June 30, 1999 $42,000,000
September 30, 1999 $44,000,000
December 31, 1999 $44,000,000
March 31, 2000 $48,000,000
June 30, 2000 $48,000,000
September 30, 2000 $50,000,000
December 31, 2000 $50,000,000
March 31, 2001 $53,000,000
June 30, 2001 $53,000,000
September 30, 2001 $55,000,000
December 31, 2001 $55,000,000
March 31, 2002 $57,000,000
June 30, 2002 $57,000,000
September 30, 2002 $60,000,000
December 31, 2002 $60,000,000
March 31, 2003 $63,000,000
June 30, 2003 $63,000,000
September 30, 2003 $66,000,000
December 31, 2003 $66,000,000
March 31, 2004 $70,000,000
June 30, 2004 $70,000,000
September 30, 2004 $70,000,000
December 31, 2004 $70,000,000
</TABLE>
(b) Maintenance of Consolidated Fixed Charges Ratio. Permit,
for any period of four consecutive fiscal quarters of the Borrower ending on the
dates set forth below, the Consolidated Fixed Charges Ratio of the Borrower on
such date to be less than the ratio set forth opposite such date below:
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<PAGE> 95
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
December 31, 1997 1.00 to 1
March 31, 1998 1.00 to 1
June 30, 1998 1.00 to 1
September 30, 1998 1.00 to 1
December 31, 1998 1.00 to 1
March 31, 1999 1.00 to 1
June 30, 1999 1.05 to 1
September 30, 1999 1.05 to 1
December 31, 1999 1.05 to 1
March 31, 2000 1.05 to 1
June 30, 2000 1.05 to 1
September 30, 2000 1.05 to 1
December 31, 2000 1.05 to 1
March 31, 2001 1.05 to 1
June 30, 2001 1.10 to 1
September 30, 2001 1.10 to 1
December 31, 2001 1.10 to 1
March 31, 2002 1.10 to 1
June 30, 2002 1.10 to 1
September 30, 2002 1.10 to 1
December 31, 2002 1.10 to 1
March 31, 2003 1.10 to 1
June 30, 2003 1.10 to 1
September 30, 2003 1.10 to 1
December 31, 2003 1.10 to 1
March 31, 2004 1.10 to 1
June 30, 2004 1.10 to 1
September 30, 2004 1.10 to 1
December 31, 2004 1.10 to 1
</TABLE>
(c) Maintenance of Leverage Ratio. Permit, for any period of
four consecutive fiscal quarters of the Borrower ending on the dates set forth
below, the Leverage Ratio of the Borrower on such date to be greater than the
ratio set forth opposite such date below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
December 31, 1997 6.50 to 1
March 31, 1998 6.50 to 1
June 30, 1998 6.00 to 1
September 30, 1998 6.00 to 1
December 31, 1998 6.00 to 1
</TABLE>
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<PAGE> 96
<TABLE>
<S> <C>
March 31, 1999 6.00 to 1
June 30, 1999 5.50 to 1
September 30, 1999 5.50 to 1
December 31, 1999 5.50 to 1
March 31, 2000 5.50 to 1
June 30, 2000 5.25 to 1
September 30, 2000 5.25 to 1
December 31, 2000 5.25 to 1
March 31, 2001 5.25 to 1
June 30, 2001 5.00 to 1
September 30, 2001 5.00 to 1
December 31, 2001 5.00 to 1
March 31, 2002 5.00 to 1
June 30, 2002 4.50 to 1
September 30, 2002 4.50 to 1
December 31, 2002 4.50 to 1
March 31, 2003 4.50 to 1
June 30, 2003 4.00 to 1
September 30, 2003 4.00 to 1
December 31, 2003 4.00 to 1
March 31, 2004 4.00 to 1
June 30, 2004 4.00 to 1
September 30, 2004 4.00 to 1
December 31, 2004 4.00 to 1
</TABLE>
8.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness (including any Indebtedness of any of its
Subsidiaries), except:
(a) Indebtedness of the Borrower under this Agreement and
under any Notes;
(b) Indebtedness under the Senior Subordinated Indenture or
evidenced by the Senior Subordinated Notes; provided that such Indebtedness
shall not be extended, renewed, replaced, refinanced or otherwise amended,
except as otherwise permitted by subsection 8.12(c);
(c) Indebtedness of the Borrower to any of its Subsidiaries
and of any Subsidiary to the Borrower or any other Subsidiary;
(d) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance or refinance the acquisition of fixed or capital assets
(whether pursuant to a loan, a Financing Lease or otherwise) otherwise permitted
pursuant to this Agreement, and any other Financing Leases, in an aggregate
principal amount not exceeding in the aggregate as to the Borrower and
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<PAGE> 97
its Subsidiaries $3,000,000 at any one time outstanding, provided that such
Indebtedness is incurred substantially simultaneously with such acquisition or
within six months after such acquisition or in connection with a refinancing
thereof;
(e) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance or refinance the purchase price of, or Indebtedness of the
Borrower and any of its Subsidiaries assumed in connection with any acquisition
otherwise permitted pursuant to this Agreement provided that (i) such
Indebtedness is incurred prior to, substantially simultaneously with or within
six months after such acquisition or in connection with a refinancing thereof,
(ii) if such Indebtedness is owed to a Person, other than the Person from whom
such acquisition is made or any Affiliate thereof, such Indebtedness shall have
terms and conditions reasonably satisfactory to the Administrative Agent and
shall not exceed 65% of the purchase price of such acquisition (including any
Indebtedness assumed in connection with such acquisition) and (iii) immediately
after giving effect to such acquisition no Default or Event of Default shall
have occurred and be continuing;
(f) to the extent that any Indebtedness may be incurred or
arise thereunder, Indebtedness of the Borrower and its Subsidiaries under
Permitted Hedging Arrangements;
(g) other Indebtedness outstanding or incurred under
facilities in existence on the Effective Date and listed on Schedule 8.2(g)
hereto, and any refinancings, refundings, renewals or extensions thereof on
financial and other terms, in the reasonable judgment of the Borrower, no more
onerous to the Borrower or any of its Subsidiaries in the aggregate than the
financial and other terms of such Indebtedness, provided that the amount of such
Indebtedness is not increased at the time of such refinancing, refunding,
renewal or extension except by an amount equal to the premium or other amounts
paid, and fees and expenses incurred, in connection with such refinancing,
refunding, renewal or extension;
(h) Indebtedness of Foreign Subsidiaries for working capital
purposes or pursuant to Section 8.6(c) (including in respect of overdrafts) in
aggregate principal amount at any one time outstanding not exceeding, as to all
such Foreign Subsidiaries, the Foreign Subsidiary Indebtedness Amount, provided
that such Indebtedness may exceed the Foreign Subsidiary Indebtedness Amount but
the Available Revolving Credit Commitments shall be reduced by the amount by
which such Indebtedness exceeds the Foreign Subsidiary Indebtedness Amount;
(i) to the extent that any Guarantee Obligation permitted
under subsection 8.4 constitutes Indebtedness, such Indebtedness;
(j) Indebtedness of the Borrower or any of its Subsidiaries in
respect of Sale and Leaseback Transactions permitted under subsection 8.11;
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<PAGE> 98
(k) Indebtedness of the Borrower or any of its Subsidiaries
incurred to finance insurance premiums in the ordinary course of business;
(l) Indebtedness arising from the honoring of a check, draft
or similar instrument against insufficient funds; provided that such
Indebtedness is extinguished within two Business Days of its incurrence;
(m) Indebtedness not otherwise permitted by the preceding
clauses of this subsection 8.2 not exceeding $3,000,000 in aggregate principal
amount at any one time outstanding; and
(n) Indebtedness of the Borrower and any of its Subsidiaries
not otherwise permitted by the preceding clauses of this subsection 8.2 which is
secured solely by a lien on Excluded Foreign Accounts of the Borrower and its
Subsidiaries and which does not exceed $5,000,000 in aggregate principal amount
at any one time outstanding, provided that the Available Revolving Credit
Commitments shall be reduced by the amount of such Indebtedness.
With respect to any Indebtedness denominated in a foreign
currency, for purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of such Indebtedness under this Section 8.2, the
amount of such Indebtedness shall be calculated monthly based on the currency
exchange rate in effect at such time.
8.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes, assessments and similar charges not yet
delinquent or the nonpayment of which in the aggregate would not reasonably be
expected to have a Material Adverse Effect, or which are being contested in good
faith by appropriate proceedings diligently conducted and adequate reserves with
respect thereto are maintained on the books of the Borrower or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings diligently conducted;
(c) Liens of landlords or of mortgagees of landlords arising
by operation of law or pursuant to the terms of real property leases, provided
that the rental payments secured thereby are not yet due and payable;
(d) pledges, deposits or other Liens in connection with
workers' compensation, unemployment insurance, other social security benefits or
other insurance related obligations
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<PAGE> 99
(including, without limitation, pledges or deposits securing liability to
insurance carriers under insurance or self-insurance arrangements);
(e) Liens arising by reason of any judgment, decree or order
of any court or other Governmental Authority, if appropriate legal proceedings
which may have been duly initiated for the review of such judgment, decree or
order, are being diligently prosecuted and shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired;
(f) Liens to secure the performance of bids, trade contracts
(other than for borrowed money), obligations for utilities, leases, statutory
obligations, surety and appeal bonds, performance bonds, judgment and like
bonds, replevin and similar bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) zoning restrictions, easements, rights-of-way,
restrictions on the use of property, other similar encumbrances incurred in the
ordinary course of business and minor irregularities of title which do not
materially interfere with the ordinary conduct of the business of the Borrower
and its Subsidiaries taken as a whole;
(h) Liens securing or consisting of Indebtedness of the
Borrower and its Subsidiaries permitted by subsection 8.2(d) incurred to finance
the acquisition of fixed or capital assets or Indebtedness of the Borrower and
its Subsidiaries permitted by subsection 8.2(e) incurred to finance the purchase
price of, or assumed in connection with any acquisition otherwise permitted
pursuant to this Agreement, provided that (i) such Liens shall be created no
later than the later of the date of such acquisition or the date of the
incurrence or assumption of such Indebtedness, and (ii) such Liens do not at any
time encumber any property other than the property financed by such Indebtedness
and, in the case of Indebtedness assumed in connection with any such
acquisition, the property subject thereto immediately prior to such acquisition;
(i) Liens existing on assets or properties at the time of the
acquisition thereof by the Borrower or any of its Subsidiaries which do not
materially interfere with the use, occupancy, operation and maintenance of
structures existing on the property subject thereto or extend to or cover any
assets or properties of the Borrower or such Subsidiary other than the assets or
property being acquired;
(j) Liens (i) in existence on the Effective Date and listed in
Schedule 8.3(j) hereto and other Liens securing Indebtedness of the Borrower and
its Subsidiaries permitted by subsection 8.2(g), provided that no such Lien is
spread to cover any additional property after the Effective Date and that the
amount of Indebtedness secured thereby is not increased except as permitted by
subsection 8.2(g), or (ii) not otherwise permitted hereunder, all of which Liens
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permitted pursuant to this subsection 8.3(j)(ii) secure obligations not
exceeding (as to the Borrower and all its Subsidiaries) $3,000,000 in aggregate
amount at any time outstanding;
(k) Liens securing Guarantee Obligations permitted under
subsection 8.4(d) not exceeding (as to the Borrower and all its Subsidiaries)
$1,000,000 in aggregate amount at any time outstanding;
(l) Liens created pursuant to the Security Documents or
otherwise securing Indebtedness permitted by subsection 8.2(a);
(m) any encumbrance or restriction (including, without
limitation, put and call agreements) with respect to the Capital Stock of any
joint venture or similar arrangement pursuant to the joint venture or similar
agreement with respect to such joint venture or similar arrangement, provided
that no such encumbrance or restriction affects in any way the ability of the
Borrower or any of its Subsidiaries to comply with subsection 8.15(b);
(n) Liens on property subject to Sale and Leaseback
Transactions permitted under subsection 8.11 and general intangibles related
thereto;
(o) Liens on property of any Foreign Subsidiary of the
Borrower securing Indebtedness of such Foreign Subsidiary permitted by
subsection 8.2(h) or otherwise permitted under this Agreement;
(p) Liens on Intellectual Property (as defined in subsection
5.9) and foreign patents, patent applications, trademarks, trademark
applications, tradenames, copyrights, technology, know-how and processes to the
extent such Liens arise from the granting of licenses to use such Intellectual
Property and foreign patents, patent applications, trademarks, trademark
applications, tradenames, copyrights, technology, know-how and processes to any
Person in the ordinary course of business of the Borrower or any of its
Subsidiaries; and
(q) Liens on Excluded Foreign Accounts of the Borrower and its
Subsidiaries securing Indebtedness permitted by subsection 8.2(n).
8.4 Limitation on Guarantee Obligations. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the Effective Date
and listed in Schedule 8.4(a) hereto, and any refinancings, refundings,
extensions or renewals thereof, provided that the amount of such Guarantee
Obligation shall not be increased at the time of such refinancing, refunding,
extension or renewal except to the extent that the amount of Indebtedness in
respect of such Guarantee Obligations is permitted to be increased by subsection
8.2(h);
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(b) Guarantee Obligations for performance, appeal, judgment,
replevin and similar bonds and suretyship arrangements, all in the ordinary
course of business;
(c) Reimbursement Obligations in respect of the Letters of
Credit;
(d) Guarantee Obligations in respect of third-party loans and
advances to officers or employees of the Borrower or any of its Subsidiaries (i)
for travel and entertainment expenses incurred in the ordinary course of
business, (ii) for relocation expenses incurred in the ordinary course of
business, or (iii) for other purposes in an aggregate amount (as to the Borrower
and all its Subsidiaries), together with the aggregate amount of all Investments
permitted under subsection 8.9(e)(iv), of up to $4,000,000 outstanding at any
time;
(e) obligations to insurers required in connection with
worker's compensation and other insurance coverage incurred in the ordinary
course of business;
(f) obligations of the Borrower and its Subsidiaries under
Permitted Hedging Arrangements;
(g) Guarantee Obligations incurred in connection with
acquisitions otherwise permitted pursuant to this Agreement, provided that if
any such Guarantee Obligation inures to the benefit of any Person other than the
Person from whom such acquisition is made or any Affiliate thereof, such
Guarantee Obligation shall not exceed, with respect to any such acquisition, 65%
of the purchase price of such acquisition (including any Indebtedness assumed in
connection with any such acquisition) or such greater percentage as shall be
reasonably satisfactory to the Administrative Agent;
(h) guarantees made in the ordinary course of its business by
the Borrower or any of its Subsidiaries of obligations of the Borrower or any of
its Subsidiaries, which obligations are otherwise permitted under this
Agreement;
(i) Guarantee Obligations in connection with sales or other
dispositions permitted under subsection 8.6, including indemnification
obligations with respect to leases, and guarantees of collectability in respect
of accounts receivable or notes receivable for up to face value;
(j) Guarantee Obligations in respect of Indebtedness of a
Person in connection with a joint venture or similar arrangement in respect to
which no other coinvestor or other Person has a greater legal or beneficial
ownership interest than the Borrower or any of its Subsidiaries, and as to all
of such Persons does not at any time exceed $10,000,000 in aggregate principal
amount;
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(k) Guarantee Obligations incurred pursuant to the Guarantees
or otherwise in respect of Indebtedness permitted by subsection 8.2(a);
(l) guarantees by Subsidiaries of the Borrower set forth in
the Senior Subordinated Notes Documents, which guarantees are subordinated as
provided in each such document;
(m) guarantees of Indebtedness of Foreign Subsidiaries
permitted by subsection 8.2(h); and
(n) Guarantee Obligations in respect of letters of credit
issued for the account of Foreign Subsidiaries, and guarantees thereof, provided
that the aggregate amount of such Guarantee Obligations, taken together with the
aggregate amount of other Indebtedness of Foreign Subsidiaries outstanding
pursuant to subsection 8.2(h), shall not exceed the aggregate amount of such
Indebtedness permitted pursuant to such subsection.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or with or into any one or more Wholly
Owned Subsidiaries of the Borrower (provided that the Wholly Owned Subsidiary or
Subsidiaries of the Borrower shall be the continuing or surviving entity);
(b) any Subsidiary of the Borrower may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any Wholly Owned Subsidiary of the Borrower; and
(c) as expressly permitted by subsections 8.6 and 8.15.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary of the
Borrower, issue or sell any shares of such Subsidiary's Capital Stock, to any
Person other than the Borrower or any Wholly Owned Subsidiary of the Borrower,
except:
(a) the sale or other Disposition of obsolete, worn out or
surplus property, whether now owned or hereafter acquired, in the ordinary
course of business;
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(b) the sale or other Disposition of any property (including
Inventory) in the ordinary course of business;
(c) the sale or discount without recourse of accounts
receivable or notes receivable arising in the ordinary course of business, or
the conversion or exchange of accounts receivable into or for notes receivable,
in connection with the compromise or collection thereof provided that, in the
case of any Foreign Subsidiary of the Borrower, any such sale or discount may be
with recourse if such sale or discount is consistent with customary practice in
such Foreign Subsidiary's country of business and the aggregate amount of any
such recourse shall be included in the determination of such Foreign
Subsidiary's Indebtedness for purposes of subsection 8.2(h);
(d) as permitted by subsection 8.5(b) and pursuant to Sale and
Leaseback Transactions permitted by subsection 8.11;
(e) Dispositions of any assets or property by the Borrower or
any of its Subsidiaries to the Borrower or any Wholly Owned Subsidiary of the
Borrower;
(f) the abandonment or other Disposition of patents,
trademarks or other intellectual property that are, in the reasonable judgment
of the Borrower, no longer economically practicable to maintain or useful in the
conduct of the business of the Borrower and its Subsidiaries taken as a whole;
(g) Asset Sales by the Borrower or any of its Subsidiaries the
Net Cash Proceeds of which do not exceed $5,000,000 in the aggregate after the
Effective Date, provided that an amount equal to 100% of the Net Cash Proceeds
of any such Asset Sale less the Reinvested Amount is applied in accordance with
subsection 4.4(d); and
(h) (i) the sale of the Borrower's LeSueur, Minnesota
facility, (ii) the sale of all or any part of the assets or Capital Stock of the
Subsidiary or Subsidiaries comprising the Borrower's military antennae business
and/or (iii) the sale of the vacant land owned by the Borrower in Burnsville,
Minnesota, provided that an amount equal to 100% of the Net Cash Proceeds of any
such Asset Sale (less the Reinvested Amount with respect thereto) is applied in
accordance with subsection 4.4(d).
8.7 Limitation on Restricted Payments. Declare or pay any
dividend (other than dividends payable solely in common stock of the Borrower or
options, warrants or other rights to purchase common stock of the Borrower) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make
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any other distribution (other than distributions payable solely in common stock
of the Borrower or options, warrants or other rights to purchase common stock of
the Borrower) in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Borrower, except that:
(a) the Borrower may pay cash dividends in an amount
sufficient to allow Holdings to pay expenses incurred in the ordinary course of
business in an aggregate amount not to exceed $750,000 in any fiscal year;
(b) the Borrower may pay cash dividends in an amount
sufficient to allow Holdings to pay all fees and expenses incurred in connection
with the Recapitalization, the issuance of the Senior Subordinated Notes and the
transactions expressly contemplated by this Agreement and the other Loan
Documents in an aggregate amount which, together with all other such fees and
expenses of the Borrower shall not exceed $38,200,000;
(c) the Borrower may pay cash dividends in an amount
sufficient to cover reasonable and necessary expenses (including professional
fees and expenses) incurred by Holding in connection with indemnification and
reimbursement of directors, officers and employees in respect of liabilities
relating to their serving in any such capacity;
(d) the Borrower may pay cash dividends in amount sufficient
to pay tax liabilities of Holdings which are paid in cash by Holdings to any
taxing authority; and
(e) the Borrower may pay cash dividends in amount sufficient
to allow Holdings to repurchase shares of its common stock or rights, option or
units in respect thereof from directors, officers or employees of Holdings and
its Subsidiaries (but not from Greenwich II or any member of the GSCP Group) for
an aggregate purchase price not to exceed $750,000.
8.8 Limitation on Capital Expenditures. Make or commit to make
any Capital Expenditures (excluding any expenses incurred in connection with
normal replacement and maintenance programs properly charged to current
operations and excluding any Reinvested Amounts); provided that the Borrower and
its Subsidiaries may make Capital Expenditures in an amount not to exceed, for
any test period set forth below, the amount set forth opposite such test period
below:
<TABLE>
<S> <C>
Effective Date - March 31, 1998 $6,000,000
April 1, 1998 - March 31, 1999 $6,000,000
April 1, 1999 - March 31, 2000 $8,000,000
April 1, 2000 - March 31, 2001 $8,000,000
April 1, 2001 - March 31, 2002 $9,000,000
April 1, 2002 - March 31, 2003 $10,000,000
</TABLE>
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<TABLE>
<S> <C>
April 1, 2003 - March 31, 2004 $10,000,000
April 1, 2004 - March 31, 2005 $10,000,000
</TABLE>
provided that any Capital Expenditures permitted to be made during any test
period and not made during such test period may be carried over and expended
during the next succeeding test period only.
8.9 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment, in cash or by
transfer of assets or property, in (each an "Investment"), any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in cash and Cash Equivalents;
(c) Investments existing on the Effective Date and described
in Schedule 8.9(c), setting forth the respective amounts of such
Investments as of a recent date;
(d) Investments in notes receivable and other instruments and
securities obtained in connection with transactions permitted by
subsection 8.6(c);
(e) loans and advances to officers, directors or employees of
Holdings, the Borrower or any of their respective Subsidiaries (i) in
the ordinary course of business for travel and entertainment expenses,
(ii) existing on the Effective Date and described in Schedule 8.9(c),
(iii) made after the Effective Date for relocation expenses in the
ordinary course of business, (iv) made for other purposes in an
aggregate amount (as to Holdings and all its Subsidiaries), together
with the aggregate amount of all Guarantee Obligations permitted
pursuant to subsection 8.4(d), of up to $4,000,000 outstanding at any
time or (v) relating to indemnification or reimbursement of any
officers, directors or employees in respect of liabilities relating to
their serving in any such capacity or as otherwise specified in
subsection 8.10;
(f) Investments by the Borrower in its Wholly Owned
Subsidiaries and by such Wholly Owned Subsidiaries in the Borrower and
in Wholly Owned Subsidiaries of the Borrower;
(g) Investments of the Borrower and its subsidiaries under
Permitted Hedging Arrangements;
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(h) Investments in the nature of pledges or deposits with
respect to leases or utilities provided to third parties in the
ordinary course of business or otherwise described in subsection
8.3(c), (d) or (f);
(i) Investments representing non-cash consideration received
by the Borrower or any of its Subsidiaries in connection with any Asset
Sale, provided that in the case of any Asset Sale permitted under
subsection 8.6(g), such non-cash consideration constitutes not more
than 25% of the aggregate consideration received in connection with
such Asset Sale and any such non-cash consideration received by the
Borrower or any of its Domestic Subsidiaries is pledged to the
Administrative Agent for the benefit of the Lenders pursuant to the
Security Documents;
(j) Investments representing evidences of Indebtedness,
securities or other property received from another Person by the
Borrower or any of its Subsidiaries in connection with any bankruptcy
proceeding or other reorganization of such other Person or as a result
of foreclosure, perfection or enforcement of any Lien or exchange for
evidences of Indebtedness, securities or other property of such other
Person held by the Borrower or any of its Subsidiaries; provided that
any such securities or other property received by the Borrower or any
of its Domestic Subsidiaries is pledged to the Administrative Agent for
the benefit of the Lenders pursuant to the Security Documents;
(k) Investments by the Borrower or any of its Subsidiaries in
a Person in connection with a joint venture or similar arrangement in
respect of which no other co investor or other Person has a greater
legal or beneficial ownership interest than the Borrower or such
Subsidiary in an aggregate amount not to exceed at any time an amount
equal to $5,000,000; and
(l) so long as (x) no Default or Event of Default has occurred
and is continuing at the time of such acquisition or would occur after
giving effect to such acquisition and (y) the Borrower would be in pro
forma compliance with the financial covenants set forth in subsections
8.1(a), (b) and (c), as of the date such acquisition is consummated
after giving effect to such acquisition, acquisitions of the business
or assets of, or stock or other evidences of beneficial ownership of,
any Person engaged in a business of the same general type as those in
which the Borrower and its Subsidiaries are engaged on the Effective
Date or which are substantially related thereto, so long as (i) such
acquisition is expressly permitted by subsection 8.5 or (ii) the
aggregate consideration paid by the Borrower and its Subsidiaries in
connection with all such acquisitions made pursuant to this clause (ii)
since the Effective Date does not exceed at any time an amount equal to
$10,000,000.
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8.10 Limitation on Transactions with Affiliates. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, and (b) upon
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate; provided that nothing contained in this subsection
8.10 shall be deemed to prohibit:
(i) the payment of transaction expenses in connection with
this Agreement and the Transactions, including, but not limited to, the
payment by the Borrower of a deal fee to GSCP in an amount not to
exceed $2,500,000;
(ii) the Borrower or any of its Subsidiaries from entering
into or performing an agreement with GSCP for the rendering of
management consulting or financial advisory services for compensation
not to exceed in the aggregate $1,720,000 per year plus reasonable
out-of-pocket expenses, provided that at any time when a Default or an
Event of Default has occurred and is continuing, the Borrower and its
Subsidiaries may not make any payments to GSCP under any such agreement
and such payments may accrue to GSCP and may be paid in full after such
Default or Event or Default has been cured or waived, provided further
that at any time when the Borrower and its Subsidiaries are not
permitted to make payments to GSCP under any such agreements, GSCP may
elect to receive Capital Stock of Holdings in lieu of such payments;
(iii) the Borrower or any of its Subsidiaries from entering
into, making payments pursuant to and otherwise performing an
indemnification and contribution agreement in favor of any person who
is or becomes a director, officer, agent or employee of the Borrower or
any of its Subsidiaries, in respect of liabilities (A) arising under
the Securities Act, the Exchange Act and any other applicable
securities laws or otherwise, in connection with any offering of
securities by the Borrower or any of its Subsidiaries, (B) incurred to
third parties for any action or failure to act of the Borrower or any
of its Subsidiaries, predecessors or successors, (C) arising out of the
performance by GSCP of management consulting or financial advisory
services provided to the Borrower or any of its Subsidiaries, (D)
arising out of the fact that any indemnitee was or is a director,
officer, agent or employee of the Borrower or any of its Subsidiaries,
or is or was serving at the request of any such corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or enterprise or (E) to the fullest
extent permitted by Delaware or other applicable state law, arising out
of any breach or alleged breach by such indemnitee of his or her
fiduciary duty as a director or officer of the Borrower or any of its
Subsidiaries;
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(iv) the Borrower or any of its Subsidiaries from performing
any agreements or commitments with or to any Affiliate existing on the
Effective Date and described on Schedule 8.10;
(v) any transaction permitted under subsection 8.3(k), 8.4(d),
8.4(j), 8.4(k), 8.5, 8.7, 8.9(e) or 8.9(k), or any transaction with a
Wholly Owned Subsidiary of the Borrower; or
(vi) the Borrower or any of its Subsidiaries from performing
its obligations under the Tax Sharing Agreement to the extent permitted
by subsection 8.7(d) (including interest and penalties).
For purposes of this subsection 8.10, (A) any transaction with
any Affiliate shall be deemed to have satisfied the standard set forth in clause
(b) of the first sentence hereof if (i) such transaction is approved by a
majority of the Disinterested Directors of the board of directors of the
Borrower or such Subsidiary, or (ii) in the event that at the time of any such
transaction, there are no Disinterested Directors serving on the board of
directors of the Borrower or such Subsidiary, such transaction shall be approved
by a nationally recognized expert with expertise in appraising the terms and
conditions of the type of transaction for which approval is required, and (B)
"Disinterested Director" shall mean, with respect to any Person and transaction,
a member of the board of directors of such Person who does not have any material
direct or indirect financial interest in or with respect to such transaction.
8.11 Limitation on Sale and Leaseback Transactions. Enter into
any arrangement with any Person providing for the leasing by the Borrower or any
of its Subsidiaries of real or personal property which has been or is to be sold
or transferred by the Borrower or any such Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or such
Subsidiary (any of such arrangements, a "Sale and Leaseback Transaction"), other
than in connection with any Disposition permitted under subsection 8.6 and
except for Sale and Leaseback Transactions entered into by the Borrower or any
such Subsidiary with respect to real or personal property with an aggregate book
value not to exceed $1,000,000 at any one time.
8.12 Limitation on Optional Payments and Modifications of Debt
Instruments and Other Documents. (a) Make any repurchase or redemption of any of
the Senior Subordinated Notes, including, without limitation, any payments on
account of, or for a sinking or other analogous fund for, the repurchase,
redemption, defeasance or other acquisition thereof, except mandatory payments
of principal, interest, fees and expenses required by the terms of the Senior
Subordinated Notes and the Senior Subordinated Note Indenture, as the case may
be, only to the extent permitted under the subordination provisions, if any,
applicable thereto.
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(b) In the event of the occurrence of a Change of Control,
repurchase the Senior Subordinated Notes or any portion thereof, unless the
Borrower shall have (i) made payment in full of the Loans, all Reimbursement
Obligations and any other amounts then due and owing to any Lender or the
Administrative Agent hereunder and under any Note and cash collateralized the
L/C Obligations on terms reasonably satisfactory to the Administrative Agent or
(ii) made an offer to pay the Loans, all Reimbursement Obligations and any
amounts then due and owing to each Lender and the Administrative Agent hereunder
and under any Note and to cash collateralize the L/C Obligations in respect of
each Lender and shall have made payment in full thereof to each such Lender or
the Administrative Agent which has accepted such offer and cash collateralized
the L/C Obligations in respect of each such Lender which has accepted such
offer.
(c) Amend, supplement, waive or otherwise modify any of the
provisions of any of the Senior Subordinated Notes or the Senior Subordinated
Notes Documents:
(i) which amends or modifies the subordination provisions, if
any, contained therein;
(ii) which shortens the fixed maturity or increases the
principal amount of, or increases the rate or shortens the time of
payment of interest on, or increases the amount or shortens the time of
payment of any principal or premium payable whether at maturity, at a
date fixed for prepayment or by acceleration or otherwise of the
Indebtedness evidenced by the Senior Subordinated Notes, or increases
the amount of, or accelerates the time of payment of, any fees or other
amounts payable in connection therewith;
(iii) which relates to any material affirmative or negative
covenants or any events of default or remedies thereunder and the
effect of which is to subject the Borrower or any of its Subsidiaries,
to any more onerous or more restrictive provisions; or
(iv) which otherwise adversely affects the interests of the
Lenders as senior creditors with respect to the Senior Subordinated
Notes or the interests of the Lenders under this Agreement or any other
Loan Document in any material respect.
8.13 Limitation on Changes in Fiscal Year. Permit the fiscal
year of the Borrower to end on a day other than March 31.
8.14 Limitation on Negative Pledge Clauses. Enter into with
any Person any agreement, other than (a) this Agreement, the other Loan
Documents and any related documents and (b) any purchase money mortgages,
acquisition agreements, Financing Leases or operating leases of real property
entered into in the ordinary course of business, which prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien in favor of the Lenders in respect of obligations and
liabilities under this Agreement, any
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Notes or any other Loan Documents upon any of its property, assets or revenues,
whether now owned or hereafter acquired except for any such agreement relating
to Indebtedness of a Foreign Subsidiary permitted by subsection 8.2(h) or
otherwise permitted under this Agreement.
8.15 Limitation on Lines of Business; Creation of
Subsidiaries. (a) Enter into any business, either directly or through any
Subsidiary or joint venture, except for those businesses of the same general
type as those in which the Borrower and its Subsidiaries are engaged on the
Effective Date or which are directly related thereto.
(b) Create any new Subsidiaries of the Borrower other than any
new Subsidiary that (i) (in the case of a new Domestic Subsidiary) shall execute
and deliver to the Administrative Agent, as applicable, the Guarantee and
Collateral Agreement and appropriate Mortgages and other security documents and
take any necessary steps to perfect the security interests to be created thereby
and (ii) for which the relevant parent corporation (if such parent corporation
is the Borrower or a Domestic Subsidiary) shall execute and deliver to the
Administrative Agent a stock pledge agreement and take any necessary steps to
perfect the security interest to be created thereby (which security interest
shall not apply to more than 65% of such parent corporation's ownership interest
in any Foreign Subsidiary).
(c) To the extent not prohibited by this Agreement, convey,
sell or otherwise transfer shares of Capital Stock of a Foreign Subsidiary to
the Borrower or any Domestic Subsidiary of the Borrower unless at the time of
such conveyance, sale or transfer (or promptly thereafter) the Borrower or such
Domestic Subsidiary shall execute and deliver to the Administrative Agent the
Guarantee and Collateral Agreement and take any necessary steps to perfect the
security interest to be created thereby (which security interest shall not apply
to (i) more than 65% of the Borrower's or such Domestic Subsidiary's ownership
interest in any Foreign Subsidiary or (ii) any ownership interest in a
non-Wholly Owned Foreign Subsidiary to the extent that the grant of such
security interest would violate the terms of any agreements under which the
Investment by the Borrower or any or its Subsidiaries was made therein).
8.16 Limitations on Currency and Commodity Hedging
Transactions. Enter into, purchase or otherwise acquire agreements or
arrangements relating to currency, commodity or other hedging except, to the
extent and only to the extent that, such agreements or arrangements are entered
into, purchased or otherwise acquired in the ordinary course of business of the
Borrower or any of its Subsidiaries with reputable financial institutions and
not for purposes of speculation (any such agreement or arrangement permitted by
this subsection, a "Permitted Hedging Arrangement").
8.17 Holding Company Status of TCI Holding. In the case of TCI
Holding, permit TCI Holding to engage in any business other than (i) the owning
of the Capital Stock of Saguaro Electronica, S.A. de C.V., a corporation
incorporated in Mexico, and the other Foreign
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Subsidiaries and (ii) any business or other activities reasonably related to the
foregoing, or to incur any material liabilities other than any liabilities (x)
reasonably related to the foregoing or (y) arising by operation of law.
8.18 Payment of Special Bonuses to Management. At any time
when a Default or an Event of Default has occurred and is continuing, make any
cash payments to its management in respect of special bonuses, provided that
such payments may accrue to such persons otherwise entitled to such payments and
may be paid in full after such Default or Event or Default has been cured or
waived, and provided further that at any time when the Borrower and its
Subsidiaries are not permitted to make such payments to management, any of such
persons otherwise entitled to such payments may elect to receive Capital Stock
of Holdings in lieu of such payments.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
or any Reimbursement Obligation when due in accordance with the terms hereof
(whether at stated maturity, by mandatory prepayment or otherwise); or the
Borrower shall fail to pay any interest or fees on any Loan, or any other amount
payable hereunder, within five days after any such interest, fees or other
amount becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document (or in any amendment,
modification or supplement hereto or thereto) or which is contained in any
certificate furnished at any time by or on behalf of any Loan Party pursuant to
this Agreement or any such other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made; or
(c) Any Loan Party shall default in the observance or
performance of any agreement contained in (i) subsection 7.7(a) or Section 8 of
this Agreement or (ii) Section 5.11 of the Guarantee and Collateral Agreement,
and, in the case of a default in the observance or performance of its
obligations under subsection 7.7(a) hereof, such default shall have continued
unremedied for a period of two days after a Responsible Officer of the Borrower
shall have discovered or should have discovered such default; or
(d) Any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any other Loan
Document (other than as provided in paragraphs (a) through (c) of this Section
9), and such default shall continue unremedied for a period ending on the
earlier of (i) the date 30 days after a Responsible Officer of the Borrower
shall have discovered or should have discovered such default and (ii) the date
15 days after
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written notice has been given to the Borrower by the Administrative Agent or the
Required Lenders; or
(e) Holdings or any of its Subsidiaries shall (i) default in
(x) any payment of principal of or interest on any Indebtedness (other than the
Loans and the Reimbursement Obligations) in excess of $1,000,000 or (y) in the
payment of any Guarantee Obligation in excess of $1,000,000, beyond the period
of grace (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee Obligation was created; or
(ii) default in the observance or performance of any other agreement or
condition relating to any Indebtedness or Guarantee Obligation referred to in
clause (i) above or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice or lapse of time if required, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become payable (an
"Acceleration"), and such time shall have lapsed and, if any notice (a "Default
Notice") shall be required to commence a grace period or declare the occurrence
of an event of default before notice of Acceleration may be delivered, such
Default Notice shall have been given; or
(f) (i) Any Loan Party shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Loan Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Loan Party any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged, unstayed or unbonded for a period of 60 days; or
(iii) there shall be commenced against any Loan Party any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) any Loan Party shall take any corporate action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Loan
Party shall be generally unable to, or shall admit in writing its general
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any
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"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan or any Lien in favor of the
PBGC or a Plan shall arise on the assets of either of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is in the reasonable opinion of the Administrative Agent likely to
result in the termination of such Plan for purposes of Title IV of ERISA, (iv)
any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v)
either of the Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Administrative Agent is likely to, incur any liability
in connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, or (vi) any other event or condition shall occur or exist
with respect to a Plan; and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if any,
could be reasonably expected to result in a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate at any time a
liability (net of any insurance or indemnity payments actually received in
respect thereof prior to or within 90 days from the entry thereof, or to be
received in respect thereof in the event any appeal thereof shall be
unsuccessful) of $2,000,000 or more, and all such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal within 90 days
from the entry thereof; or
(i) The Senior Subordinated Notes, for any reason, shall not
be or shall cease to be validly subordinated as provided therein and in the
Senior Subordinated Notes Documents to the obligations of the Borrower under
this Agreement, any Notes and the other Loan Documents, or the obligations of
any other Loan Party under a guarantee of the Senior Subordinated Notes, for any
reason, shall not be or shall cease to be validly subordinated as provided
therein and in the Senior Subordinated Notes Documents to the obligations of
such Loan Party under the Guarantee to which it is a party; or
(j) (i) Any of the Security Documents shall cease for any
reason to be in full force and effect (other than pursuant to the terms hereof
or thereof), or any Loan Party which is a party to any of the Security Documents
shall so assert in writing, or (ii) the Lien created by any of the Security
Documents shall cease to be perfected and enforceable in accordance with its
terms or of the same effect as to perfection and priority purported to be
created thereby with respect to any significant portion of the Collateral (other
than in connection with any termination of such Lien in respect of any
Collateral as permitted hereby or by any Security Document), and such failure of
such Lien to be perfected and enforceable with such priority shall have
continued unremedied for a period of 20 days; or
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(k) Any Guarantee shall cease for any reason to be in full
force and effect (other than pursuant to the terms hereof or thereof) or any
Guarantor shall so assert in writing; or
(l) Any Loan Document (other than this Agreement, any of the
Security Documents or any Guarantee) shall cease for any reason to be in full
force and effect (other than pursuant to the terms hereof or thereof) or any
Loan Party shall so assert in writing; or
(m) A Change of Control shall have occurred;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph 9(f) above with respect to the Borrower,
automatically the Revolving Credit Commitments and the Term Loan Commitments, if
any, shall immediately terminate and the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) and any Notes shall immediately become due and payable, and
(B) if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders the
Administrative Agent shall, by notice to the Borrower, declare the Revolving
Credit Commitments and the Term Loan Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments and the Term Loan Commitments, if
any, shall immediately terminate; and (ii) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower, declare the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and any Notes to
be due and payable forthwith, whereupon the same shall immediately become due
and payable.
With respect to any Letter of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower in respect of such Letter of
Credit shall at such time deposit in a cash collateral account opened by the
Administrative Agent an amount equal to the aggregate then undrawn and unexpired
amount of such Letter of Credit. Such Borrower hereby grants to the
Administrative Agent, for the benefit of the Issuing Lender and the L/C
Participants, a security interest in such cash collateral to secure all
obligations of such Borrower in respect of such Letter of Credit under this
Agreement and the other Loan Documents. Such Borrower shall execute and deliver
to the Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, such further documents and instruments as the Administrative Agent
may request to evidence the creation and perfection of such security interest in
such cash collateral account. Amounts held in such cash collateral account shall
be applied by the Administrative Agent to the payment of
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drafts drawn under such Letter of Credit, and the unused portion thereof after
all such Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay other obligations of the Borrower hereunder and under
any Notes. After all Letters of Credit shall have expired or been fully drawn
upon, all Reimbursement Obligations shall have been satisfied and all other
obligations of the Borrower hereunder and under any Notes shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrower.
Except as expressly provided above in this Section 9,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENT AND THE OTHER REPRESENTATIVES
10.1 Appointment. Each Lender hereby irrevocably designates
and appoints Chase as the Administrative Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes Chase, as the Administrative Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent and the Other Representatives shall not
have any duties or responsibilities, except, in the case of the Administrative
Agent and the Issuing Lender, those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent or the Other Representatives.
10.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact, and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact or counsel selected by it with reasonable care.
10.3 Exculpatory Provisions. None of the Administrative Agent
or any Other Representative nor any of their officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by such Person under or in connection with
this Agreement or any other Loan Document (except for the gross negligence or
willful misconduct of such Person or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates) or (ii) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by the Borrower or any other Loan Party or any officer thereof contained in
this Agreement or any other Loan Document or in any
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certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any Notes or any
other Loan Document or for any failure of the Borrower or any other Loan Party
to perform its obligations hereunder or thereunder. Neither the Administrative
Agent nor any Other Representative shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
other Loan Party. Each Lender agrees that, except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or given to the Administrative Agent for the
account of or with copies for the Lenders, the Administrative Agent and the
Other Representatives shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower or any other Loan Party which may come into the possession of the
Administrative Agent and the Other Representatives or any of their officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
10.4 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified as between itself and the Lenders
in failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders and/or such other requisite percentage of the Lenders as is
required pursuant to subsection 11.1 as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and any
Notes and the other Loan Documents in accordance with a request of the Required
Lenders and/or such other requisite percentage of the Lenders as is required
pursuant to subsection 11.1, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Loans.
10.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the
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Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders. The Administrative Agent shall take such action reasonably promptly
with respect to such Default or Event of Default as shall be directed by the
Required Lenders and/or such other requisite percentage of the Lenders as is
required pursuant to subsection 11.1; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
10.6 Acknowledgements and Representations by Lenders. Each
Lender expressly acknowledges that none of the Administrative Agent or the Other
Representatives nor any of their officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to it
and that no act by the Administrative Agent or any Other Representative
hereafter taken, including any review of the affairs of the Borrower or any
other Loan Party, shall be deemed to constitute any representation or warranty
by the Administrative Agent or such Other Representative to any Lender. Each
Lender represents to the Administrative Agent, the Other Representatives and
each of the Loan Parties that, independently and without reliance upon the
Administrative Agent, the Other Representatives or any other Lender, and based
on such documents and information as it has deemed appropriate, it has made and
will make its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of each of the
Borrower and the other Loan Parties, it has made its own decision to make its
Loans hereunder and enter into this Agreement and it will make its own decisions
in taking or not taking action under this Agreement and the other Loan
Documents. Each Lender represents to each other party hereto that it is a bank,
savings and loan association or other similar savings institution, insurance
company, investment fund or company or other financial institution which makes
or acquires commercial loans in the ordinary course of its business, that it is
participating hereunder as a Lender for its account and for such commercial
purposes, and that it has the knowledge and experience to be and is capable of
evaluating the merits and risks of being a Lender hereunder. Each Lender
acknowledges and agrees to comply with the provisions of subsection 11.6
applicable to the Lenders hereunder.
10.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Other Representatives in their capacities as such
(to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower or any of the other Loan Parties to do so), ratably
according to their respective Total Credit Percentages in effect on the date on
which indemnification is sought under this subsection (or, if indemnification is
sought after the date upon which the Revolving Credit Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with their Total Credit Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages,
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penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent or any Other Representative in any way relating
to or arising out of this Agreement, any of the other Loan Documents or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent or any Other Representative under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
arising from (i) the Administrative Agent's or any Other Representative's gross
negligence or willful misconduct or (ii) claims made or legal proceedings
commenced against the Administrative Agent or any Other Representative by any
securityholder or creditor thereof arising out of and based upon rights afforded
any such securityholder or creditor solely in its capacity as such. The
obligations to indemnify the Issuing Lender and Swing Line Lender shall be
ratable among the Revolving Credit Lenders in accordance with their respective
Revolving Credit Commitments (or, if the Revolving Credit Commitments have been
terminated, the outstanding principal amount of their respective Revolving
Credit Loans and L/C Obligations and their respective participating interests in
the outstanding Letters of Credit and shall be payable only by the Revolving
Credit Lenders). The agreements in this subsection shall survive the payment of
the Loans and all other amounts payable hereunder.
10.8 Administrative Agent and Other Representatives in Their
Individual Capacity. The Administrative Agent, the Other Representatives and
their Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Borrower or any other Loan Party as though the
Administrative Agent and the Other Representatives were not the Administrative
Agent and the Other Representatives hereunder and under the other Loan
Documents. With respect to Loans made or renewed by them and any Note issued to
them and with respect to any Letter of Credit issued or participated in by them,
the Administrative Agent and the Other Representatives shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though they were not the Administrative
Agent or an Other Representative, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent (which shall be a bank) for the Lenders, which
successor agent shall be approved by the Borrower (such approval not to be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated,
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without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any holders of
the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this subsection shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
10.10 Swing Line Lender. The provisions of this Section 10
shall apply to the Swing Line Lender in its capacity as such to the same extent
that such provisions apply to the Administrative Agent.
10.11 Assumption Agreement. Each of the Lenders hereby
consents to the provisions of the Telex Assumption Agreement and irrevocably
constitutes and appoints the Administrative Agent as its attorney-in-fact for
the purpose of executing the Telex Assumption Agreement on such Lender's behalf.
10.12 Release of Liens on Excluded Foreign Accounts. In
connection with the incurrence by the Borrower or any of its Subsidiaries of
Indebtedness permitted by subsection 8.2(n), the Borrower may deliver to the
Administrative Agent, a written request for release identifying the relevant
Excluded Foreign Accounts and the terms of such Indebtedness in reasonable
detail together with a certification by the Borrower stating that such
transaction is in compliance with this Agreement. The Administrative Agent shall
execute and deliver to the Borrower (at the sole cost and expense of the
Borrower) all releases or other documents (including without limitation UCC
termination statements) necessary or reasonably desirable for the release or (to
the extent acceptable to the holder of such Indebtedness) subordination of the
Liens created by the Guarantee and Collateral Agreement on such Excluded Foreign
Accounts as the Borrower may reasonably request. Each of the Lenders hereby
authorizes the Administrative Agent to deliver such releases or other documents.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof, may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Required Lenders may, or, with the written consent of the
Required Lenders, the Administrative Agent may, from time to time, (x) enter
into with the Loan Parties hereto or thereto, as the case may be, written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or to the other Loan
Documents or changing in any manner the rights or obligations of the Lenders or
the Loan Parties hereunder or thereunder or (y) waive at any Loan Party's
request, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the
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requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall:
(i) reduce the amount or extend the scheduled date of maturity
of any Loan or any Reimbursement Obligation or of any scheduled
installment thereof or reduce the stated rate of any interest or fee
payable hereunder or extend the scheduled date of any payment thereof
or increase the amount or extend the expiration date of any Lender's
Revolving Credit Commitment or change the method or procedure for
determining the Borrowing Base, in each case without the consent of
each Lender directly affected thereby;
(ii) amend, modify or waive any provision of this subsection
11.1 or reduce the percentage specified in the definition of Required
Lenders, in each case without the written consent of all the Lenders;
(iii) release any Guarantee or, in the aggregate (in a single
transaction or a series of related transactions), substantially all of
the Collateral without the consent of all the Lenders, except as
expressly permitted hereby or by any Guarantee or Security Document (as
such documents are in effect on the date hereof or, if later, the date
of execution and delivery thereof in accordance with the terms hereof);
(iv) amend or modify the definition of "Borrowing Base",
"Eligible Inventory" or "Eligible Accounts Receivable", in each case
without the consent of each Revolving Credit Lender;
(v) amend, modify or waive any provision of Section 10 without
the written consent of the then Administrative Agent and of any Other
Representative affected thereby;
(vi) amend, modify or waive the provisions of any Letter of
Credit or any L/C Obligation without the written consent of the Issuing
Lender and each affected L/C Participant; or
(vii) amend, modify or waive any provision of this Agreement
regarding the allocation of prepayment amounts among the Term Loans or
the application of such prepayment amounts to the respective
installments of principal under the respective Term Loans without the
written consent of (x) the Tranche A Term Loan Lenders the Tranche A
Term Loan Commitment Percentages of which aggregate more than 50% and
(y) the Tranche B Term Loan Lenders the Tranche B Term Loan Commitment
Percentages of which aggregate more than 50%; or
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(viii) subject to clause (i) of this subsection 11.1 as it
relates to reducing the amount or extending the scheduled date of
maturity of any Loan or any installment thereof, amend, modify or waive
any provision of (x) subsection 2.6 (to the extent subsection 2.6
relates to the Tranche A Term Loans) or subsection 2.7 without the
written consent of Tranche A Term Loan Lenders the Tranche A Term Loan
Commitment Percentages of which aggregate more than 50% or (y)
subsection 2.6 (to the extent subsection 2.7 relates to the Tranche B
Term Loans) or subsection 2.8 without the written consent of Tranche B
Term Loan Lenders the Tranche B Term Loan Percentages of which
aggregate more than 50%; or
(ix) amend, modify or waive any provision of subsection 2.1,
2.2, 2.3 or 2.4 or, subject to paragraph (i) of this subsection 11.1 as
it relates to reducing the amount or extending the scheduled date of
maturity of any Reimbursement Obligation, Section 3 without the written
consent of the Revolving Credit Lenders the Revolving Credit Commitment
Percentages of which aggregate more than 50%; or
(x) amend, modify or waive any provision of the Swing Line
Note (if any) or subsection 2.5 without the written consent of the
Swing Line Lender and each other Lender, if any, which holds, or is
required to purchase, a participation in any Swing Line Loan pursuant
to subsection 2.5(d).
Any waiver and any amendment, supplement or modification pursuant to this
subsection 11.1 shall apply to each of the Lenders and shall be binding upon the
Loan Parties, the Lenders, the Administrative Agent and all future holders of
the Loans. In the case of any waiver, each of the Loan Parties, the Lenders and
the Administrative Agent shall be restored to their former position and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, or, in the case of delivery by a nationally recognized overnight
courier, when received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Loans:
The Borrower: Telex Communications, Inc.
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
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Attention: John A. Palleschi
Telecopy: (612) 887-9172
with a copy to: Greenwich Street Capital Partners
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nick Somers
Telecopy: (212) 816-0166
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: David Brittenham
Telecopy: (212) 909-6386
The Administrative Chase Securities Inc.
Agent, Swing Line 10 South LaSalle Street
Lender and Issuing Suite 2300
Lender Chicago, Illinois 60603
Attention: Jonathan Twichell
Telecopy: (312) 807-4077
with a copy to: Loan & Agency Services Group
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Patricia Ciocco
Telecopy: (212) 552-5662
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.3, 2.4, 2.9, 3.2, 4.2, 4.4 or 4.8 shall
not be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
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11.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in the other Loan Documents
(or in any amendment, modification or supplement hereto or thereto) and in any
certificate delivered pursuant hereto or such other Loan Documents shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Administrative Agent and the Other Representatives for all
their reasonable out-of-pocket costs and expenses incurred in connection with
the preparation, execution, delivery and administration of, and any amendment,
supplement, waiver or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions (including the
syndication of the Revolving Credit Commitments and Term Loans (including the
reasonable expenses of the Administrative Agent's due diligence investigation)
and the monitoring of the Collateral) contemplated hereby and thereby,
including, without limitation, the reasonable fees and disbursements of one firm
of counsel to the Administrative Agent and the Other Representatives, (b) to pay
or reimburse each Lender, each Other Representative and the Administrative Agent
for all its reasonable costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, the
Other Representatives and the several Lenders, and any reasonable Environmental
Costs incurred by any of them arising out of or in any way relating to any Loan
Party or any property in which any Loan Party has had any interest at any time,
(c) to pay, and indemnify and hold harmless each Lender, the Administrative
Agent and the Other Representatives from and against, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, and indemnify and hold harmless each
Lender, the Administrative Agent and the Other Representatives (and their
respective directors, trustees, officers, employees, agents, successors and
assigns) from and against, any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (whether or not caused by any such Person's own
negligence (other than gross negligence) and including, without limitation, the
reasonable fees and disbursements of counsel) with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
other Loan Documents and any such other documents (regardless of whether the
Administrative Agent, any such Other Representative or any Lender is a party to
the litigation or other proceeding giving rise thereto and regardless of whether
any such litigation or other proceeding is brought by the Borrower or any other
Person), including, without limitation, any of
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the foregoing relating to the violation of, noncompliance with, or liability
under, any Environmental Laws or any orders, requirements or demands of
Governmental Authorities related thereto applicable to the operations of the
Borrower, any of its Subsidiaries or any of the facilities and properties owned,
leased or operated by the Borrower or any of its Subsidiaries (all the foregoing
in this clause (d), collectively, the "indemnified liabilities"), provided that
the Borrower shall not have any obligation hereunder to the Administrative
Agent, any such Other Representative or any Lender with respect to Environmental
Costs or indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Administrative Agent, any Other Representative or any
such Lender (or any of their respective directors, trustees, officers,
employees, agents, successors and assigns) or (ii) claims made or legal
proceedings commenced against the Administrative Agent, any Other Representative
or any such Lender by any securityholder or creditor thereof arising out of and
based upon rights afforded any such securityholder or creditor solely in its
capacity as such. Notwithstanding the foregoing, except as provided in clauses
(b) and (c) above, the Borrower shall have no obligation under this subsection
11.5 to the Administrative Agent, any Other Representative or any Lender with
respect to any tax, levy, impost, duty, charge, fee, deduction or withholding
imposed, levied, collected, withheld or assessed by any Governmental Authority.
The agreements in this subsection shall survive repayment of the Loans and all
other amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of each of the
Loan Parties party hereto, the Lenders, the Administrative Agent, the Other
Representatives, all future holders of the Loans and their respective successors
and assigns, except that none of the Loan Parties may, other than in accordance
with subsection 8.5, assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its business and
in accordance with applicable law, at any time sell to one or more banks or
other entities ("Participants") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Revolving Credit Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Loan Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan (and any Note evidencing such Loan) for all purposes
under this Agreement and the other Loan Documents and the Loan Parties and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. Any agreement pursuant to which any Lender shall sell
any such participating interest shall provide that such Lender shall retain the
sole right and responsibility to exercise such Lender's rights and enforce each
of the Loan Parties' obligations hereunder, including the right to consent to
any amendment, supplement, modification or waiver of any
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provision of this Agreement or any of the other Loan Documents, provided that
such participation agreement may provide that such Lender would be required to
obtain the consent of the Participant prior to consenting to any amendment,
supplement, modification or waiver described in clauses (i) through (x) to which
the affirmative vote of the Lender would be required. The Borrower agrees that
each Lender shall be entitled to the benefits of subsections 4.9, 4.10, 4.11,
4.12 and 11.5 without regard to whether it has granted any participating
interests, and that all amounts payable to a Lender under subsections 4.9, 4.10,
4.11 and 4.12 shall be determined as if such Lender had not granted any such
participating interests.
(c) Any Lender may, in the ordinary course of its business and
in accordance with applicable law, at any time and from time to time assign to
any other Lender or any Affiliate of such assigning Lender or, with the prior
written consent of the Administrative Agent and, if no Default or Event of
Default has occurred and is continuing, the Borrower (which consent in each case
shall not be unreasonably withheld), to an additional bank or financial
institution (an "Assignee") all or any part of its rights and obligations under
this Agreement and any Notes, including, without limitation, its Revolving
Credit Commitment and Loans, pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit H, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an Affiliate thereof, by the Borrower and the Administrative Agent) and
delivered to the Administrative Agent for its acceptance and recording in the
Register; provided that (unless the Administrative Agent, and if no Default or
Event of Default has occurred and is continuing, the Borrower, otherwise consent
in writing) no such transfer to an Assignee (other than a Lender or any
Affiliate or to an Approved Fund of the assigning Lender) shall be (i) in an
aggregate principal amount not less than $5,000,000 in the aggregate (or, if
less, the full amount of such assigning Lender's Term Loans, Revolving Credit
Loans and Revolving Credit Commitment) and (ii) if a partial assignment, after
giving effect to such partial assignment, the assigning Lender shall have
remaining Loans and Commitments aggregating at least $5,000,000. Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Revolving Credit Commitment and the Term Loans, as set forth therein, and
(y) the assigning Lender thereunder shall be released from its obligations under
this Agreement to the extent that such obligations shall have been expressly
assumed by the Assignee pursuant to such Assignment and Acceptance (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such assigning
Lender shall cease to be a party hereto but shall nevertheless continue to be
entitled to the benefits of subsections 4.10, 4.11, 4.12 and 11.5).
Notwithstanding the foregoing, no Assignee, which as of the date of any
assignment to it pursuant to this subsection 11.6(c) would be entitled to
receive any greater payment under subsection 4.10 or 4.11 than the assigning
Lender would have been entitled to receive as of such date under such
subsections with respect to the rights assigned, shall be entitled to receive
such payments unless the Borrower has expressly
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consented in writing to waive the benefit of this provision at the time of the
assignment. For the purposes of this Section, "Approved Fund" means, with
respect to any Lender that is a fund that invests in bank loans, any other fund
that invests in bank loans and is managed by the same investment advisor as such
Lender or by an Affiliate of such investment advisor.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at its address referred to in subsection 11.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Revolving Credit
Commitment of, and the principal amount of the Loans owing to, and any Notes
evidencing such Loans owned by, each Lender from time to time. Notwithstanding
anything in this Agreement to the contrary, each of the Borrower, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of any Loan, any Notes and the Revolving
Credit Commitments recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower at any reasonable
time and from time to time upon reasonable prior notice.
(e) Notwithstanding anything in this Agreement to the
contrary, no assignment under subsection 11.6(c) of any rights or obligations
under or in respect of the Loans or the Notes evidencing such Loans shall be
effective unless and until the Administrative Agent shall have recorded the
assignment pursuant to subsection 11.6(d). Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Assignee (and, in the case of
an Assignee that is not then a Lender or an Affiliate of the assigning Lender,
by the Administrative Agent and if no Default or Event of Default has occurred
and is continuing, the Borrower), together with payment to the Administrative
Agent of a registration and processing fee of $3,500 (which fee need not be paid
in the case of any assignment to an Affiliate of the assigning Lender), the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give prompt notice of such
acceptance and recordation to the Borrower. On or prior to such effective date,
the assigning Lender shall surrender any outstanding Notes held by it all or a
portion of which are being assigned, and the Borrower, at its own expense,
shall, upon the request to the Administrative Agent by the assigning Lender or
the Assignee, as applicable, execute and deliver to the Administrative Agent (in
exchange for the outstanding Notes of the assigning Lender) a new Revolving
Credit Note and/or Term Note and/or Swing Line Note, as the case may be, to the
order of such Assignee in an amount equal to (i) in the case of a Revolving
Credit Note, the lesser of (A) the amount of such Assignee's Revolving Credit
Commitment and (B) the aggregate principal amount of all Revolving Credit Loans
made by such Assignee and (ii) in the case of a Term Note, the amount of such
Assignee's Term Loans, in each case with respect to the relevant Loan or
Revolving Credit Commitment after giving effect to such Assignment and
Acceptance and, if the assigning Lender has retained a Revolving Credit
Commitment or Term Loan hereunder, a new Revolving Credit Note and/or Term Note
and/or Swing Line Note, as the case may be, to the order of the assigning Lender
in an amount equal to
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<PAGE> 127
(i) in the case of a Revolving Credit Note, the lesser of (A) the amount of such
Lender's Revolving Credit Commitment and (B) the aggregate principal amount of
all Revolving Credit Loans made by such Lender and (ii) in the case of a Term
Note the amount of such Lender's Term Loans and (iii) in the case of a Swing
Line Note, the lesser of (A) the Swing Line Commitment and (B) the aggregate
principal amount of all Swing Line Loans made by such Lender, in each case with
respect to the relevant Loan, Swing Line Commitment, Revolving Credit Commitment
or Term Loan Commitment after giving effect to such Assignment and Acceptance.
Any such new Notes shall be dated the Effective Date and shall otherwise be in
the form of the Note replaced thereby. Any Notes surrendered by the assigning
Lender shall be returned by the Administrative Agent to the Borrower marked
"cancelled".
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of subsection 11.15, any and all information in such
Lender's possession concerning the Borrower and their Affiliates which has been
delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of each of the
Borrower and its Affiliates prior to becoming a party to this Agreement. No
assignment or participation made or purported to be made to any Transferee shall
be effective without the prior written consent of the Borrower if it would
require the Borrower to make any filing with any Governmental Authority or
qualify any Loan or Note under the laws of any jurisdiction, and the Borrower
shall be entitled to request and receive such information and assurances as it
may reasonably request from any Lender or any Transferee to determine whether
any such filing or qualification is required or whether any assignment or
participation is otherwise in accordance with applicable law.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Loan or any Note to any Federal Reserve Bank in accordance with
applicable law.
11.7 Adjustments; Set-off. (a) If any Lender (a "benefitted
Lender") shall at any time receive any payment of all or part of its Revolving
Credit Loans, Term Loans or the Reimbursement Obligations owing to it, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 9(f), or otherwise (except pursuant to
subsection 4.4, 4.13(d) or 11.6)), in a greater proportion than any such payment
to or collateral received by any other Lender, if any, in respect of such other
Lender's Revolving Credit Loans, Term Loans or the Reimbursement Obligations, as
the case may be, owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders an interest (by participation,
assignment or otherwise) in such portion of each such other Lender's Revolving
Credit Loans, Term Loans or the Reimbursement Obligations, as the case may be,
owing to it, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
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<PAGE> 128
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by such Borrower to the extent
permitted by applicable law, upon the occurrence of an Event of Default under
Section 9(a) to set-off and appropriate and apply against any amount then due
and payable under Section 9(a) any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower. Each Lender agrees promptly to notify such Borrower and
the Administrative Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be delivered to the Borrower and the
Administrative Agent.
11.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of each of the Loan Parties party hereto, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by any of
the Loan Parties party hereto, the Administrative Agent or any Lender relative
to the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND ANY NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND ANY NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW
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<PAGE> 129
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
11.12 Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient forum and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower, the applicable Lender or the Administrative
Agent, as the case may be, at the address specified in subsection 11.2
or at such other address of which the Administrative Agent, any such
Lender and any Borrower shall have been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any punitive damages.
11.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Other
Representative or Lender has any fiduciary relationship with or duty to the
Borrower arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Administrative
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<PAGE> 130
Agent and Lenders, on the one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
and thereby among the Lenders or among the Borrower and the Lenders.
11.14 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY NOTES OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. The Administrative Agent and each
Lender agrees to keep confidential any information (a) provided to it by or on
behalf of the Borrower or any of its Subsidiaries pursuant to or in connection
with this Agreement or (b) obtained by such Lender based on a review of the
books and records of the Borrower or any of its Subsidiaries; provided that
nothing herein shall prevent any Lender from disclosing any such information (i)
to the Administrative Agent or any other Lender, (ii) to any Transferee or
prospective Transferee or to any direct or indirect contractual counterparties
in swap agreements or such contractual counterparties' professional advisors
which agrees to comply with the provisions of this subsection, (iii) to its
affiliates and the employees, directors, agents, attorneys, accountants and
other professional advisors of it and its affiliates, provided that such Lender
shall inform each such Person of the agreement under this subsection 11.15 and
take reasonable actions to cause compliance by any such Person referred to in
this clause (iii) with this agreement (including, where appropriate, to cause
any such Person to acknowledge its agreement to be bound by the agreement under
this subsection 11.15), (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender or to the extent required in
response to any order of any court or other Governmental Authority or as shall
otherwise be required pursuant to any Requirement of Law, provided that such
Lender shall, unless prohibited by any Requirement of Law, notify the Borrower
of any disclosure pursuant to this clause (iv) as far in advance as is
reasonably practicable under such circumstances, (v) which has been publicly
disclosed other than in breach of this Agreement, (vi) in connection with the
exercise of any remedy hereunder, (vii) in connection with periodic regulatory
examinations and reviews conducted by the National Association of Insurance
Commissioners (to the extent applicable), (viii) in connection with any
litigation to which such Lender may be a party, subject to the proviso in clause
(iv), and (ix) if, prior to such information having been so provided or
obtained, such information was already in the Administrative Agent's or a
Lender's possession on a nonconfidential basis without a duty of confidentiality
to the Borrower being violated.
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<PAGE> 131
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
GST ACQUISITION CORP.
By: _________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent, Swing Line Lender,
Issuing Lender and a Lender
By: _________________________
Name:
Title:
MORGAN STANLEY SENIOR FUNDING, INC.,
as Documentation Agent and a Lender
By: _________________________
Name:
Title:
125
<PAGE> 132
Schedule I
Commitments and Addresses
<PAGE> 133
Schedule II
Applicable Margin and Commitment Fee Step-Downs
Step-Downs for Revolving Credit Loans, Tranche A Term Loans and Commitment Fees
<TABLE>
<CAPTION>
Leverage Eurodollar ABR
Ratio Applicable Margin Applicable Margin Commitment Fee
----- ----------------- ----------------- --------------
<S> <C> <C> <C>
Greater Than 5.00 to 1 2.50% 1.50% 0.500%
Greater Than 4.50 to 1 2.25% 1.25% 0.500%
Greater Than 4.00 to 1 2.00% 1.00% 0.375%
Greater Than 3.50 to 1 1.75% .75% 0.375%
Less Than 3.50 to 1 1.50% .50% 0.375%
</TABLE>
Step-Down for Tranche B Term Loans
<TABLE>
<CAPTION>
Eurodollar Applicable
Leverage Ratio Margin ABR Applicable Margin
-------------- ------ ---------------------
<S> <C> <C> <C>
Less Than 4.00 to 1 2.75% 1.75%
</TABLE>
<PAGE> 134
EXHIBIT A-1 TO
CREDIT AGREEMENT
FORM OF REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE
TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS
REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$_____________ New York, New York
May __, 1997
FOR VALUE RECEIVED, the undersigned, GST ACQUISITION CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of _____________ (the "Lender") and its successors and assigns, at the
office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New
York 10017, in lawful money of the United States of America and in immediately
available funds, the aggregate unpaid principal amount of the Revolving Credit
Loans made by the Lender to the undersigned pursuant to subsection 2.1 of the
Credit Agreement, as defined below, which sum shall be payable on the
Termination Date.
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
This Revolving Credit Note is one of the Revolving Credit
Notes referred to in, and is subject in all respects to, the Credit Agreement,
dated as of May __, 1997 (as amended, supplemented, waived or otherwise modified
from time to time, the "Credit Agreement"), among the Borrower, the several
banks and other financial institutions from time to time parties thereto
(including the Lender), The Chase Manhattan Bank, as administrative agent for
such banks and financial institutions, and Morgan Stanley Senior Funding, Inc.
as documentation agent for such banks and financial institutions, and is
entitled to the benefits thereof, is secured and guaranteed as provided therein
and is subject to optional and mandatory prepayment in whole or in part as
provided therein. Each holder hereof, by its acceptance of this Revolving Credit
Note, agrees to the terms of, and to be bound by and to observe the provisions
applicable to the Lenders contained in, the Credit Agreement. Terms used herein
which are defined in the Credit Agreement shall have such defined meanings
unless otherwise defined herein or unless the context otherwise requires.
<PAGE> 135
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Revolving Credit Note shall become, or may be declared to be, immediately
due and payable, all as provided therein.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
GST ACQUISITION CORP.
By:_______________________________
Title:
2
<PAGE> 136
EXHIBIT A-2 TO
CREDIT AGREEMENT
FORM OF TRANCHE A TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE
TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS
REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
May __, 1997
FOR VALUE RECEIVED, the undersigned, GST ACQUISITION CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of _____________ (the "Lender") and its successors and assigns, at the
office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New
York 10017, in lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a)_____________________
DOLLARS ($____________) and (b) the aggregate unpaid principal amount of the
Term Loan made by the Lender to the undersigned pursuant to subsection 2.6 of
the Credit Agreement, as defined below, which sum shall be payable in accordance
with subsection 2.7(b) of the Credit Agreement in __ consecutive __________
installments, commencing on _________ __, 199_, each such installment to be in
an amount equal to the Lender's Tranche A Term Loan Commitment Percentage of the
amount set forth next to the applicable installment date in such subsection
2.7(b).
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
This Term Note is one of the Term Notes referred to in, and is
subject in all respects to, the Credit Agreement, dated as of May __, 1997 (as
amended, supplemented, waived or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the several banks and other financial
institutions from time to time parties thereto (including the Lender), The Chase
Manhattan Bank, as administrative agent for such banks and
<PAGE> 137
financial institutions, and Morgan Stanley Senior Funding, as documentation
agent for such banks and financial institutions, and is entitled to the benefits
thereof, is secured and guaranteed as provided therein and is subject to
optional and mandatory prepayment in whole or in part as provided therein. Each
holder hereof, by its acceptance of this Term Note, agrees to the terms of, and
to be bound by and to observe the provisions applicable to the Lenders contained
in, the Credit Agreement. Terms used herein which are defined in the Credit
Agreement shall have such defined meanings unless otherwise defined herein or
unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Term Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
GST ACQUISITION CORP.
By:___________________________________
Title:
2
<PAGE> 138
EXHIBIT A-3 TO
CREDIT AGREEMENT
FORM OF TRANCHE B TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE
TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS
REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
May __, 1997
FOR VALUE RECEIVED, the undersigned, GST ACQUISITION CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of _____________ (the "Lender") and its successors and assigns, at the
office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New
York 10017, in lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a)_____________________
DOLLARS ($____________) and (b) the aggregate unpaid principal amount of the
Term Loan made by the Lender to the undersigned pursuant to subsection 2.6 of
the Credit Agreement, as defined below, which sum shall be payable in accordance
with subsection 2.7(b) of the Credit Agreement in __ consecutive __________
installments, commencing on _________ __, 199_, each such installment to be in
an amount equal to the Lender's Tranche B Term Loan Commitment Percentage of the
amount set forth next to the applicable installment date in such subsection
2.7(b).
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
This Term Note is one of the Term Notes referred to in, and is
subject in all respects to, the Credit Agreement, dated as of May __, 1997 (as
amended, supplemented, waived or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the several banks and other financial
institutions from time to time parties thereto (including the Lender), The Chase
Manhattan Bank, as administrative agent for such banks and financial
institutions, and Morgan Stanley Senior Funding, Inc., as documentation agent
for such banks and financial institutions, and is entitled to the benefits
thereof, is secured and guaranteed as
<PAGE> 139
provided therein and is subject to optional and mandatory prepayment in whole or
in part as provided therein. Each holder hereof, by its acceptance of this Term
Note, agrees to the terms of, and to be bound by and to observe the provisions
applicable to the Lenders contained in, the Credit Agreement. Terms used herein
which are defined in the Credit Agreement shall have such defined meanings
unless otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Term Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
GST ACQUISITION CORP.
By:_________________________________
Title:
2
<PAGE> 140
EXHIBIT A-4 TO
CREDIT AGREEMENT
FORM OF SWING LINE NOTE
$____________ New York, New York
May __, 1997
FOR VALUE RECEIVED, the undersigned, GST ACQUISITION CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of THE CHASE MANHATTAN BANK (the "Swing Line Lender") and its
successors and assigns, at the office of Chemical Bank, 270 Park Avenue, New
York, New York 10017, in lawful money of the United States of America and in
immediately available funds, the principal amount of the lesser of (a)
__________________________ DOLLARS ($____________) and (b) the aggregate unpaid
principal amount of all Swing Line Loans made by the Swing Line Lender to the
undersigned pursuant to subsection 2.5 of the Senior Secured Credit Agreement,
as defined below, which sum shall be payable on the Termination Date.
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Credit Agreement until paid in full (both before and after judgment).
This Swing Line Note is the Swing Line Note referred to in,
and is subject in all respects to, the Credit Agreement, dated as of May 6, 1997
(as amended, supplemented, waived or otherwise modified from time to time, the
"Senior Secured Credit Agreement"), among the Borrower, the several banks and
other financial institutions from time to time parties thereto (including the
Swing Line Lender), The Chase Manhattan Bank, as administrative agent for such
banks and financial institutions, and Morgan Stanley Senior Funding, Inc. as
documentation agent for such banks and financial institutions, and is entitled
to the benefits thereof, is secured and guaranteed as provided therein and is
subject to optional and mandatory prepayment in whole or in part as provided
therein. Each holder hereof, by its acceptance of this Swing Line Note, agrees
to the terms of, and to be bound by and to observe the provisions applicable to
the Lenders contained in, the Senior Secured Credit Agreement. Terms used herein
which are defined in the Credit Agreement shall have such defined meanings
unless otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts remaining unpaid on this
Swing Line Note shall become, or may be declared to be, immediately due and
payable all as provided therein.
<PAGE> 141
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
GST ACQUISITION CORP.
By:___________________________
Title:
2
<PAGE> 142
EXHIBIT B TO
CREDIT AGREEMENT
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
TELEX COMMUNICATIONS, INC.
(as successor to GST ACQUISITION CORP.)
TELEX COMMUNICATIONS GROUP, INC.
and
TCI HOLDINGS CORP.
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of May 6, 1997
================================================================================
<PAGE> 143
EXHIBIT B TO
CREDIT AGREEMENT
FORM OF GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 6, 1997,
made by TELEX COMMUNICATIONS, INC., a Delaware corporation ("Telex" or the
"Borrower") as successor by assumption to GST Acquisition Corp. upon the
effectiveness of the Telex Assumption Agreement (as defined herein), TELEX
COMMUNICATIONS GROUP, INC., a Delaware Corporation ("Holdings"), and TCI
HOLDINGS CORP., together with any other Subsidiary of the Borrower that becomes
a party hereto from time to time after the date hereof, the ("Granting
Parties"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (collectively, the "Lenders"; individually, a "Lender") from time
to time parties to the Credit Agreement, dated as of May 6, 1997 (as amended,
waived, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Lenders, the Administrative Agent and
Morgan Stanley Senior Funding, Inc., as Documentation Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, it is a condition to the obligation of the Lenders to
make their respective extensions of credit to the Borrower under the Credit
Agreement that the Granting Parties shall execute and deliver this Agreement to
the Administrative Agent for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Granting Party hereby agrees with the Administrative
Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 12.. DEFINED TERMS
12.1. Definitions. (i) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement, and the following terms which are defined in the
Code (as defined below) are used herein as so defined: Chattel Paper, Documents,
Equipment, Farm Products, Fixtures, Instruments and Inventory.
(ii) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of the
Borrower, including, without limitation all Accounts (as defined in the
Credit Agreement) of the Borrower.
<PAGE> 144
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations
and all other obligations and liabilities of the Borrower (including,
without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and
Reimbursement Obligations and interest accruing at the then applicable
rate provided in the Credit Agreement after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to
the Administrative Agent or any Lender (or, in the case of any Hedge
Agreement referred to below, any Affiliate of any Lender), whether
direct or indirect, absolute or contingent, due or to become due, or
now existing or hereafter incurred, which may arise under, out of, or
in connection with, the Credit Agreement, this Agreement, the other
Loan Documents and any Letter of Credit or any Hedge Agreement entered
into by the Borrower with any Lender (or, in the case of any Hedge
Agreement, any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by the Borrower
pursuant to the terms of any of the foregoing agreements).
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account Bank": The Chase Manhattan Bank or another
bank which at all times is a Lender as selected by the Borrower and
notified to the Administrative Agent in writing promptly following such
selection.
"Collateral Proceeds Account": the cash collateral account
established by the relevant Grantor at an office of the Collateral
Account Bank in the name of the Administrative Agent.
"Commitments": the collective reference to the Revolving
Credit Commitments, the Swing Line Commitments, the Term Loan
Commitments and the L/C Commitment; individually, a "Commitment".
"Contracts" with respect to any Grantor, all contracts,
agreements, instruments and indentures in any form, and portions
thereof (except for the contracts listed on Schedule 8), to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to
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which such Grantor or any property of such Grantor is subject, as the
same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (i) all rights of such Grantor
to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages
arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder.
"Copyright Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor providing for the
grant by or to such Grantor of any right to use any Copyright of such
Grantor, other than intercompany agreements, including, without
limitation, any license agreements listed on Schedule 5 hereto subject,
in each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses.
"Copyrights": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States
copyrights, whether or not the underlying works of authorship have been
published or registered, United States copyright registrations and
copyright applications, and (a) all renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringement thereof and (c) the right to sue or
otherwise recover for past, present and future infringement and
misappropriation thereof.
"Default": a "Default" as defined in the Credit Agreement.
"Event of Default": an "Event of Default" as defined in the
Credit Agreement.
"General Fund Account": the general fund account of the
relevant Grantor established at the same office of the Collateral
Account Bank as the Collateral Proceeds Account.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect in
the State of New York on the date hereof.
"Granting Parties": as defined in the initial paragraph
hereof.
"Grantor": the Borrower and each Domestic Subsidiary of the
Borrower that from time to time becomes a party hereto.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which
such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement
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obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be
paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"Guarantors": the collective reference to each Granting Party
other than the Borrower.
"Hedge Agreements": as to any Grantor, all interest rate
swaps, caps or collar agreements or similar arrangements entered into
by such Person providing for protection against fluctuations in
interest rates or currency exchange rates or the exchange of nominal
interest obligations, either generally or under specific contingencies,
including, without limitation, all Interest Rate Protection Agreements
and Permitted Hedging Arrangements with respect to currency exchange
rates.
"Intellectual Property": with respect to any Grantor, the
collective reference to such Grantor's Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trade Secrets, Trademarks and Trademark
Licenses.
"Intercompany Note": with respect to any Grantor, any
promissory note evidencing loans made by such Grantor to the Borrower
or any of its Subsidiaries.
"Issuers": the collective reference to the Persons identified
on Schedule 2 as the issuers of the Pledged Stock.
"Inventory": with respect to any Grantor, all inventory (as
defined in the Code) of such Grantor, including, without limitation,
all Inventory (as defined in the Credit Agreement) of the Borrower.
"Loan Documents": the collective reference to the "Loan
Documents" as defined in the Credit Agreement.
"Loans": the collective reference to the "Loans" as defined in
the Credit Agreement.
"Notes": the collective reference to the "Notes" as defined in
the Credit Agreement.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patent Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who
is not an Affiliate or a Subsidiary in connection with any of the
Patents of such Grantor or such other Person's patents, whether such
Grantor is a licensor or a licensee under any such agreement,
including, without limitation, the license
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agreements listed on Schedule 5, subject, in each case, to the terms of
such license agreements, and the right to prepare for sale, sell and
advertise for sale, all Inventory now or hereafter covered by such
licenses.
"Patents": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States patents, patent
applications and patentable inventions and all reissues and extensions
thereof, including, without limitation, all patents and patent
applications identified in Schedule 5, and including, without
limitation, (a) all inventions and improvements described and claimed
therein, and patentable inventions, (b) the right to sue or otherwise
recover for any and all past, present and future infringement and
misappropriation thereof, (c) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered
into in connection therewith, and damages and payments for past or
future infringements thereof), and (d) all other rights corresponding
thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and
extensions thereof, all improvements thereon, and all other rights of
any kind whatsoever of such Grantor accruing thereunder or pertaining
thereto.
"Pledged Collateral": as defined in Section 3.
"Pledged Notes": with respect to any Pledgor, all Intercompany
Notes at any time issued to such Pledgor and all other promissory notes
issued to or held by such Pledgor (other than promissory notes issued
in connection with extensions of trade credit by any Pledgor in the
ordinary course of business).
"Pledged Securities": the collective reference to the Pledged
Notes and the Pledged Stock.
"Pledged Stock": with respect to any Pledgor, the shares of
Capital Stock listed on Schedule 2 as held by such Pledgor, together
with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Issuer that
may be issued or granted to, or held by, such Pledgor while this
Agreement is in effect (provided that in no event shall there be
pledged, nor shall any Pledgor be required to pledge, directly or
indirectly, more than 65% of any series of the outstanding Capital
Stock of any Foreign Subsidiary pursuant to this Agreement).
"Pledgor": Holdings (with respect to Pledged Stock of the
Borrower), the Borrower (with respect to Pledged Stock of the
corporations listed on Schedule 2 hereto under the name of the Borrower
and any other Subsidiary of the Borrower and any other Pledged
Securities held by the Borrower) and any other Granting Party (with
respect to Pledged Securities held by such Granting Party).
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"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, Proceeds of Pledged
Securities shall include, without limitation, all dividends or other
income from the Pledged Securities, collections thereon or
distributions or payments with respect thereto.
"Revolving Credit Commitments": the collective reference to
the "Revolving Credit Commitments" as defined in the Credit Agreement.
"Secured Parties": the collective reference to the
Administrative Agent, the Lenders (including, without limitation the
Issuing Lender) and any Affiliate of any Lender which has entered into
any Interest Rate Protection Agreement or Permitted Hedging Arrangement
with the Borrower or any of its Subsidiaries, and their respective
successors and assigns.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Security Collateral": as defined in Section 3.
"Trade Secrets": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States trade
secrets, including, without limitation, know-how, processes, formulae,
compositions, designs, and confidential business and technical
information, and all rights of any kind whatsoever accruing thereunder
or pertaining thereto, including, without limitation, (a) all income,
royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, payments under all
licenses, non-disclosure agreements and memoranda of understanding
entered into in connection therewith, and damages and payments for past
or future misappropriation thereof, and (b) the right to sue or
otherwise recover for past, present or future misappropriation thereof.
"Trademark Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who
is not an Affiliate or a Subsidiary in connection with any of the
Trademarks of such Grantor or such other Person's names or trademarks,
whether such Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed
on Schedule 5, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory now or hereafter covered by such licenses.
"Trademarks": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States
trademarks, service marks, trade names, trade dress or other indicia of
trade origin or business identifiers, trademark and service mark
registrations, and applications for trademark or service mark
registrations (except for "intent to use" applications for trademark or
service mark registrations filed pursuant to Section 1(b) of the Lanham
Act, 15 U.S.C. Section 1051, unless and until an Amendment to Allege
Use or a Statement of Use under Sections 1(c) and 1(d)
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of said Act has been filed), and any renewals thereof, including,
without limitation, each registration and application identified in
Schedule 5, and including, without limitation, (a) the right to sue or
otherwise recover for any and all past, present and future
infringements and misappropriation thereof, (b) all income, royalties,
damages and other payments now and hereafter due and/or payable with
respect thereto (including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringements thereof), and (c) all other rights
corresponding thereto in the United States and all other rights of any
kind whatsoever of such Grantor accruing thereunder or pertaining
thereto, together in each case with the goodwill of the business
connected with the use of, and symbolized by, each such trademark,
service mark, trade name, trade dress or other indicia of trade origin
or business identifiers.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title
law of any state and all tires and other appurtenances to any of the
foregoing.
12.2 Other Definitional Provisions. (i) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section, Schedule and Annex references are to
this Agreement unless otherwise specified.
(ii) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(iii) Where the context requires, terms relating to the
Collateral, Pledged Collateral or Security Collateral, or any part thereof, when
used in relation to a Granting Party shall refer to such Granting Party's
Collateral, Pledged Collateral or Security Collateral or the relevant part
thereof.
SECTION 13.. GUARANTEE
13.1 Guarantee. (i) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due and payable (whether at the stated
maturity, by acceleration or otherwise) of the Borrower Obligations.
(ii) Anything herein or in any other Loan Document to
the contrary notwithstanding, the maximum liability of each Guarantor hereunder
and under the other Loan Documents shall in no event exceed the amount which can
be guaranteed by such Guarantor under applicable law, including applicable
federal and state laws relating to the insolvency of debtors.
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(iii) Each Guarantor agrees that the Borrower Obligations may
at any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Administrative Agent or any other
Secured Party hereunder.
(iv) The guarantee contained in this Section 2 shall remain in
full force and effect until the earlier to occur of (i) the first date on which
all the Loans, any Reimbursement Obligations, all other Borrower Obligations
then due and owing, and the obligations of each Guarantor under the guarantee
contained in this Section 2 then due and owing shall have been satisfied by
payment in full, no Letter of Credit shall be outstanding and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Borrower may be free from any Borrower Obligations or
(ii) as to any Guarantor, the sale or other disposition of all of the Capital
Stock of such Guarantor permitted under the Credit Agreement.
(v) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any other Secured Party from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or any
payment received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the earlier to occur of (i) the
first date on which the Loans, any Reimbursement Obligations, and all other
Borrower Obligations then due and owing, are paid in full, no Letter of Credit
shall be outstanding and the Commitments are terminated or (ii) the sale or
other disposition of all of the Capital Stock of such Guarantor permitted under
the Credit Agreement.
13.2. Right of Contribution. Each Guarantor hereby agrees
that to the extent that a Guarantor shall have paid more than its proportionate
share of any payment made hereunder, such Guarantor shall be entitled to seek
and receive contribution from and against any other Guarantor hereunder which
has not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the other Secured
Parties, and each Guarantor shall remain liable to the Administrative Agent and
the Lenders for the full amount guaranteed by such Guarantor hereunder.
13.3. No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any other Secured Party, no Guarantor shall be
entitled to be subrogated to any of the rights of the Administrative Agent or
any other Secured Party against the Borrower or any other Guarantor or any
collateral security or
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guarantee or right of offset held by the Administrative Agent or any other
Secured Party for the payment of the Borrower Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Borrower or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Administrative Agent and the other
Secured Parties by the Borrower on account of the Borrower Obligations are paid
in full, no Letter of Credit shall be outstanding and the Commitments are
terminated. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Borrower Obligations shall not
have been paid in full, such amount shall be held by such Guarantor in trust for
the Administrative Agent and the other Secured Parties, segregated from other
funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be
turned over to the Administrative Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if
required), to be applied against the Borrower Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.
13.4. Amendments, etc. with respect to the Borrower
Obligations. To the maximum extent permitted by law, each Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of
rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Borrower Obligations made by the
Administrative Agent or any other Secured Party may be rescinded by the
Administrative Agent or such other Secured Party and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
other Secured Party, and the Credit Agreement and the other Loan Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any other Secured Party
for the payment of the Borrower Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any other Secured
Party shall have any obligation to protect, secure, perfect or insure any Lien
at any time held by it as security for the Borrower Obligations or for the
guarantee contained in this Section 2 or any property subject thereto, except to
the extent required by applicable law.
13.5. Guarantee Absolute and Unconditional. Each Guarantor
waives, to the maximum extent permitted by applicable law, any and all notice of
the creation, renewal, extension or accrual of any of the Borrower Obligations
and notice of or proof of reliance by the Administrative Agent or any other
Secured Party upon the guarantee contained in this Section 2 or acceptance of
the guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Administrative Agent and the other
Secured Parties, on the other
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hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives,
to the maximum extent permitted by applicable law, diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the other Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees, to the extent permitted by
law, that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment. Each Guarantor
hereby waives, to the maximum extent permitted by applicable law, any and all
defenses that it may have arising out of or in connection with any and all of
the following: (a) the validity or enforceability of the Credit Agreement or any
other Loan Document, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any other Secured
Party, (b) any defense, set-off or counterclaim (other than a defense of payment
or performance) which may at any time be available to or be asserted by the
Borrower against the Administrative Agent or any other Secured Party, (c) any
change in the time, place, manner or place of payment, amendment, or waiver or
increase in the Obligations, (d) any exchange, taking, or release of Collateral,
(e) any change in the corporate structure or existence of the Borrower, (f) any
application of Collateral to Obligations or (g) any other circumstance
whatsoever (with or without notice to or knowledge of the Borrower or such
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Borrower for the Borrower Obligations, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy or in
any other instance. When making any demand hereunder or otherwise pursuing its
rights and remedies hereunder against any Guarantor, the Administrative Agent or
any other Secured Party may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as it may have against
the Borrower, any other Guarantor or any other Person or against any collateral
security or guarantee for the Borrower Obligations or any right of offset with
respect thereto, and any failure by the Administrative Agent or any other
Secured Party to make any such demand, to pursue such other rights or remedies
or to collect any payments from the Borrower, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent or
any other Secured Party against any Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
13.6. Reinstatement. The guarantee contained in this Section
2 shall continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
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13.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 14. GRANT OF SECURITY INTEREST
Each Granting Party (1) that is a Grantor hereby grants to the
Administrative Agent, for the ratable benefit of the Secured Parties, a security
interest in all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of such Grantor:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment (other than Vehicles);
(vi) all General Intangibles;
(vii) all Instruments;
(viii) all Intellectual Property;
(ix) all Inventory;
(x) all books and records pertaining to any of the
foregoing;
(xi) the Collateral Proceeds Account; and
(xii) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to any of the
foregoing;
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and (2) that is a Pledgor hereby grants to the Administrative Agent, for the
ratable benefit of the Secured Parties, a security interest in all of the
Pledged Securities now owned or at any time hereafter acquired by such Pledgor,
and any Proceeds thereof (the "Pledged Collateral"), as collateral
security for the prompt and complete performance when due (whether at the stated
maturity by acceleration or otherwise) of the obligations of the Pledgor; (the
Collateral (if any) and the Pledged Collateral (if any) of any Granting Party
being collectively referred to herein as such Granting Party's "Security
Collateral");
provided however, that (x) Collateral shall not include any Pledged Collateral,
or any property or assets specifically excluded from Pledged Collateral
(including any Capital Stock of any Foreign Subsidiary in excess of 65% of any
series of such stock); and (y) in the case of any Instruments, Contracts,
Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses,
Trademark Licenses or other contracts or agreements with or issued by Persons
(other than a Subsidiary of the Borrower) that would otherwise be included in
the Security Collateral, no security interest in the right, title and interest
of any Granting Party thereunder or therein will be granted pursuant to this
Section 2 (and such Instruments, Contracts, Chattel Paper, General Intangibles,
Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or
agreements shall not be deemed to constitute a part of the Security Collateral)
for so long as, and to the extent that, the granting of a security interest in
the right, title and interest of such Grantor thereunder or therein pursuant to
the terms hereof would result in a breach, default or termination of such
Instruments, Contracts, Chattel Paper, General Intangibles, Copyright Licenses,
Patent Licenses, Trademark Licenses or other contracts or agreements and (z) in
the case of the Equipment that would otherwise be included in the foregoing
Collateral, the foregoing will not be deemed to grant a security interest
therein under this Agreement (and such Equipment shall not be deemed to
constitute a part of the Collateral) if such Equipment is subject to a Lien
permitted by subsection 8.3(h) of the Credit Agreement.
SECTION 15. REPRESENTATIONS AND WARRANTIES
15.1 Representations and Warranties of Each Guarantor.
To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Guarantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that the
representations and warranties set forth in Section 5 of the Credit Agreement as
they relate to such Guarantor or to the Loan Documents to which such Guarantor
is a party or to the Transaction Documents to which such Guarantor is a party,
each of which representations and warranties is hereby incorporated herein by
reference, are true and correct in all material respects, and the Administrative
Agent and each other Secured Party shall be entitled to rely on each of such
representations and warranties as if fully set forth herein; provided
that each reference in each such representation and warranty to the Borrower's
knowledge shall, for the purposes of this Section 4.1, be deemed to be a
reference to such Guarantor's knowledge.
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15.2 Representations and Warranties of Each Grantor. To induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Grantor hereby represents and warrants to the
Administrative Agent and each other Secured Party that:
(a) Title; No Other Liens. Except for the security interest
granted to the Administrative Agent, for the ratable benefit of the Secured
Parties, pursuant to this Agreement and the other Liens permitted to exist on
such Grantor's Collateral by the Credit Agreement (including without limitation
subsection 8.3 thereof), such Grantor owns each item of such Grantor's
Collateral free and clear of any and all Liens. Except as set forth on Schedule
6, no financing statement or other similar public notice with respect to all or
any part of such Grantor's Collateral is on file or of record in any public
office, except such as have been filed in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties, pursuant to this Agreement or as are
permitted by the Credit Agreement (including without limitation subsection 8.3
thereof) or any other Loan Document or for which termination statements will be
delivered on the Closing Date.
(b) Perfected First Priority Liens. (i) This Agreement is
effective to create, as collateral security for the Obligations of such Grantor,
valid and enforceable Liens on such Grantor's Collateral in favor of the
Administrative Agent, for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditor's rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
(ii) Except with respect to (A) Liens on Equipment
constituting Fixtures, (B) any rights reserved in favor of the United States
government as required under law, (C) Liens upon Patents, Patent Licenses,
Trademarks and Trademark Licenses to the extent that (I) such Liens cannot be
perfected by the filing of financing statements under the Uniform Commercial
Code or by the filing and acceptance thereof in the United States Patent and
Trademark Office or (II) such Patents, Patent Licenses, Trademarks and Trademark
Licenses are not, individually or in the aggregate, material to the business of
the Borrower and its Subsidiaries taken as a whole, (D) Liens on uncertificated
securities, (E) Liens on Collateral the perfection of which requires filings in
or other actions under the laws of jurisdictions outside of the United States of
America, any State, territory or dependency thereof or the District of Columbia
(except to the extent that such filings or other actions have been made or
taken), (F) Liens on contracts or receivables on which the United States of
America or any department, agency, or instrumentality thereof is the obligor,
(G) Liens on Proceeds of receivables and Inventory, until transferred to or
deposited in the Collateral Proceeds Account (if any), and (H) claims of
creditors of Persons receiving goods included as Collateral for "sale or return"
within the meaning of Section 2-326 of the Uniform Commercial Code of the
applicable jurisdiction, upon filing of the financing statements delivered to
the Administrative Agent by such Grantor on the Effective Date in the
jurisdictions listed on Schedule 5.14 to the Credit Agreement (which financing
statements are in proper form for filing in such jurisdictions) and the
recording of the Mortgages (and the recording of any Patent and Trademark
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Security Agreement, as set forth therein, and the making of filings after the
Effective Date in any other jurisdiction as may be necessary under any
Requirement of Law) and the delivery to, and continuing possession by, the
Administrative Agent of all Instruments, Chattel Paper and Documents a security
interest in which is perfected by possession, the Liens created pursuant to this
Agreement will constitute valid Liens on and, to the extent provided herein,
perfected security interests in such Grantor's Collateral (but as to the
Copyrights and Copyright Licenses and accounts arising therefrom, only to the
extent the Uniform Commercial Code of the relevant jurisdiction, from time to
time in effect, is applicable) in favor of the Administrative Agent for the
benefit of the Secured Parties, which Liens will be prior to all other Liens of
all other Persons, except for Liens permitted pursuant to the Loan Documents
(including, without limitation, those permitted to exist pursuant to subsection
8.3 of the Credit Agreement), and which Liens are enforceable as such as against
all other Persons (except to the extent that the recording of an assignment or
other transfer of title to the Administrative Agent in the United States Patent
and Trademark Office may be necessary for enforceability, and except, with
respect to goods only, buyers in the ordinary course of business to the extent
provided in Section 9-307(1) of the Code), except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair dealing.
(c) Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 3.
(d) Inventory and Equipment. On the date hereof, such
Grantor's Inventory and Equipment (other than mobile goods) are kept at the
locations listed on Schedule 4.
(e) Farm Products. None of such Grantor's Collateral
constitutes, or is the Proceeds of, Farm Products.
(f) Accounts. The amount represented by such Grantor to the
Administrative Agent or the other Secured Parties from time to time as owing by
each account debtor or by all account debtors in respect of such Grantor's
Accounts will at such time be the correct amount, in all material respects,
actually owing by such account debtor or debtors thereunder, except to the
extent that appropriate reserves therefor have been established on the books of
such Grantor in accordance with GAAP. The places where such Grantor keeps its
records concerning such Grantor's Accounts are listed on Schedule 7 or such
other location or locations of which such Grantor shall have provided prior
written notice to the Administrative Agent pursuant to Section 5.2.5 hereof.
Unless otherwise indicated in writing to the Administrative Agent, each Account
of such Grantor arises out of a bona fide sale and delivery of goods or
rendition of services by such Grantor. Such Grantor has not given any account
debtor any deduction in respect of the amount due under any such Account, except
as such Grantor may otherwise advise the Administrative Agent in writing.
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(g) Intellectual Property. Schedule 5 lists all material
Trademarks and material Patents (including, without limitation, Trademarks and
Patents registered in the United States Patent and Trademark Office) owned by
such Grantor in its own name as of the date hereof and all material Trademark
Licenses and all material Patent Licenses (including, without limitation,
material Trademark Licenses for registered Trademarks and material Patent
Licenses for registered Patents) owned by such Grantor in its own name as of the
date hereof.
15.3 Representations and Warranties of Each Pledgor. To induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Pledgor hereby represents and warrants to the
Administrative Agent and each other Secured party that:
(a) The shares of Pledged Stock pledged by such Pledgor
hereunder constitute (i) in the case of each Domestic Subsidiary, all the issued
and outstanding shares of all classes of the Capital Stock of each such Domestic
Subsidiary owned by such Pledgor and (ii) in the case of each Foreign Subsidiary
such percentage (not more than 65%) as is specified on Schedule 2 of all the
issued and outstanding shares of all classes of the Capital Stock of each such
Foreign Subsidiary.
(b) All the shares of the Pledged Stock pledged by such
Pledgor hereunder have been duly and validly issued and are fully paid and
nonassessable.
(c) Such Pledgor is the record and beneficial owner of, and
has good and valid title to, the Pledged Securities pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement and Liens imposed
by operation of law.
(d) Upon delivery to the Administrative Agent of the
certificates evidencing the Pledged Securities held by such Pledgor, the
security interest created by this Agreement in such Pledged Collateral, assuming
the continuing possession of such Pledged Securities by the Administrative
Agent, will constitute a valid, perfected first priority security interest in
such Pledged Collateral to the extent provided in the Code, enforceable in
accordance with its terms against all creditors of such Pledgor and any persons
purporting to purchase such Pledged Collateral from such Pledgor, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 16. COVENANTS
16.1 Covenants of Each Guarantor. Each Guarantor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing, shall have
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been paid in full, no Letter of Credit shall be outstanding and the
Commitments shall have terminated, such Guarantor shall take, or shall refrain
from taking, as the case may be, each action that is necessary to be taken or
not taken, as the case may be, so that no Default or Event of Default is caused
by the failure to take such action or to refrain from taking such action by such
Guarantor or any of its Subsidiaries.
16.2 Covenants of Each Grantor. Each Grantor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing, shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
(a) Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of such Grantor's Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall be promptly delivered to the Administrative Agent, duly indorsed in
a manner satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
(b) Maintenance of Insurance. (i) Such Grantor will maintain,
with financially sound and reputable companies, insurance policies (i) insuring
such Grantor's Inventory and Equipment against loss by fire, explosion, theft
and such other casualties as may be reasonably satisfactory to the
Administrative Agent and (ii) insuring such Grantor, the Administrative Agent
and the other Secured Parties against liability for personal injury and property
damage relating to such Inventory and Equipment, such policies to be in such
form and amounts and having such coverage as may be reasonably satisfactory to
the Administrative Agent.
(ii) All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Administrative Agent of written notice thereof, (ii) name the Administrative
Agent as an additional insured party or loss payee, (iii) include deductibles
consistent with past practice or otherwise reasonably satisfactory to the
Administrative Agent and (iv) be reasonably satisfactory in all other respects
to the Administrative Agent.
(iii) Such Grantor (if the Borrower) shall deliver to the
Administrative Agent and the other Secured Parties reports of one or more
reputable insurance brokers of the individual insurance companies with respect
to such insurance as the Administrative Agent may from time to time reasonably
request.
(c) Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon such Grantor's Collateral or in respect of income or
profits therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and
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supplies) against or with respect to such Grantor's Collateral, except that no
such tax, assessment, charge or levy need be paid or satisfied if the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings, reserves in conformity with GAAP with respect thereto have been
provided on the books of such Grantor and such proceedings would not reasonably
be expected to result in the sale, forfeiture or loss of any material portion of
the Collateral or any interest therein.
(d) Maintenance of Perfected Security Interest; Further
Documentation. (i) Such Grantor shall maintain the security interest created by
this Agreement in such Grantor's Collateral as a perfected security interest
having at least the priority described in Section 4.2.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.
(ii) Such Grantor will furnish to the Administrative Agent
from time to time statements and schedules further identifying and describing
such Grantor's Collateral and such other reports in connection with such
Grantor's Collateral as the Administrative Agent may reasonably request in
writing, all in reasonable detail.
(iii) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted by such Grantor,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
(e) Changes in Locations, Name, etc. Such Grantor will not,
except upon not less than 30 days' prior written notice to the Administrative
Agent and delivery to the Administrative Agent, if applicable, of a written
supplement to Schedule 4 showing any additional location at which such Grantor's
Inventory or Equipment shall be kept:
(i) permit any of such Grantor's Inventory or Equipment to be
kept at a location other than the location(s) applicable to such
Grantor listed on Schedule 4 (other than Inventory or Equipment being
conveyed, sold, leased, assigned, transferred or otherwise disposed of
as permitted by the Credit Agreement);
(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.2.3; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative
Agent in connection with this Agreement would become misleading;
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provided that, prior to taking any such action, or promptly after
receiving a written request therefor from the Administrative Agent, such Grantor
shall deliver to the Administrative Agent all additional executed financing
statements and other documents reasonably requested by the Administrative Agent
to maintain the validity, perfection and priority of the security interests
provided for herein.
(f) Notices. Such Grantor will advise the Administrative Agent
promptly, in reasonable detail, of:
(i) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of such Grantor's Collateral
which would adversely affect the ability of the Administrative Agent to exercise
any of its remedies hereunder; and
(ii) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of such Grantor's Collateral or on the security interests created hereby.
(g) Pledged Securities. In the case of each Grantor which is
an Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Stock issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 5.3.1 with respect to the Pledged Stock issued by it and
(iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section
6.3(c) or 6.7 with respect to the Pledged Stock issued by it.
(h) Accounts. (i) Other than in the ordinary course of
business, such Grantor will not (i) grant any extension of the time of payment
of any of such Grantor's Accounts, (ii) compromise or settle any such Account
for less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any such Account or (v) amend, supplement or modify any Account in
any manner that could adversely affect the value thereof.
(ii) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that questions
or calls into doubt the validity or enforceability of more than 10% of the
aggregate amount of the then outstanding Accounts.
(i) Maintenance of Records. Such Grantor will keep and
maintain at its own cost and expense reasonably satisfactory and complete
records of its Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to such Collateral, and
shall mark such records to evidence this Agreement and the Liens and the
security interests created hereby. For the Administrative Agent's and the other
Secured Parties' further security, the Administrative Agent, for the benefit of
the Secured Parties, shall have a security interest in all of such Grantor's
books and records pertaining to such Grantor's Collateral.
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(j) Acquisition of Intellectual Property. Within 45 days after
the end of each calendar quarter, such Grantor will notify the Administrative
Agent of any acquisition by such Grantor of (i) any material registration of
Copyright, Patent or Trademark or (ii) any exclusive rights under a material
Copyright License, Patent License or Trademark License, and shall take such
actions as may be reasonably requested by the Administrative Agent (but only to
the extent such actions are within such Grantor's control) to perfect the
security interest granted to the Administrative Agent and the other Secured
Parties therein (including, without limitation, (x) the execution and delivery
of a Patent and Trademark Security Agreement (or amendments to any such
agreement previously executed or delivered by such Grantor) or other comparable
agreements with respect to Copyrights or Copyright Licenses and (y) the making
of appropriate filings (I) of financing statements under the Uniform Commercial
Code of any applicable jurisdiction and/or (II) in the United States Patent and
Trademark Office, or with respect to Copyrights and Copyright Licenses, other
applicable office).
(k) Protection of Trade Secrets. Such Grantor shall take all
steps which it deems commercially reasonable to preserve and protect the secrecy
of all material Trade Secrets of such Grantor.
16.3 Covenants of Each Pledgor. Each Pledgor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
(a) If such Pledgor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Pledgor shall accept the same as the agent of the Administrative
Agent and the other Secured Parties, hold the same in trust for the
Administrative Agent and deliver the same forthwith to the Administrative Agent
in the exact form received, duly indorsed by such Pledgor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations (provided that in no event shall there be pledged,
nor shall any Pledgor be required to pledge, more than 65% of any series of the
outstanding Capital Stock of any Foreign Subsidiary pursuant to this Agreement).
Any sums paid upon or in respect of the Pledged Securities upon the liquidation
or dissolution of any Issuer or Maker (except any liquidation or dissolution of
any Subsidiary of the Borrower in accordance with the Credit Agreement) shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
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recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Pledgor, such Pledgor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Secured Parties, segregated from other funds of such Pledgor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, such Pledgor will not (except pursuant to a transaction permitted by the
Credit Agreement) (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof or (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or Liens arising by operation of law.
(c) Such Pledgor shall maintain the security interest created
by this Agreement in such Pledgor's Pledged Collateral as a perfected security
interest having at least the priority described in Section 4.3.4 and shall
defend such security interest against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Pledgor, such Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted by such Pledgor.
16.4 Covenants of Holdings. Holdings covenants and agrees with
the Administrative Agent and the other Secured Parties that, from and after the
date of this Agreement until the Loans, any Reimbursement Obligations, and all
other Obligations then due and owing have been paid in full, no Letter of Credit
shall be outstanding and the Commitments shall have terminated:
(a) Holdings shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and management
services to or on behalf of the Borrower or any of its Subsidiaries, (ii) the
ownership of the Capital Stock of the Borrower (or any successor thereto), and
the exercise of rights and performance of obligations in connection therewith,
(iii) the entry into, and exercise of rights and performance of obligations in
respect of, (A) the Transaction Documents and Senior Subordinated Notes
Documents to which Holdings is a party, this Guarantee and Collateral Agreement
and the other Loan Documents to which Holdings is a party, and any other
agreement to which Holdings is a party on the
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date hereof, in each case as amended, supplemented, waived or otherwise modified
from time to time, and any refinancings, refundings, renewals or extensions
thereof, (B) contracts and agreements with officers, directors and employees of
the Holdings or a Subsidiary thereof relating to their employment or
directorships, (C) insurance policies and related contracts and agreements, and
(D) equity subscription agreements, registration rights agreements, voting and
other stockholder agreements, engagement letters, underwriting agreements and
other agreements in respect of its equity securities or any offering, issuance
or sale thereof, (iv) the offering, issuance and sale of its equity securities,
(v) the filing of registration statements, and compliance with applicable
reporting and other obligations, under federal, state or other securities laws,
(vi) the listing of its equity securities and compliance with applicable
reporting and other obligations in connection therewith, (vii) the retention of
transfer agents, private placement agents, underwriters, counsel, accountants
and other advisors and consultants, (viii) the performance of obligations under
and compliance with its certificate of incorporation and by-laws, or any
applicable law, ordinance, regulation, rule, order, judgment, decree or permit,
including, without limitation, as a result of or in connection with the
activities of the Borrower and its Subsidiaries, (ix) the incurrence and payment
of its operating and business expenses and any taxes for which it may be liable,
and (x) other activities incidental or related to the foregoing. Holdings shall
not make any interest payment on the Subordinated Debentures With Warrants in
cash that may be made in kind.
(b) Holdings shall not own, lease, manage or otherwise operate
any properties or assets (other than in connection with the activities described
in Section 5.4.1 above), or incur, create, assume or suffer to exist any
Indebtedness or Guarantee Obligations of Holdings (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.4.1 above.
SECTION 17. REMEDIAL PROVISIONS
17.1 Certain Matters Relating to Accounts. (i) At any time and
from time to time after the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the relevant Grantor shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's reasonable request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(ii) The Administrative Agent hereby authorizes each Grantor
to collect such Grantor's Accounts and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of Default,
any Proceeds constituting collections of such Accounts, when collected by such
Grantor, (i) shall be forthwith (and, in
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any event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in the Collateral Proceeds Account established by such Grantor maintained under
the sole dominion and control of the Administrative Agent, subject to withdrawal
by the Administrative Agent for the account of the Secured Parties only as
provided in Section 6.5, and (ii) until so turned over, shall be held by such
Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Grantor. Each such deposit of Proceeds of
Accounts shall be accompanied by a report identifying in reasonable detail the
nature and source of the payments included in the deposit. All Proceeds
constituting collections of Accounts while held by the Collateral Account Bank
(or by any Guarantor in trust for the benefit of the Administrative Agent and
the other Secured Parties) shall continue to be collateral security for all of
the Obligations and shall not constitute payment thereof until applied as
hereinafter provided. At any time when an Event of Default has occurred and is
continuing, at the Administrative Agent's election, the Administrative Agent may
apply all or any part of the funds on deposit in the Collateral Proceeds Account
established by the relevant Grantor to the payment of the Obligations of such
Grantor then due and owing, such application to be made as set forth in Section
6.5 hereof. So long as no Event of Default has occurred and is continuing, the
funds on deposit in the Collateral Proceeds Account shall be remitted as
provided in Section 6.9 hereof. At any time when an Event of Default has
occurred and is continuing, at the Administrative Agent's request, each Grantor
shall deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
such Grantor's Accounts, including, without limitation, all statements relating
to such Grantor's Accounts.
(iii) At any time and from time to time after the occurrence
and during the continuance of an Event of Default, at the Administrative Agent's
request, each Grantor shall deliver to the Administrative Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to such Grantor's Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(iv) General Fund Account. So long as no Event of Default has
occurred and is continuing, the Administrative Agent shall instruct the
Collateral Account Bank to promptly remit any funds on deposit in each Grantor's
Collateral Proceeds Account to such Grantor's General Fund Account. In the event
that an Event of Default has occurred and is continuing, the Administrative
Agent and the Grantors agree that the Administrative Agent, at its option, may
require that each Collateral Proceeds Account be established at The Chase
Manhattan Bank. Each Grantor shall have the right, at any time and from time to
time, to withdraw such of its own funds from its own General Fund Account, and
to maintain such balances in its General Fund Account, as it shall deem to be
necessary or desirable.
(v) Restructuring of Deposit Accounts. If (a) any Collateral
Proceeds Account is maintained at a Collateral Account Bank located in a state
within the United States in which Article 9 of the Uniform Commercial Code in
effect in such state has been expressly made applicable to (and only for so long
as it is applicable to) demand deposit accounts and all filings have been made
in such state
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which are necessary to perfect the Secured Parties' security interest in such
Collateral Proceeds Account or (b) after the Effective Date the relevant Grantor
demonstrates to the Administrative Agent, and the Administrative Agent in its
sole discretion agrees, that the costs associated with maintaining both a
Collateral Proceeds Account and a General Fund Account outweigh any benefits to
the Secured Parties in terms of any additional protection to their rights in
such Grantor's Collateral that could not be achieved with the use of a single
account, then upon the request of such Grantor, the Administrative Agent may
amend this Agreement to delete the requirement that a separate General Fund
Account be maintained and provide that such Grantor be entitled to withdraw
funds on deposit in such Collateral Proceeds Account at any time so long as no
Event of Default has occurred and is continuing.
17.2 Communications with Obligors; Grantors Remain Liable. (i)
The Administrative Agent in its own name or in the name of others may at any
time and from time to time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts and parties to the
Contracts (in each case, to the extent constituting Collateral) to verify with
them to the Administrative Agent's satisfaction the existence, amount and terms
of any Receivables or Contracts.
(ii) Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on such Grantor's Accounts and parties to such
Grantor's Contracts (in each case, to the extent constituting Collateral) that
such Accounts and such Contracts have been assigned to the Administrative Agent,
for the ratable benefit of the Secured Parties, and that payments in respect
thereof shall be made directly to the Administrative Agent.
(iii) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of such Grantor's Accounts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any other Secured Party of any payment relating thereto,
nor shall the Administrative Agent or any other Secured Party be obligated in
any manner to perform any of the obligations of any Grantor under or pursuant to
any Account (or any agreement giving rise thereto) to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
17.3 Pledged Stock. (i) Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall have
given notice to the relevant Pledgor of the Administrative Agent's intent to
exercise its corresponding rights pursuant to Section 6.3(b), each Pledgor shall
be permitted to receive all cash dividends paid in respect of the Pledged Stock
and all
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payments made in respect of the Pledged Notes, to the extent permitted in the
Credit Agreement, and to exercise all voting and corporate rights with respect
to the Pledged Stock; provided, however, that no vote shall be cast or corporate
right exercised or such other action taken (other than in connection with a
transaction expressly permitted by the Credit Agreement) which, in the
Administrative Agent's reasonable judgment, would materially impair the Pledged
Collateral or the related rights or remedies of the Secured Parties or which
would be inconsistent with or result in any violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.
(ii) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the relevant Pledgor or Pledgors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Stock and make application thereof to the Obligations in
such order as the Administrative Agent may determine, and (ii) any or all of the
Pledged Stock shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x)
all voting, corporate and other rights pertaining to such Pledged Stock at any
meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y)
any and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by the relevant Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Pledged Stock, and in connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may reasonably determine), all without liability (other
than for its gross negligence or willful misconduct) except to account for
property actually received by it, but the Administrative Agent shall have no
duty to any Pledgor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing, provided that
the Administrative Agent shall not exercise any voting or other consensual
rights pertaining to the Pledged Stock in any way that would constitute an
exercise of the remedies described in Section 7 other than in accordance with
Section 7.
(iii) Each Pledgor hereby authorizes and instructs each Issuer
or Maker of any Pledged Securities pledged by such Pledgor hereunder to (i)
comply with any instruction received by it from the Administrative Agent in
writing that (x) states that an Event of Default has occurred and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Pledgor, and each Pledgor agrees that each Issuer
or Maker shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Administrative Agent.
17.4 Proceeds to be Turned Over To Administrative
Agent. In addition to the rights of the Administrative Agent and the other
Secured Parties specified in Section 6.1 with respect to payments
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of Accounts, if an Event of Default shall occur and be continuing, and the
Administrative Agent shall have instructed any Grantor to do so, all Proceeds
received by such Grantor consisting of cash, checks and other Cash Equivalent
items shall be held by such Grantor in trust for the Administrative Agent and
the other Secured Parties, segregated from other funds of such Grantor, and
shall, forthwith upon receipt by such Grantor, be turned over to the
Administrative Agent in the exact form received by such Grantor (duly indorsed
by such Grantor to the Administrative Agent, if required). All Proceeds received
by the Administrative Agent hereunder shall be held by the Administrative Agent
in the relevant Collateral Proceeds Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in such
Collateral Proceeds Account (or by such Grantor in trust for the Administrative
Agent and the other Secured Parties) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section 6.5.
17.5 Application of Proceeds. It is agreed that if an Event of
Default shall occur and be continuing, any and all Proceeds of the relevant
Granting Party's Security Collateral received by the Administrative Agent
(whether from the relevant Granting Party or otherwise) shall be held by the
Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations of the relevant Granting Party (whether matured or
unmatured), and/or then or at any time thereafter may, in the sole discretion of
the Administrative Agent, be applied by the Administrative Agent against the
Obligations of the relevant Granting Party then due and owing in the following
order of priority:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Administrative Agent in connection with this Agreement,
the Credit Agreement, any other Loan Document or any of the Obligations
of the relevant Granting Party, including, without limitation, all
court costs and the reasonable fees and expenses of its agents and
legal counsel, and any other reasonable costs or expenses incurred in
connection with the exercise by the Administrative Agent of any right
or remedy under this Agreement, the Credit Agreement, or any other Loan
Document;
SECOND, to the ratable satisfaction of all other Obligations
of the relevant Granting Party; and
THIRD, to the relevant Granting Party or its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same.
17.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Secured
Parties, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code or any other applicable law. Without limiting the
generality of the foregoing, to the extent permitted by applicable law, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to
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below) to or upon any Granting Party or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Security Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Security Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any other
Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Administrative Agent
or any other Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Security Collateral so sold, free of
any right or equity of redemption in any Granting Party, which right or equity
is hereby waived or released. Each Granting Party further agrees, at the
Administrative Agent's request, to assemble the Security Collateral and make it
available to the Administrative Agent at places which the Administrative Agent
shall reasonably select, whether at such Granting Party's premises or elsewhere.
The Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Security Collateral or in any way relating to the
Security Collateral or the rights of the Administrative Agent and the other
Secured Parties hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations of
the relevant Granting Party, in the order of priority specified in Section 6.5
above, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to any Granting Party. To
the extent permitted by applicable law, each Granting Party waives all claims,
damages and demands it may acquire against the Administrative Agent or any other
Secured Party arising out of the exercise by them of any rights hereunder,
except to the extent arising as a result of the gross negligence or willful
misconduct of the Administrative Agent or such other Secured Party. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
17.7 Registration Rights. (i) If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section 6.6, and if in the reasonable opinion of the
Administrative Agent it is necessary or reasonably advisable to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of
the Securities Act, the relevant Pledgor will use its reasonable best efforts to
cause the Issuer thereof to (i) execute and deliver, and use its best efforts to
cause the directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto
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and/or to the related prospectus which, in the reasonable opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Such Pledgor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall
reasonably designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(ii) Such Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all such Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(iii) Such Pledgor agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of such Pledged Stock pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable
Requirements of Law. Such Pledgor further agrees that a breach of any of the
covenants contained in this Section 6.7 will cause irreparable injury to the
Administrative Agent and the Lenders, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 6.7 shall be
specifically enforceable against such Pledgor, and to the extent permitted by
applicable law, such Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.
17.8 Waiver; Deficiency. Each Granting Party (other than the
Borrower) waives and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the Code, to the extent permitted by applicable
law. Each Granting Party shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Security Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any other Secured Party to collect such deficiency.
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SECTION 18. THE ADMINISTRATIVE AGENT
18.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc. (i) Each Granting Party hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Granting Party and in the
name of such Granting Party or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be reasonably necessary
or desirable to accomplish the purposes of this Agreement to the extent
permitted by applicable law. Without limiting the generality of the foregoing,
at any time when an Event of Default has occurred and is continuing (in each
case to the extent permitted by applicable law), (x) each Pledgor hereby gives
the Administrative Agent the power and right, on behalf of such Pledgor, without
notice or assent by such Pledgor, to execute, in connection with any sale
provided for in Section 6.6 or 6.7, any indorsements, assessments or other
instruments of conveyance or transfer with respect to such Pledgor's Pledged
Collateral, and (y) each Grantor hereby gives the Administrative Agent the power
and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Account of such Grantor or with respect to any other Collateral of
such Grantor and file any claim or take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such
moneys due under any Account of such Grantor or with respect to any
other Collateral of such Grantor whenever payable;
(ii) in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and
all agreements, instruments, documents and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent's and
the Lenders' security interest in such Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral of such Grantor, effect any repairs
or any insurance called for by the terms of this Agreement and pay all
or any part of the premiums therefor and the costs thereof; and
(iv) (i) direct any party liable for any payment under any of
the Collateral of such Grantor to make payment of any and all moneys
due or to become due thereunder directly to the Administrative Agent or
as the Administrative Agent shall direct; (ii) ask or demand for,
collect, receive payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect of or
arising out of any Collateral of such Grantor; (iii) sign and indorse
any invoices, freight or express bills, bills of lading, storage or
warehouse receipts,
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drafts against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral of such Grantor;
(iv) commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the
Collateral of such Grantor or any portion thereof and to enforce any
other right in respect of any Collateral of such Grantor; (v) defend
any suit, action or proceeding brought against such Grantor with
respect to any Collateral of such Grantor; (vi) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (vii) subject to any existing reserved
rights or licenses, assign any Copyright, Patent or Trademark
constituting Collateral of such Grantor (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains),
for such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (viii)
generally, sell, transfer, pledge and make any agreement with respect
to or otherwise deal with any of the Collateral of such Grantor as
fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative
Agent's option and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent deems
necessary to protect, preserve or realize upon the Collateral of such
Grantor and the Administrative Agent's and the other Secured Parties'
security interests therein and to effect the intent of this Agreement,
all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(ii) If any Granting Party fails to perform or comply with any
of its agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(iii) The reasonable expenses of the Administrative Agent
incurred in connection with actions undertaken as provided in this Section 7.1,
together with interest thereon at a rate per annum equal to the rate per annum
at which interest would then be payable on past due ABR Loans which are Term
Loans under the Credit Agreement, from the date of payment by the Administrative
Agent to the date reimbursed by the relevant Granting Party, shall be payable by
such Granting Party to the Administrative Agent on demand.
(iv) Each Granting Party hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable as to the relevant Granting Party until this
Agreement is terminated as to such Granting Party, and the security interests in
the Security Collateral of such Granting Party created hereby are released.
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18.2 Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Security Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any other Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Security Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any Security
Collateral upon the request of any Granting Party or any other Person or to take
any other action whatsoever with regard to the Security Collateral or any part
thereof. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Security Collateral and shall not impose any
duty upon the Administrative Agent or any other Secured Party to exercise any
such powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Granting Party for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct.
18.3 Execution of Financing Statements. Pursuant to Section
9-402 of the Code and any other applicable law, each Granting Party authorizes
the Administrative Agent to file or record financing statements and other filing
or recording documents or instruments with respect to such Granting Party's
Security Collateral without the signature of such Granting Party in such form
and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement. A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
18.4 Authority of Administrative Agent. Each Granting Party
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement or any amendment, supplement or other
modification of this Agreement shall, as between the Administrative Agent and
the Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Granting Parties the Administrative
Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and no
Granting Party shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
18.5 Right Of Inspection. Upon reasonable written advance
notice to any Grantor and at reasonable intervals, or at any time and from time
to time after the occurrence and during the continuation of an Event of Default,
the Administrative Agent shall have reasonable access during
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normal business hours to all the books, correspondence and records of such
Granting Party, and the Administrative Agent and its representatives may examine
the same, and to the extent reasonable take extracts therefrom and make
photocopies thereof, and such Granting Party agrees to render to the
Administrative Agent, at such Granting Party's reasonable cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto. The Administrative Agent and its representatives shall also have the
right, upon reasonable advance written notice to such Granting Party, to enter
during normal business hours into and upon any premises owned, leased or
operated by such Granting Party where any of such Granting Party's Inventory or
Equipment is located for the purpose of inspecting the same, observing its use
or otherwise protecting its interests therein.
SECTION 19. MISCELLANEOUS
19.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each affected Granting Party and the
Administrative Agent, provided that any provision of this Agreement imposing
obligations on any Granting Party may be waived by the Administrative Agent in a
written instrument executed by the Administrative Agent.
19.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Granting Party hereunder shall be effected in the
manner provided for in subsection 11.2 of the Credit Agreement; provided that
any such notice, request or demand to or upon any Guarantor shall be addressed
to such Guarantor at its notice address set forth on Schedule 1, unless and
until such Guarantor shall change such address by notice to the Administrative
Agent given in accordance with subsection 11.2 of the Credit Agreement.
19.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any other Secured Party shall by any act
(except by a written instrument pursuant to Section 8.1), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
other Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any other Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Administrative
Agent or such other Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
19.4 Enforcement Expenses; Indemnification. (i) Each
Guarantor agrees to pay or reimburse each Secured Party and the Administrative
Agent for all their respective reasonable costs and
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expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement against such Guarantor and the other Loan Documents to which such
Guarantor is a party, including, without limitation, the reasonable fees and
disbursements of one firm of counsel to the Secured Parties and the
Administrative Agent.
(ii) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Secured Parties harmless from, (x) any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other similar taxes which may be payable or determined
to be payable with respect to any of the Security Collateral or in connection
with any of the transactions contemplated by this Agreement and (y) any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement (collectively, the "indemnified liabilities"), in each case to the
extent the Borrower would be required to do so pursuant to Section 11.5 of the
Credit Agreement, and in any event excluding any taxes or other indemnified
liabilities arising from gross negligence or willful misconduct of the
Administrative Agent or any Secured Party.
(iii) The agreements in this Section 8.4 shall survive
repayment of the Obligations and all other amounts payable under the Credit
Agreement and the other Loan Documents.
19.5 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Granting Parties, the Administrative
Agent and the Secured Parties and their respective successors and assigns;
provided that no Granting Party may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Administrative Agent.
19.6 Set-Off. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each other Secured Party at any time and from time to
time without notice to such Guarantor, any other Guarantor or the Borrower, any
such notice being expressly waived by each Guarantor and by the Borrower, to the
extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default under Section 9(a) of the Credit Agreement
and any amount remaining unpaid after it becomes due and payable by such
Guarantor hereunder, to set-off and appropriate and apply against any such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Administrative Agent or
such other Secured Party to or for the credit or the account of such Guarantor,
or any part thereof in such amounts as the Administrative Agent or such other
Secured Party may elect. The Administrative Agent and each other Secured Party
shall notify such Guarantor promptly of any such set-off and the application
made by the Administrative Agent or such other Secured Party of the proceeds
thereof; provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Administrative Agent
and each other Secured Party under this Section
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8.6 are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Administrative Agent or such other Secured
Party may have.
19.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
19.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
19.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
19.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Granting Parties, the Administrative Agent
and the other Secured Parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Granting Parties, the Administrative Agent or any other Secured Party relative
to subject matter hereof not expressly set forth or referred to herein or in the
other Loan Documents.
19.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
19.12 Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
33
<PAGE> 176
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address referred to in Section 8.2 or at
such other address of which the Administrative Agent (in the case of
any other party hereto) or the Borrower (in the case of the
Administrative Agent) shall have been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any punitive damages.
19.13 Acknowledgements. Each Guarantor hereby acknowledges
that:
(i) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents
to which it is a party;
(ii) neither the Administrative Agent nor any other Secured
Party has any fiduciary relationship with or duty to any Guarantor
arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Guarantors, on the one
hand, and the Administrative Agent and the Secured Parties, on the
other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(iii) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Secured Parties or among the Guarantors
and the Secured Parties.
19.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
19.15 Additional Granting Parties. Each new Domestic
Subsidiary of the Borrower that is required to become a party to this Agreement
pursuant to Section 8.15 of the Credit Agreement shall become a Granting Party
for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.
19.16 Releases. (i) At such time as the Loans, the
Reimbursement Obligations and the other Obligations then due and owing shall
have been paid in full, the Commitments have been terminated and no Letters of
Credit shall be outstanding, all Security Collateral shall be released from the
Liens created hereby, and this Agreement and all obligations (other than those
expressly stated to
34
<PAGE> 177
survive such termination) of the Administrative Agent and each Granting Party
hereunder shall terminate, all without delivery of any instrument or performance
of any act by any party, and all rights to the Security Collateral shall revert
to the Granting Parties. At the request and sole expense of any Granting Party
following any such termination, the Administrative Agent shall deliver to such
Granting Party any Security Collateral held by the Administrative Agent
hereunder, and execute and deliver to such Granting Party such documents
(including without limitation UCC termination statements) as such Granting Party
shall reasonably request to evidence such termination.
(ii) In connection with the sale or other disposition of all
of the Capital Stock of any Guarantor or the sale or other disposition of
Security Collateral permitted under the Credit Agreement and the release of such
Guarantor from its Guarantee or the release of the Security Collateral subject
to such sale or other disposition, the Borrower shall deliver to the
Administrative Agent, a written request for release identifying such Guarantor
or the relevant Security Collateral and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Borrower stating
that such transaction is in compliance with the Credit Agreement and the other
Loan Documents. The Administrative Agent shall execute and deliver to the
relevant Granting Party (at the sole cost and expense of such Granting Party)
all releases or other documents (including without limitation UCC termination
statements) necessary or reasonably desirable for the release of the Liens
created hereby on such Security Collateral as such Granting Party may reasonably
request.
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<PAGE> 178
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
TELEX COMMUNICATIONS, INC.
By: ____________________________
Name:
Title
TELEX COMMUNICATIONS GROUP, INC.
By: ____________________________
Name:
Title
TCI HOLDINGS CORP.
By: ____________________________
Name:
Title
Acknowledged and Agreed to as
of the date hereof by:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: _______________________________
Name:
Title:
36
<PAGE> 179
Schedule 1
NOTICE ADDRESSES OF GUARANTORS
Telex Communications Group, Inc.
c/o Telex Communications, Inc.
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
Attention: John A. Palleschi
Telephone: (612) 884-4051
Telecopy: (612) 887-9172
TCI Holdings Corp.
c/o Telex Communications, Inc.
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
Attention: John A. Palleschi
Telephone: (612) 884-4051
Telecopy: (612) 887-9172
with Copies to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
re: Telex Communications Group, Inc.
Attention: Nicholas E. Somers
Telephone: (212) 816-2889
Telecopy: (212) 816-0166
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: David A. Brittenham, Esq.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
<PAGE> 180
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
<TABLE>
<CAPTION>
Stock Certificate
Issuer Class of Stock No. No. of Shares
------------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
Telex Communications, Inc. Common 2 500
Telex Communications (SEA) PTE, Ltd. Common 5 130,000(1)
Telex Communications (U.K.) Ltd. Common 4 3,250
Telex Communications, Ltd. Common C-2 6,500
TCI Holdings Corp. Common 2 325
</TABLE>
- ----------
1. Notwithstanding the delivery of a stock certificate representing all of
the outstanding shares of common stock of Telex Communications (SEA)
PTE, Ltd., Telex has not pledged more than 65% of the common stock of
Telex Communications (SEA) PTE, Ltd. hereunder.
<PAGE> 181
Schedule 3
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE
OFFICE OR SOLE PLACE OF BUSINESS
Granting Party Location
-------------- --------
Telex Communications Group, Inc. Jurisdiction of Organization:
Delaware
Chief Executive Office:
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
Telex Communications, Inc. As above.
TCI Holdings Corp. As above.
<PAGE> 182
Schedule 4
LOCATION OF INVENTORY AND EQUIPMENT
Granting Party Locations
-------------- ---------
Telex Communications Group, Inc. None
Telex Communications, Inc.
TCI Holdings Corp. None
<PAGE> 183
Schedule 5
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 184
Schedule 6
EXISTING PRIOR LIENS
I. Real Property Liens
A. 9600 Aldrich Ave. S., Bloomington, Hennepin County, MN
1. Subject to utility and drainage easements as shown on the
recorded plat at Document No. 1093227 (per recital on Certificate of Title).
2. Subject to an easement over the south 12 feet for driveway
purposes as shown in Deed Document No. 226740, Files of Registrar of Titles, and
together with an easement for driveway purposes as shown in Deed Document No.
28103, Files of Registrar of Titles (per recital on Certificate of Title).
3. Easement for storm sewer purposes in favor of the Village
of Bloomington created in Quit Claim Deeds dated February 27, 1957, filed May
15, 1957 as Document No. 529463, and dated February 14, 1957, filed August 2,
1957 as Document No. 535893.
4. Final Certificates dated September 15, 1958, filed October
30, 1958 as Document No. 574454, and dated February 14, 1962, filed April 3,
1962 as Document No. 687375.
5. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 25, 1997.
6. Unrecorded Lease Agreement, dated July 5, 1988, between
Telex Communications, Inc. as lessor and Naegele Outdoor Advertising, Inc. as
Lessee.
7. Unrecorded Building Option and Lease Agreement, dated June
19, 1992, between Telex Communications, Inc. as lessor and SMSA Limited
Partnership as tenant.
B. West First St., Blue Earth, Faribault County, MN
1. Right to construct and maintain temporary snow fences in
favor of the State of Minnesota pursuant to Final Certificate dated September 9,
1932, filed September 12, 1932 in Book 88 of Deeds, Page 604.
2. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 22, 1997.
<PAGE> 185
C. Vacant Land, Lac Lavon Drive and Southcross Drive, Burnsville,
Dakota County, MN
1. Easement for public utility and roadway purposes in favor of
the City of Burnsville dated March 7, 1985, filed March 19, 1985 as Document No.
145169.
2. Rights of the public in that portion of the subject property
embraced within County State Aid Highway No. 42.
3. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 23, 1997.
D. 1720 East 14th Street, Glencoe, McLeod County, MN
1. Reservation of utility easements in vacated streets and
avenues in favor of the City of Glencoe as contained in Resolutions filed
December 7, 1961, in Book 48 of Misc. Page 53, December 7, 1961 in Book 48 of
Misc., Page 54, and filed June 8, 1967 in Book 55 of Misc., Page 550.
2. Terms and conditions of Easement Agreement dated September
21, 1979, filed September 24, 1979 in Book 85 of Misc., page 79.
3. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 25, 1997.
E. 101 Minneapolis Avenue, LeSueur, LeSueur County, MN
1. Terms and conditions of Grant of Easement dated October 22,
1984, filed October 29, 1984 in Book 209 of Deeds, Page 134.
2. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 16, 1997.
3. Unrecorded Lease, dated August 26, 1996, between Telex
Communications, Inc. as landlord and Taylor Corporation d/b/a Great Papers, a
Minnesota corporation, as tenant.
F. 1620 Industrial Drive NW, Rochester, Olmsted County, MN
1. Utility easement as shown on the recorded plat of Fred
Schuster Industrial Park.
2. Terms and conditions of and easements created in instrument
dated October 4, 1982, filed October 4, 1982 in Book N-4 of Misc. Records, Page
716 as Document No. 447119, as
2
<PAGE> 186
modified by the provisions contained in Warranty Deed dated October 4, 1982,
filed October 4, 1982 in Book 382 of Deeds, Page 949 as Document No. 447163.
3. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 25, 1997.
G. 8601 Cornhusker Highway, Lincoln, Lancaster County, NE
1. Easement for Right-of-Way to Lincoln Telephone & Telegraph
Company dated September 3, 1948, recorded September 23, 1948 in Book 35, Page
498, records of Lancaster County, Nebraska.
2. Easement to City of Lincoln, Nebraska dated February 23,
1954 recorded March 13, 1954 in Book 51, Page 69, records of Lancaster County,
Nebraska.
3. Right-of-Way Easement to River Public Power District dated
March 5, 1956 recorded April 24, 1956 in Book 59, Page 504; conveyed to Nebraska
Public Power District by Corporate Quitclaim Deed dated November 25, 1970,
recorded December 21, 1970 as Instrument number 70-14031, records of Lancaster
County, Nebraska.
4. Pipe Line Easement to Western Power & Gas Company dated
March 8, 1962 recorded April 23, 1962 in Book 87, Page 248, records of Lancaster
County, Nebraska.
5. Terms and conditions of Agreement by and between City of
Lincoln, Lancaster County, Nebraska, and Western Power & Gas Company, with
reference to Easements filed at Book 51, Page 69, and Book 87, Page 248; dated
June 18, 1962, recorded June 22, 1962 in Book 88, Page 91, records of Lancaster
County, Nebraska.
6. Easement for Electric Lines to Consumers Public Power
District dated October 5, 1962 recorded November 19, 1962 in Book 90, Page 85,
records of Lancaster County, Nebraska.
7. Easement for Electric Lines of Underground Electric to
Lincoln Electric System, Lincoln Telephone & Telegraph Company, dated April 21,
1983 recorded June 29, 1983 as Instrument Number 83-12246, records of Lancaster
County, Nebraska.
8. Ingress and Egress Restrictions shown in Quitclaim Deed from
the County of Lancaster to the State of Nebraska, dated August 19, 1980 recorded
December 3, 1980 as Instrument Number 80-25116, records of Lancaster County,
Nebraska.
9. Any adverse claim based upon the assertion that: (a) some
portion of the land has been created by artificial means, or has accreted to
such portion so created, or (b) some portion of the
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<PAGE> 187
land has been brought within the boundaries thereof by any avulsive movement of
the adjacent river, or has been formed by any accretion to any such portion.
Any decrease in area, if any, of the land by erosion and the
consequences of any future change in the location of the adjacent river.
10. Terms and conditions of Notation pursuant to 40 C.F.R.
Subpart G executed by Telex Communications, Inc. dated January 9, 1990, recorded
January 11, 1990 as Instrument Number 90-1098, records of Lancaster County,
Nebraska.
11. Matters shown on the survey prepared by Ross Engineering,
Inc. on or about April 29, 1997.
II. UCC Liens
See attached chart.
4
<PAGE> 188
Schedule 7
ACCOUNTS
[To come]
<PAGE> 189
Schedule 8
CONTRACTS
None.
<PAGE> 190
EXHIBIT C TO
CREDIT AGREEMENT
FORM OF PATENT AND TRADEMARK SECURITY AGREEMENT
PATENT AND TRADEMARK SECURITY AGREEMENT, dated as of May __,
1997, made by [Telex Communications, Inc., a Delaware corporation ] [name of
Domestic Subsidiary of the Borrower] (the "Grantor"), in favor of The
Chase Manhattan Bank, a New York banking corporation ("Chase"), as
administrative agent (in such capacity, the "Administrative Agent") and
Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), as Documentation
Agent (in such capacity, the "Documentation Agent") for the banks and
other financial institutions (the "Lenders") from time to time parties
to the Credit Agreement, dated as of May __, 1997 (as amended, waived,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Grantor (as successor by assumption to GST
Acquisition Corp. upon the effectiveness of the Telex Assumption Agreement (as
defined herein) the Lenders and the Administrative Agent and Morgan Stanley.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower (as defined
therein) upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition to the obligation of the Lenders to
make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantor shall execute and deliver this Agreement to the
Administrative Agent for the ratable benefit of the Secured Parties (as defined
below);
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, the Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:
3. Defined Terms. 3.1 Unless otherwise defined herein,
capitalized terms which are defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.
3.2 The following terms shall have the following meanings:
"Agreement": this Patent and Trademark Security Agreement, as
the same may be amended, supplemented, waived or otherwise modified
from time to time.
<PAGE> 191
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 2 of this Agreement.
"Default": a "Default" as defined in the Credit Agreement.
"Event of Default": an "Event of Default" as defined in the
Credit Agreement.
"General Intangibles": as defined in Section 9-106 of the
Code, including, without limitation, all Patents and Trademarks now or
hereafter owned by the Grantor to the extent such Patents and
Trademarks would be included in General Intangibles under the Code.
"Loan Documents": the collective reference to the "Loan
Documents" as defined in the Credit Agreement.
"Loans": the collective reference to the "Loans" as defined in
the Credit Agreement.
"Obligations": the Obligations (as defined in the Guarantee
and Collateral Agreement) of the Grantor.
"Patent Licenses": all United States written license
agreements of the Grantor with any Person who is not an Affiliate or
Subsidiary of the Grantor in connection with any of the Patents or such
other Person's patents, whether the Grantor is a licensor or a licensee
under any such agreement, including, without limitation, the license
agreements listed on Schedule II hereto, subject, in each case, to the
terms of such license agreements, and the right to prepare for sale,
sell and advertise for sale, all Inventory (as defined in the Guarantee
and Collateral Agreement) now or hereafter covered by such licenses.
"Patents": all of the Grantor's right, title and interest in
and to all United States patents, patent applications and patentable
inventions and all reissues and extensions thereof, including, without
limitation, all patents and patent applications identified in Schedule
II hereto, and including, without limitation, (a) all inventions and
improvements described and claimed therein, and patentable inventions,
(b) the right to sue or otherwise recover for any and all past, present
and future infringements and misappropriations thereof, (c) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages
and payments for past or future infringements thereof), and (d) all
other rights corresponding thereto in the United States and all
reissues, divisions, continuations, continuations-in-part, substitutes,
renewals, and extensions thereof, all improvements thereon, and all
other rights of any kind
2
<PAGE> 192
whatsoever of the Grantor accruing thereunder or pertaining thereto
(Patents and Patent Licenses being, collectively, the "Patent
Collateral").
"Proceeds": as defined in Section 9-306(1) of the Code.
"Revolving Credit Commitments": the collective reference to
the "Revolving Credit Commitments" as defined in the Credit Agreement.
"Secured Parties": the collective reference to the
Administrative Agent, the Lenders (including, without limitation, the
Issuing Lender and the Swing Line Lender), any Affiliate of any Lender
which has entered into any Interest Rate Protection Agreement or
Permitted Hedging Arrangement with the Borrower or any of its
Subsidiaries, and their respective successors and assigns.
"Trademark Licenses": all United States written license
agreements of the Grantor with any Person who is not an Affiliate or
Subsidiary of the Grantor in connection with any of the Trademarks or
such other Person's names or trademarks, whether the Grantor is a
licensor or a licensee under any such agreement, including, without
limitation, the license agreements listed on Schedule I hereto,
subject, in each case, to the terms of such license agreements, and the
right to prepare for sale, sell and advertise for sale, all Inventory
(as defined in the Guarantee and Collateral Agreement) now or hereafter
covered by such licenses.
"Trademarks": all of the Grantor's right, title and interest
in and to all United States trademarks, service marks, trade names,
trade dress or other indicia of trade origin or business identifiers,
trademark and service mark registrations, and applications for
trademark or service mark registrations (except for "intent to use"
applications for trademark or service mark registrations filed pursuant
to Section 1(b) of the Lanham Act, 15 U.S.C. Section 1051, unless and
until an Amendment to Allege Use or a Statement of Use under Sections
1(c) and 1(d) of said Act has been filed), and any renewals thereof,
including, without limitation, each registration and application
identified in Schedule I hereto, and including, without limitation, (a)
the right to sue or otherwise recover for any and all past, present and
future infringements and misappropriations thereof, (b) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages
and payments for past or future infringements thereof), and (c) all
other rights corresponding thereto in the United States and all other
rights of any kind whatsoever of the Grantor accruing thereunder or
pertaining thereto, together in each case with the goodwill of the
business connected with the use of, and symbolized by, each such
trademark, service mark, trade name, trade dress or other indicia of
trade origin or business identifiers (Trademarks and Trademark Licenses
being, collectively, the "Trademark Collateral").
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<PAGE> 193
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to the Grantor, shall
refer to the Grantor's Collateral or the relevant part thereof.
4. Grant of Security Interest. The Grantor hereby grants,
subject to existing licenses granted by the Grantor in the ordinary course of
business with respect to the Collateral (as hereinafter defined), to the
Administrative Agent for the ratable benefit of the Secured Parties a security
interest in all of the following property now owned or at any time hereafter
acquired by the Grantor or in which the Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of the Grantor:
(a) all Patents;
(b) all Patent Licenses;
(c) all Trademarks;
(d) all Trademark Licenses;
(e) all General Intangibles connected with the use of or
symbolized by the Trademarks and Patents; and
(f) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security
and guarantees given by any Person with respect to any of the
foregoing;
provided, that the foregoing grant of a security interest with respect
to General Intangibles, Patent Licenses and Trademark Licenses shall not include
a security interest in, and the Collateral shall not include, any Patent License
or Trademark License with or issued by Persons other than a Subsidiary of the
Grantor that would otherwise be included in the Collateral to the extent that
the grant by such Grantor of such security interest is prohibited by the terms
and provisions of the written agreement or document or instrument creating or
evidencing such license or permit or Patent License or Trademark License, or
gives the other party thereto the right to terminate such Patent License or
Trademark License in the event of the grant of a security interest with respect
thereto. All references in this Agreement to
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<PAGE> 194
any of the property described in clauses (i) through (vi) of the preceding
sentence, or to any Proceeds thereof, shall be deemed to be references to such
property or Proceeds to the extent such property or Proceeds constitutes
Collateral.
5. Representations and Warranties. The Grantor hereby
represents and warrants to the Administrative Agent on behalf of the Secured
Parties that:
5.1 Power and Authority. As of the date hereof, the Grantor
has the corporate power and authority, and the legal right, to make,
deliver and perform its obligations under, and to grant the security
interest in the Trademark Collateral and the Patent Collateral to the
extent provided in, and pursuant to, this Agreement and has taken all
necessary corporate action to authorize the execution, delivery and
performance of, and grant of the security interest in the Trademark
Collateral and the Patent Collateral to the extent provided in, and
pursuant to, this Agreement.
5.2 Title; No Other Liens. As of the date hereof, except for
the Liens granted to the Administrative Agent, for the benefit of the
Secured Parties, pursuant to this Agreement and the other Liens
permitted to exist on the Collateral pursuant to the Loan Documents
(including, without limitation, any Liens permitted to exist on the
Collateral pursuant to subsection 8.3 of the Credit Agreement), the
Grantor is (or, in the case of after-acquired Collateral, will be) the
sole, legal and beneficial owner of the entire right, title and
interest in and to the material Trademarks set forth on Schedule I
hereto and the material Patents set forth in Schedule II hereto free
and clear of any and all Liens. As of the date hereof, except as set
forth on Schedule III hereto, no security agreement, financing
statement or other public notice similar in effect with respect to all
or any part of the Collateral is on file or of record in any public
office (including, without limitation, the United States Patent and
Trademark Office), except such as may have been filed in favor of the
Administrative Agent, for the benefit of the Secured Parties, pursuant
to this Agreement or in respect of such Liens as may be permitted
pursuant to the Loan Documents (including, without limitation, any
Liens permitted to exist on the Collateral pursuant to subsection 8.3
of the Credit Agreement).
5.3 Perfected First Priority Liens. (a) As of the date hereof,
this Agreement is effective to create, as collateral security for the
Obligations, valid and enforceable Liens on the Collateral in favor of
the Administrative Agent, for the benefit of the Secured Parties,
except as enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(b) As of the date hereof, except with respect to Liens upon
Patents and Trademarks and Patent Licenses and Trademark Licenses,
which Liens, to the extent not otherwise perfected by the filing of
financing statements under the Code in accordance herewith, would in
the case of
5
<PAGE> 195
Patents and Trademarks listed in Schedules I and II hereto, or in the
case of Patent Licenses and Trademark Licenses listed in Schedules I
and II hereto may be perfected upon the filing, acceptance and
recordation thereof in the United States Patent and Trademark Office,
upon filing of the financing statements delivered to the Administrative
Agent by the Grantor on the Effective Date in the jurisdictions listed
on Schedule 5.14 to the Credit Agreement (which financing statements
are in proper form for filing in such jurisdictions) (and the recording
of this Agreement in the United States Patent and Trademark Office, and
the making of filings after the Effective Date in any other
jurisdiction in the United States as may be necessary under any
Requirement of Law) the Liens created pursuant to this Agreement will
constitute valid and perfected Liens on the Collateral in the United
States in favor of the Administrative Agent for the benefit of the
Secured Parties, which Liens will be prior to all other Liens of all
other Persons with respect to the Collateral, except for Liens
permitted pursuant to the Loan Documents (including, without
limitation, those permitted to exist pursuant to subsection 8.3 of the
Credit Agreement), and which Liens are enforceable as such against all
creditors of and purchasers (except to the extent that the recording of
an assignment or other transfer of title to the Administrative Agent in
the United States Patent and Trademark Office may be necessary for such
enforceability) from the Grantor, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law) or by an implied covenant of good
faith and fair dealing.
5.4 Consents. No consent of any party (other than the
Grantor) to any material Patent License or material Trademark License
constituting Collateral is required, or purports to be required, to be
obtained by or on behalf of the Grantor in connection with the
execution, delivery and performance of this Agreement that has not been
obtained. Each Patent License and Trademark License constituting
Collateral is in full force and effect and constitutes a valid and
legally enforceable obligation of the Grantor and (to the knowledge of
the Grantor) each other party thereto except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditor's rights generally
and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law) or by an implied covenant of good
faith and fair dealing and except to the extent the failure of any such
Patent License or Trademark License constituting Collateral to be in
full force and effect or valid or legally enforceable would not be
reasonably expected, in the aggregate, to have a material adverse
effect on the value of the Collateral (as such term is defined in the
Credit Agreement). No consent or authorization of, filing with or other
act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Patent Licenses or Trademark Licenses
constituting Collateral by any party thereto other than those which
have been duly obtained, made or performed and are in full force and
effect and those the failure of which to make or obtain would not be
reasonably expected, in the aggregate, to have a material adverse
effect on the value of the Collateral (as such term is defined in the
Credit Agreement). Neither such Grantor nor (to the knowledge of
6
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such Grantor) any other party to any Patent License or Trademark
License constituting Collateral is in default in the performance or
observance of any of the terms thereof, except for such defaults as
would not reasonably be expected, in the aggregate, to have a material
adverse effect on the value of the Collateral (as such term is defined
in the Credit Agreement). Except for rights reserved in favor of the
United States government, as required under law, the right, title and
interest of the Grantor in, to and under each Patent License and
Trademark License constituting Collateral are not subject to any
defense, offset, counterclaim or claim which would be reasonably
expected, either individually or in the aggregate, to have a material
adverse effect on the value of the Collateral (as such term is defined
in the Credit Agreement).
5.5 Schedules I and II are Complete; All Filings Have Been
Made. Set forth in Schedules I and II is a complete and accurate list
of all material Trademarks and material Patents owned by the Grantor as
of the date hereof. As of the date hereof, the Grantor will have made
all necessary filings to protect and maintain its interest in the
Trademarks and Patents set forth in Schedules I and II, including,
without limitation, all necessary filings and payments of all
maintenance fees, in the United States Patent and Trademark Office to
the extent such Trademarks and Patents are material to the Grantor's
business. Set forth in Schedules I and II is a complete and accurate
list of all of the material Trademark Licenses and material Patent
Licenses owned by the Grantor as of the date hereof.
5.6 The Trademarks and Trademark Licenses are Subsisting and
Not Adjudged Invalid. As of the date hereof, each trademark
registration and trademark application of the Grantor set forth in
Schedule I is subsisting as of the date hereof, and has not been
adjudged invalid, unregisterable or unenforceable, in whole or in part,
and, to the best of such Grantor's knowledge, is valid, registrable and
enforceable. As of the date hereof, each of the Trademark Licenses set
forth in Schedule I is validly subsisting and has not been adjudged
invalid or unenforceable, in whole or in part, and, to the best of such
Grantor's knowledge, is valid and enforceable. As of the date hereof,
each Grantor has notified the Administrative Agent in writing of all
uses of any item of Trademark Collateral material to such Grantor's
business of which such Grantor is aware which could reasonably be
expected to lead to such item becoming invalid or unenforceable,
including unauthorized uses by third parties and uses which were not
supported by the goodwill of the business connected with such
Collateral.
5.7 The Patent and Patent Licenses are Subsisting and Not
Adjudged Invalid. As of the date hereof, each Patent and patent
application of the Grantor set forth in Schedule II is subsisting and
has not been adjudged invalid, unpatentable or unenforceable, in whole
or in part, and, to the best of such Grantor's knowledge, is valid,
patentable and enforceable. As of the date hereof, each of the Patent
Licenses set forth in Schedule II is validly subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and, to
the best of such Grantor's knowledge, is valid and enforceable. As of
the date hereof, the Grantor has notified the Administrative Agent in
writing of all uses of any item of Patent Collateral material to such
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Grantor's business of which such Grantor is aware which could
reasonably be expected to lead to such item becoming invalid or
unenforceable.
5.8 No Previous Assignments or Releases. As of the date
hereof, the Grantor has not made an agreement constituting a present or
future assignment, sale, transfer or encumbrance of any of the
Collateral (except for any such assignment, sale, transfer or
encumbrance permitted under the Loan Documents). Except as permitted by
the Loan Documents or as required by law, the Grantor has not granted
any license, shop right, release, covenant not to sue, or non-assertion
assurance to any Person with respect to any material part of the
Collateral which would have a Material Adverse Effect.
5.9 Proper Statutory Notice. The Grantor has marked its
products with the trademark registration symbol (R), the numbers of all
appropriate patents, the common law trademark symbol (TM), or the
designation "patent pending," as the case may be, to the extent that it
is reasonably and commercially practicable.
5.10 No Knowledge of Claims Likely to Arise. Except for the
Trademark Licenses and Patent Licenses listed in Schedules I and II
hereto, the Grantor has no knowledge of the existence of any right or
any claim (other than as permitted by this Agreement or the Loan
Documents) that is likely to be made under or against any item of
Collateral contained on Schedules I and II which would have a Material
Adverse Effect.
5.11 No Knowledge of Existing or Threatened Claims. No claim
has been made and is continuing or, to the Grantor's knowledge,
threatened that the use by such Grantor of any item of Collateral is
invalid or unenforceable or that the use by such Grantor of any
Collateral does or may violate the rights of any Person, which would
have a Material Adverse Effect. To the Grantor's knowledge, there is
currently no infringement or unauthorized use of any item of Collateral
contained on Schedules I and II hereto which would have a Material
Adverse Effect.
The Grantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Grantor on and as of each
date on which an extension of credit is made by the Lenders to the Borrower
under the Credit Agreement, in each case as though made on and as of each such
date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date).
6. Covenants. The Grantor covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the payment in full of the Loans, the Reimbursement
Obligations and to the extent then due and owing, all other Obligations, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit:
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6.1 Further Documentation; Pledge of Instruments and Chattel
Paper. At any time and from time to time, upon the written request of
the Administrative Agent or the Grantor, as the case may be, and at the
sole expense of such Grantor, such Grantor or the Administrative Agent,
as the case may be, will promptly and duly execute and deliver such
further instruments and documents and take such further action as the
Administrative Agent or the Grantor, as the case may be, may reasonably
request for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby. The Grantor also
hereby authorizes the Administrative Agent to file any such financing
or continuation statement without the signature of the Grantor to the
extent permitted by applicable law. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. The Administrative Agent
agrees to notify the Grantor and the Grantor agrees to notify the
Administrative Agent of any financing or continuation statement filed
by it pursuant to this Section 4(a), provided that any failure to give
any the notice shall not affect the validity or effectiveness of any
the filing.
6.2 Indemnification and Expenses. The Grantor agrees to pay,
and to save the Administrative Agent, the other Secured Parties and
their respective agents, officers, directors and successors harmless
from, any and all liabilities and reasonable costs and expenses
(including, without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay by the Grantor in
complying with any material Requirement of Law applicable to any of the
Collateral, or (ii) in connection with any of the transactions
contemplated by this Agreement, provided that such indemnity shall not,
as to the Administrative Agent, any of the other Secured Parties or any
of their respective agents, officers, directors and successors, be
available to the extent that such liabilities, costs and expenses
resulted from the gross negligence or willful misconduct of any of the
same. In any suit, proceeding or action brought by the Administrative
Agent or any other Secured Party under any of the Collateral for any
sum owing thereunder, or to enforce any of the Collateral, the Grantor
will save, indemnify and keep the Administrative Agent, such Secured
Party and their respective agents, officers, directors and successors
harmless from and against all expense, loss or damage suffered by
reason of any defense or counterclaim raised in any such suit,
proceeding or action, except to the extent such expense, loss or damage
resulted from the gross negligence or willful misconduct of any of the
same.
6.3 Maintenance of Records. The Grantor will keep and maintain
at its own cost and expense reasonably satisfactory and complete
records of the Collateral, and shall mark such records to evidence this
Agreement and the Liens and the security interests created hereby. For
the Administrative Agent's and the other Secured Parties' further
security, the Administrative Agent, for the benefit of the Secured
Parties, shall have a security interest in all of the Grantor's books
and records pertaining to the Collateral.
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6.4 Right of Inspection. Upon reasonable written advance
notice to the Grantor and at reasonable intervals, or at any time and
from time to time after the occurrence and during the continuation of
an Event of Default, the Administrative Agent shall have reasonable
access during normal business hours to all the books, correspondence
and records of the Grantor, and the Administrative Agent and its
representatives may examine the same, and to the extent reasonable take
extracts therefrom and make photocopies thereof, and the Grantor agrees
to render to the Administrative Agent, at the Grantor's reasonable cost
and expense, such clerical and other assistance as may be reasonably
requested with regard thereto.
6.5 Compliance with Laws, etc. The Grantor will comply in all
material respects with all material Requirements of Law applicable to
the Collateral or any part thereof, except to the extent that the
failure to so comply would not be reasonably expected to materially
adversely affect in the aggregate the Administrative Agent's or the
other Secured Parties' rights hereunder, the priority of their Liens on
the Collateral or the value of the Collateral.
6.6 Further Identification of Collateral. The Grantor will
furnish to the Administrative Agent from time to time such statements
and schedules further identifying and describing the Collateral, and
such other reports in connection with the Collateral, as the
Administrative Agent may reasonably request, all in reasonable detail.
6.7 Security Interest in Any Newly Acquired Collateral. The
Grantor agrees that, should it obtain an ownership interest in any
material Trademark, Patent, Trademark License or Patent License, which
is not now a part of the Collateral, (i) the provisions of Section 2
shall automatically apply thereto, (ii) any such Trademark, Patent,
Trademark License and Patent License shall automatically become part of
the Collateral, and (iii) with respect to any ownership interest in any
such Trademark, Patent, Trademark License or Patent License that such
Grantor should obtain, it shall give notice thereof to the
Administrative Agent in writing, in reasonable detail, at its address
set forth in each of the Credit Agreements within 45 days after the end
of the calendar quarter in which it obtains such ownership interest.
The Grantor authorizes the Administrative Agent to modify this
Agreement by amending Schedules I and II (and will cooperate reasonably
with the Administrative Agent in effecting any such amendment) to
include on Schedule I any Trademark and Trademark License and on
Schedule II any Patent or Patent License of which it receives notice
under this Section, or to prepare and file with the United States
Patent and Trademark Office a supplement to this Agreement to include
any Patent or Trademark of which it receives notice to under this
Section.
6.8 Maintenance of the Trademark Collateral. Except as
permitted in the Loan Documents the Grantor agrees to take all
reasonably necessary steps, including, without limitation, in the
United States Patent and Trademark Office or in any court, to (i)
maintain each trademark registration and each Trademark License
identified on Schedule I hereto, and (ii) pursue each trademark
application now or hereafter identified in Schedule I hereto,
including,
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without limitation, the filing of responses to office actions issued by
the United States Patent and Trademark Office, the filing of
applications for renewal, the filing of affidavits under Sections 8 and
15 of the United States Trademark Act, and the participation in
opposition, cancellation, infringement and misappropriation
proceedings, except, in each case in which such Grantor has reasonably
determined that any of the foregoing is not of material economic value
to it. The Grantor agrees to take corresponding steps with respect to
each new or acquired trademark or service mark registration, or
application for trademark or service mark registration, or any rights
obtained under any Trademark License, in each case, which it is now or
later becomes entitled, except in each case in which the Grantor has
reasonably determined that any of the foregoing is not of material
economic value to it. Any expenses incurred in connection with such
activities shall be borne by such Grantor.
6.9 Maintenance of the Patent Collateral. The Grantor agrees
to take all necessary steps, including, without limitation, in the
United States Patent and Trademark Office or in any court, to (i)
maintain each patent and each Patent License identified on Schedule II
hereto, and (ii) pursue each patent application, now or hereafter
identified in Schedule II hereto, including, without limitation, the
filing of divisional, continuation, continuation-in-part and substitute
applications, the filing of applications for reissue, renewal or
extensions, the payment of maintenance fees, and the participation in
interference, reexamination, opposition, infringement and
misappropriation proceedings, except, in each case in which the Grantor
has reasonably determined that any of the foregoing is not of material
economic value to it. The Grantor agrees to take corresponding steps
with respect to each new or acquired patent, patent application, or any
rights obtained under any Patent License, in each case, which it is now
or later becomes entitled, except in each case in which the Grantor has
reasonably determined that any of the foregoing is not of material
economic value to it. Any expenses incurred in connection with such
activities shall be borne by the Grantor.
6.10 Preservation and Protection of the Trademark Collateral
and Patent Collateral. Except as provided in Section 4(k) hereof, the
Grantor shall take all steps which it or the Administrative Agent deems
reasonably appropriate under the circumstances to preserve and protect
its material Trademark Collateral and Patent Collateral.
6.11 Grantor Shall Not Abandon any Collateral. The Grantor
shall not abandon any trademark registration, patent or any pending
trademark or patent application, in each case listed on Schedule I or
Schedule II, without the written consent of the Administrative Agent,
unless such Grantor shall have previously determined that such use or
the pursuit or maintenance of such trademark registration, patent or
pending trademark or patent application is not of material economic
value to it, in which case, such Grantor will, at least annually, give
notice of any such abandonment to the Administrative Agent in writing,
in reasonable detail, at its address set forth in the Credit Agreement.
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6.12 Infringement of Any Collateral. In the event that any
Grantor becomes aware that any item of the Collateral which such
Grantor has reasonably determined to be material to its business is
infringed or misappropriated by a third party, which infringement or
misappropriation would reasonably be expected to have a Material
Adverse Effect, the Grantor shall notify the Administrative Agent
promptly and in writing, in reasonable detail, at its address set forth
in the Credit Agreement, and shall take such actions as the Grantor or
the Administrative Agent deems reasonably appropriate under the
circumstances to protect such Collateral, including, without
limitation, suing for infringement or misappropriation and for an
injunction against such infringement or misappropriation. Any expense
incurred in connection with such activities shall be borne by such
Grantor. The Grantor will advise the Administrative Agent promptly and
in writing, in reasonable detail, at its address set forth in the
Credit Agreement, of any adverse determination or the institution of
any proceeding (including, without limitation, the institution of any
proceeding in the United States Patent and Trademark Office or any
court) regarding any item of the Collateral which has a Material
Adverse Effect.
6.13 Use of Statutory Notice. The Grantor shall mark its
products with the trademark registration symbol (R), the numbers of all
appropriate patents, the common law trademark symbol (TM), or the
designation "patent pending," as the case may be, to the extent that it
is reasonably and commercially practicable.
6.14 Limitation on Liens on Collateral. The Grantor will not
create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is reasonably necessary to remove,
any material Lien or material adverse claim on or to any of the
Collateral, other than Liens created hereby and other than as permitted
pursuant to the Loan Documents (including, without limitation, any
Liens permitted to exist on the Collateral pursuant to subsection 8.3
of the Credit Agreement), and will defend the right, title and interest
of the Administrative Agent and the other Secured Parties in and to any
of the Collateral against the claims and demands of all Persons
whomsoever, except where failure to defend would not have a Material
Adverse Effect.
6.15 Limitations on Dispositions of Collateral. Without the
prior written consent of the Administrative Agent, the Grantor will not
sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, the Collateral, or attempt, offer or contract
to do so, except with respect to licenses in the ordinary course of
business or as permitted by this Agreement or the Loan Documents.
6.16 Notices. The Grantor will advise the Administrative Agent
promptly and in writing, in reasonable detail, at its address set forth
in the Credit Agreement, (i) of any Lien (other than Liens created
hereby or permitted under the Loan Documents, including, without
limitation, any Liens permitted to exist on the Collateral pursuant to
subsection 8.3 of the Credit Agreement) on any Patents or Trademarks
and (ii) of the occurrence of any other event which
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would reasonably be expected in the aggregate to have a material
adverse effect on the aggregate value of the Collateral taken as a
whole or the Liens created hereunder.
7. Administrative Agent's Appointment as Attorney-in-Fact. 7.1
Powers. The Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent of the Administrative Agent, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantor and in the
name of the Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be reasonably necessary or
desirable to accomplish the purposes of this Agreement to the extent permitted
by law, and, without limiting the generality of the foregoing, to the extent
permitted by law, the Grantor hereby gives the Administrative Agent the power
and right, on behalf of the Grantor, without notice to or assent by the Grantor,
to do, at any time when an Event of Default has occurred and is continuing, the
following:
(a) to execute and deliver any and all agreements,
instruments, documents, and papers as the Administrative Agent may
reasonably request to evidence the Administrative Agent's and the other
Secured Parties' security interest in any of the Collateral and the
goodwill of the Grantor relating thereto or represented thereby;
(b) in the name of the Grantor or its own name, or otherwise,
to take possession of and indorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due
under any General Intangible (to the extent that the foregoing
constitute Collateral) or with respect to any other Collateral and to
file any claim or to take any other action or institute any proceeding
in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such
moneys due under such General Intangible or with respect to any other
Collateral whenever payable;
(c) to pay or discharge Liens placed on the Collateral, other
than Liens permitted under this Agreement or the other Loan Documents,
including, without limitation, any Liens permitted to exist on the
Collateral pursuant to subsection 8.3 of the Credit Agreement; and
(d) (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) to ask for, or demand, collect,
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (C) to sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
thereof and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action or proceeding brought against the
Grantor
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with respect to any of the Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in clause (E) above
and, in connection therewith, to give such discharges or releases as
the Administrative Agent may deem appropriate; (G) subject to any
pre-existing reserved rights or licenses, to assign any Patent or
Trademark constituting Collateral (along with the goodwill of the
business to which any such Patent or Trademark pertains), for such term
or terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (H) generally, to
sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Administrative Agent were the absolute owner thereof for all
purposes, and to do, at the Administrative Agent's option and the
Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems reasonably necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the other Secured Parties' Liens thereon and to effect the
intent of this Agreement, all as fully and effectively as the Grantor
might do.
The Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and the other Obligations then due and owing, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit.
7.2 Other Powers. The Grantor also authorizes the
Administrative Agent, from time to time if an Event of Default shall have
occurred and be continuing, to execute, in connection with any sale provided for
in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
7.3 No Duty on the Part of Administrative Agent or Secured
Parties. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any other Secured Party to exercise any such powers.
The Administrative Agent and the other Secured Parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees,
affiliates, agents or successors shall be responsible to the Grantor for any act
or failure to act hereunder, except for gross negligence or willful misconduct
of any of the same.
8. Performance by Administrative Agent of Grantor's
Obligations. If the Grantor fails to perform or comply with any of its
agreements contained herein and the Administrative Agent, as provided for by the
terms of this Agreement, shall perform or comply, or otherwise cause performance
or compliance, with such agreements, the reasonable expenses of the
Administrative Agent incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to 1.75% above the rate
applicable to ABR Loans that are Term Loans, shall be payable by the
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Grantor to the Administrative Agent on demand, and the Grantor's obligations to
make such payments shall constitute Obligations secured hereby.
9. Proceeds. It is agreed that if an Event of Default shall
occur and be continuing, (a) all Proceeds of any Collateral received by the
Grantor consisting of cash, checks and other near-cash items shall be held by
the Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of the Grantor, and shall, forthwith upon receipt by
the Grantor, be turned over to the Administrative Agent in the exact form
received by the Grantor (duly indorsed by the Grantor to the Administrative
Agent, if required), and (b) any and all such Proceeds received by the
Administrative Agent (whether from the Grantor or otherwise) shall be held by
the Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations (whether matured or unmatured), and/or then or at
any time thereafter may, in the sole discretion of the Administrative Agent, be
applied by the Administrative Agent against the Obligations then due and owing
in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Administrative Agent (including, without limitation, in
its capacity as Credit Agreement Administrative Agent) in connection
with this Agreement, the Guarantee and Collateral Agreement, the Credit
Agreement, any other Loan Document or any of the Obligations,
including, without limitation, all court costs and the reasonable fees
and expenses of its agents and legal counsel, and any other reasonable
costs or expenses incurred in connection with the exercise by the
Administrative Agent (including, without limitation, in its capacity as
Credit Agreement Administrative Agent) of any right or remedy under
this Agreement, the Credit Agreement, or any other Loan Document;
SECOND, to the ratable satisfaction of all other Obligations;
and
THIRD, to the Grantor or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same.
10. Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties, may
exercise all rights and remedies of a secured party under the Code, and, to the
extent permitted by law, all other rights and remedies granted to the
Administrative Agent or any Secured Party in this Agreement and the other Loan
Documents and in any other instrument or agreement securing, evidencing or
relating to the Obligations. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances, to the extent permitted by law, forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver
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the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of the Administrative Agent or any other Secured Party
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any other Secured
Party shall have the right, to the extent permitted by law, upon any such sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Grantor, which right or equity is
hereby waived and released. The Grantor further agrees, at the Administrative
Agent's request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at the Grantor's premises or elsewhere. In the event of any
sale, assignment, or other disposition of any of the Collateral, the goodwill of
the business connected with and symbolized by any Trademark Collateral subject
to such disposition shall be included, and the Grantor shall supply to the
Administrative Agent or its designee the Grantor's know-how and expertise
relating to the Collateral subject to such disposition, and the Grantor's
notebooks, studies, reports, records, documents and things embodying the same or
relating to the inventions, processes or ideas covered by, and to the
manufacture of any products under or in connection with, the Collateral subject
to such disposition, and the Grantor's customer's lists, studies and surveys and
other records and documents relating to the distribution, marketing, advertising
and sale of products relating to the Collateral subject to such disposition. The
Administrative Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent and the other Secured
Parties hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment and performance in whole or in part of the
Obligations then due and owing, in the order of priority specified in Section 7
hereof, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the Grantor. To the
extent permitted by applicable law, (a) the Grantor waives all claims, damages
and demands it may acquire against the Administrative Agent or any other Secured
Party arising out of the repossession, retention or sale of the Collateral,
other than any such claims, damages and demands that may arise from the gross
negligence or willful misconduct of any of them, and (b) any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay in full the Loans, the Reimbursement Obligations, and,
to the extent then due and owing, all other Obligations, including, without
limitation, the reasonable fees and disbursements of any attorneys employed by
the Administrative Agent or any other Secured Party to collect such deficiency,
as provided in the Credit Agreement.
11. Limitation on Duties Regarding Preservation of Collateral.
The Administrative Agent's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in
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its possession, under Section 9-207 of the Code or otherwise, shall be to deal
with it in the same manner as the Administrative Agent deals with similar
property for its own account. Neither the Administrative Agent, any other
Secured Party, nor any of their respective directors, officers, employees,
affiliates or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Grantor or any other Person.
12. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are powers coupled with
an interest and are irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and, to the extent then due and owing, all other
Obligations, the termination of the Revolving Credit Commitments and the
expiration, termination or return to the Issuing Lender of any Letters of
Credit.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. Neither the Administrative
Agent nor any other Secured Party nor the Grantor shall by any act (except by a
written instrument pursuant to Section 14 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any other Secured Party or
the Grantor, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
any other Secured Party or the Grantor of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, such other Secured Party or the Grantor would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
16. Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Agreement may be amended, supplemented, waived or
otherwise modified except by a written instrument executed by the Grantor and
the Administrative Agent, provided that, if requested by the Grantor, any
provision of this Agreement for the benefit of the Administrative Agent and/or
the other
17
<PAGE> 207
Secured Parties may be waived by the Administrative Agent in a written letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Agreement shall be binding upon
and shall inure to the benefit of the Grantor and its successors and assigns,
and the Administrative Agent and the other Secured Parties and their respective
successors, indorsees, transferees and assigns, except that (other than in
accordance with subsection 8.5 of the Credit Agreement) the Grantor shall not
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Administrative Agent.
17. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be made in accordance with subsection 11.2 of
the Credit Agreement. The Administrative Agent, the Secured Parties and the
Grantor may change their respective addresses and transmission numbers for
notices by notice in the manner provided in this Section 15.
18. Authority of Administrative Agent. The Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and the Grantor shall not be under any obligation to make any inquiry
respecting such authority.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
20. Release of Collateral and Termination. 20.1 This Agreement
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms and the security interest created by this Agreement
shall not be released until the payment in full of the Loans, the Reimbursement
Obligations and the other Obligations then due and owing shall have occurred,
the Revolving Credit Commitments shall have been terminated and any Letters of
Credit shall have expired or been terminated or returned to the Issuing Lender,
at which time the Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Administrative Agent and the Grantor hereunder
shall terminate, all without delivery of any instrument or performance of any
act by any party, and all rights to the Collateral shall revert to the Grantor,
provided that if any payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or any
18
<PAGE> 208
other Loan Party, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or a trustee or similar officer for, the Grantor
or any other Loan Party or any substantial part of its property, or otherwise,
this Agreement, all rights hereunder and the Liens created hereby shall continue
to be effective, or be reinstated, as though such payments had not been made.
Upon request of the Grantor following any such termination, the Administrative
Agent shall reassign (at the sole cost and expense of the Grantor) to the
Grantor any Collateral held by the Administrative Agent hereunder, and execute
and deliver (at the sole cost and expense of the Grantor) to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination
and reassignment.
20.2 If any of the Collateral shall be sold, transferred or
otherwise disposed of by the Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent shall execute and deliver to the
Grantor (at the sole cost and expense of the Grantor) all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral.
21. Incorporation of Provisions of Guarantee and Collateral
Agreement. The Grantor hereby acknowledges and affirms that the rights and
remedies of the Administrative Agent with respect to the security interest in
the Collateral made and granted hereby are more fully set forth in the Guarantee
and Collateral Agreement, the terms, conditions and other provisions of which,
in so far as they relate to the Collateral, such security interest and such
rights and remedies, are incorporated by reference herein as if fully set forth
herein. Nothing in this Agreement shall defer or impair the attachment or
perfection of any security interest in any collateral described in the Guarantee
and Collateral Agreement which would attach or be perfected pursuant to the
terms of the Guarantee and Collateral Agreement without action by the Grantor or
any other Person.
22. Interpretation. In the event of a conflict between any term
of this Agreement and the terms of the Credit Agreement, the terms of the Credit
Agreement shall control.
23. Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Grantor and the Administrative Agent with
respect to the subject matter hereof and there are no promises or
representations by the Grantor, the Administrative Agent or any other Secured
Party relative to the subject matter hereof not reflected or referred to herein
or therein.
24. Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
24.1 submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
19
<PAGE> 209
24.2 consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient forum and agrees not to plead or claim the same;
24.3 agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Grantor or the applicable Secured Party, as the case
may be, at the address referred to in Section 15 or at such other
address of which the Administrative Agent and the Grantor shall have
been notified pursuant thereto;
24.4 agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
24.5 waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 22 any punitive damages.
25. WAIVER OF JURY TRIAL. THE GRANTOR AND THE ADMINISTRATIVE
AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
24. Counterparts. This Agreement may be executed and
acknowledged by one or more of the parties to this Agreement on any
number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
20
<PAGE> 210
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
TELEX COMMUNICATIONS, INC.
By: __________________________
Title:
ACKNOWLEDGED AND AGREED AS OF
THE DATE HEREOF BY:
THE CHASE MANHATTAN BANK, as Administrative Agent
By:_____________________________________
Title:
21
<PAGE> 211
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ______ day of _________, 1997, before me personally came
_______________________ to me known, who, being by me duly sworn, did depose and
say he resides at ____________________________________ and that he is the
_______________ of Telex Communications, Inc., the corporation described in and
which executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
___________________________
Notary Public
[Notarial Seal]
<PAGE> 212
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, 1997, before me personally came
_____________________ to me known, who, being by me duly sworn, did depose and
say he resides at ___________________________________ and that he is the
__________________ of THE CHASE MANHATTAN BANK, the national banking association
described in and which executed the above instrument; that he has been
authorized to execute said instrument on behalf of said association; and that he
has signed said instrument on behalf of said association pursuant to said
authority.
______________________________
Notary Public
______________________________________
[Notarial Seal]
<PAGE> 213
Schedule I
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 214
Schedule II
PATENTS AND PATENT LICENSES
<PAGE> 215
Schedule III
EXISTING SECURITY INTERESTS
<PAGE> 216
EXHIBIT G TO
CREDIT AGREEMENT
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
Reference is made to the Loan(s) held by the undersigned
pursuant to the Credit Agreement (as amended, supplemented, waived or otherwise
modified from time to time, the "Credit Agreement"), dated as of May __, 1997
among Telex Communications, Inc., a Delaware corporation, the several banks and
other financial institutions from time to time parties thereto (the "Lenders"),
Morgan Stanley Senior Funding, Inc., as documentation agent for the Lenders and
The Chase Manhattan Bank, a New York banking corporation, as administrative
agent for the Lenders. The undersigned hereby certifies under penalty of perjury
that:
(1) The undersigned is the beneficial owner of the Loan(s) (as
well as any Note(s) evidencing such Loan(s)) registered in its name;
(2) The undersigned is not a bank (as such term is used in
Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended
(the " Code")), is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been treated as
a bank for purposes of any tax, securities law or other filing or
submission made to any governmental authority, any application made to
a rating agency or any qualification for any exemption from any tax,
securities law or other legal requirements;
(3) The undersigned is not a 10-percent shareholder within the
meaning of Section 881(c)(3)(B) of the Code; and
(4) The undersigned is not a controlled foreign corporation
receiving interest from a related person within the meaning of Section
881(c)(3)(C) of the Code.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
[NAME OF LENDER]
By:________________________________
[Address]
Dated: ____________, 199_
<PAGE> 217
EXHIBIT H TO
CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of May __,
1997 (as amended, supplemented, waived or otherwise modified from time to time,
the "Credit Agreement"), among GST Acquisition Corp., a Delaware corporation
(the "Borrower"), the several banks and other financial institutions from time
to time parties thereto (the "Lenders"), The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent") and Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), as
documentation agent for the Lenders (in such capacity, the "Documentation
Agent"). Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
____________ (the "Assignor") and ____ (the "Assignee") agree as follows:
26. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby
irrevocably purchases and assumes from the Assignor without recourse to
the Assignor, as of the Transfer Effective Date (as defined below), a
percentage interest (the " Assigned Interest") as set forth in Schedule
1 hereto in and to the Assignor's rights and obligations under the
Credit Agreement and the other Loan Documents with respect to those
credit facilities provided for in the Credit Agreement as are set forth
on Schedule 1 hereto (individually, an "Assigned Facility";
collectively, the "Assigned Facilities"), in a principal amount for
each Assigned Facility as set forth on Schedule 1 hereto.
27. The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement, any
other Loan Document or any other instrument or document furnished
pursuant thereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other
Loan Document or any other instrument or document furnished pursuant
thereto, other than that it has not created any adverse claim upon the
interest being assigned by it hereunder and that such interest is free
and clear of any such adverse claim; makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower, any of its Subsidiaries or any other obligor
or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective
obligations under the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; and
attaches the Note(s), if any, held by it evidencing the Assigned
Facilities and requests that the Administrative Agent exchange such
Note(s) for a new Note or Notes payable to the Assignee and (if the
Assignor has retained any interest in the Assigned Facilities) a new
Note or Notes payable to the
<PAGE> 218
Assignor in the respective amounts which reflect the assignment being
made hereby (and after giving effect to any other assignments which
have become effective on the Transfer Effective Date) and (d)
represents and warrants that it is legally authorized to enter into
this Assignment and Acceptance.
28. The Assignee represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; confirms that
it has received a copy of the Credit Agreement, together with copies of
the financial statements referred to in subsection 5.1 thereof and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance; agrees that it will, independently and without reliance
upon the Assignor, the Administrative Agent or any other Lender and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under the Credit Agreement, the other Loan Documents or
any other instrument or document furnished pursuant hereto or thereto;
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under
the Credit Agreement, the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto as are delegated to
the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; hereby affirms the acknowledgments
and representations of such Assignee as a Lender contained in
subsection 10.6 of the Credit Agreement; and agrees that it will be
bound by the provisions of the Credit Agreement and will perform in
accordance with the terms of the Credit Agreement all the obligations
which by the terms of the Credit Agreement are required to be performed
by it as a Lender, including its obligations pursuant to subsection
11.15 of the Credit Agreement, and, if it is organized under the laws
of a jurisdiction outside the United States, its obligations pursuant
to subsection 4.11(b) of the Credit Agreement.
29. The effective date of this Assignment and Acceptance shall
be ________, 19__ (the "Transfer Effective Date"). Following the
execution of this Assignment and Acceptance, it will be delivered to
the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to subsection 11.6 of the Credit
Agreement, effective as of the Transfer Effective Date (which shall
not, unless otherwise agreed to by the Administrative Agent, be earlier
than five Business Days after the date of such acceptance and recording
by the Administrative Agent).
30. Upon such acceptance and recording, from and after the
Transfer Effective Date, the Administrative Agent shall make all
payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignee whether
such amounts have accrued prior to the Transfer Effective Date or
accrued subsequent to the Transfer Effective Date. The Assignor and the
Assignee shall
2
<PAGE> 219
make all appropriate adjustments in payments by the Administrative
Agent for periods prior to the Transfer Effective Date or with respect
to the making of this assignment directly between themselves.
31. From and after the Transfer Effective Date, the Assignee
shall be a party to the Credit Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and under the other Loan Documents and shall be bound
by the provisions thereof and the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Credit Agreement, but shall
nevertheless continue to be entitled to the benefits of subsections
4.10, 4.11, 4.12 and 11.5 thereof.
32. Notwithstanding any other provision hereof, if the
consents of the Borrower and the Administrative Agent hereto are
required under subsection 11.6 of the Credit Agreement, this Assignment
and Acceptance shall not be effective unless such consents shall have
been obtained.
33. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York without
regard to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date indicated by their
respective duly authorized officers on Schedule 1 hereto.
3
<PAGE> 220
SCHEDULE 1 TO THE
ASSIGNMENT AND ACCEPTANCE
Re: Credit Agreement, dated as of May __, 1997 (as
amended, supplemented, waived or otherwise modified from time
to time, the "Credit Agreement"), among GST Acquisition
Corp., a Delaware corporation (the "Borrower"), the
several banks and other financial institutions from time to
time parties thereto (the "Lenders"), The Chase
Manhattan Bank, as administrative agent for the Lenders (in
such capacity, the "Administrative Agent") and Morgan
Stanley Senior Funding, Inc., as documentation agent for the
Lenders (in such capacity, the "Documentation Agent").
Name of Assignor:
Name of Assignee:
Transfer Effective Date of Assignment:
<TABLE>
<CAPTION>
Percentage of
Credit Assignor's Interest in Principal Commitment
Facility Credit Facility Amount Percentage
Assigned Assigned Assigned Assigned
-------- -------- -------- --------
<S> <C> <C> <C>
. % $ . %
</TABLE>
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: ______________________ By: ______________________
Title: Title:
Accepted for recording in the Register: Consented To:
THE CHASE MANHATTAN BANK, as TELEX COMMUNICATIONS, INC.,
Administrative Agent (as successor to GST ACQUISITION CORP.)
<PAGE> 221
By: ______________________ By: ______________________
Title: Title:
DATED: __________________ THE CHASE MANHATTAN BANK, as
Administrative Agent
By: ______________________
Title:
2
<PAGE> 222
EXHIBIT I TO
CREDIT AGREEMENT
FORM OF BORROWING CERTIFICATE
TELEX COMMUNICATIONS, INC.
Pursuant to subsection 6.1(t) of the Credit Agreement, dated as
of May __, 1997 (the "Credit Agreement"; terms defined therein being
used herein as therein defined), among GST Acquisition Corp., a Delaware
corporation (the "Borrower"), the several banks and other financial
institutions from time to time parties thereto (the "Lenders"), The
Chase Manhattan Bank, as administrative agent for the Lenders (in such capacity,
the "Administrative Agent"), and Morgan Stanley Senior Funding, Inc., as
documentation agent for the Lenders (in such capacity, the "Documentation
Agent") the Borrower hereby certifies that:
34. The representations and warranties of the Borrower set
forth in the Credit Agreement and each of the other Loan Documents to
which the Borrower is a party or which are contained in any certificate
furnished by or on behalf of the Borrower pursuant to or in connection
with the Credit Agreement or any of the other Loan Documents are true
and correct in all material respects on and as of the date hereof with
the same effect as if made on the date hereof except for
representations and warranties expressly stated to relate to a specific
earlier date, in which case such representations and warranties are
true and correct as of such earlier date; and
35. No Default or Event of Default has occurred and is
continuing as of the date hereof or after giving effect to the Loans to
be made on the date hereof and/or the issuance of any Letters of Credit
to be issued on the date hereof.
IN WITNESS WHEREOF, the Borrower has caused this certificate to
be duly executed and delivered on its behalf as of the date set forth below.
TELEX COMMUNICATIONS, INC.
By: ______________________________
Title:
Date: May __, 1997
<PAGE> 223
EXHIBIT J TO
CREDIT AGREEMENT
FORM OF
BORROWING BASE CERTIFICATE
Reference is made to the Credit Agreement, dated as of May 6,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among GST Acquisition Corp., a Delaware corporation, the
several banks and other financial institutions from time to time parties thereto
(the "Lenders"), The Chase Manhattan Bank, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), and Morgan Stanley
Senior Funding, Inc., as documentation agent for the Lenders (in such capacity,
the "Documentation Agent"). Unless otherwise defined herein, capitalized terms
which are used herein shall have the meanings assigned thereto in the Credit
Agreement.
The undersigned, _________________, a ___________________ (a
Responsible Officer of the Borrower) does hereby certify that, as of the date
hereof, the Borrowing Base, as set forth on Schedule A hereto, is
$___________________ and no Default or Event of Default has occurred and is
continuing.
Pursuant to subsection 7.2(e) of the Credit Agreement, the
Borrower hereby certifies, and represents and warrants, that this Borrowing Base
Certificate and the attached Schedule A are true, correct and complete in all
material respects and that the amounts set forth in such Schedule are in
compliance in all material respects with the provisions of the Credit Agreement.
The Borrower acknowledges that the Administrative Agent and Lenders are relying
upon the information contained herein and therein in making the Loans.
IN WITNESS WHEREOF, the undersigned has caused this Borrowing
Base Certificate to be executed and delivered as of this ____ day of
________________, 199__.
TELEX COMMUNICATIONS, INC.
By: ________________________________
Name:
Title:
<PAGE> 224
SCHEDULE
TELEX COMMUNICATIONS, INC.
SUMMARY OF BORROWING BASE RECEIVABLES
as of _____________ ____, 199__
<TABLE>
<CAPTION>
ADVANCE BASE
DESCRIPTION RECEIVABLE RATE RECEIVABLE TOTALS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic
[Debtor Name] $ % $
$ % $ $
Foreign Syndication
[Debtor Name] $ % $
$ % $ $
Other
Domestic Syndication:
[Debtor Name] $ % $
$ % $ $
Foreign Syndication:
[Debtor Name] $ % $
$ % $ $
TOTAL BORROWING BASE $
</TABLE>
<PAGE> 225
EXHIBIT M TO
CREDIT AGREEMENT
FORM OF TELEX ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of May 6, 1997 (this
"Agreement"), between TELEX COMMUNICATIONS GROUP, INC., a Delaware
corporation ("Holdings"), and TELEX COMMUNICATIONS, INC., a Delaware
corporation ("Telex"), and consented to by THE CHASE MANHATTAN BANK, a
New York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the banks and other financial institutions
(the "Lenders") from time to time parties to the Credit Agreement (as
hereinafter defined).
W I T N E S S E T H:
WHEREAS, GST Acquisition Corp., a Delaware corporation ("Acquisition
Co."), the Lenders and the Administrative Agent are parties to the Credit
Agreement, dated as of May 6, 1997 (as amended, supplemented, waived or
otherwise modified from time to time, the "Credit Agreement"); and
WHEREAS, in connection with the recapitalization of Holdings,
Acquisition Co. will be merged (the "Merger") with and into Holdings
with Holdings continuing as the surviving corporation; and
WHEREAS, immediately upon consummation of the Merger, Holdings, as
successor in interest to Acquisition Co., wishes to assign, transfer and convey
to Telex all of Holdings' rights as "Borrower" under, and Telex, in
consideration of a capital contribution being made on the date hereof by
Holdings to Telex and the access to the revolving credit facility under the
Credit Agreement that will inure to Telex as a result of such assignment, wishes
to assume from Holdings all of Holdings' obligations and liabilities as
"Borrower" under, the Credit Agreement, any Notes, any Letters of Credit and the
other Loan Documents (as each of such terms is defined in the Credit Agreement);
and
WHEREAS, pursuant to subsection 10.11 of the Credit Agreement, the
Administrative Agent is authorized to consent to this Agreement on behalf of the
Lenders;
NOW, THEREFORE, the parties hereto hereby agree as follows:
36. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
37. Assignment of Rights and Obligations. Effective as of
immediately after the Effective Time (as defined in the Recapitalization
Agreement), Holdings hereby irrevocably
<PAGE> 226
assigns, transfers and conveys to Telex all of Holdings', as successor in
interest to Acquisition Co., rights, obligations, covenants, agreements, duties
and liabilities as "Borrower" under or with respect to the Credit Agreement, any
Notes, any Letters of Credit, any of the other Loan Documents and any and all
certificates and other documents executed by Holdings or Acquisition Co. in
connection therewith; provided, however, that Holdings understands and agrees
that such assignment, transfer and conveyance shall not be effective with
respect to, or in any way release Holdings from any of its obligations,
covenants, agreements, duties and liabilities under or with respect to this
Agreement or the Guarantee and Collateral Agreement.
38. Assumption of Agreements and Obligations. Effective as of
immediately after the Effective Time, Telex, in consideration of a capital
contribution being made on the date hereof by Holdings to Telex and the access
to the revolving credit facility under the Credit Agreement that will inure to
Telex as a result of such assignment, hereby expressly assumes, confirms and
agrees to perform and observe all of the indebtedness, obligations (including,
without limitation, all obligations in respect of the Loans and the Letters of
Credit), covenants, agreements, terms, conditions, duties and liabilities of
Holdings, as successor in interest to Acquisition Co., as "Borrower" under and
with respect to the Credit Agreement, any Notes, any Letters of Credit, any of
the other Loan Documents and any and all certificates and other documents
executed by Holdings or Acquisition Co. in connection therewith as fully as if
Telex were originally the obligor in respect thereof and the signatory thereto;
provided, however, that Holdings understands and agrees that such assumption
shall not be effective with respect to, or in any way obligate Telex to perform
and observe any obligations, covenants, agreements, terms, conditions, duties or
liabilities of Holdings under or with respect to this Agreement or the Guarantee
and Collateral Agreement. At all times after the effectiveness of such
assumption, with respect to all Extensions of Credit made to or for the account
of Acquisition Co. or Holdings prior to the effectiveness of such assumption,
Telex shall have the obligations of, and Holdings shall no longer be or have the
obligations of, the "Borrower" within the meaning of and for all purposes of the
Credit Agreement. In addition, at all times after the effectiveness of such
assumption, all references to the "Borrower" in the Credit Agreement, any Notes,
any Letter of Credit, any of the other Loan Documents and any and all
certificates and other documents executed by Acquisition Co. or Holdings in
connection therewith shall be deemed to be references to Telex.
39. Amendment to the Credit Agreement. The Credit Agreement is hereby
deemed to be amended to the extent, but only to the extent, necessary to effect
the assignment and assumption provided for hereby. Except as expressly amended,
modified and supplemented hereby, the provisions of the Credit Agreement and the
other Loan Documents are and shall remain in full force and effect.
40. Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. A set of
2
<PAGE> 227
the copies of this Agreement signed by all the parties shall be delivered to
Holdings, Telex and the Administrative Agent.
41. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
42. Integration. This Agreement and the other Loan Documents represent
the entire agreement of each of the Loan Parties party hereto, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by any of
the Loan Parties party hereto, the Administrative Agent or any Lender relative
to the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
43. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
44. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
45. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Holdings and Telex and their respective successors and
assigns, and the Administrative Agent and the Lenders and their respective
successors, indorsees, transferees and assigns.
3
<PAGE> 228
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
TELEX COMMUNICATIONS GROUP, INC.
By: _________________________
Name:
Title:
TELEX COMMUNICATIONS, INC.
By: _________________________
Name:
Title:
Consented to:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: _______________________________
Name:
Title:
4
<PAGE> 1
EXHIBIT 4(e)
TELEX ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of May 6, 1997 (this
"Agreement"), between TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation
("Holdings"), and TELEX COMMUNICATIONS, INC., a Delaware corporation ("Telex"),
and consented to by THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent (in such capacity, the "Administrative Agent") for the
banks and other financial institutions (the "Lenders") from time to time parties
to the Credit Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, GST Acquisition Corp., a Delaware corporation
("Acquisition Co."), the Lenders and the Administrative Agent are parties to the
Credit Agreement, dated as of May 6, 1997 (as amended, supplemented, waived or
otherwise modified from time to time, the "Credit Agreement"); and
WHEREAS, in connection with the recapitalization of Holdings,
Acquisition Co. will be merged (the "Merger") with and into Holdings with
Holdings continuing as the surviving corporation; and
WHEREAS, immediately upon consummation of the Merger,
Holdings, as successor in interest to Acquisition Co., wishes to assign,
transfer and convey to Telex all of Holdings' rights as "Borrower" under, and
Telex, in consideration of a capital contribution being made on the date hereof
by Holdings to Telex and the access to the revolving credit facility under the
Credit Agreement that will inure to Telex as a result of such assignment, wishes
to assume from Holdings all of Holdings' obligations and liabilities as
"Borrower" under, the Credit Agreement, any Notes, any Letters of Credit and the
other Loan Documents (as each of such terms is defined in the Credit Agreement);
and
WHEREAS, pursuant to subsection 10.11 of the Credit Agreement,
the Administrative Agent is authorized to consent to this Agreement on behalf of
the Lenders;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
2. Assignment of Rights and Obligations. Effective as of
immediately after the Effective Time (as defined in the Recapitalization
Agreement), Holdings hereby irrevocably assigns, transfers and conveys to Telex
all of Holdings', as successor in interest to Acquisition Co., rights,
obligations, covenants, agreements, duties and liabilities as "Borrower" under
or with
<PAGE> 2
respect to the Credit Agreement, any Notes, any Letters of Credit, any of the
other Loan Documents and any and all certificates and other documents executed
by Holdings or Acquisition Co. in connection therewith; provided, however, that
Holdings understands and agrees that such assignment, transfer and conveyance
shall not be effective with respect to, or in any way release Holdings from any
of its obligations, covenants, agreements, duties and liabilities under or with
respect to this Agreement or the Guarantee and Collateral Agreement.
3. Assumption of Agreements and Obligations. Effective as of
immediately after the Effective Time, Telex, in consideration of a capital
contribution being made on the date hereof by Holdings to Telex and the access
to the revolving credit facility under the Credit Agreement that will inure to
Telex as a result of such assignment, hereby expressly assumes, confirms and
agrees to perform and observe all of the indebtedness, obligations (including,
without limitation, all obligations in respect of the Loans and the Letters of
Credit), covenants, agreements, terms, conditions, duties and liabilities of
Holdings, as successor in interest to Acquisition Co., as "Borrower" under and
with respect to the Credit Agreement, any Notes, any Letters of Credit, any of
the other Loan Documents and any and all certificates and other documents
executed by Holdings or Acquisition Co. in connection therewith as fully as if
Telex were originally the obligor in respect thereof and the signatory thereto;
provided, however, that Holdings understands and agrees that such assumption
shall not be effective with respect to, or in any way obligate Telex to perform
and observe any obligations, covenants, agreements, terms, conditions, duties or
liabilities of Holdings under or with respect to this Agreement or the Guarantee
and Collateral Agreement. At all times after the effectiveness of such
assumption, with respect to all Extensions of Credit made to or for the account
of Acquisition Co. or Holdings prior to the effectiveness of such assumption,
Telex shall have the obligations of, and Holdings shall no longer be or have the
obligations of, the "Borrower" within the meaning of and for all purposes of the
Credit Agreement. In addition, at all times after the effectiveness of such
assumption, all references to the "Borrower" in the Credit Agreement, any Notes,
any Letter of Credit, any of the other Loan Documents and any and all
certificates and other documents executed by Acquisition Co. or Holdings in
connection therewith shall be deemed to be references to Telex.
4. Amendment to the Credit Agreement. The Credit Agreement is
hereby deemed to be amended to the extent, but only to the extent, necessary to
effect the assignment and assumption provided for hereby. Except as expressly
amended, modified and supplemented hereby, the provisions of the Credit
Agreement and the other Loan Documents are and shall remain in full force and
effect.
5. Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. A set of
2
<PAGE> 3
the copies of this Agreement signed by all the parties shall be delivered to
Holdings, Telex and the Administrative Agent.
6. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7. Integration. This Agreement and the other Loan Documents
represent the entire agreement of each of the Loan Parties party hereto, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by any of
the Loan Parties party hereto, the Administrative Agent or any Lender relative
to the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
8. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
9. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
10. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Holdings and Telex and their respective
successors and assigns, and the Administrative Agent and the Lenders and their
respective successors, indorsees, transferees and assigns.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
TELEX COMMUNICATIONS GROUP, INC.
By: _________________________
Name:
Title:
TELEX COMMUNICATIONS, INC.
By: _________________________
Name:
Title:
Consented to:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: _______________________________
Name:
Title:
4
<PAGE> 1
EXHIBIT 4F
- --------------------------------------------------------------------------------
GUARANTEE AND COLLATERAL AGREEMENT
made by
TELEX COMMUNICATIONS, INC.
(as successor to GST ACQUISITION CORP.)
TELEX COMMUNICATIONS GROUP, INC.
and
TCI HOLDINGS CORP.
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of May 6, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINED TERMS.................................................................. 1
1.1 Definitions.................................................................... 1
1.2 Other Definitional Provisions.................................................. 8
SECTION 2. GUARANTEE...................................................................... 8
2.1 Guarantee...................................................................... 8
2.2 Right of Contribution.......................................................... 9
2.3 No Subrogation................................................................. 10
2.4 Amendments, etc. with respect to the Borrower Obligations...................... 10
2.5 Guarantee Absolute and Unconditional........................................... 11
2.6 Reinstatement.................................................................. 12
2.7 Payments....................................................................... 12
SECTION 3. GRANT OF SECURITY INTEREST..................................................... 12
SECTION 4. REPRESENTATIONS AND WARRANTIES................................................. 14
4.1 Representations and Warranties of Each Guarantor............................... 14
4.2 Representations and Warranties of Each Grantor................................. 14
4.2.1 Title; No Other Liens................................................. 14
4.2.2 Perfected First Priority Liens........................................ 14
4.2.3 Chief Executive Office................................................ 16
4.2.4 Inventory and Equipment............................................... 16
4.2.5 Farm Products......................................................... 16
4.2.6 Accounts.............................................................. 16
4.2.7 Intellectual Property................................................. 16
4.3 Representations and Warranties of Each Pledgor................................. 16
SECTION 5. COVENANTS...................................................................... 17
5.1 Covenants of Each Guarantor.................................................... 17
5.2 Covenants of Each Grantor...................................................... 18
5.2.1 Delivery of Instruments and Chattel Paper............................. 18
5.2.2 Maintenance of Insurance.............................................. 18
5.2.3 Payment of Obligations................................................ 18
5.2.4 Maintenance of Perfected Security Interest; Further Documentation..... 19
5.2.5 Changes in Locations, Name, etc....................................... 19
5.2.6 Notices............................................................... 20
5.2.7 Pledged Securities.................................................... 20
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.2.8 Accounts.............................................................. 20
5.2.9 Maintenance of Records................................................ 21
5.2.10 Acquisition of Intellectual Property.................................. 21
5.2.11 Protection of Trade Secrets........................................... 21
5.3 Covenants of Each Pledgor...................................................... 21
5.4 Covenants of Holdings.......................................................... 23
SECTION 6. REMEDIAL PROVISIONS............................................................ 24
6.1 Certain Matters Relating to Accounts........................................... 24
6.2 Communications with Obligors; Grantors Remain Liable........................... 26
6.3 Pledged Stock.................................................................. 26
6.4 Proceeds to be Turned Over To Administrative Agent............................. 28
6.5 Application of Proceeds........................................................ 28
6.6 Code and Other Remedies........................................................ 29
6.7 Registration Rights............................................................ 30
6.8 Waiver; Deficiency............................................................. 31
SECTION 7. THE ADMINISTRATIVE AGENT....................................................... 31
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc.................... 31
7.2 Duty of Administrative Agent................................................... 33
7.3 Execution of Financing Statements.............................................. 34
7.4 Authority of Administrative Agent.............................................. 34
7.5 Right Of Inspection............................................................ 34
SECTION 8. MISCELLANEOUS.................................................................. 35
8.1 Amendments in Writing.......................................................... 35
8.2 Notices........................................................................ 35
8.3 No Waiver by Course of Conduct; Cumulative Remedies............................ 35
8.4 Enforcement Expenses; Indemnification.......................................... 35
8.5 Successors and Assigns......................................................... 36
8.6 Set-Off........................................................................ 36
8.7 Counterparts................................................................... 37
8.8 Severability................................................................... 37
8.9 Section Headings............................................................... 37
8.10 Integration.................................................................... 37
8.11 GOVERNING LAW.................................................................. 37
8.12 Submission To Jurisdiction; Waivers............................................ 37
8.13 Acknowledgements............................................................... 38
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.14 WAIVER OF JURY TRIAL........................................................... 38
8.15 Additional Granting Parties.................................................... 38
8.16 Releases....................................................................... 39
</TABLE>
iii
<PAGE> 5
SCHEDULES
1 Notice Addresses of Guarantors
2 Description of Pledged Securities
3 Location of Jurisdiction of Organization and Chief Executive Office or
Sole Place of Business
4 Location of Inventory and Equipment
5 Copyrights and Copyright Licenses; Patents and Patent Licenses;
Trademarks and Trademark Licenses
6 Existing Prior Liens
7 Accounts
8 Contracts
ANNEXES
1 Assumption Agreement
iv
<PAGE> 6
EXHIBIT 4F
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 6, 1997,
made by TELEX COMMUNICATIONS, INC., a Delaware corporation ("Telex" or the
"Borrower") as successor by assumption to GST Acquisition Corp. upon the
effectiveness of the Telex Assumption Agreement (as defined herein), TELEX
COMMUNICATIONS GROUP, INC., a Delaware Corporation ("Holdings"), and TCI
HOLDINGS CORP., together with any other Subsidiary of the Borrower that becomes
a party hereto from time to time after the date hereof, the ("Granting
Parties"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (collectively, the "Lenders"; individually, a "Lender") from time
to time parties to the Credit Agreement, dated as of May 6, 1997 (as amended,
waived, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Lenders, the Administrative Agent and
Morgan Stanley Senior Funding, Inc., as Documentation Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, it is a condition to the obligation of the Lenders to
make their respective extensions of credit to the Borrower under the Credit
Agreement that the Granting Parties shall execute and deliver this Agreement to
the Administrative Agent for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Granting Party hereby agrees with the Administrative
Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement, and the following terms which are defined in the
Code (as defined below) are used herein as so defined: Chattel Paper, Documents,
Equipment, Farm Products, Fixtures, Instruments and Inventory.
<PAGE> 7
(b) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of the
Borrower, including, without limitation all Accounts (as defined in the
Credit Agreement) of the Borrower.
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations
and all other obligations and liabilities of the Borrower (including,
without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and
Reimbursement Obligations and interest accruing at the then applicable
rate provided in the Credit Agreement after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to
the Administrative Agent or any Lender (or, in the case of any Hedge
Agreement referred to below, any Affiliate of any Lender), whether
direct or indirect, absolute or contingent, due or to become due, or
now existing or hereafter incurred, which may arise under, out of, or
in connection with, the Credit Agreement, this Agreement, the other
Loan Documents and any Letter of Credit or any Hedge Agreement entered
into by the Borrower with any Lender (or, in the case of any Hedge
Agreement, any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by the Borrower
pursuant to the terms of any of the foregoing agreements).
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account Bank": The Chase Manhattan Bank or another
bank which at all times is a Lender as selected by the Borrower and
notified to the Administrative Agent in writing promptly following such
selection.
"Collateral Proceeds Account": the cash collateral account
established by the relevant Grantor at an office of the Collateral
Account Bank in the name of the Administrative Agent.
2
<PAGE> 8
"Commitments": the collective reference to the Revolving
Credit Commitments, the Swing Line Commitments, the Term Loan
Commitments and the L/C Commitment; individually, a "Commitment".
"Contracts" with respect to any Grantor, all contracts,
agreements, instruments and indentures in any form, and portions
thereof (except for the contracts listed on Schedule 8), to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of
such Grantor to receive moneys due and to become due to it thereunder
or in connection therewith, (ii) all rights of such Grantor to damages
arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder.
"Copyright Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor providing for the
grant by or to such Grantor of any right to use any Copyright of such
Grantor, other than intercompany agreements, including, without
limitation, any license agreements listed on Schedule 5 hereto subject,
in each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses.
"Copyrights": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States
copyrights, whether or not the underlying works of authorship have been
published or registered, United States copyright registrations and
copyright applications, and (a) all renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringement thereof and (c) the right to sue or
otherwise recover for past, present and future infringement and
misappropriation thereof.
"Default": a "Default" as defined in the Credit Agreement.
"Event of Default": an "Event of Default" as defined in the
Credit Agreement.
"General Fund Account": the general fund account of the
relevant Grantor established at the same office of the Collateral
Account Bank as the Collateral Proceeds Account.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect in
the State of New York on the date hereof.
3
<PAGE> 9
"Granting Parties": as defined in the initial paragraph
hereof.
"Grantor": the Borrower and each Domestic Subsidiary of the
Borrower that from time to time becomes a party hereto.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which
such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders
that are required to be paid by such Guarantor pursuant to the terms of
this Agreement or any other Loan Document).
"Guarantors": the collective reference to each Granting Party
other than the Borrower.
"Hedge Agreements": as to any Grantor, all interest rate
swaps, caps or collar agreements or similar arrangements entered into
by such Person providing for protection against fluctuations in
interest rates or currency exchange rates or the exchange of nominal
interest obligations, either generally or under specific contingencies,
including, without limitation, all Interest Rate Protection Agreements
and Permitted Hedging Arrangements with respect to currency exchange
rates.
"Intellectual Property": with respect to any Grantor, the
collective reference to such Grantor's Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trade Secrets, Trademarks and Trademark
Licenses.
"Intercompany Note": with respect to any Grantor, any
promissory note evidencing loans made by such Grantor to the Borrower
or any of its Subsidiaries.
"Issuers": the collective reference to the Persons identified
on Schedule 2 as the issuers of the Pledged Stock.
"Inventory": with respect to any Grantor, all inventory (as
defined in the Code) of such Grantor, including, without limitation,
all Inventory (as defined in the Credit Agreement) of the Borrower.
"Loan Documents": the collective reference to the "Loan
Documents" as defined in the Credit Agreement.
4
<PAGE> 10
"Loans": the collective reference to the "Loans" as defined in
the Credit Agreement.
"Notes": the collective reference to the "Notes" as defined in
the Credit Agreement.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patent Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who
is not an Affiliate or a Subsidiary in connection with any of the
Patents of such Grantor or such other Person's patents, whether such
Grantor is a licensor or a licensee under any such agreement,
including, without limitation, the license agreements listed on
Schedule 5, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory now or hereafter covered by such licenses.
"Patents": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States patents, patent
applications and patentable inventions and all reissues and extensions
thereof, including, without limitation, all patents and patent
applications identified in Schedule 5, and including, without
limitation, (a) all inventions and improvements described and claimed
therein, and patentable inventions, (b) the right to sue or otherwise
recover for any and all past, present and future infringement and
misappropriation thereof, (c) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered
into in connection therewith, and damages and payments for past or
future infringements thereof), and (d) all other rights corresponding
thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and
extensions thereof, all improvements thereon, and all other rights of
any kind whatsoever of such Grantor accruing thereunder or pertaining
thereto.
"Pledged Collateral": as defined in Section 3.
"Pledged Notes": with respect to any Pledgor, all Intercompany
Notes at any time issued to such Pledgor and all other promissory notes
issued to or held by such Pledgor (other than promissory notes issued
in connection with extensions of trade credit by any Pledgor in the
ordinary course of business).
"Pledged Securities": the collective reference to the Pledged
Notes and the Pledged Stock.
5
<PAGE> 11
"Pledged Stock": with respect to any Pledgor, the shares of
Capital Stock listed on Schedule 2 as held by such Pledgor, together
with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Issuer that
may be issued or granted to, or held by, such Pledgor while this
Agreement is in effect (provided that in no event shall there be
pledged, nor shall any Pledgor be required to pledge, directly or
indirectly, more than 65% of any series of the outstanding Capital
Stock of any Foreign Subsidiary pursuant to this Agreement).
"Pledgor": Holdings (with respect to Pledged Stock of the
Borrower), the Borrower (with respect to Pledged Stock of the
corporations listed on Schedule 2 hereto under the name of the Borrower
and any other Subsidiary of the Borrower and any other Pledged
Securities held by the Borrower) and any other Granting Party (with
respect to Pledged Securities held by such Granting Party).
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, Proceeds of Pledged
Securities shall include, without limitation, all dividends or other
income from the Pledged Securities, collections thereon or
distributions or payments with respect thereto.
"Revolving Credit Commitments": the collective reference to
the "Revolving Credit Commitments" as defined in the Credit Agreement.
"Secured Parties": the collective reference to the
Administrative Agent, the Lenders (including, without limitation the
Issuing Lender) and any Affiliate of any Lender which has entered into
any Interest Rate Protection Agreement or Permitted Hedging Arrangement
with the Borrower or any of its Subsidiaries, and their respective
successors and assigns.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Security Collateral": as defined in Section 3.
"Trade Secrets": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States trade
secrets, including, without limitation, know-how, processes, formulae,
compositions, designs, and confidential business and technical
information, and all rights of any kind whatsoever accruing thereunder
or pertaining thereto, including, without limitation, (a) all income,
royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, payments under all
licenses, non-disclosure agreements and memoranda of understanding
entered into in connection therewith, and damages and payments for past
or future
6
<PAGE> 12
misappropriation thereof, and (b) the right to sue or otherwise recover
for past, present or future misappropriation thereof.
"Trademark Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who
is not an Affiliate or a Subsidiary in connection with any of the
Trademarks of such Grantor or such other Person's names or trademarks,
whether such Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed
on Schedule 5, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory now or hereafter covered by such licenses.
"Trademarks": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States
trademarks, service marks, trade names, trade dress or other indicia of
trade origin or business identifiers, trademark and service mark
registrations, and applications for trademark or service mark
registrations (except for "intent to use" applications for trademark or
service mark registrations filed pursuant to Section 1(b) of the Lanham
Act, 15 U.S.C. Section 1051, unless and until an Amendment to Allege
Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has
been filed), and any renewals thereof, including, without limitation,
each registration and application identified in Schedule 5, and
including, without limitation, (a) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriation thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered
into in connection therewith, and damages and payments for past or
future infringements thereof), and (c) all other rights corresponding
thereto in the United States and all other rights of any kind
whatsoever of such Grantor accruing thereunder or pertaining thereto,
together in each case with the goodwill of the business connected with
the use of, and symbolized by, each such trademark, service mark, trade
name, trade dress or other indicia of trade origin or business
identifiers.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title
law of any state and all tires and other appurtenances to any of the
foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section, Schedule and Annex references are to
this Agreement unless otherwise specified.
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(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral, Pledged Collateral or Security Collateral, or any part thereof, when
used in relation to a Granting Party shall refer to such Granting Party's
Collateral, Pledged Collateral or Security Collateral or the relevant part
thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due and payable (whether at the stated
maturity, by acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable law, including applicable federal
and state laws relating to the insolvency of debtors.
(c) Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Administrative Agent or any other
Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until the earlier to occur of (i) the first date on which
all the Loans, any Reimbursement Obligations, all other Borrower Obligations
then due and owing, and the obligations of each Guarantor under the guarantee
contained in this Section 2 then due and owing shall have been satisfied by
payment in full, no Letter of Credit shall be outstanding and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Borrower may be free from any Borrower Obligations or
(ii) as to any Guarantor, the sale or other disposition of all of the Capital
Stock of such Guarantor permitted under the Credit Agreement.
(e) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any other Secured Party from the Borrower, any of the
Guarantors, any other guarantor or any other Person
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by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the earlier to
occur of (i) the first date on which the Loans, any Reimbursement Obligations,
and all other Borrower Obligations then due and owing, are paid in full, no
Letter of Credit shall be outstanding and the Commitments are terminated or (ii)
the sale or other disposition of all of the Capital Stock of such Guarantor
permitted under the Credit Agreement.
2.2 Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the other Secured
Parties, and each Guarantor shall remain liable to the Administrative Agent and
the Lenders for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any other Secured Party, no Guarantor shall be
entitled to be subrogated to any of the rights of the Administrative Agent or
any other Secured Party against the Borrower or any other Guarantor or any
collateral security or guarantee or right of offset held by the Administrative
Agent or any other Secured Party for the payment of the Borrower Obligations,
nor shall any Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrower or any other Guarantor in respect of payments
made by such Guarantor hereunder, until all amounts owing to the Administrative
Agent and the other Secured Parties by the Borrower on account of the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Borrower
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
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2.4 Amendments, etc. with respect to the Borrower Obligations.
To the maximum extent permitted by law, each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations made by the Administrative Agent
or any other Secured Party may be rescinded by the Administrative Agent or such
other Secured Party and any of the Borrower Obligations continued, and the
Borrower Obligations, or the liability of any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any other Secured Party, and the Credit
Agreement and the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders, as the case may be) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any other Secured Party for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any other Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or for the guarantee contained in this Section 2 or
any property subject thereto, except to the extent required by applicable law.
2.5 Guarantee Absolute and Unconditional. Each Guarantor
waives, to the maximum extent permitted by applicable law, any and all notice of
the creation, renewal, extension or accrual of any of the Borrower Obligations
and notice of or proof of reliance by the Administrative Agent or any other
Secured Party upon the guarantee contained in this Section 2 or acceptance of
the guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Administrative Agent and the other
Secured Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives, to the maximum extent permitted by applicable
law, diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Borrower or any of the other Guarantors with
respect to the Borrower Obligations. Each Guarantor understands and agrees, to
the extent permitted by law, that the guarantee contained in this Section 2
shall be construed as a continuing, absolute and unconditional guarantee of
payment. Each Guarantor hereby waives, to the maximum extent permitted by
applicable law, any and all defenses that it may have arising out of or in
connection with any and all of the following: (a) the validity or enforceability
of the Credit Agreement or any other Loan Document, any of the Borrower
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
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Administrative Agent or any other Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower against the Administrative
Agent or any other Secured Party, (c) any change in the time, place, manner or
place of payment, amendment, or waiver or increase in the Obligations, (d) any
exchange, taking, or release of Collateral, (e) any change in the corporate
structure or existence of the Borrower, (f) any application of Collateral to
Obligations or (g) any other circumstance whatsoever (with or without notice to
or knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the
Borrower Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any other Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any other Secured Party to make any such demand, to
pursue such other rights or remedies or to collect any payments from the
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Borrower, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any other Secured Party against
any Guarantor. For the purposes hereof "demand" shall include the commencement
and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
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Each Granting Party (1) that is a Grantor hereby grants to the
Administrative Agent, for the ratable benefit of the Secured Parties, a security
interest in all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of such Grantor:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment (other than Vehicles);
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all books and records pertaining to any of the foregoing;
(k) the Collateral Proceeds Account; and
(l) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security
and guarantees given by any Person with respect to any of the
foregoing;
and (2) that is a Pledgor hereby grants to the Administrative Agent, for the
ratable benefit of the Secured Parties, a security interest in all of the
Pledged Securities now owned or at any time hereafter acquired by such Pledgor,
and any Proceeds thereof (the "Pledged Collateral"), as collateral security for
the prompt and complete performance when due (whether at the stated maturity by
acceleration or otherwise) of the obligations of the Pledgor; (the Collateral
(if any) and the Pledged Collateral (if any) of any Granting Party being
collectively referred to herein as such Granting Party's "Security Collateral");
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provided however, that (x) Collateral shall not include any Pledged Collateral,
or any property or assets specifically excluded from Pledged Collateral
(including any Capital Stock of any Foreign Subsidiary in excess of 65% of any
series of such stock); and (y) in the case of any Instruments, Contracts,
Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses,
Trademark Licenses or other contracts or agreements with or issued by Persons
(other than a Subsidiary of the Borrower) that would otherwise be included in
the Security Collateral, no security interest in the right, title and interest
of any Granting Party thereunder or therein will be granted pursuant to this
Section 2 (and such Instruments, Contracts, Chattel Paper, General Intangibles,
Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or
agreements shall not be deemed to constitute a part of the Security Collateral)
for so long as, and to the extent that, the granting of a security interest in
the right, title and interest of such Grantor thereunder or therein pursuant to
the terms hereof would result in a breach, default or termination of such
Instruments, Contracts, Chattel Paper, General Intangibles, Copyright Licenses,
Patent Licenses, Trademark Licenses or other contracts or agreements and (z) in
the case of the Equipment that would otherwise be included in the foregoing
Collateral, the foregoing will not be deemed to grant a security interest
therein under this Agreement (and such Equipment shall not be deemed to
constitute a part of the Collateral) if such Equipment is subject to a Lien
permitted by subsection 8.3(h) of the Credit Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Each Guarantor. To
induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Guarantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that the
representations and warranties set forth in Section 5 of the Credit Agreement as
they relate to such Guarantor or to the Loan Documents to which such Guarantor
is a party or to the Transaction Documents to which such Guarantor is a party,
each of which representations and warranties is hereby incorporated herein by
reference, are true and correct in all material respects, and the Administrative
Agent and each other Secured Party shall be entitled to rely on each of such
representations and warranties as if fully set forth herein; provided that each
reference in each such representation and warranty to the Borrower's knowledge
shall, for the purposes of this Section 4.1, be deemed to be a reference to such
Guarantor's knowledge.
4.2 Representations and Warranties of Each Grantor. To induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Grantor hereby represents and warrants to the
Administrative Agent and each other Secured Party that:
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4.2.1 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent, for the ratable benefit of the Secured
Parties, pursuant to this Agreement and the other Liens permitted to exist on
such Grantor's Collateral by the Credit Agreement (including without limitation
subsection 8.3 thereof), such Grantor owns each item of such Grantor's
Collateral free and clear of any and all Liens. Except as set forth on Schedule
6, no financing statement or other similar public notice with respect to all or
any part of such Grantor's Collateral is on file or of record in any public
office, except such as have been filed in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties, pursuant to this Agreement or as are
permitted by the Credit Agreement (including without limitation subsection 8.3
thereof) or any other Loan Document or for which termination statements will be
delivered on the Closing Date.
4.2.2 Perfected First Priority Liens. (i) This Agreement is
effective to create, as collateral security for the Obligations of such Grantor,
valid and enforceable Liens on such Grantor's Collateral in favor of the
Administrative Agent, for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditor's rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
(ii) Except with respect to (A) Liens on Equipment
constituting Fixtures, (B) any rights reserved in favor of the United States
government as required under law, (C) Liens upon Patents, Patent Licenses,
Trademarks and Trademark Licenses to the extent that (I) such Liens cannot be
perfected by the filing of financing statements under the Uniform Commercial
Code or by the filing and acceptance thereof in the United States Patent and
Trademark Office or (II) such Patents, Patent Licenses, Trademarks and Trademark
Licenses are not, individually or in the aggregate, material to the business of
the Borrower and its Subsidiaries taken as a whole, (D) Liens on uncertificated
securities, (E) Liens on Collateral the perfection of which requires filings in
or other actions under the laws of jurisdictions outside of the United States of
America, any State, territory or dependency thereof or the District of Columbia
(except to the extent that such filings or other actions have been made or
taken), (F) Liens on contracts or receivables on which the United States of
America or any department, agency, or instrumentality thereof is the obligor,
(G) Liens on Proceeds of receivables and Inventory, until transferred to or
deposited in the Collateral Proceeds Account (if any), and (H) claims of
creditors of Persons receiving goods included as Collateral for "sale or return"
within the meaning of Section 2-326 of the Uniform Commercial Code of the
applicable jurisdiction, upon filing of the financing statements delivered to
the Administrative Agent by such Grantor on the Effective Date in the
jurisdictions listed on Schedule 5.14 to the Credit Agreement (which financing
statements are in proper form for filing in such jurisdictions) and the
recording of the Mortgages (and the recording of any Patent and Trademark
Security Agreement, as set forth therein, and the making of filings after the
Effective Date in any other jurisdiction as may be necessary under any
Requirement of Law) and the
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delivery to, and continuing possession by, the Administrative Agent of all
Instruments, Chattel Paper and Documents a security interest in which is
perfected by possession, the Liens created pursuant to this Agreement will
constitute valid Liens on and, to the extent provided herein, perfected security
interests in such Grantor's Collateral (but as to the Copyrights and Copyright
Licenses and accounts arising therefrom, only to the extent the Uniform
Commercial Code of the relevant jurisdiction, from time to time in effect, is
applicable) in favor of the Administrative Agent for the benefit of the Secured
Parties, which Liens will be prior to all other Liens of all other Persons,
except for Liens permitted pursuant to the Loan Documents (including, without
limitation, those permitted to exist pursuant to subsection 8.3 of the Credit
Agreement), and which Liens are enforceable as such as against all other Persons
(except to the extent that the recording of an assignment or other transfer of
title to the Administrative Agent in the United States Patent and Trademark
Office may be necessary for enforceability, and except, with respect to goods
only, buyers in the ordinary course of business to the extent provided in
Section 9-307(1) of the Code), except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law) or by an implied covenant of good faith and fair dealing.
4.2.3 Chief Executive Office. On the date hereof, such
Grantor's jurisdiction of organization and the location of such Grantor's chief
executive office or sole place of business are specified on Schedule 3.
4.2.4 Inventory and Equipment. On the date hereof, such
Grantor's Inventory and Equipment (other than mobile goods) are kept at the
locations listed on Schedule 4.
4.2.5 Farm Products. None of such Grantor's Collateral
constitutes, or is the Proceeds of, Farm Products.
4.2.6 Accounts. The amount represented by such Grantor to the
Administrative Agent or the other Secured Parties from time to time as owing by
each account debtor or by all account debtors in respect of such Grantor's
Accounts will at such time be the correct amount, in all material respects,
actually owing by such account debtor or debtors thereunder, except to the
extent that appropriate reserves therefor have been established on the books of
such Grantor in accordance with GAAP. The places where such Grantor keeps its
records concerning such Grantor's Accounts are listed on Schedule 7 or such
other location or locations of which such Grantor shall have provided prior
written notice to the Administrative Agent pursuant to Section 5.2.5 hereof.
Unless otherwise indicated in writing to the Administrative Agent, each Account
of such Grantor arises out of a bona fide sale and delivery of goods or
rendition of services by such Grantor. Such Grantor has not given any account
debtor any deduction in respect of the amount due under any such Account, except
as such Grantor may otherwise advise the Administrative Agent in writing.
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4.2.7 Intellectual Property. Schedule 5 lists all material
Trademarks and material Patents (including, without limitation, Trademarks and
Patents registered in the United States Patent and Trademark Office) owned by
such Grantor in its own name as of the date hereof and all material Trademark
Licenses and all material Patent Licenses (including, without limitation,
material Trademark Licenses for registered Trademarks and material Patent
Licenses for registered Patents) owned by such Grantor in its own name as of the
date hereof.
4.3 Representations and Warranties of Each Pledgor. To induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Pledgor hereby represents and warrants to the
Administrative Agent and each other Secured party that:
4.3.1 The shares of Pledged Stock pledged by such Pledgor
hereunder constitute (i) in the case of each Domestic Subsidiary, all the issued
and outstanding shares of all classes of the Capital Stock of each such Domestic
Subsidiary owned by such Pledgor and (ii) in the case of each Foreign Subsidiary
such percentage (not more than 65%) as is specified on Schedule 2 of all the
issued and outstanding shares of all classes of the Capital Stock of each such
Foreign Subsidiary.
4.3.2 All the shares of the Pledged Stock pledged by such
Pledgor hereunder have been duly and validly issued and are fully paid and
nonassessable.
4.3.3 Such Pledgor is the record and beneficial owner of, and
has good and valid title to, the Pledged Securities pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement and Liens imposed
by operation of law.
4.3.4 Upon delivery to the Administrative Agent of the
certificates evidencing the Pledged Securities held by such Pledgor, the
security interest created by this Agreement in such Pledged Collateral, assuming
the continuing possession of such Pledged Securities by the Administrative
Agent, will constitute a valid, perfected first priority security interest in
such Pledged Collateral to the extent provided in the Code, enforceable in
accordance with its terms against all creditors of such Pledgor and any persons
purporting to purchase such Pledged Collateral from such Pledgor, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
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SECTION 5. COVENANTS
5.1 Covenants of Each Guarantor. Each Guarantor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing, shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
5.2 Covenants of Each Grantor. Each Grantor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing, shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
5.2.1 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of such Grantor's Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall be promptly delivered to the Administrative Agent, duly indorsed in
a manner satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
5.2.2 Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable companies, insurance policies (i)
insuring such Grantor's Inventory and Equipment against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to the
Administrative Agent and (ii) insuring such Grantor, the Administrative Agent
and the other Secured Parties against liability for personal injury and property
damage relating to such Inventory and Equipment, such policies to be in such
form and amounts and having such coverage as may be reasonably satisfactory to
the Administrative Agent.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as an additional
insured party or loss payee, (iii) include deductibles consistent with past
practice or otherwise reasonably satisfactory to the Administrative Agent and
(iv) be reasonably satisfactory in all other respects to the Administrative
Agent.
(c) Such Grantor (if the Borrower) shall deliver to the
Administrative Agent and the other Secured Parties reports of one or more
reputable insurance brokers of the individual
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insurance companies with respect to such insurance as the Administrative Agent
may from time to time reasonably request.
5.2.3 Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon such Grantor's Collateral or in respect of income or
profits therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with respect to
such Grantor's Collateral, except that no such tax, assessment, charge or levy
need be paid or satisfied if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings would not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.2.4 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement in such Grantor's Collateral as a perfected security interest
having at least the priority described in Section 4.2.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent from
time to time statements and schedules further identifying and describing such
Grantor's Collateral and such other reports in connection with such Grantor's
Collateral as the Administrative Agent may reasonably request in writing, all in
reasonable detail.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted by such Grantor,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
5.2.5 Changes in Locations, Name, etc. Such Grantor will not,
except upon not less than 30 days' prior written notice to the Administrative
Agent and delivery to the Administrative Agent, if applicable, of a written
supplement to Schedule 4 showing any additional location at which such Grantor's
Inventory or Equipment shall be kept:
(i) permit any of such Grantor's Inventory or Equipment to be
kept at a location other than the location(s) applicable to such
Grantor listed on Schedule 4 (other than
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Inventory or Equipment being conveyed, sold, leased, assigned,
transferred or otherwise disposed of as permitted by the Credit
Agreement);
(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.2.3; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative
Agent in connection with this Agreement would become misleading;
provided that, prior to taking any such action, or promptly after receiving a
written request therefor from the Administrative Agent, such Grantor shall
deliver to the Administrative Agent all additional executed financing statements
and other documents reasonably requested by the Administrative Agent to maintain
the validity, perfection and priority of the security interests provided for
herein.
5.2.6 Notices. Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of such Grantor's Collateral
which would adversely affect the ability of the Administrative Agent to exercise
any of its remedies hereunder; and
(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of such Grantor's Collateral or on the security interests created hereby.
5.2.7 Pledged Securities. In the case of each Grantor which is
an Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Stock issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 5.3.1 with respect to the Pledged Stock issued by it and
(iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section
6.3(c) or 6.7 with respect to the Pledged Stock issued by it.
5.2.8 Accounts. (a) Other than in the ordinary course of
business, such Grantor will not (i) grant any extension of the time of payment
of any of such Grantor's Accounts, (ii) compromise or settle any such Account
for less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any such Account or (v) amend, supplement or modify any Account in
any manner that could adversely affect the value thereof.
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(b) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that questions
or calls into doubt the validity or enforceability of more than 10% of the
aggregate amount of the then outstanding Accounts.
5.2.9 Maintenance of Records. Such Grantor will keep and
maintain at its own cost and expense reasonably satisfactory and complete
records of its Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to such Collateral, and
shall mark such records to evidence this Agreement and the Liens and the
security interests created hereby. For the Administrative Agent's and the other
Secured Parties' further security, the Administrative Agent, for the benefit of
the Secured Parties, shall have a security interest in all of such Grantor's
books and records pertaining to such Grantor's Collateral.
5.2.10 Acquisition of Intellectual Property. Within 45 days
after the end of each calendar quarter, such Grantor will notify the
Administrative Agent of any acquisition by such Grantor of (i) any material
registration of Copyright, Patent or Trademark or (ii) any exclusive rights
under a material Copyright License, Patent License or Trademark License, and
shall take such actions as may be reasonably requested by the Administrative
Agent (but only to the extent such actions are within such Grantor's control) to
perfect the security interest granted to the Administrative Agent and the other
Secured Parties therein (including, without limitation, (x) the execution and
delivery of a Patent and Trademark Security Agreement (or amendments to any such
agreement previously executed or delivered by such Grantor) or other comparable
agreements with respect to Copyrights or Copyright Licenses and (y) the making
of appropriate filings (I) of financing statements under the Uniform Commercial
Code of any applicable jurisdiction and/or (II) in the United States Patent and
Trademark Office, or with respect to Copyrights and Copyright Licenses, other
applicable office).
5.2.11 Protection of Trade Secrets. Such Grantor shall take
all steps which it deems commercially reasonable to preserve and protect the
secrecy of all material Trade Secrets of such Grantor.
5.3 Covenants of Each Pledgor. Each Pledgor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
5.3.1 If such Pledgor shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital or any certificate issued
in connection with any reorganization), option or rights in respect of the
Capital Stock of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange
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for, any shares of the Pledged Stock, or otherwise in respect thereof, such
Pledgor shall accept the same as the agent of the Administrative Agent and the
other Secured Parties, hold the same in trust for the Administrative Agent and
deliver the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by such Pledgor to the Administrative Agent, if
required, together with an undated stock power covering such certificate duly
executed in blank by such Grantor and with, if the Administrative Agent so
requests, signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Obligations
(provided that in no event shall there be pledged, nor shall any Pledgor be
required to pledge, more than 65% of any series of the outstanding Capital Stock
of any Foreign Subsidiary pursuant to this Agreement). Any sums paid upon or in
respect of the Pledged Securities upon the liquidation or dissolution of any
Issuer or Maker (except any liquidation or dissolution of any Subsidiary of the
Borrower in accordance with the Credit Agreement) shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Stock or any property shall be distributed
upon or with respect to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Administrative Agent, be delivered
to the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Pledgor, such Pledgor shall, until such money or property is paid or delivered
to the Administrative Agent, hold such money or property in trust for the
Secured Parties, segregated from other funds of such Pledgor, as additional
collateral security for the Obligations.
5.3.2 Without the prior written consent of the Administrative
Agent, such Pledgor will not (except pursuant to a transaction permitted by the
Credit Agreement) (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof or (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or Liens arising by operation of law.
5.3.3 Such Pledgor shall maintain the security interest
created by this Agreement in such Pledgor's Pledged Collateral as a perfected
security interest having at least the priority described in Section 4.3.4 and
shall defend such security interest against the claims
and demands of all Persons whomsoever. At any time and from time to time, upon
the written request of the Administrative Agent, and at the sole expense of such
Pledgor, such Pledgor will promptly and duly execute and deliver such further
instruments and documents and take such further actions as
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the Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted by such Pledgor.
5.4 Covenants of Holdings. Holdings covenants and agrees with
the Administrative Agent and the other Secured Parties that, from and after the
date of this Agreement until the Loans, any Reimbursement Obligations, and all
other Obligations then due and owing have been paid in full, no Letter of Credit
shall be outstanding and the Commitments shall have terminated:
5.4.1 Holdings shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and management
services to or on behalf of the Borrower or any of its Subsidiaries, (ii) the
ownership of the Capital Stock of the Borrower (or any successor thereto), and
the exercise of rights and performance of obligations in connection therewith,
(iii) the entry into, and exercise of rights and performance of obligations in
respect of, (A) the Transaction Documents and Senior Subordinated Notes
Documents to which Holdings is a party, this Guarantee and Collateral Agreement
and the other Loan Documents to which Holdings is a party, and any other
agreement to which Holdings is a party on the date hereof, in each case as
amended, supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of the Holdings or a
Subsidiary thereof relating to their employment or directorships, (C) insurance
policies and related contracts and agreements, and (D) equity subscription
agreements, registration rights agreements, voting and other stockholder
agreements, engagement letters, underwriting agreements and other agreements in
respect of its equity securities or any offering, issuance or sale thereof, (iv)
the offering, issuance and sale of its equity securities, (v) the filing of
registration statements, and compliance with applicable reporting and other
obligations, under federal, state or other securities laws, (vi) the listing of
its equity securities and compliance with applicable reporting and other
obligations in connection therewith, (vii) the retention of transfer agents,
private placement agents, underwriters, counsel, accountants and other advisors
and consultants, (viii) the performance of obligations under and compliance with
its certificate of incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, including, without
limitation, as a result of or in connection with the activities of the Borrower
and its Subsidiaries, (ix) the incurrence and payment of its operating and
business expenses and any taxes for which it may be liable, and (x) other
activities incidental or related to the foregoing. Holdings shall not make any
interest payment on the Subordinated Debentures With Warrants in cash that may
be made in kind.
5.4.2 Holdings shall not own, lease, manage or otherwise
operate any properties or assets (other than in connection with the activities
described in Section 5.4.1 above), or incur, create, assume or suffer to exist
any Indebtedness or Guarantee Obligations of Holdings (other
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than such as may be incurred, created or assumed or exist in connection with the
activities described in Section 5.4.1 above.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) At any time and
from time to time after the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the relevant Grantor shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's reasonable request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Accounts and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of Default,
any Proceeds constituting collections of such Accounts, when collected by such
Grantor, (i) shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such
Grantor to the Administrative Agent if required, in the Collateral Proceeds
Account established by such Grantor maintained under the sole dominion and
control of the Administrative Agent, subject to withdrawal by the Administrative
Agent for the account of the Secured Parties only as provided in Section 6.5,
and (ii) until so turned over, shall be held by such Grantor in trust for the
Administrative Agent and the other Secured Parties, segregated from other funds
of such Grantor. Each such deposit of Proceeds of Accounts shall be accompanied
by a report identifying in reasonable detail the nature and source of the
payments included in the deposit. All Proceeds constituting collections of
Accounts while held by the Collateral Account Bank (or by any Guarantor in trust
for the benefit of the Administrative Agent and the other Secured Parties) shall
continue to be collateral security for all of the Obligations and shall not
constitute payment thereof until applied as hereinafter provided. At any time
when an Event of Default has occurred and is continuing, at the Administrative
Agent's election, the Administrative Agent may apply all or any part of the
funds on deposit in the Collateral Proceeds Account established by the relevant
Grantor to the payment of the Obligations of such Grantor then due and owing,
such application to be made as set forth in Section 6.5 hereof. So long as no
Event of Default has occurred and is continuing, the funds on deposit in the
Collateral Proceeds Account shall be remitted as provided in Section 6.9 hereof.
At any time when an Event of Default has occurred and is continuing, at the
Administrative
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Agent's request, each Grantor shall deliver to the Administrative Agent all
original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to such Grantor's Accounts, including, without
limitation, all statements relating to such Grantor's Accounts.
(c) At any time and from time to time after the occurrence and
during the continuance of an Event of Default, at the Administrative Agent's
request, each Grantor shall deliver to the Administrative Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to such Grantor's Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(d) General Fund Account. So long as no Event of Default has
occurred and is continuing, the Administrative Agent shall instruct the
Collateral Account Bank to promptly remit any funds on deposit in each Grantor's
Collateral Proceeds Account to such Grantor's General Fund Account. In the event
that an Event of Default has occurred and is continuing, the Administrative
Agent and the Grantors agree that the Administrative Agent, at its option, may
require that each Collateral Proceeds Account be established at The Chase
Manhattan Bank. Each Grantor shall have the right, at any time and from time to
time, to withdraw such of its own funds from its own General Fund Account, and
to maintain such balances in its General Fund Account, as it shall deem to be
necessary or desirable.
(e) Restructuring of Deposit Accounts. If (a) any Collateral
Proceeds Account is maintained at a Collateral Account Bank located in a state
within the United States in which Article 9 of the Uniform Commercial Code in
effect in such state has been expressly made applicable to (and only for so long
as it is applicable to) demand deposit accounts and all filings have been made
in such state which are necessary to perfect the Secured Parties' security
interest in such Collateral Proceeds Account or (b) after the Effective Date the
relevant Grantor demonstrates to the Administrative Agent, and the
Administrative Agent in its sole discretion agrees, that the costs associated
with maintaining both a Collateral Proceeds Account and a General Fund Account
outweigh any benefits to the Secured Parties in terms of any additional
protection to their rights in such Grantor's Collateral that could not be
achieved with the use of a single account, then upon the request of such
Grantor, the Administrative Agent may amend this Agreement to delete the
requirement that a separate General Fund Account be maintained and provide that
such Grantor be entitled to withdraw funds on deposit in such Collateral
Proceeds Account at any time so long as no Event of Default has occurred and is
continuing.
6.2 Communications with Obligors; Grantors Remain Liable. (a)
The Administrative Agent in its own name or in the name of others may at any
time and from time to time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts and parties to the
Contracts (in each case, to the extent constituting
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Collateral) to verify with them to the Administrative Agent's satisfaction the
existence, amount and terms of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on such Grantor's Accounts and parties to such
Grantor's Contracts (in each case, to the extent constituting Collateral) that
such Accounts and such Contracts have been assigned to the Administrative Agent,
for the ratable benefit of the Secured Parties, and that payments in respect
thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of such Grantor's Accounts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any other Secured Party of any payment relating thereto,
nor shall the Administrative Agent or any other Secured Party be obligated in
any manner to perform any of the obligations of any Grantor under or pursuant to
any Account (or any agreement giving rise thereto) to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Pledgor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Pledgor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, to the extent permitted in the
Credit Agreement, and to exercise all voting and corporate rights with respect
to the Pledged Stock; provided, however, that no vote shall be cast or corporate
right exercised or such other action taken (other than in connection with a
transaction expressly permitted by the Credit Agreement) which, in the
Administrative Agent's reasonable judgment, would materially impair the Pledged
Collateral or the related rights or remedies of the Secured Parties or which
would be inconsistent with or result in any violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the relevant Pledgor or Pledgors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Stock and make application thereof to the
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Obligations in such order as the Administrative Agent may determine, and (ii)
any or all of the Pledged Stock shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Stock at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
Pledged Stock as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of any Issuer, or upon the
exercise by the relevant Pledgor or the Administrative Agent of any right,
privilege or option pertaining to such Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may reasonably
determine), all without liability (other than for its gross negligence or
willful misconduct) except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Pledgor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing, provided that the Administrative Agent shall not exercise
any voting or other consensual rights pertaining to the Pledged Stock in any way
that would constitute an exercise of the remedies described in Section 7 other
than in accordance with Section 7.
(c) Each Pledgor hereby authorizes and instructs each Issuer
or Maker of any Pledged Securities pledged by such Pledgor hereunder to (i)
comply with any instruction received by it from the Administrative Agent in
writing that (x) states that an Event of Default has occurred and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Pledgor, and each Pledgor agrees that each Issuer
or Maker shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the other Secured Parties
specified in Section 6.1 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing, and the Administrative Agent shall have
instructed any Grantor to do so, all Proceeds received by such Grantor
consisting of cash, checks and other Cash Equivalent items shall be held by such
Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent in the relevant Collateral Proceeds
Account maintained under its sole dominion and control. All Proceeds while held
by the Administrative Agent in such Collateral Proceeds Account (or by such
Grantor in trust for the Administrative Agent
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and the other Secured Parties) shall continue to be held as collateral security
for all the Obligations and shall not constitute payment thereof until applied
as provided in Section 6.5.
6.5 Application of Proceeds. It is agreed that if an Event of
Default shall occur and be continuing, any and all Proceeds of the relevant
Granting Party's Security Collateral received by the Administrative Agent
(whether from the relevant Granting Party or otherwise) shall be held by the
Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations of the relevant Granting Party (whether matured or
unmatured), and/or then or at any time thereafter may, in the sole discretion of
the Administrative Agent, be applied by the Administrative Agent against the
Obligations of the relevant Granting Party then due and owing in the following
order of priority:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Administrative Agent in connection with this Agreement,
the Credit Agreement, any other Loan Document or any of the Obligations
of the relevant Granting Party, including, without limitation, all
court costs and the reasonable fees and expenses of its agents and
legal counsel, and any other reasonable costs or expenses incurred in
connection with the exercise by the Administrative Agent of any right
or remedy under this Agreement, the Credit Agreement, or any other Loan
Document;
SECOND, to the ratable satisfaction of all other Obligations
of the relevant Granting Party; and
THIRD, to the relevant Granting Party or its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Secured
Parties, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code or any other applicable law. Without limiting the
generality of the foregoing, to the extent permitted by applicable law, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Granting Party or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Security Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Security Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Administrative Agent or any other Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may
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deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Administrative Agent or any other Secured Party shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Security Collateral so sold, free of any right or equity of redemption in
any Granting Party, which right or equity is hereby waived or released. Each
Granting Party further agrees, at the Administrative Agent's request, to
assemble the Security Collateral and make it available to the Administrative
Agent at places which the Administrative Agent shall reasonably select, whether
at such Granting Party's premises or elsewhere. The Administrative Agent shall
apply the net proceeds of any action taken by it pursuant to this Section 6.6,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Security Collateral or in any way relating to the Security Collateral or the
rights of the Administrative Agent and the other Secured Parties hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations of the relevant Granting
Party, in the order of priority specified in Section 6.5 above, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to any Granting Party. To the extent permitted by applicable law, each
Granting Party waives all claims, damages and demands it may acquire against the
Administrative Agent or any other Secured Party arising out of the exercise by
them of any rights hereunder, except to the extent arising as a result of the
gross negligence or willful misconduct of the Administrative Agent or such other
Secured Party. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the reasonable opinion of the Administrative Agent it
is necessary or reasonably advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Pledgor will use its reasonable best efforts to cause the Issuer
thereof to (i) execute and deliver, and use its best efforts to cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the reasonable
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. Such
Pledgor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue
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Sky" laws of any and all jurisdictions which the Administrative Agent shall
reasonably designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) Such Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all such Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of such Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Such Pledgor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative 20407326.01
Agent and the Lenders, that the Administrative Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Pledgor, and to the extent permitted by applicable law,
such Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred under the Credit Agreement.
6.8 Waiver; Deficiency. Each Granting Party (other than the
Borrower) waives and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the Code, to the extent permitted by applicable
law. Each Granting Party shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Security Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any other Secured Party to collect such deficiency.
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<PAGE> 35
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc. (a) Each Granting Party hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Granting Party and in the
name of such Granting Party or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be reasonably necessary
or desirable to accomplish the purposes of this Agreement to the extent
permitted by applicable law. Without limiting the generality of the foregoing,
at any time when an Event of Default has occurred and is continuing (in each
case to the extent permitted by applicable law), (x) each Pledgor hereby gives
the Administrative Agent the power and right, on behalf of such Pledgor, without
notice or assent by such Pledgor, to execute, in connection with any sale
provided for in Section 6.6 or 6.7, any indorsements, assessments or other
instruments of conveyance or transfer with respect to such Pledgor's Pledged
Collateral, and (y) each Grantor hereby gives the Administrative Agent the power
and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Account of such Grantor or with respect to any other Collateral of
such Grantor and file any claim or take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such
moneys due under any Account of such Grantor or with respect to any
other Collateral of such Grantor whenever payable;
(ii) in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and
all agreements, instruments, documents and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent's and
the Lenders' security interest in such Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral of such Grantor, effect any repairs
or any insurance called for by the terms of this Agreement and pay all
or any part of the premiums therefor and the costs thereof; and
(iv) (i) direct any party liable for any payment under any of
the Collateral of such Grantor to make payment of any and all moneys
due or to become due thereunder directly to the Administrative Agent or
as the Administrative Agent shall direct; (ii) ask or
30
<PAGE> 36
demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral of such Grantor; (iii) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of
the Collateral of such Grantor; (iv) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral of such Grantor or any portion
thereof and to enforce any other right in respect of any Collateral of
such Grantor; (v) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral of such Grantor; (vi)
settle, compromise or adjust any such suit, action or proceeding and,
in connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; (vii) subject to any
existing reserved rights or licenses, assign any Copyright, Patent or
Trademark constituting Collateral of such Grantor (along with the
goodwill of the business to which any such Copyright, Patent or
Trademark pertains), for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its sole discretion
determine; and (viii) generally, sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral
of such Grantor as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent's option and such Grantor's expense, at any time,
or from time to time, all acts and things which the Administrative
Agent deems necessary to protect, preserve or realize upon the
Collateral of such Grantor and the Administrative Agent's and the other
Secured Parties' security interests therein and to effect the intent of
this Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Granting Party fails to perform or comply with any
of its agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The reasonable expenses of the Administrative Agent
incurred in connection with actions undertaken as provided in this Section 7.1,
together with interest thereon at a rate per annum equal to the rate per annum
at which interest would then be payable on past due ABR Loans which are Term
Loans under the Credit Agreement, from the date of payment by the Administrative
Agent to the date reimbursed by the relevant Granting Party, shall be payable by
such Granting Party to the Administrative Agent on demand.
31
<PAGE> 37
(d) Each Granting Party hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable as to the relevant Granting Party until this
Agreement is terminated as to such Granting Party, and the security interests in
the Security Collateral of such Granting Party created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Security Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any other Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Security Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any Security
Collateral upon the request of any Granting Party or any other Person or to take
any other action whatsoever with regard to the Security Collateral or any part
thereof. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Security Collateral and shall not impose any
duty upon the Administrative Agent or any other Secured Party to exercise any
such powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Granting Party for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct.
7.3 Execution of Financing Statements. Pursuant to Section
9-402 of the Code and any other applicable law, each Granting Party authorizes
the Administrative Agent to file or record financing statements and other filing
or recording documents or instruments with respect to such Granting Party's
Security Collateral without the signature of such Granting Party in such form
and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement. A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
7.4 Authority of Administrative Agent. Each Granting Party
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement or any amendment, supplement or other
modification of this Agreement shall, as between the Administrative Agent and
the Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent
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<PAGE> 38
and the Granting Parties the Administrative Agent shall be conclusively presumed
to be acting as agent for the Secured Parties with full and valid authority so
to act or refrain from acting, and no Granting Party shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
7.5 Right Of Inspection. Upon reasonable written advance
notice to any Grantor and at reasonable intervals, or at any time and from time
to time after the occurrence and during the continuation of an Event of Default,
the Administrative Agent shall have reasonable access during normal business
hours to all the books, correspondence and records of such Granting Party, and
the Administrative Agent and its representatives may examine the same, and to
the extent reasonable take extracts therefrom and make photocopies thereof, and
such Granting Party agrees to render to the Administrative Agent, at such
Granting Party's reasonable cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Administrative Agent and
its representatives shall also have the right, upon reasonable advance written
notice to such Granting Party, to enter during normal business hours into and
upon any premises owned, leased or operated by such Granting Party where any of
such Granting Party's Inventory or Equipment is located for the purpose of
inspecting the same, observing its use or otherwise protecting its interests
therein.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each affected Granting Party and the
Administrative Agent, provided that any provision of this Agreement imposing
obligations on any Granting Party may be waived by the Administrative Agent in a
written instrument executed by the Administrative Agent.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Granting Party hereunder shall be effected in the
manner provided for in subsection 11.2 of the Credit Agreement; provided that
any such notice, request or demand to or upon any Guarantor shall be addressed
to such Guarantor at its notice address set forth on Schedule 1, unless and
until such Guarantor shall change such address by notice to the Administrative
Agent given in accordance with subsection 11.2 of the Credit Agreement.
8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any other Secured Party shall by any act
(except by a written instrument pursuant to Section 8.1), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
other Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof.
33
<PAGE> 39
No single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any other
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
other Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
agrees to pay or reimburse each Secured Party and the Administrative Agent for
all their respective reasonable costs and expenses incurred in collecting
against such Guarantor under the guarantee contained in Section 2 or otherwise
enforcing or preserving any rights under this Agreement against such Guarantor
and the other Loan Documents to which such Guarantor is a party, including,
without limitation, the reasonable fees and disbursements of one firm of counsel
to the Secured Parties and the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Secured Parties harmless from, (x) any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other similar taxes which may be payable or determined
to be payable with respect to any of the Security Collateral or in connection
with any of the transactions contemplated by this Agreement and (y) any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement (collectively, the "indemnified liabilities"), in each case to the
extent the Borrower would be required to do so pursuant to Section 11.5 of the
Credit Agreement, and in any event excluding any taxes or other indemnified
liabilities arising from gross negligence or willful misconduct of the
Administrative Agent or any Secured Party.
(c) The agreements in this Section 8.4 shall survive repayment
of the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Granting Parties, the Administrative
Agent and the Secured Parties and their respective successors and assigns;
provided that no Granting Party may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Administrative Agent.
8.6 Set-Off. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each other Secured Party at any time and from time to
time without notice to such Guarantor, any other Guarantor or the Borrower, any
such notice being expressly waived by each Guarantor and by the Borrower, to the
extent permitted by applicable law, upon the occurrence
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<PAGE> 40
and during the continuance of an Event of Default under Section 9(a) of the
Credit Agreement and any amount remaining unpaid after it becomes due and
payable by such Guarantor hereunder, to set-off and appropriate and apply
against any such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such other Secured Party to or for the
credit or the account of such Guarantor, or any part thereof in such amounts as
the Administrative Agent or such other Secured Party may elect. The
Administrative Agent and each other Secured Party shall notify such Guarantor
promptly of any such set-off and the application made by the Administrative
Agent or such other Secured Party of the proceeds thereof; provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent and each other Secured Party
under this Section 8.6 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Administrative Agent or
such other Secured Party may have.
8.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Granting Parties, the Administrative Agent
and the other Secured Parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Granting Parties, the Administrative Agent or any other Secured Party relative
to subject matter hereof not expressly set forth or referred to herein or in the
other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.
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<PAGE> 41
8.12 Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address referred to in Section 8.2 or at
such other address of which the Administrative Agent (in the case of
any other party hereto) or the Borrower (in the case of the
Administrative Agent) shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any punitive damages.
8.13 Acknowledgements. Each Guarantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents
to which it is a party;
(b) neither the Administrative Agent nor any other Secured
Party has any fiduciary relationship with or duty to any Guarantor
arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Guarantors, on the one
hand, and the Administrative Agent and the Secured Parties, on the
other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
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<PAGE> 42
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Secured Parties or among the Guarantors
and the Secured Parties.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
8.15 Additional Granting Parties. Each new Domestic Subsidiary
of the Borrower that is required to become a party to this Agreement pursuant to
Section 8.15 of the Credit Agreement shall become a Granting Party for all
purposes of this Agreement upon execution and delivery by such Subsidiary of an
Assumption Agreement in the form of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations then due and owing shall
have been paid in full, the Commitments have been terminated and no Letters of
Credit shall be outstanding, all Security Collateral shall be released from the
Liens created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
each Granting Party hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Security Collateral shall revert to the Granting Parties. At the request and
sole expense of any Granting Party following any such termination, the
Administrative Agent shall deliver to such Granting Party any Security
Collateral held by the Administrative Agent hereunder, and execute and deliver
to such Granting Party such documents (including without limitation UCC
termination statements) as such Granting Party shall reasonably request to
evidence such termination.
(b) In connection with the sale or other disposition of all of
the Capital Stock of any Guarantor or the sale or other disposition of Security
Collateral permitted under the Credit Agreement and the release of such
Guarantor from its Guarantee or the release of the Security Collateral subject
to such sale or other disposition, the Borrower shall deliver to the
Administrative Agent, a written request for release identifying such Guarantor
or the relevant Security Collateral and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Borrower stating
that such transaction is in compliance with the Credit Agreement and the other
Loan Documents. The Administrative Agent shall execute and deliver to the
relevant Granting Party (at the sole cost and expense of such Granting Party)
all releases or other documents (including without limitation UCC termination
statements) necessary or reasonably desirable for the release of the Liens
created hereby on such Security Collateral as such Granting Party may reasonably
request.
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<PAGE> 43
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
TELEX COMMUNICATIONS, INC.
By: ____________________________
Name:
Title
TELEX COMMUNICATIONS GROUP, INC.
By: ____________________________
Name:
Title
TCI HOLDINGS CORP.
By: ____________________________
Name:
Title
Acknowledged and Agreed to as
of the date hereof by:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: _______________________________
Name:
Title:
39
<PAGE> 44
Schedule 1
----------
NOTICE ADDRESSES OF GUARANTORS
Telex Communications Group, Inc.
c/o Telex Communications, Inc.
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
Attention: John A. Palleschi
Telephone: (612) 884-4051
Telecopy: (612) 887-9172
TCI Holdings Corp.
c/o Telex Communications, Inc.
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
Attention: John A. Palleschi
Telephone: (612) 884-4051
Telecopy: (612) 887-9172
with Copies to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
re: Telex Communications Group, Inc.
Attention: Nicholas E. Somers
Telephone: (212) 816-2889
Telecopy: (212) 816-0166
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: David A. Brittenham, Esq.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
<PAGE> 45
Schedule 2
----------
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
<TABLE>
<CAPTION>
Stock Certificate
Issuer Class of Stock No. No. of Shares
- ----------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
Telex Communications, Inc. Common 2 500
Telex Communications (SEA) Common 5 130,000(1)
PTE, Ltd.
Telex Communications (U.K.) Common 4 3,250
Ltd.
Telex Communications, Ltd. Common C-2 6,500
TCI Holdings Corp. Common 1 65
</TABLE>
- --------------------
1. Notwithstanding the delivery of a stock certificate representing all of
the outstanding shares of common stock of Telex Communications (SEA)
PTE, Ltd., Telex has not pledged more than 65% of the common stock of
Telex Communications (SEA) PTE, Ltd. hereunder.
<PAGE> 46
Schedule 3
----------
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF
EXECUTIVE OFFICE OR SOLE PLACE OF BUSINESS
Granting Party Location
- -------------- --------
Telex Communications Group, Inc. Jurisdiction of Organization:
Delaware
Chief Executive Office:
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
Telex Communications, Inc. As above.
TCI Holdings Corp. As above.
<PAGE> 47
Schedule 4
----------
LOCATION OF INVENTORY AND EQUIPMENT
Granting Party Locations
- -------- ---------------
Telex Communications Group, Inc. None
Telex Communications, Inc.
TCI Holdings Corp. None
<PAGE> 48
Schedule 5
----------
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 49
Schedule 6
----------
EXISTING PRIOR LIENS
I. Real Property Liens
A. 9600 Aldrich Ave. S., Bloomington, Hennepin County, MN
1. Subject to utility and drainage easements as shown on the
recorded plat at Document No. 1093227 (per recital on Certificate of Title).
2. Subject to an easement over the south 12 feet for driveway
purposes as shown in Deed Document No. 226740, Files of Registrar of Titles, and
together with an easement for driveway purposes as shown in Deed Document No.
28103, Files of Registrar of Titles (per recital on Certificate of Title).
3. Easement for storm sewer purposes in favor of the Village
of Bloomington created in Quit Claim Deeds dated February 27, 1957, filed May
15, 1957 as Document No. 529463, and dated February 14, 1957, filed August 2,
1957 as Document No. 535893.
4. Final Certificates dated September 15, 1958, filed October
30, 1958 as Document No. 574454, and dated February 14, 1962, filed April 3,
1962 as Document No. 687375.
5. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 25, 1997.
6. Unrecorded Lease Agreement, dated July 5, 1988, between
Telex Communications, Inc. as lessor and Naegele Outdoor Advertising, Inc. as
Lessee.
7. Unrecorded Building Option and Lease Agreement, dated June
19, 1992, between Telex Communications, Inc. as lessor and SMSA Limited
Partnership as tenant.
B. West First St., Blue Earth, Faribault County, MN
1. Right to construct and maintain temporary snow fences in
favor of the State of Minnesota pursuant to Final Certificate dated September 9,
1932, filed September 12, 1932 in Book 88 of Deeds, Page 604.
2. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 22, 1997.
<PAGE> 50
C. Vacant Land, Lac Lavon Drive and Southcross Drive, Burnsville,
Dakota County, MN
1. Easement for public utility and roadway purposes in favor
of the City of Burnsville dated March 7, 1985, filed March 19, 1985 as Document
No. 145169.
2. Rights of the public in that portion of the subject
property embraced within County State Aid Highway No. 42.
3. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 23, 1997.
D. 1720 East 14th Street, Glencoe, McLeod County, MN
1. Reservation of utility easements in vacated streets and
avenues in favor of the City of Glencoe as contained in Resolutions filed
December 7, 1961, in Book 48 of Misc. Page 53, December 7, 1961 in Book 48 of
Misc., Page 54, and filed June 8, 1967 in Book 55 of Misc., Page 550.
2. Terms and conditions of Easement Agreement dated September
21, 1979, filed September 24, 1979 in Book 85 of Misc., page 79.
3. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 25, 1997.
E. 101 Minneapolis Avenue, LeSueur, LeSueur County, MN
1. Terms and conditions of Grant of Easement dated October 22,
1984, filed October 29, 1984 in Book 209 of Deeds, Page 134.
2. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 16, 1997.
3. Unrecorded Lease, dated August 26, 1996, between Telex
Communications, Inc. as landlord and Taylor Corporation d/b/a Great Papers, a
Minnesota corporation, as tenant.
F. 1620 Industrial Drive NW, Rochester, Olmsted County, MN
2
<PAGE> 51
1. Utility easement as shown on the recorded plat of Fred
Schuster Industrial Park.
2. Terms and conditions of and easements created in instrument
dated October 4, 1982, filed October 4, 1982 in Book N-4 of Misc. Records, Page
716 as Document No. 447119, as modified by the provisions contained in Warranty
Deed dated October 4, 1982, filed October 4, 1982 in Book 382 of Deeds, Page 949
as Document No. 447163.
3. Matters shown on the survey prepared by Westwood
Professional Service, Inc. on or about April 25, 1997.
G. 8601 Cornhusker Highway, Lincoln, Lancaster County, NE
1. Easement for Right-of-Way to Lincoln Telephone & Telegraph
Company dated September 3, 1948, recorded September 23, 1948 in Book 35, Page
498, records of Lancaster County, Nebraska.
2. Easement to City of Lincoln, Nebraska dated February 23,
1954 recorded March 13, 1954 in Book 51, Page 69, records of Lancaster County,
Nebraska.
3. Right-of-Way Easement to River Public Power District dated
March 5, 1956 recorded April 24, 1956 in Book 59, Page 504; conveyed to Nebraska
Public Power District by Corporate Quitclaim Deed dated November 25, 1970,
recorded December 21, 1970 as Instrument number 70-14031, records of Lancaster
County, Nebraska.
4. Pipe Line Easement to Western Power & Gas Company dated
March 8, 1962 recorded April 23, 1962 in Book 87, Page 248, records of Lancaster
County, Nebraska.
5. Terms and conditions of Agreement by and between City of
Lincoln, Lancaster County, Nebraska, and Western Power & Gas Company, with
reference to Easements filed at Book 51, Page 69, and Book 87, Page 248; dated
June 18, 1962, recorded June 22, 1962 in Book 88, Page 91, records of Lancaster
County, Nebraska.
6. Easement for Electric Lines to Consumers Public Power
District dated October 5, 1962 recorded November 19, 1962 in Book 90, Page 85,
records of Lancaster County, Nebraska.
7. Easement for Electric Lines of Underground Electric to
Lincoln Electric System, Lincoln Telephone & Telegraph Company, dated April 21,
1983 recorded June 29, 1983 as Instrument Number 83-12246, records of Lancaster
County, Nebraska.
3
<PAGE> 52
8. Ingress and Egress Restrictions shown in Quitclaim Deed
from the County of Lancaster to the State of Nebraska, dated August 19, 1980
recorded December 3, 1980 as Instrument Number 80-25116, records of Lancaster
County, Nebraska.
9. Any adverse claim based upon the assertion that: (a) some
portion of the land has been created by artificial means, or has accreted to
such portion so created, or (b) some portion of the land has been brought within
the boundaries thereof by any avulsive movement of the adjacent river, or has
been formed by any accretion to any such portion.
Any decrease in area, if any, of the land by erosion and the
consequences of any future change in the location of the adjacent river.
10. Terms and conditions of Notation pursuant to 40 C.F.R.
Subpart G executed by Telex Communications, Inc. dated January 9, 1990, recorded
January 11, 1990 as Instrument Number 90-1098, records of Lancaster County,
Nebraska.
11. Matters shown on the survey prepared by Ross Engineering,
Inc. on or about April 29, 1997.
II. UCC Liens
See attached chart.
4
<PAGE> 53
Schedule 7
----------
ACCOUNTS
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
<PAGE> 54
Schedule 8
----------
CONTRACTS
None.
<PAGE> 55
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of _________ __, 199_, made by
______________________________, a ______________ corporation (the "Additional
Granting Party"), in favor of THE CHASE MANHATTAN BANK, as administrative agent
(in such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Credit Agreement
referred to below and the other Secured Parties (as defined below). All
capitalized terms not defined herein shall have the meaning ascribed to them in
such the Guarantee and Collateral Agreement referred to below, or if not defined
therein, in Credit Agreement.
W I T N E S S E T H :
WHEREAS, GST Acquisition Corp., a Delaware corporation (the
"Borrower"), the Lenders and the Administrative Agent are parties to a Credit
Agreement, dated as of May 6, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
and Telex Communications Group, Inc. ("Holdings") are, or are to become, parties
to the Guarantee and Collateral Agreement, dated as of May 6, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee and
Collateral Agreement") in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties (as defined in the Guarantee and Collateral
Agreement);
WHEREAS, the Additional Grantor is a member of an affiliated
group of companies that includes the Borrower and the other Granting Party to
the Guarantee and Collateral Agreement; the proceeds of the extensions of credit
under the Credit Agreement will be used in part to enable the Borrower to make
valuable transfers to one or more of the other Granting Parties (including the
Additional Grantor) in connection with the operation of their respective
businesses; and the Borrower and the other Granting Parties (including the
Additional Grantor) are engaged in related businesses, and each such Granting
Party (including the Additional Grantor) will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement;
WHEREAS, the Credit Agreement requires the Additional Granting
Party to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Granting Party has agreed to execute
and deliver this Assumption Agreement in order to become a party to the
Guarantee and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
<PAGE> 56
1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Granting Party, as provided
in Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a
party to the Guarantee and Collateral Agreement as a Granting Party thereunder
with the same force and effect as if originally named therein as a Guarantor [,
Grantor and Pledgor] [and Grantor] [and Pledgor]1 and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor]2
thereunder. The information set forth in Annex 1-A hereto is hereby added to the
information set forth in Schedules ____________ to the Guarantee and Collateral
Agreement, and such Schedules are hereby amended and modified to include such
information. The Additional Granting Party hereby represents and warrants that
each of the representations and warranties of such Additional Grantor, in its
capacities as a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor],3
contained in Section 4 of the Guarantee and Collateral Agreement is true and
correct in all material respects on and as the date hereof (after giving effect
to this Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTING PARTY]
By: ________________________________
Name:
Title:
_________________________
1. Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
2. Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
3. Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
2
<PAGE> 57
Annex 1-A to
Assumption Agreement
--------------------
<PAGE> 58
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Amendments, etc. with respect to the Borrower Obligations . . . . . . . . . . . 10
2.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . 11
2.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Representations and Warranties of Each Guarantor. . . . . . . . . . . . . . . . 14
4.2 Representations and Warranties of Each Grantor . . . . . . . . . . . . . . . . 14
4.2.1 Title; No Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2.2 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . . . 14
4.2.3 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2.4 Inventory and Equipment . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2.5 Farm Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2.6 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2.7 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Representations and Warranties of Each Pledgor . . . . . . . . . . . . . . . . 16
SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Covenants of Each Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Covenants of Each Grantor . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2.1 Delivery of Instruments and Chattel Paper . . . . . . . . . . . . . . . 18
5.2.2 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . 18
5.2.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2.4 Maintenance of Perfected Security Interest; Further Documentation . . . 19
5.2.5 Changes in Locations, Name, etc. . . . . . . . . . . . . . . . . . . . 19
5.2.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2.7 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 59
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.2.8 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2.9 Maintenance of Records . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.10 Acquisition of Intellectual Property . . . . . . . . . . . . . . . . . 21
5.2.11 Protection of Trade Secrets . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Covenants of Each Pledgor . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Covenants of Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6. REMEDIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Certain Matters Relating to Accounts . . . . . . . . . . . . . . . . . . . . . 24
6.2 Communications with Obligors; Grantors Remain Liable . . . . . . . . . . . . . 26
6.3 Pledged Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Proceeds to be Turned Over To Administrative Agent . . . . . . . . . . . . . . 28
6.5 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Code and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.7 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 Waiver; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc . . . . . . . . . . 31
7.2 Duty of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Execution of Financing Statements . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Authority of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . 34
7.5 Right Of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 No Waiver by Course of Conduct; Cumulative Remedies . . . . . . . . . . . . . . 35
8.4 Enforcement Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . 35
8.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . 37
8.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.14 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.15 Additional Granting Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.16 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
ii
<PAGE> 1
Exhibit 4(g)
PATENT AND TRADEMARK SECURITY AGREEMENT
PATENT AND TRADEMARK SECURITY AGREEMENT, dated as of May 6,
1997, made by Telex Communications, Inc., a Delaware corporation (the
"Grantor"), in favor of The Chase Manhattan Bank, a New York banking corporation
("Chase"), as administrative agent (in such capacity, the "Administrative
Agent") and Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), as
Documentation Agent (in such capacity, the "Documentation Agent") for the banks
and other financial institutions (the "Lenders") from time to time parties to
the Credit Agreement, dated as of May 6, 1997 (as amended, waived, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
Grantor (as successor by assumption to GST Acquisition Corp. upon the
effectiveness of the Telex Assumption Agreement (as defined herein) the Lenders
and the Administrative Agent and Morgan Stanley.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower (as defined
therein) upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition to the obligation of the Lenders to
make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantor shall execute and deliver this Agreement to the
Administrative Agent for the ratable benefit of the Secured Parties (as defined
below);
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, the Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
capitalized terms which are defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.
(b) The following terms shall have the following meanings:
<PAGE> 2
"Agreement": this Patent and Trademark Security Agreement, as
the same may be amended, supplemented, waived or otherwise modified from time to
time.
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 2 of this Agreement.
"Default": a "Default" as defined in the Credit Agreement.
"Event of Default": an "Event of Default" as defined in the
Credit Agreement.
"General Intangibles": as defined in Section 9-106 of the
Code, including, without limitation, all Patents and Trademarks now or hereafter
owned by the Grantor to the extent such Patents and Trademarks would be included
in General Intangibles under the Code.
"Loan Documents": the collective reference to the "Loan
Documents" as defined in the Credit Agreement.
"Loans": the collective reference to the "Loans" as defined in
the Credit Agreement.
"Obligations": the Obligations (as defined in the Guarantee
and Collateral Agreement) of the Grantor.
"Patent Licenses": all United States written license
agreements of the Grantor with any Person who is not an Affiliate or Subsidiary
of the Grantor in connection with any of the Patents or such other Person's
patents, whether the Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed on
Schedule II hereto, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for sale, all
Inventory (as defined in the Guarantee and Collateral Agreement) now or
hereafter covered by such licenses.
"Patents": all of the Grantor's right, title and interest in
and to all United States patents, patent applications and patentable inventions
and all reissues and extensions thereof, including, without limitation, all
patents and patent applications identified in Schedule II hereto, and including,
without limitation, (a) all inventions and improvements described and claimed
therein, and patentable inventions, (b) the right to sue or otherwise recover
for any and all past, present and future infringements and misappropriations
2
<PAGE> 3
thereof, (c) all income, royalties, damages and other payments now and hereafter
due and/or payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof), and (d) all other rights
corresponding thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind whatsoever
of the Grantor accruing thereunder or pertaining thereto (Patents and Patent
Licenses being, collectively, the "Patent Collateral").
"Proceeds": as defined in Section 9-306(1) of the Code.
"Revolving Credit Commitments": the collective reference to
the "Revolving Credit Commitments" as defined in the Credit Agreement.
"Secured Parties": the collective reference to the
Administrative Agent, the Lenders (including, without limitation, the Issuing
Lender and the Swing Line Lender), any Affiliate of any Lender which has entered
into any Interest Rate Protection Agreement or Permitted Hedging Arrangement
with the Borrower or any of its Subsidiaries, and their respective successors
and assigns.
"Trademark Licenses": all United States written license
agreements of the Grantor with any Person who is not an Affiliate or Subsidiary
of the Grantor in connection with any of the Trademarks or such other Person's
names or trademarks, whether the Grantor is a licensor or a licensee under any
such agreement, including, without limitation, the license agreements listed on
Schedule I hereto, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for sale, all
Inventory (as defined in the Guarantee and Collateral Agreement) now or
hereafter covered by such licenses.
"Trademarks": all of the Grantor's right, title and interest
in and to all United States trademarks, service marks, trade names, trade dress
or other indicia of trade origin or business identifiers, trademark and service
mark registrations, and applications for trademark or service mark registrations
(except for "intent to use" applications for trademark or service mark
registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C.
Section 1051, unless and until an Amendment to Allege Use or a Statement of Use
under Sections 1(c) and 1(d) of said Act has been filed), and any renewals
thereof, including, without limitation, each registration and application
identified in Schedule I hereto, and including, without limitation, (a) the
right to sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (b) all income, royalties, damages
and other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered
3
<PAGE> 4
into in connection therewith, and damages and payments for past or
future infringements thereof), and (c) all other rights corresponding
thereto in the United States and all other rights of any kind
whatsoever of the Grantor accruing thereunder or pertaining thereto,
together in each case with the goodwill of the business connected with
the use of, and symbolized by, each such trademark, service mark, trade
name, trade dress or other indicia of trade origin or business
identifiers (Trademarks and Trademark Licenses being, collectively, the
"Trademark Collateral").
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(d) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to the Grantor, shall
refer to the Grantor's Collateral or the relevant part thereof.
2. Grant of Security Interest. The Grantor hereby grants,
subject to existing licenses granted by the Grantor in the ordinary course of
business with respect to the Collateral (as hereinafter defined), to the
Administrative Agent for the ratable benefit of the Secured Parties a security
interest in all of the following property now owned or at any time hereafter
acquired by the Grantor or in which the Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of the Grantor:
(i) all Patents;
(ii) all Patent Licenses;
(iii) all Trademarks;
(iv) all Trademark Licenses;
(v) all General Intangibles connected with the use of or
symbolized by the Trademarks and Patents; and
4
<PAGE> 5
(vi) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security
and guarantees given by any Person with respect to any of the
foregoing;
provided, that the foregoing grant of a security interest with respect to
General Intangibles, Patent Licenses and Trademark Licenses shall not include a
security interest in, and the Collateral shall not include, any Patent License
or Trademark License with or issued by Persons other than a Subsidiary of the
Grantor that would otherwise be included in the Collateral to the extent that
the grant by such Grantor of such security interest is prohibited by the terms
and provisions of the written agreement or document or instrument creating or
evidencing such license or permit or Patent License or Trademark License, or
gives the other party thereto the right to terminate such Patent License or
Trademark License in the event of the grant of a security interest with respect
thereto. All references in this Agreement to any of the property described in
clauses (i) through (vi) of the preceding sentence, or to any Proceeds thereof,
shall be deemed to be references to such property or Proceeds to the extent such
property or Proceeds constitutes Collateral.
3. Representations and Warranties. The Grantor hereby
represents and warrants to the Administrative Agent on behalf of the Secured
Parties that:
(a) Power and Authority. As of the date hereof, the Grantor
has the corporate power and authority, and the legal right, to make,
deliver and perform its obligations under, and to grant the security
interest in the Trademark Collateral and the Patent Collateral to the
extent provided in, and pursuant to, this Agreement and has taken all
necessary corporate action to authorize the execution, delivery and
performance of, and grant of the security interest in the Trademark
Collateral and the Patent Collateral to the extent provided in, and
pursuant to, this Agreement.
(b) Title; No Other Liens. As of the date hereof, except for
the Liens granted to the Administrative Agent, for the benefit of the
Secured Parties, pursuant to this Agreement and the other Liens
permitted to exist on the Collateral pursuant to the Loan Documents
(including, without limitation, any Liens permitted to exist on the
Collateral pursuant to subsection 8.3 of the Credit Agreement), the
Grantor is (or, in the case of after-acquired Collateral, will be) the
sole, legal and beneficial owner of the entire right, title and
interest in and to the material Trademarks set forth on Schedule I
hereto and the material Patents set forth in Schedule II hereto free
and clear of any and all Liens. As of the date hereof, except as set
forth on Schedule III hereto, no security agreement, financing
statement or other public notice similar in effect with respect to all
or any part of the Collateral is on file or of record in any public
office (including, without limitation, the United States Patent and
Trademark Office), except such as may have been filed in favor of the
Administrative Agent, for the benefit of the Secured Parties, pursuant
to this Agreement or in respect of such Liens as may be permitted
pursuant to the Loan
5
<PAGE> 6
Documents (including, without limitation, any Liens permitted to exist
on the Collateral pursuant to subsection 8.3 of the Credit Agreement).
(c) Perfected First Priority Liens. (i) As of the date hereof,
this Agreement is effective to create, as collateral security for the
Obligations, valid and enforceable Liens on the Collateral in favor of
the Administrative Agent, for the benefit of the Secured Parties,
except as enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(ii) As of the date hereof, except with respect to Liens upon
Patents and Trademarks and Patent Licenses and Trademark Licenses,
which Liens, to the extent not otherwise perfected by the filing of
financing statements under the Code in accordance herewith, would in
the case of Patents and Trademarks listed in Schedules I and II hereto,
or in the case of Patent Licenses and Trademark Licenses listed in
Schedules I and II hereto may be perfected upon the filing, acceptance
and recordation thereof in the United States Patent and Trademark
Office, upon filing of the financing statements delivered to the
Administrative Agent by the Grantor on the Effective Date in the
jurisdictions listed on Schedule 5.14 to the Credit Agreement (which
financing statements are in proper form for filing in such
jurisdictions) (and the recording of this Agreement in the United
States Patent and Trademark Office, and the making of filings after the
Effective Date in any other jurisdiction in the United States as may be
necessary under any Requirement of Law) the Liens created pursuant to
this Agreement will constitute valid and perfected Liens on the
Collateral in the United States in favor of the Administrative Agent
for the benefit of the Secured Parties, which Liens will be prior to
all other Liens of all other Persons with respect to the Collateral,
except for Liens permitted pursuant to the Loan Documents (including,
without limitation, those permitted to exist pursuant to subsection 8.3
of the Credit Agreement), and which Liens are enforceable as such
against all creditors of and purchasers (except to the extent that the
recording of an assignment or other transfer of title to the
Administrative Agent in the United States Patent and Trademark Office
may be necessary for such enforceability) from the Grantor, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law) or
by an implied covenant of good faith and fair dealing.
(d) Consents. No consent of any party (other than the Grantor)
to any material Patent License or material Trademark License
constituting Collateral is required, or purports to be required, to be
obtained by or on behalf of the Grantor in connection with the
execution, delivery and performance of this Agreement that has not been
obtained.
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Each Patent License and Trademark License constituting Collateral is in
full force and effect and constitutes a valid and legally enforceable
obligation of the Grantor and (to the knowledge of the Grantor) each
other party thereto except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor's rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair
dealing and except to the extent the failure of any such Patent License
or Trademark License constituting Collateral to be in full force and
effect or valid or legally enforceable would not be reasonably
expected, in the aggregate, to have a material adverse effect on the
value of the Collateral (as such term is defined in the Credit
Agreement). No consent or authorization of, filing with or other act by
or in respect of any Governmental Authority is required in connection
with the execution, delivery, performance, validity or enforceability
of any of the Patent Licenses or Trademark Licenses constituting
Collateral by any party thereto other than those which have been duly
obtained, made or performed and are in full force and effect and those
the failure of which to make or obtain would not be reasonably
expected, in the aggregate, to have a material adverse effect on the
value of the Collateral (as such term is defined in the Credit
Agreement). Neither such Grantor nor (to the knowledge of such Grantor)
any other party to any Patent License or Trademark License constituting
Collateral is in default in the performance or observance of any of the
terms thereof, except for such defaults as would not reasonably be
expected, in the aggregate, to have a material adverse effect on the
value of the Collateral (as such term is defined in the Credit
Agreement). Except for rights reserved in favor of the United States
government, as required under law, the right, title and interest of the
Grantor in, to and under each Patent License and Trademark License
constituting Collateral are not subject to any defense, offset,
counterclaim or claim which would be reasonably expected, either
individually or in the aggregate, to have a material adverse effect on
the value of the Collateral (as such term is defined in the Credit
Agreement).
(e) Schedules I and II are Complete; All Filings Have Been
Made. Set forth in Schedules I and II is a complete and accurate list
of all material Trademarks and material Patents owned by the Grantor as
of the date hereof. As of the date hereof, the Grantor will have made
all necessary filings to protect and maintain its interest in the
Trademarks and Patents set forth in Schedules I and II, including,
without limitation, all necessary filings and payments of all
maintenance fees, in the United States Patent and Trademark Office to
the extent such Trademarks and Patents are material to the Grantor's
business. Set forth in Schedules I and II is a complete and accurate
list of all of the material Trademark Licenses and material Patent
Licenses owned by the Grantor as of the date hereof.
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<PAGE> 8
(f) The Trademarks and Trademark Licenses are Subsisting and
Not Adjudged Invalid. As of the date hereof, each trademark
registration and trademark application of the Grantor set forth in
Schedule I is subsisting as of the date hereof, and has not been
adjudged invalid, unregisterable or unenforceable, in whole or in part,
and, to the best of such Grantor's knowledge, is valid, registrable and
enforceable. As of the date hereof, each of the Trademark Licenses set
forth in Schedule I is validly subsisting and has not been adjudged
invalid or unenforceable, in whole or in part, and, to the best of such
Grantor's knowledge, is valid and enforceable. As of the date hereof,
each Grantor has notified the Administrative Agent in writing of all
uses of any item of Trademark Collateral material to such Grantor's
business of which such Grantor is aware which could reasonably be
expected to lead to such item becoming invalid or unenforceable,
including unauthorized uses by third parties and uses which were not
supported by the goodwill of the business connected with such
Collateral.
(g) The Patent and Patent Licenses are Subsisting and Not
Adjudged Invalid. As of the date hereof, each Patent and patent
application of the Grantor set forth in Schedule II is subsisting and
has not been adjudged invalid, unpatentable or unenforceable, in whole
or in part, and, to the best of such Grantor's knowledge, is valid,
patentable and enforceable. As of the date hereof, each of the Patent
Licenses set forth in Schedule II is validly subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and, to
the best of such Grantor's knowledge, is valid and enforceable. As of
the date hereof, the Grantor has notified the Administrative Agent in
writing of all uses of any item of Patent Collateral material to such
Grantor's business of which such Grantor is aware which could
reasonably be expected to lead to such item becoming invalid or
unenforceable.
(h) No Previous Assignments or Releases. As of the date
hereof, the Grantor has not made an agreement constituting a present or
future assignment, sale, transfer or encumbrance of any of the
Collateral (except for any such assignment, sale, transfer or
encumbrance permitted under the Loan Documents). Except as permitted by
the Loan Documents or as required by law, the Grantor has not granted
any license, shop right, release, covenant not to sue, or non-assertion
assurance to any Person with respect to any material part of the
Collateral which would have a Material Adverse Effect.
(i) Proper Statutory Notice. The Grantor has marked its
products with the trademark registration symbol (R), the numbers of all
appropriate patents, the common law trademark symbol (TM), or the
designation "patent pending," as the case may be, to the extent that it
is reasonably and commercially practicable.
(j) No Knowledge of Claims Likely to Arise. Except for the
Trademark Licenses and Patent Licenses listed in Schedules I and II
hereto, the Grantor has no knowledge of
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<PAGE> 9
the existence of any right or any claim (other than as permitted by
this Agreement or the Loan Documents) that is likely to be made under
or against any item of Collateral contained on Schedules I and II which
would have a Material Adverse Effect.
(k) No Knowledge of Existing or Threatened Claims. No claim
has been made and is continuing or, to the Grantor's knowledge,
threatened that the use by such Grantor of any item of Collateral is
invalid or unenforceable or that the use by such Grantor of any
Collateral does or may violate the rights of any Person, which would
have a Material Adverse Effect. To the Grantor's knowledge, there is
currently no infringement or unauthorized use of any item of Collateral
contained on Schedules I and II hereto which would have a Material
Adverse Effect.
The Grantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Grantor on and as of each
date on which an extension of credit is made by the Lenders to the Borrower
under the Credit Agreement, in each case as though made on and as of each such
date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date).
4. Covenants. The Grantor covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the payment in full of the Loans, the Reimbursement
Obligations and to the extent then due and owing, all other Obligations, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit:
(a) Further Documentation; Pledge of Instruments and Chattel
Paper. At any time and from time to time, upon the written request of
the Administrative Agent or the Grantor, as the case may be, and at the
sole expense of such Grantor, such Grantor or the Administrative Agent,
as the case may be, will promptly and duly execute and deliver such
further instruments and documents and take such further action as the
Administrative Agent or the Grantor, as the case may be, may reasonably
request for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby. The Grantor also
hereby authorizes the Administrative Agent to file any such financing
or continuation statement without the signature of the Grantor to the
extent permitted by applicable law. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. The Administrative Agent
agrees to notify the Grantor and the Grantor agrees to notify the
Administrative Agent of any financing or continuation statement filed
by it pursuant to this Section 4(a), provided that any failure to give
any the notice shall not affect the validity or effectiveness of any
the filing.
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<PAGE> 10
(b) Indemnification and Expenses. The Grantor agrees to pay,
and to save the Administrative Agent, the other Secured Parties and
their respective agents, officers, directors and successors harmless
from, any and all liabilities and reasonable costs and expenses
(including, without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay by the Grantor in
complying with any material Requirement of Law applicable to any of the
Collateral, or (ii) in connection with any of the transactions
contemplated by this Agreement, provided that such indemnity shall not,
as to the Administrative Agent, any of the other Secured Parties or any
of their respective agents, officers, directors and successors, be
available to the extent that such liabilities, costs and expenses
resulted from the gross negligence or willful misconduct of any of the
same. In any suit, proceeding or action brought by the Administrative
Agent or any other Secured Party under any of the Collateral for any
sum owing thereunder, or to enforce any of the Collateral, the Grantor
will save, indemnify and keep the Administrative Agent, such Secured
Party and their respective agents, officers, directors and successors
harmless from and against all expense, loss or damage suffered by
reason of any defense or counterclaim raised in any such suit,
proceeding or action, except to the extent such expense, loss or damage
resulted from the gross negligence or willful misconduct of any of the
same.
(c) Maintenance of Records. The Grantor will keep and maintain
at its own cost and expense reasonably satisfactory and complete
records of the Collateral, and shall mark such records to evidence this
Agreement and the Liens and the security interests created hereby. For
the Administrative Agent's and the other Secured Parties' further
security, the Administrative Agent, for the benefit of the Secured
Parties, shall have a security interest in all of the Grantor's books
and records pertaining to the Collateral.
(d) Right of Inspection. Upon reasonable written advance
notice to the Grantor and at reasonable intervals, or at any time and
from time to time after the occurrence and during the continuation of
an Event of Default, the Administrative Agent shall have reasonable
access during normal business hours to all the books, correspondence
and records of the Grantor, and the Administrative Agent and its
representatives may examine the same, and to the extent reasonable take
extracts therefrom and make photocopies thereof, and the Grantor agrees
to render to the Administrative Agent, at the Grantor's reasonable cost
and expense, such clerical and other assistance as may be reasonably
requested with regard thereto.
(e) Compliance with Laws, etc. The Grantor will comply in all
material respects with all material Requirements of Law applicable to
the Collateral or any part thereof, except to the extent that the
failure to so comply would not be reasonably expected to materially
adversely affect in the aggregate the Administrative Agent's or the
other
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Secured Parties' rights hereunder, the priority of their Liens on the
Collateral or the value of the Collateral.
(f) Further Identification of Collateral. The Grantor will
furnish to the Administrative Agent from time to time such statements
and schedules further identifying and describing the Collateral, and
such other reports in connection with the Collateral, as the
Administrative Agent may reasonably request, all in reasonable detail.
(g) Security Interest in Any Newly Acquired Collateral. The
Grantor agrees that, should it obtain an ownership interest in any
material Trademark, Patent, Trademark License or Patent License, which
is not now a part of the Collateral, (i) the provisions of Section 2
shall automatically apply thereto, (ii) any such Trademark, Patent,
Trademark License and Patent License shall automatically become part of
the Collateral, and (iii) with respect to any ownership interest in any
such Trademark, Patent, Trademark License or Patent License that such
Grantor should obtain, it shall give notice thereof to the
Administrative Agent in writing, in reasonable detail, at its address
set forth in each of the Credit Agreements within 45 days after the end
of the calendar quarter in which it obtains such ownership interest.
The Grantor authorizes the Administrative Agent to modify this
Agreement by amending Schedules I and II (and will cooperate reasonably
with the Administrative Agent in effecting any such amendment) to
include on Schedule I any Trademark and Trademark License and on
Schedule II any Patent or Patent License of which it receives notice
under this Section, or to prepare and file with the United States
Patent and Trademark Office a supplement to this Agreement to include
any Patent or Trademark of which it receives notice to under this
Section.
(h) Maintenance of the Trademark Collateral. Except as
permitted in the Loan Documents the Grantor agrees to take all
reasonably necessary steps, including, without limitation, in the
United States Patent and Trademark Office or in any court, to (i)
maintain each trademark registration and each Trademark License
identified on Schedule I hereto, and (ii) pursue each trademark
application now or hereafter identified in Schedule I hereto,
including, without limitation, the filing of responses to office
actions issued by the United States Patent and Trademark Office, the
filing of applications for renewal, the filing of affidavits under
Sections 8 and 15 of the United States Trademark Act, and the
participation in opposition, cancellation, infringement and
misappropriation proceedings, except, in each case in which such
Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. The Grantor agrees to take corresponding
steps with respect to each new or acquired trademark or service mark
registration, or application for trademark or service mark
registration, or any rights obtained under any Trademark License, in
each case, which it is now or later becomes entitled, except in each
case in which the Grantor has reasonably determined that any of
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the foregoing is not of material economic value to it. Any expenses
incurred in connection with such activities shall be borne by such
Grantor.
(i) Maintenance of the Patent Collateral. The Grantor agrees
to take all necessary steps, including, without limitation, in the
United States Patent and Trademark Office or in any court, to (i)
maintain each patent and each Patent License identified on Schedule II
hereto, and (ii) pursue each patent application, now or hereafter
identified in Schedule II hereto, including, without limitation, the
filing of divisional, continuation, continuation-in-part and substitute
applications, the filing of applications for reissue, renewal or
extensions, the payment of maintenance fees, and the participation in
interference, reexamination, opposition, infringement and
misappropriation proceedings, except, in each case in which the Grantor
has reasonably determined that any of the foregoing is not of material
economic value to it. The Grantor agrees to take corresponding steps
with respect to each new or acquired patent, patent application, or any
rights obtained under any Patent License, in each case, which it is now
or later becomes entitled, except in each case in which the Grantor has
reasonably determined that any of the foregoing is not of material
economic value to it. Any expenses incurred in connection with such
activities shall be borne by the Grantor.
(j) Preservation and Protection of the Trademark Collateral
and Patent Collateral. Except as provided in Section 4(k) hereof, the
Grantor shall take all steps which it or the Administrative Agent deems
reasonably appropriate under the circumstances to preserve and protect
its material Trademark Collateral and Patent Collateral.
(k) Grantor Shall Not Abandon any Collateral. The Grantor
shall not abandon any trademark registration, patent or any pending
trademark or patent application, in each case listed on Schedule I or
Schedule II, without the written consent of the Administrative Agent,
unless such Grantor shall have previously determined that such use or
the pursuit or maintenance of such trademark registration, patent or
pending trademark or patent application is not of material economic
value to it, in which case, such Grantor will, at least annually, give
notice of any such abandonment to the Administrative Agent in writing,
in reasonable detail, at its address set forth in the Credit Agreement.
(l) Infringement of Any Collateral. In the event that any
Grantor becomes aware that any item of the Collateral which such
Grantor has reasonably determined to be material to its business is
infringed or misappropriated by a third party, which infringement or
misappropriation would reasonably be expected to have a Material
Adverse Effect, the Grantor shall notify the Administrative Agent
promptly and in writing, in reasonable detail, at its address set forth
in the Credit Agreement, and shall take such actions as the Grantor or
the Administrative Agent deems reasonably appropriate under the
circumstances to protect such Collateral, including, without
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limitation, suing for infringement or misappropriation and for an
injunction against such infringement or misappropriation. Any expense
incurred in connection with such activities shall be borne by such
Grantor. The Grantor will advise the Administrative Agent promptly and
in writing, in reasonable detail, at its address set forth in the
Credit Agreement, of any adverse determination or the institution of
any proceeding (including, without limitation, the institution of any
proceeding in the United States Patent and Trademark Office or any
court) regarding any item of the Collateral which has a Material
Adverse Effect.
(m) Use of Statutory Notice. The Grantor shall mark its
products with the trademark registration symbol (R), the numbers of all
appropriate patents, the common law trademark symbol (TM), or the
designation "patent pending," as the case may be, to the extent that it
is reasonably and commercially practicable.
(n) Limitation on Liens on Collateral. The Grantor will not
create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is reasonably necessary to remove,
any material Lien or material adverse claim on or to any of the
Collateral, other than Liens created hereby and other than as permitted
pursuant to the Loan Documents (including, without limitation, any
Liens permitted to exist on the Collateral pursuant to subsection 8.3
of the Credit Agreement), and will defend the right, title and interest
of the Administrative Agent and the other Secured Parties in and to any
of the Collateral against the claims and demands of all Persons
whomsoever, except where failure to defend would not have a Material
Adverse Effect.
(o) Limitations on Dispositions of Collateral. Without the
prior written consent of the Administrative Agent, the Grantor will not
sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, the Collateral, or attempt, offer or contract
to do so, except with respect to licenses in the ordinary course of
business or as permitted by this Agreement or the Loan Documents.
(p) Notices. The Grantor will advise the Administrative Agent
promptly and in writing, in reasonable detail, at its address set forth
in the Credit Agreement, (i) of any Lien (other than Liens created
hereby or permitted under the Loan Documents, including, without
limitation, any Liens permitted to exist on the Collateral pursuant to
subsection 8.3 of the Credit Agreement) on any Patents or Trademarks
and (ii) of the occurrence of any other event which would reasonably be
expected in the aggregate to have a material adverse effect on the
aggregate value of the Collateral taken as a whole or the Liens created
hereunder.
5. Administrative Agent's Appointment as Attorney-in-Fact. (a)
Powers. The Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or
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agent of the Administrative Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Grantor and in the name of the Grantor or in its own
name, for the purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents and instruments
which may be reasonably necessary or desirable to accomplish the purposes of
this Agreement to the extent permitted by law, and, without limiting the
generality of the foregoing, to the extent permitted by law, the Grantor hereby
gives the Administrative Agent the power and right, on behalf of the Grantor,
without notice to or assent by the Grantor, to do, at any time when an Event of
Default has occurred and is continuing, the following:
(i) to execute and deliver any and all agreements,
instruments, documents, and papers as the Administrative Agent may
reasonably request to evidence the Administrative Agent's and the other
Secured Parties' security interest in any of the Collateral and the
goodwill of the Grantor relating thereto or represented thereby;
(ii) in the name of the Grantor or its own name, or
otherwise, to take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any General Intangible (to the extent that the
foregoing constitute Collateral) or with respect to any other
Collateral and to file any claim or to take any other action or
institute any proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under such General Intangible or
with respect to any other Collateral whenever payable;
(iii) to pay or discharge Liens placed on the Collateral,
other than Liens permitted under this Agreement or the other Loan
Documents, including, without limitation, any Liens permitted to exist
on the Collateral pursuant to subsection 8.3 of the Credit Agreement;
and
(iv) (A) to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) to ask for, or demand, collect,
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (C) to sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
thereof and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action or proceeding brought against the
Grantor with respect to any of the Collateral; (F) to settle,
compromise or
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adjust any suit, action or proceeding described in clause (E) above
and, in connection therewith, to give such discharges or releases as
the Administrative Agent may deem appropriate; (G) subject to any
pre-existing reserved rights or licenses, to assign any Patent or
Trademark constituting Collateral (along with the goodwill of the
business to which any such Patent or Trademark pertains), for such term
or terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (H) generally, to
sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Administrative Agent were the absolute owner thereof for all
purposes, and to do, at the Administrative Agent's option and the
Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems reasonably necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the other Secured Parties' Liens thereon and to effect the
intent of this Agreement, all as fully and effectively as the Grantor
might do.
The Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and the other Obligations then due and owing, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit.
(b) Other Powers. The Grantor also authorizes the
Administrative Agent, from time to time if an Event of Default shall have
occurred and be continuing, to execute, in connection with any sale provided for
in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on the Part of Administrative Agent or Secured
Parties. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any other Secured Party to exercise any such powers.
The Administrative Agent and the other Secured Parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees,
affiliates, agents or successors shall be responsible to the Grantor for any act
or failure to act hereunder, except for gross negligence or willful misconduct
of any of the same.
6. Performance by Administrative Agent of Grantor's
Obligations. If the Grantor fails to perform or comply with any of its
agreements contained herein and the Administrative Agent, as provided for by the
terms of this Agreement, shall perform or comply, or otherwise cause performance
or compliance, with such agreements, the reasonable expenses of the
Administrative Agent incurred in connection with such performance or compliance,
together
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with interest thereon at a rate per annum equal to 1.75% above the rate
applicable to ABR Loans that are Term Loans, shall be payable by the Grantor to
the Administrative Agent on demand, and the Grantor's obligations to make such
payments shall constitute Obligations secured hereby.
7. Proceeds. It is agreed that if an Event of Default shall
occur and be continuing, (a) all Proceeds of any Collateral received by the
Grantor consisting of cash, checks and other near-cash items shall be held by
the Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of the Grantor, and shall, forthwith upon receipt by
the Grantor, be turned over to the Administrative Agent in the exact form
received by the Grantor (duly indorsed by the Grantor to the Administrative
Agent, if required), and (b) any and all such Proceeds received by the
Administrative Agent (whether from the Grantor or otherwise) shall be held by
the Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations (whether matured or unmatured), and/or then or at
any time thereafter may, in the sole discretion of the Administrative Agent, be
applied by the Administrative Agent against the Obligations then due and owing
in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Administrative Agent (including, without limitation, in
its capacity as Credit Agreement Administrative Agent) in connection
with this Agreement, the Guarantee and Collateral Agreement, the Credit
Agreement, any other Loan Document or any of the Obligations,
including, without limitation, all court costs and the reasonable fees
and expenses of its agents and legal counsel, and any other reasonable
costs or expenses incurred in connection with the exercise by the
Administrative Agent (including, without limitation, in its capacity as
Credit Agreement Administrative Agent) of any right or remedy under
this Agreement, the Credit Agreement, or any other Loan Document;
SECOND, to the ratable satisfaction of all other Obligations;
and
THIRD, to the Grantor or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same.
8. Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties, may
exercise all rights and remedies of a secured party under the Code, and, to the
extent permitted by law, all other rights and remedies granted to the
Administrative Agent or any Secured Party in this Agreement and the other Loan
Documents and in any other instrument or agreement securing, evidencing or
relating to the Obligations. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances, to the extent permitted by law, forthwith
collect, receive, appropriate
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and realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any other
Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Administrative Agent
or any other Secured Party shall have the right, to the extent permitted by law,
upon any such sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Grantor, which right
or equity is hereby waived and released. The Grantor further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at the Grantor's premises or elsewhere. In the event
of any sale, assignment, or other disposition of any of the Collateral, the
goodwill of the business connected with and symbolized by any Trademark
Collateral subject to such disposition shall be included, and the Grantor shall
supply to the Administrative Agent or its designee the Grantor's know-how and
expertise relating to the Collateral subject to such disposition, and the
Grantor's notebooks, studies, reports, records, documents and things embodying
the same or relating to the inventions, processes or ideas covered by, and to
the manufacture of any products under or in connection with, the Collateral
subject to such disposition, and the Grantor's customer's lists, studies and
surveys and other records and documents relating to the distribution, marketing,
advertising and sale of products relating to the Collateral subject to such
disposition. The Administrative Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
other Secured Parties hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment and performance in whole or in
part of the Obligations then due and owing, in the order of priority specified
in Section 7 hereof, and only after such application and after the payment by
the Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the Grantor. To the
extent permitted by applicable law, (a) the Grantor waives all claims, damages
and demands it may acquire against the Administrative Agent or any other Secured
Party arising out of the repossession, retention or sale of the Collateral,
other than any such claims, damages and demands that may arise from the gross
negligence or willful misconduct of any of them, and (b) any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay in full the Loans, the Reimbursement Obligations, and,
to the extent then due and owing, all other Obligations, including, without
limitation, the reasonable fees and disbursements of any
17
<PAGE> 18
attorneys employed by the Administrative Agent or any other Secured Party to
collect such deficiency, as provided in the Credit Agreement.
9. Limitation on Duties Regarding Preservation of Collateral.
The Administrative Agent's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under Section
9-207 of the Code or otherwise, shall be to deal with it in the same manner as
the Administrative Agent deals with similar property for its own account.
Neither the Administrative Agent, any other Secured Party, nor any of their
respective directors, officers, employees, affiliates or agents shall be liable
for failure to demand, collect or realize upon all or any part of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Grantor or any other
Person.
10. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are powers coupled with
an interest and are irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and, to the extent then due and owing, all other
Obligations, the termination of the Revolving Credit Commitments and the
expiration, termination or return to the Issuing Lender of any Letters of
Credit.
11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Administrative
Agent nor any other Secured Party nor the Grantor shall by any act (except by a
written instrument pursuant to Section 14 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any other Secured Party or
the Grantor, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
any other Secured Party or the Grantor of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, such other Secured Party or the Grantor would otherwise
have on any future occasion. The rights and remedies herein provided
18
<PAGE> 19
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
14. Waivers and Amendments; Successors and Assigns. None of
the terms or provisions of this Agreement may be amended, supplemented, waived
or otherwise modified except by a written instrument executed by the Grantor and
the Administrative Agent, provided that, if requested by the Grantor, any
provision of this Agreement for the benefit of the Administrative Agent and/or
the other Secured Parties may be waived by the Administrative Agent in a written
letter or agreement executed by the Administrative Agent or by telex or
facsimile transmission from the Administrative Agent. This Agreement shall be
binding upon and shall inure to the benefit of the Grantor and its successors
and assigns, and the Administrative Agent and the other Secured Parties and
their respective successors, indorsees, transferees and assigns, except that
(other than in accordance with subsection 8.5 of the Credit Agreement) the
Grantor shall not assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Administrative
Agent.
15. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be made in accordance with subsection 11.2 of
the Credit Agreement. The Administrative Agent, the Secured Parties and the
Grantor may change their respective addresses and transmission numbers for
notices by notice in the manner provided in this Section 15.
16. Authority of Administrative Agent. The Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and the Grantor shall not be under any obligation to make any inquiry
respecting such authority.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
18. Release of Collateral and Termination. (a) This Agreement
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms and the security interest created by this Agreement
shall not be released until the payment in full of the Loans, the Reimbursement
Obligations and the other Obligations then due and owing shall have
19
<PAGE> 20
occurred, the Revolving Credit Commitments shall have been terminated and any
Letters of Credit shall have expired or been terminated or returned to the
Issuing Lender, at which time the Collateral shall be released from the Liens
created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
the Grantor hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party, and all rights to the Collateral shall
revert to the Grantor, provided that if any payment, or any part thereof, of any
of the Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any other Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Grantor or any other Loan
Party, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or a trustee or similar officer for, the Grantor or any other
Loan Party or any substantial part of its property, or otherwise, this
Agreement, all rights hereunder and the Liens created hereby shall continue to
be effective, or be reinstated, as though such payments had not been made. Upon
request of the Grantor following any such termination, the Administrative Agent
shall reassign (at the sole cost and expense of the Grantor) to the Grantor any
Collateral held by the Administrative Agent hereunder, and execute and deliver
(at the sole cost and expense of the Grantor) to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination and
reassignment.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by the Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent shall execute and deliver to the
Grantor (at the sole cost and expense of the Grantor) all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral.
19. Incorporation of Provisions of Guarantee and Collateral
Agreement. The Grantor hereby acknowledges and affirms that the rights and
remedies of the Administrative Agent with respect to the security interest in
the Collateral made and granted hereby are more fully set forth in the Guarantee
and Collateral Agreement, the terms, conditions and other provisions of which,
in so far as they relate to the Collateral, such security interest and such
rights and remedies, are incorporated by reference herein as if fully set forth
herein. Nothing in this Agreement shall defer or impair the attachment or
perfection of any security interest in any collateral described in the Guarantee
and Collateral Agreement which would attach or be perfected pursuant to the
terms of the Guarantee and Collateral Agreement without action by the Grantor or
any other Person.
20. Interpretation. In the event of a conflict between any
term of this Agreement and the terms of the Credit Agreement, the terms of the
Credit Agreement shall control.
20
<PAGE> 21
21. Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Grantor and the Administrative Agent with
respect to the subject matter hereof and there are no promises or
representations by the Grantor, the Administrative Agent or any other Secured
Party relative to the subject matter hereof not reflected or referred to herein
or therein.
22. Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient forum and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Grantor or the applicable Secured Party, as the case
may be, at the address referred to in Section 15 or at such other
address of which the Administrative Agent and the Grantor shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 22 any punitive damages.
23. WAIVER OF JURY TRIAL. THE GRANTOR AND THE ADMINISTRATIVE
AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
21
<PAGE> 22
24. Counterparts. This Agreement may be executed and
acknowledged by one or more of the parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
22
<PAGE> 23
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
TELEX COMMUNICATIONS, INC.
By: __________________________
Title:
ACKNOWLEDGED AND AGREED AS OF
THE DATE HEREOF BY:
THE CHASE MANHATTAN BANK, as Administrative Agent
By:__________________________________________________
Title:
23
<PAGE> 24
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, 1997, before me personally came
_______________ to me known, who, being by me duly sworn, did depose and say he
resides at __________ and that he is the __________of Telex Communications,
Inc., the corporation described in and which executed the above instrument; that
he has been authorized to execute said instrument on behalf of said corporation;
and that he signed said instrument on behalf of said corporation pursuant to
said authority.
______________________
Notary Public
[Notarial Seal]
<PAGE> 25
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, 1997, before me personally came
__________ to me known, who, being by me duly sworn, did depose and say he
resides at __________ and that he is the __________ of THE CHASE MANHATTAN BANK,
the national banking association described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said association; and that he has signed said instrument on behalf of said
association pursuant to said authority.
______________________
Notary Public
[Notarial Seal]
<PAGE> 26
Schedule I
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 27
Schedule II
PATENTS AND PATENT LICENSES
<PAGE> 28
Schedule III
EXISTING SECURITY INTERESTS
None
<PAGE> 1
================================================================================
Exhibit 10(a)
STOCKHOLDERS AND REGISTRATION
RIGHTS AGREEMENT
Amended and Restated as of
May 6, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Restrictions on Transfer of Shares....................................... 2
1.1. Restriction on Transfers.......................................... 2
1.2. Management Permitted Transferees Trust,
Corporation, Partnership, etc........................................... 3
2. Sales to the Company..................................................... 3
2.1. The Management Stockholders....................................... 3
2.2. Notice............................................................ 4
2.3. Payment........................................................... 4
3. Right of the Company to Purchase from Management
Stockholders Shares of Common Stock.......................................... 5
3.1. Right to Purchase................................................. 5
3.2. Notice............................................................ 6
3.3. Payment........................................................... 6
3.4. Deferral of Payments.............................................. 6
3.5. Promissory Notes. ................................................ 7
3.6. Interest.......................................................... 7
4. Purchase Price........................................................... 8
4.1. Valuation Formula................................................. 8
4.2. Dispute Resolution Procedure...................................... 8
4.3. Fair Market Value................................................. 9
4.4. Carrying Value.................................................... 11
4.5. Other Defined Terms............................................... 11
4.6. Costs............................................................. 13
5. Prohibited Purchases, etc................................................ 13
5.1. Prohibited Purchases.............................................. 13
5.2. Prohibited Purchases Termination Date............................. 16
5.3. Special Right With Respect to Certain Puts and
Calls................................................................... 16
6. Involuntary Transfers.................................................... 17
7. Tag-Along and Drag-Along Rights......................................... 17
7.1. Tag-Along Rights.................................................. 17
7.2. Drag-Along Rights................................................. 18
8. Registrations Upon Request............................................... 18
</TABLE>
iv
<PAGE> 3
<TABLE>
<S> <C>
8.1. Requests.......................................................... 18
8.2. Filing of Registration Statements................................. 19
8.3. Registration Statement Form....................................... 19
8.4. Expenses.......................................................... 20
8.5. No Company Initiated Registration................................. 20
9. Registration Rights...................................................... 20
9.1. Incidental Registrations.......................................... 20
9.2. Registration Expenses............................................. 22
10. Registration Procedures................................................. 22
11. Furnishing of Information; Reasonable Investigation..................... 26
12. Amendments to Registration Statement.................................... 27
13. Underwritten Offerings.................................................. 27
13.1. Underwriting Agreement........................................... 27
13.2. Selection of Underwriters........................................ 28
14. Holdback Agreements..................................................... 28
15. No Grant of Future Registration Rights.................................. 29
16. Indemnification......................................................... 29
16.1. Indemnification by the Company................................... 29
16.2. Indemnification by the Sellers................................... 30
16.3. Notices of Claims, etc........................................... 31
16.4. Indemnification Payments......................................... 32
16.5. Other Remedies................................................... 32
17. Stock Splits, etc....................................................... 32
18. Termination............................................................. 33
19. Definitions............................................................. 33
20. Stock Certificate Legend................................................ 38
21. Covenants; Representation and Warranties. ............................. 39
21.1. No Other Arrangements or Agreements.............................. 39
21.2. New Management Stockholders...................................... 40
21.3. Limitation on Transactions with Affiliates....................... 40
22. Amendment and Modification.............................................. 41
</TABLE>
v
<PAGE> 4
<TABLE>
<S> <C>
23. Assignment.............................................................. 41
23.1. Assignment by the Company........................................ 41
23.2. Assignment Generally............................................. 41
24. Agreements to Be Bound.................................................. 42
25. Recapitalizations, Exchanges, etc. Affecting the Common
Stock........................................................................ 42
26. Rule 144 etc............................................................ 43
27. Further Assurances...................................................... 43
28. Governing Law........................................................... 43
29. Invalidity of Provision................................................. 43
30. Notices................................................................. 43
31. Headings; Execution in Counterpart...................................... 45
32. Entire Agreement........................................................ 45
33. Effect as to Princes Gate Investors..................................... 45
34. Injunctive Relief....................................................... 45
</TABLE>
vi
<PAGE> 5
AMENDED AND RESTATED STOCKHOLDERS AND REGISTRATION
RIGHTS AGREEMENT
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT, dated as of
March 4, 1997, as amended and restated as of May 6, 1997, among GST Acquisition
Corp. ("GST"; and after giving effect to the Merger referred to below with Telex
Communications Group, Inc., the "Company"), Greenwich II LLC, a Delaware limited
liability company ("Greenwich"), and the Management Stockholders set forth on
Schedule A hereto (such Management Stockholders, together with any Persons who
become a party to this Agreement pursuant to Section 21.2, collectively the
"Management Stockholders"). Greenwich and the Management Stockholders are
hereinafter referred to collectively as the "Stockholders", and each
individually as a "Stockholder". Notwithstanding anything in this Agreement to
the contrary, this Agreement shall take effect only upon the closing of the
Merger referred to below and shall terminate and be of no further force or
effect if such Merger does not occur.
W I T N E S S E T H :
WHEREAS, Greenwich, GST, and Telex Communications Group, Inc.
("Telex") are party to that certain Agreement and Plan of Merger, dated as of
March 4, 1997 (the "Merger Agreement"), pursuant to which, GST shall merge with
and into Telex (the "Merger"), with GST being the Surviving Corporation of the
Merger and thereafter being referred to herein as the "Company";
WHEREAS, immediately after the Merger (a) Greenwich will own
approximately 86% of the total issued and outstanding shares of common stock,
par value $.0l per share, of the Company ("Common Stock"), and (b) each
Management Stockholder will own (x) the number of shares of Common Stock set
forth opposite such Management Stockholder's name on Schedule A hereto and (y)
options to acquire the number of additional shares of Common Stock set forth
opposite such Management Stockholder's name on Schedule A hereto;
WHEREAS, in connection with the Merger, the Company is
adopting the Stock Option Plan (as defined below) under which the Management
Stockholders will be granted
1
<PAGE> 6
additional options to acquire additional shares of Common Stock; and
WHEREAS, the Company has entered into a Securities Purchase
Agreement with the purchasers named therein (the "Princes Gate Securityholders")
dated as of May 6, 1997 (the "Securities Purchase Agreement") pursuant to which
each Purchaser has agreed to purchase Subordinated Notes (as defined below) in
accordance with the terms and conditions thereof;
WHEREAS, in certain circumstances, as provided in the
Subordinated Notes, Holdings may issue Warrants (as defined below) to the
Purchasers in satisfaction of certain obligations thereunder;
WHEREAS, the Company has entered into a Securityholders
Agreement with the Princes Gate Securityholders dated as of May 6, 1997 (the
"Securityholders Agreement"); and
WHEREAS, the parties hereto believe it to be in their best
interests that they enter into this Agreement providing for certain rights and
restrictions with respect to the shares of Common Stock owned from time to time
by them or their transferees and providing for certain rights and restrictions
in relation to the rights and obligations of the Princes Gate Securityholders
and the Company under the Securityholders Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
1. Restrictions on Transfer of Shares.
1.1. Restriction on Transfers. Except for Transfers (as
defined below) to a transferee pursuant to Section 1.2 (a "Management Permitted
Transferee"), sales of shares of Common Stock to the Company pursuant to Section
2 and 3 and as otherwise provided in this Agreement, each Management Stockholder
shall not, without the prior written consent of Greenwich, 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
2
<PAGE> 7
of (hereinafter, "Transfer", and "Transferred" and "Transferring" shall have
correlative meanings) any shares of Common Stock now or hereafter owned by such
Management Stockholder, or any interest therein or rights relating thereto,
including, without limitation, any Option now or hereafter owned by such
Management Stockholder.
1.2. Management Permitted Transferees. Trust, Corporation,
Partnership, etc. Subject to Section 24, each Management Stockholder may
Transfer any shares of Common Stock now or hereafter owned by such Management
Stockholder or any interest therein (i) for estate planning purposes of such
Management Stockholder and with the prior written consent of the Board of
Directors of the Company (the "Board"), which consent shall not be unreasonably
withheld, to (A) a trust under which the distribution of the shares of Common
Stock may be made only to beneficiaries who are such Management Stockholder,
such Management Stockholder's spouse, parents or lineal descendants or members
of such Management Stockholder's immediate family, (B) a charitable remainder
trust, the income from which will be paid to such Management Stockholder during
such Management Stockholder's life, (C) a corporation, the stockholders of which
are only such Management Stockholder, such Management Stockholder's spouse,
parents or lineal descendants or members of such Management Stockholder's
immediate family or (D) a partnership, the partners of which are only such
Management Stockholder, such Management Stockholder's spouse, parents or lineal
descendants or members of such Management Stockholder's immediate family or (ii)
in case of such Management Stockholder's death, by will or by the laws of
intestate succession, to such Management Stockholder's executors,
administrators, testamentary trustees, legatees or beneficiaries; provided,
however, that in each such case, the shares of Common Stock so Transferred shall
be subject to the provisions of Sections 2, 3 and 6 of this Agreement as though
the Transferring Management Stockholder were the holder of such shares.
2. Sales to the Company.
2.1. The Management Stockholders. Subject to all subsections
of this Section 2 and Section 5, each Management Stockholder shall have the
right to sell to the Company, and the Company shall have the obligation to
purchase from such Management Stockholder, all, but not less than all, of such
3
<PAGE> 8
Management Stockholder's shares of Puttable Common Stock at their Fair Market
Value if the employment of such Management Stockholder with the Company or any
of its subsidiaries is terminated by the Company or any such subsidiary without
Cause (as defined in Section 19.4) or terminates as a result of (a) the death or
Disability (as defined in Section 19.4) of such Management Stockholder, (b) the
resignation of such Management Stockholder for Good Reason (as defined in
Section 19.6) or (c) the retirement of such Management Stockholder upon or after
reaching the age of 65 ("Retirement"); it being understood and agreed that a
Management Stockholder's exercise of such Management Stockholder's rights
hereunder shall not limit such Management Stockholder's right to also exercise
such Management Stockholder's put right in the future with respect to any shares
of Common Stock which did not constitute shares of Puttable Common Stock at the
time of such earlier exercise.
2.2. Notice. If any Management Stockholder wishes to sell
shares constituting Puttable Common Stock pursuant to Section 2.1, such
Management Stockholder (or such Management Stockholder's Permitted Transferee,
as the case may be) shall so notify the Company in writing no later than the
180th day after the later to occur of (i) the event first giving rise to such
Management Stockholder's right to sell such shares of Puttable Common Stock and
(ii) such Management Stockholder's acquisition of such shares of Puttable Common
Stock. All such notices shall specify the number of shares of Puttable Common
Stock such Management Stockholder owns.
2.3. Payment. Subject to Section 5, payment for shares of
Common Stock constituting Puttable Common Stock sold by a Management Stockholder
pursuant to Section 2.1, together with interest accrued thereon, if any, shall
be made on the date that is 30 days (or the first business day thereafter if
such 30th day is not a business day) following the date of the receipt by the
Company of the Management Stockholder's notice pursuant to Section 2.2;
provided, however, that if either the Company or such Management Stockholder
declines to accept, in accordance with Section 4 hereof, a determination of Fair
Market Value based on the then most recently established Valuation Formula, then
such payment shall be made on the date that is 30 days (or the first business
day thereafter if the 30th day is not a
4
<PAGE> 9
business day) following the date on which the Fair Market Value for such shares
is established in accordance with the applicable provisions of Section 4 hereof.
Any payments required to be made by the Company under this Section 2.3 shall
accrue simple interest at a rate per annum equal to the prime rate as announced
from time to time by The Chase Manhattan Bank (the "Prime Rate") from and
including the date of termination of employment of the relevant Management
Stockholder to but excluding the date the Company shall have made such payments.
3. Right of the Company to Purchase from Management
Stockholders Shares of Common Stock.
3.1. Right to Purchase. Subject to all subsections of this
Section 3 and Section 5, the Company shall have the right to purchase from each
Management Stockholder, and each Management Stockholder shall have the
obligation to sell to the Company, all, but not less than all, of such
Management Stockholder's shares of Common Stock, and all, but not less than all
of such Management Stockholders' Vested Options:
(a) at the Fair Market Value of the shares of Common Stock to
be purchased (and, in the case of Vested Options, at the excess of the
aggregate Fair Market Value of all of the shares of Common Stock which
are subject to the Vested Options to be purchased over the aggregate
exercise price therefor) if the employment of such Management
Stockholder's employment with the Company or any of its subsidiaries is
terminated by the Company or any such subsidiary without Cause, or
terminates as a result of (i) the death or Disability of such
Management Stockholder, (ii) the resignation of such Management
Stockholder for Good Reason or (iii) the Retirement of such Management
Stockholder;
(b) at the lesser of the Fair Market Value and the Carrying
Value (as defined in Section 4.4 (a)) of the shares of Common Stock to
be purchased (and, in the case of Vested Options, at the lesser of (A)
the excess of (x) the aggregate Fair Market Value of the shares of
Common Stock which are subject to the Vested Options to be purchased
over (y) the aggregate exercise price therefor and (B) the excess of
the Carrying Value of
5
<PAGE> 10
the shares of Common Stock which are subject to the Vested Options to
be purchased over (y) the aggregate exercise price therefor) if the
employment of such Management Stockholder with the Company or any of
its subsidiaries is terminated by the Company or any such subsidiary
for Cause; or
(c) at the Fair Market Value or the Carrying Value (as defined
in Section 4.4 (b)) of the shares of Common Stock to be purchased (and,
in the case of Vested Options, at (A) the excess of (x) the Fair Market
Value of the shares of Common Stock which are subject to the Vested
Options to be purchased over (y) the aggregate exercise price therefor
or (B) the excess of (x) the Carrying Value of the shares of Common
Stock which are subject to the Vested Options to be purchased over (y)
the aggregate exercise price therefor), in all cases (except for the
proviso below) in the sole discretion of the Board, if the employment
of such Management Stockholder with the Company or any of its
subsidiaries is terminated for any reason other than as a result of an
event described in paragraph (a) or (b) of this Section 3.1; provided,
that, in the event that at the time of the purchase in question, the
Fair Market Value is less than the Carrying Value, any such purchase
shall be at the Carrying Value of the shares of Common Stock to be
purchased (and, in the case of Vested Options, at the excess of (x) the
Carrying Value of the shares of Common Stock which are subject to the
Vested Options to be purchased over (y) the aggregate exercise price
therefor).
3.2. Notice. If the Company wishes to purchase shares of
Common Stock and/or Vested Options from a Management Stockholder pursuant to
Section 3.1, it shall so notify such Management Stockholder (or such Management
Stockholder's estate, as the case may be) in writing not more than 60 days after
the occurrence of the event giving rise to the Company's right to acquire such
Management Stockholder's shares of Common Stock and/or Vested Options.
3.3. Payment. Subject to Section 5, payment for shares of
Common Stock and/or Vested Options purchased by the Company pursuant to Section
3.1(a), together with interest accrued thereon, if any, shall be made on the
date that is 30 days (or the first business day thereafter if the
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30th day is not a business day) following the date of the receipt by a
Management Stockholder of the Company's notice pursuant to Section 3.2;
provided, however, that if such payment is in any way dependent on Fair Market
Value and, either the Company or such Management Stockholder declines to accept,
in accordance with Section 4 hereof, a determination of Fair Market Value based
on the then most recently established Valuation Formula, then such payment shall
be made on the date that is 30 days (or the first business day thereafter if the
30th day is not a business day) following the date on which the Fair Market
Value for such shares is established in accordance with the applicable
provisions of Section 4 hereof.
3.4. Deferral of Payments. Subject to Section 5 and in the
sole discretion of the Board, payment for shares of Common Stock and/or Vested
Options purchased by the Company pursuant to Section 3.1(b) or 3.1(c), in each
case together with interest accrued thereon if any, shall be made as follows (or
on a more accelerated schedule if the Board so elects):
(a) if the date of termination occurs prior to the third
anniversary of the Effective Time, then one-third of the purchase price
of the purchased shares and/or Vested Options shall be paid within 30
days following each of the third, fourth and fifth anniversaries of the
Effective Time;
(b) if the date of termination occurs on or after the third
anniversary of the Effective Time and prior to the fourth anniversary
of the Effective Time, then (x) two-thirds of the purchase price of the
purchased shares and/or Vested Options shall be paid within 30 days
following such fourth anniversary and (y) one-third of the purchase
price of the purchased shares and/or Vested Options shall be paid
within 30 days following the fifth anniversary of the Effective Time;
(c) if the date of termination occurs on or after the fourth
anniversary of the Effective Time and prior to the fifth anniversary of
the Effective Time, then the purchase price of the purchased shares
and/or Vested Options shall be paid within 30 days following such fifth
anniversary; and
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(d) if the date of termination occurs on or after the fifth
anniversary of the Closing, then the purchase price of the purchased
shares and/or Vested Options shall be paid contemporaneously with the
surrender of the certificates representing the purchased shares.
3.5. Promissory Notes. Upon exercising any right to defer any
payment for shares of Common Stock under Section 3.4 hereof, the Company shall
promptly issue a promissory note to the Management Stockholder in question
evidencing the Company's payment obligations with respect to such shares under
Sections 3.4 and 3.6 hereof; it being understood and agreed that the Company
shall not issue any such promissory note upon exercising any right to defer any
payment for the purchase of any Vested Options under Section 4.
3.6. Interest. Any payments based on Fair Market Value
required to be made by the Company under Section 3.1 shall accrue simple
interest at a rate per annum equal to the Prime Rate on the amounts not paid
from and including the date of termination to but excluding the date the Company
shall have made such payments.
4. Purchase Price.
4.1. Valuation Formula. No later than 45 days following the
end of each fiscal quarter of the Company, the Company shall provide to each
holder of equity securities of the Company a statement (the "Valuation
Statement") setting forth the Valuation Formula then in effect and the fair
market value of the Company as of the end of the immediately preceding fiscal
quarter determined on the basis of such Valuation Formula. The Valuation
Statement shall reflect in reasonable detail the basis for such calculation of
fair market value. The calculation of fair market value set forth in the
Valuation Statement provided to Stockholders following the end of the Company's
fiscal year shall be subject to review by the Company's independent accountants
in connection with the year-end audit of the Company's financial statements. In
the event that the Company's independent accountants determine that an error has
been made in the calculation of fair market value reflected in such Valuation
Statement, the Company shall promptly provide to the holders of equity
securities of the Company a revised
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Valuation Statement setting forth the correct calculation of fair market value.
4.2. Dispute Resolution Procedure. (a) In the event a
Management Stockholder becomes entitled to put his shares pursuant to Section 2
or the Company is entitled to call a Management Stockholder's shares pursuant to
Section 3 of this Agreement, the Management Stockholder or the Company, as the
case may be, shall indicate in their written notice of their intent to put or
call (the "Valuation Trigger Notice") (a copy of which shall be delivered to
Greenwich and the Princes Gate Investors) whether they accept a determination of
fair market value based on the Valuation Formula. The parties receiving such
Valuation Trigger Notice shall then have a period of 15 days to provide written
notice (a "Valuation Response Notice") to each of the other parties stating
whether they accept a determination of fair market value on such basis.
In the event any party (a "Disputing Party") indicates its
intention to dispute fair market value as determined under the Valuation
Formula, such Disputing Party or Parties shall include in the Valuation Trigger
Notice or the Valuation Response Notice, as the case may be, such Disputing
Party's valuation of the fair market value of the shares subject to the put or
call. The parties shall meet promptly (but in any event within 15 days)
following the delivery of the Valuation Response Notice and shall negotiate in
good faith to agree upon a determination of fair market value.
If the parties are unable to reach an agreement on fair market
value on a negotiated basis within 30 days, then the Disputing Party or Parties
may request an appraisal. The appraisal shall be conducted by a nationally
recognized investment bank or appraisal firm from a list of 5 such firms (the
"Approved Appraisers") to be designated from time to time by mutual agreement of
Greenwich, the Princes Gate Investors and the Management Stockholders (acting by
majority vote). The Approved Appraiser shall be chosen (i) by the Management
Stockholders (acting by majority vote) or the Company if either (but not both)
is a non-Disputing Party and (ii) the Company, if both the Company and the
Management Stockholders are non-Disputing Parties. In the event that both the
Company and the Management Stockholders are Disputing Parties they shall attempt
to agree on an
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Approved Appraiser to conduct the appraisal. If they are unable to do so the
Management Stockholders (acting by majority vote) and the Company shall each
designate an Approved Appraiser and two appraisals shall be conducted. In all
other cases, a single appraisal shall be conducted.
Notwithstanding the foregoing, (a) no Person may request an
appraisal unless such Person holds Common Stock Equivalents (as defined in
Section 7.1, assuming in the case of a Management Stockholder, the exercise in
full of all Vested Options owned by such Management Stockholder) with a fair
market value, based on the determination of fair market value set forth in the
most recent Valuation Statement of the Company, of in excess of $500,000 and
(b) neither Greenwich nor the Princes Gate Investors shall be entitled to
deliver a Valuation Response Notice or to become a Disputing Party until
such time as Greenwich ceases to control the Company. For purposes of this
section 4.2, Greenwich shall be deemed to control the Company for so long as
Greenwich, together with its Affiliates, has the power to elect a majority of
the Board of Directors of the Company.
4.3. Fair Market Value. (a) For the purposes of Sections 2 and
3 of this Agreement, the Fair Market Value of any share of Common Stock as of
any date of determination prior to an Initial Public Offering shall be
calculated based on (i) the determination of fair market value set forth in the
most recent Valuation Statement prior to such date of determination, if the
parties in question all agree to accept a determination of Fair Market Value
based on such Valuation Formula, as provided in Section 4.2 hereof, (ii) the
valuation agreed to by the parties in question, if the parties are required to,
and successfully establish such value for such purpose pursuant to the
negotiations provided for in the applicable provisions of Section 4.2 hereof,
(iii) the Appraisal conducted pursuant to the applicable provisions of Section
4.2 in order to determine the Fair Market Value of such shares of Common Stock,
if the provisions of Section 4 result in only one Appraisal being conducted for
such purpose or (iv) the average of the First Appraisal and the Second Appraisal
which are conducted pursuant to the applicable provisions of Section 4.2 in
order to determine the Fair Market Value of such shares of Common Stock, if both
the Company and the Management Stockholder in question elect to cause such
appraisals to be conducted for such purpose in accordance with Section 4.2
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hereof. The "Fair Market Value" of any share of Common Stock to be determined
pursuant to an Appraisal as of any Appraisal Date shall be (i) the fair market
value of the entire Common Stock equity interest of the Company taken as a whole
as of such Appraisal Date, without giving effect to any restrictions on transfer
of shares, any lack of marketability discount, or the fact that such shares
would represent a majority or minority interest, divided by (ii) the sum of (x)
number of outstanding Common Stock Equivalent's as of such Appraisal Date plus
(y) the aggregate number of all shares of Common Stock which are issuable in
respect of all Vested Options as of such Appraisal Date.
(b) For the purposes of Sections 2 and 3 hereof, the "Fair
Market Value" of any share of Common Stock to be purchased pursuant to Sections
2 or 3 hereof as of any date after an Initial Public Offering shall be the
average closing prices of the shares of Common Stock for the sixty trading days
immediately preceding such date (or such lesser time period for which a trading
market has existed); provided that if no trade is made of any such day, the
average closing price on such day for purposes of the foregoing shall be deemed
to be the average of the last bid and asked prices for such Common Stock on such
day.
(c) For the purposes of Section 6.3 of this Agreement, the
Fair Market Value of any share of Common Stock shall be calculated with
reference to the Appraisal as of the most recent Appraisal Date prior to the
date of the Involuntary Transfer.
4.4. Carrying Value. (a) For all purposes of Section 3.2(b) of
this Agreement, the "Carrying Value" of any share of Common Stock being
purchased by the Company shall be (X) in the case of all of the shares of Common
Stock set forth on Schedule A hereto, including without limitation, all such
shares subject to the Rollover Options set forth on Schedule A, $638.59 per
share and (Y) in the case of all other shares of Common Stock, the product of
the General Adjustment Percentage (as defined in Section 19.5) and the Fair
Market Value of a share of Common Stock, together, in the case of all shares
referred to in clause (X) above, with interest thereon from and including the
date of the purchase of such shares and/or such Vested Options by the selling
Management Stockholder (which date, in the case
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of all shares referred to in clause (X) of this Section 4.4(a), shall be deemed
to be the date of the Closing) to but excluding the date of such purchase by the
Company, less the amount of dividends paid to such Management Stockholder in
respect of such share.
(b) For purposes of Section 3.1(c) of this Agreement, the
"Carrying Value" of any share of Common Stock being purchased by the Company
shall be equal to the greater of (X) $638.59 per share and (Y) the product of
the Special Adjustment Percentage (as defined in Section 19.17) and the Fair
Market Value of a share of Common Stock, together, in the case of all shares
referred to in clause (a) above, with interest thereon from and including the
date of the purchase of such shares and/or such Vested Options by the selling
Management Stockholder (which date, in the case of all shares referred to in
clause (a) of this Section 4.4(b), shall be deemed to be the date of the
Closing) to but excluding the date of such purchase by the Company, less the
amount of dividends paid to such Management Stockholder in respect of such
share.
4.5. Other Defined Terms. For purposes of this Section 4, the
following terms shall have the following respective meanings:
The Valuation Formula shall mean:
(LTM EBITDA x EBITDA Multiple)-Principal Indebtedness + Cash
- --------------------------------------------------------------------------------
the total number of outstanding Common Stock
Equivalents on a fully diluted basis (including,
for this purpose, any shares of convertible preferred stock to
the extent (and only to the extent) that such shares
constitute In The Money Shares (as defined below)
or such other formula as may be agreed from time to time by Greenwich, the
Princes Gate Investors and Management Stockholders holding a majority of the
shares of Common Stock then held by all Management Stockholders, calculated
on a fully diluted basis.
"Adjusted Merger Consideration" shall mean the aggregate
Merger Consideration paid under the Recapitalization and Plan of Merger
Agreement, without
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regard to the adjustment provided for in clause (c) of the definition of the
term "Merger Consideration" in the Merger Agreement.
"EBITDA Multiple" shall mean following the effective time of
the Merger, the Adjusted Merger Consideration plus the principal amount of the
Company's 12% Senior Notes Due 2004 less Closing Cash divided by LTM EBITDA for
the twelve-month period ending on the last day of the month immediately
preceding the effective time of the Merger. The EBITDA Multiple shall be subject
to adjustment from time to time by the Board of Directors in its good faith
judgment, taking into account as appropriate EBITDA Multiples for comparable
publicly traded companies and, to the extent available, for comparable private
companies which have been recently subject to a change of control transaction.
"In The Money Shares" shall mean, as of any date of
determination, all shares of convertible preferred stock of the Company which
are then convertible into Common Stock at a conversion price (including all
applicable premiums) which is equal to or less than the fair market value of the
Common Stock, treating such shares of convertible preferred stock as shares of
Common Stock for purposes of calculating the fair market value of the Common
Stock pursuant to the Valuation Formula.
"LTM EBITDA" shall mean the EBITDA of the Company as defined
in its bank credit agreement for the twelve-month period ending on the last day
of the month immediately preceding any determination of fair market value
pursuant to the Valuation Formula.
"Principal Indebtedness" shall mean the sum of the aggregate
principal amount of any indebtedness for borrowed money of the Company and the
aggregate liquidation value of all outstanding shares of preferred stock of the
Company, other than any In The Money Shares.
4.6. Costs. If there are two appraisals, each party shall be
responsible for paying the costs of its own appraisal. If the Company is the
sole Disputing Party, or if a Management Stockholder (or Stockholders),
Greenwich, and the Princes Gate Investors are the sole Disputing Parties and the
resulting appraisal exceeds the Valuation
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Formula by 10% or more, the Company shall pay the full amount of the appraisal.
If a Management Stockholder (or stockholders), Greenwich and the Princes Gate
Investors are and the sole Disputing Parties and the resulting appraisal exceeds
the Valuation Formula by less than 10%, or is equal to or less than the
Valuation Formula, the fees and expenses of the Approved Appraiser shall be
shared equally by the Company and such Disputing Party or Parties on a per
capita basis (treating the disputing Management Stockholders as a single person
for such purpose). In such event, the Company shall advance the portion of the
fees and expenses of the Approved Appraiser owed by the Management Stockholders,
and such fees and expenses shall be deducted from the proceeds to be paid to
such Management Stockholder (or Stockholders on a pro rata basis) when he
receives payment for his shares.
5. Prohibited Purchases, etc.
5.1. Prohibited Purchases. Notwithstanding any thing to the
contrary herein, but subject to Sections 5.2 and 5.3 hereof, the Company shall
not be permitted or obligated to purchase any shares of Common Stock and/or
Vested Options from a Management Stockholder hereunder to the extent (a) the
Company is prohibited from purchasing such shares and/or such Vested Options by
applicable law or by any debt instruments or agreements, including any
amendment, renewal, extension, substitution, refinancing, replacement or other
modification thereof (the "Financing Documents") entered into by the Company or
any of its subsidiaries, (b) a default shall have occurred and be continuing
under any Financing Document, (c) the purchase of such shares and/or such Vested
Options would, or in the opinion of the Board might, result in the occurrence of
an event of default under any Financing Document or create a condition which
would or might, with notice or lapse of time or both, result in such an event of
default, (d) the purchase of such shares and/or such Vested Options would, in
the reasonable opinion of the Board, be materially adverse to the Company and
its subsidiaries, taken as a whole, in view of (i) the financial condition
(then-present or projected) of the Company or any of its subsidiaries or (ii)
the anticipated impact of the purchase of such shares and/or such Vested Options
on the Company's or any of its subsidiaries' ability to meet its respective
obligations under any Financing Document, (e) the purchase of such
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shares and/or such Vested Options, in the reasonable opinion of the Board (based
on advice from a nationally recognized accounting firm), would be reasonably
likely to have a negative effect on the ability of the Company to treat the
Merger as a recapitalization for financial accounting purposes under applicable
accounting rules. If shares of Common Stock which the Company has the right or
obligation to purchase on any date exceed the total amount permitted to be
purchased on such date pursuant to the preceding sentence (the "Maximum
Amount"), the Company shall purchase on such date only that number of shares of
Common Stock equal to the Maximum Amount (and shall not be required to purchase
more than the Maximum Amount) in such amounts as the Board shall in good faith
determine, applying the following order of priority (and treating, for all of
the following purposes of this Section 5, all Vested Options which the Company
has the right or obligation to purchase on such date as constituting the number
of shares of Common Stock for which such Vested Options are then exercisable):
(i) First, all shares of Common Stock (a) which constitute
Rollover Shares or which were or are issuable in respect of Rollover
Options and (b) which are being purchased by the Company by reason of
the termination of a Management Stockholder's employment due to death
or Disability, provided that, to the extent that the number of such
shares of Common Stock that the Company is obligated to purchase from
such Management Stockholders (but for this Section 5) exceeds the
Maximum Amount, such shares of Common Stock pro rata among such
Management Stockholders on the basis of the number of such shares of
Common Stock held by each of such Management Stockholders that the
Company is obligated or has the right to purchase, and
(ii) Second, to the extent that the Maximum Amount is in
excess of the amount the Company purchases pursuant to clause (i)
above, all of the other shares of Common Stock of all Management
Stockholders whose shares of Common Stock are being purchased by the
Company by reason of termination of employment due to death or
Disability and, to the extent that the number of such other shares of
Common Stock that the Company is obligated to purchase from such
Management Stockholders (but for this Section 5) exceeds the Maximum
Amount, such other shares of Common Stock pro
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rata among such Management Stockholders on the basis of the number of
such other shares of Common Stock held by each of such Management
Stockholders that the Company is obligated or has the right to
purchase, and
(iii) Third, to the extent that the Maximum Amount is in
excess of the amount the Company purchases pursuant to clause (ii)
above, all shares of Common Stock (a) which constitute Rollover Shares
or which were or are issuable in respect of Rollover Options and (b)
which are being purchased by the Company by reason of termination of
employment without Cause or due to Retirement or resignation for Good
Reason, provided that, to the extent that the number of such shares of
Common Stock that the Company is obligated to purchase from such
Management Stockholders (but for this Section 5) exceeds the Maximum
Amount, such shares of Common Stock pro rata among such Management
Stockholders on the basis of the number of such shares of Common Stock
held by each of such Management Stockholders that the Company is
obligated or has the right to purchase, and
(iv) Fourth, to the extent that the Maximum Amount is in
excess of the amount the Company purchases pursuant to clause (iii)
above, all other shares of Common Stock of all Management Stockholders
whose shares of Common Stock are being purchased by the Company by
reason of termination of employment without Cause or due to Retirement
or resignation for Good Reason and, to the extent that the number of
such other shares of Common Stock that the Company is obligated to
purchase from such Management Stockholders (but for this Section 5)
exceeds the Maximum Amount, such other shares of Common Stock pro rata
among such Management Stockholders on the basis of the number of such
other shares of Common Stock held by each of such Management
Stockholders that the Company is obligated or has the right to
purchase, and
(v) Fifth, to the extent the Maximum Amount is in excess of
the amounts the Company purchases pursuant to clauses (i), (ii), (iii)
and (iv) above, the shares of Common Stock of all other Management
Stockholders whose shares of Common Stock are being purchased by the
Company up to the Maximum Amount and, to the extent that the number of
shares of Common Stock that the
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Company is obligated to purchase from such Management Stockholders (but
for this Section 5) exceeds the Maximum Amount, the shares of Common
Stock of such Management Stockholders in such order of priority and in
such amounts as the Board in its sole discretion shall in good faith
determine to be appropriate under the circumstances.
Notwithstanding anything to the contrary contained in this Agreement, if the
Company is unable to make any payment when due to any Management Stockholder
under this Agreement by reason of this Section 5, the Company shall make such
payment, together with interest accrued thereon, if any, at the earliest
practicable date permitted under this Section 5. Any such payment shall accrue
simple interest (or if such payment is accruing interest at such time, shall
continue to accrue simple interest) at a rate per annum equal to the Prime Rate
from and including the date such payment is due and owing to but excluding the
date such payment is made.
5.2. Prohibited Purchases Termination Date. The provisions of
Section 5 hereof shall cease to apply to any shares of Common Stock and/or
Vested Options on the Prohibited Purchases Termination Date (as defined in
Section 19.11) for such shares and/or Vested Options.
5.3. Special Right With Respect to Certain Puts and Calls.
Notwithstanding anything in this Agreement to the contrary, it is understood and
agreed that the Company may fully satisfy its purchase obligations with respect
to any shares of Common Stock and/or Vested Options which are to be purchased or
sold by it pursuant to Section 2 or 3 hereof as a result of any exercise of any
right under either such Section after an Initial Public Offering by causing such
Common Stock and/or the Common Stock issuable upon exercise of such Vested
Options to be sold in a registered public offering under the Securities Act of
1933, as amended. If the Company shall so exercise its right to cause any such
shares of Common Stock to be so registered, the Company shall cause such shares
to be registered as soon as is commercially reasonable under all of the then
prevailing circumstances (with due regard to the considerations addressed by
Section 14 hereof) and each Management Stockholder whose shares of Common Stock
are to be so sold in such registered offering shall cooperate with the Company
to effect such registration and sale of such
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shares, which cooperation, in the case of any Management Stockholder whose
Vested Options are being purchased by the Company pursuant to Section 3, shall
include the exercise of such Vested Option prior to the date of such public
offering.
6. Involuntary Transfers. In the case of any transfer of title
or beneficial ownership of shares of Common Stock and/or Vested Options upon
default, foreclosure, forfeit, divorce, court order or otherwise than by a
voluntary decision on the part of a Management Stockholder (each, an
"Involuntary Transfer"), the Company shall have the right to purchase such
shares and/or Vested Options pursuant to this Section 6. Upon the Involuntary
Transfer of any shares of Common Stock and/or Vested Options, such Management
Stockholder shall promptly (but in no event later than two days after such
Involuntary Transfer) furnish written notice (the "Notice") to the Company
indicating that the Involuntary Transfer has occurred, specifying the name of
the Person to whom such shares have been transferred (the "Involuntary
Transferee"), giving a detailed description of the circumstances giving rise to,
and stating the legal basis for, the Involuntary Transfer. Upon the receipt of
the Notice, and for 60 days thereafter, the Company shall have the right to
purchase, and the Involuntary Transferee shall have the obligation to sell, all
(but not less than all) of the shares of Common Stock and/or Vested Options
acquired by the Involuntary Transferee for a purchase price equal to the Fair
Market Value of such shares of Common Stock.
7. Tag-Along and Drag-Along Rights.
7.1. Tag-Along Rights. Greenwich shall not sell any shares of
Common Stock to any one or more third parties if such shares, together with all
shares of Common Stock that shall have been previously sold by Greenwich and its
Permitted Assignees (as defined below) to one or more third parties, would
represent more than 34% of the aggregate number of shares of Common Stock held
by Greenwich immediately after the date of this Agreement, unless each
Management Stockholder is offered a pro rata right (based on the number of
Common Share Equivalents owned by each such Management Stockholder and taking
into account the number of Common Share Equivalents owned by the Princes Gate
Investors) to participate in such sale for a purchase price
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per share of Common Stock and on other terms and conditions not less favorable
to such Management Stockholder than those applicable to Greenwich. For the
purposes of this Section 7.1, a sale to a "third party" shall not include (a) a
sale by Greenwich to any Person that directly, or indirectly through one or more
intermediaries, controls, or is con trolled by, is under common control with,
Greenwich ("Permitted Assignee") or (b) a sale pursuant to an effective
registration statement (a "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"). The number of "Common Share
Equivalents" represented by an Equity Security is (i) in the case of a share of
Common Stock, one, and (ii) in the case of all or a portion of any Warrant, the
number of shares of Common Stock receivable upon exercise of such Warrant (or
such portion of such Warrant).
7.2. Drag-Along Rights. If Greenwich proposes to sell to any
one or more third parties shares of Common Stock which, together with all shares
of Common Stock that shall have been previously sold by Greenwich and its
Permitted Assignees to one or more third parties, would represent more than 50%
of the aggregate number of shares of Common Stock held by Greenwich immediately
after the date of this Agreement, then, upon request by Greenwich, each
Management Stockholder shall be required to join Greenwich in such sale on a pro
rata basis (based on each such Management Stock holder's ownership of Common
Share Equivalents after exercise of all Vested Options then held by such
Management Stockholder and taking into account the number of Common Share
Equivalents owned by the Princes Gate Investors) for a purchase price per share
of Common Stock and on other terms and conditions not less favorable to each
than those applicable to Greenwich. For the purposes of this Section 7.2, a
sale to a "third party" shall not include a sale to any Permitted Assignee or a
sale pursuant to a Registration Statement.
8. Registrations Upon Request.
8.1. Requests. At any time after the date hereof, Greenwich
shall have the right to make up to four requests that the Company effect a
public offering under the Securities Act pursuant to a Registration Statement (a
"Registration") of any of the Registrable Securities of Greenwich, each such
request to specify the intended method
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or methods of disposition thereof, provided, that (a) if Greenwich determines in
its good faith judgment to withdraw the proposed Registration of any Registrable
Securities it shall have requested to be registered pursuant to this Section 8.1
due to marketing or regulatory reasons or (b) the Registration Statement
relating to any such request is not declared effective within 90 days of the
date such Registration Statement is first filed with the Commission or (c) if,
within 180 days after the Registration relating to any such request shall have
become effective, such Registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason and the Company fails to have such stop order,
injunction or other order or requirement removed, withdrawn or resolved within
30 days to the reasonable satisfaction of Greenwich or (d) the conditions to
closing specified in the underwriting agreement entered into in connection with
the Registration relating to any such request are not satisfied (other than as a
result of a default or breach thereunder by Greenwich), then such request shall
not be counted for purposes of the request limitations set forth above. Upon any
such request, the Company will promptly, and in any event within 15 days of its
receipt thereof, give written notice of such request to all holders of
Registrable Securities and thereupon the Company will, subject to Section 8.2,
use its best efforts to effect the prompt Registration under the Securities Act
of the Registrable Securities which the Company shall have been so requested to
register by Greenwich pursuant to this Section 8.1, all to the extent required
to permit the disposition of the Registrable Securities so to be registered in
accordance with Greenwich's intended method or methods of disposition of such
Registrable Securities.
8.2. Filing of Registration Statements. Notwithstanding the
foregoing, but subject to the rights of holders of Registrable Securities under
Section 9, if the Company has pending or in process a material transaction, the
disclosure of which would, in the good faith judgment of the Board, materially
and adversely affect the Company, the Company may furnish to Greenwich a
certificate signed by the President of the Company so stating and the Company
may defer the filing (but not the preparation) of a Registration Statement for a
period of not more than 60 days (but the Company shall use its best efforts to
resolve the
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transaction and file the Registration Statement as soon as possible).
8.3. Registration Statement Form. Each Registration requested
pursuant to Section 8.1 shall be effected by the filing of a Registration
Statement on a form agreed to by Greenwich.
8.4. Expenses. The Company will pay all Registration Expenses
in connection with any Registrations requested under Section 8.1.
8.5. No Company Initiated Registration. After receipt of
notice of a requested Registration pursuant to Section 8.1, the Company shall
not initiate, without the consent of Greenwich, a registration of any of its
securities for its own account until 90 days after such Registration shall have
been effected or such Registration shall have been terminated.
9. Registration Rights.
9.1. Incidental Registrations. If the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than pursuant to a Registration Statement on Form S-4 or S-8 or any
successor form) at any time when Greenwich owns less than 35% of the Common
Stock on a fully diluted basis, and the registration form to be used may be used
for the Registration of Registrable Securities, it will give prompt written
notice to all Management Stockholders of its intention to do so. Upon the
written request of any such Management Stockholder made within 20 days after the
receipt of any such notice (which request shall specify the number of
Registrable Securities intended to be disposed of by such holder and the
intended method or methods of disposition thereof), the Company shall use its
best efforts to effect the Registration under the Securities Act of all such
Registrable Securities in accordance with such intended method or methods of
disposition, provided that:
(a) if such Registration shall be in connection with any
public offering by the Company, the Company shall not include any
Registrable Securities in such proposed Registration if the Board shall
have determined, after consultation with the managing underwriter
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<PAGE> 26
for such offering, that it is not in the best interests of the Company
or Greenwich, as the case may be, to include such Registrable
Securities in such Registration;
(b) if, at any time after giving written notice of its
intention to register any equity securities and prior to the effective
date of a Registration Statement filed in connection with such
Registration, the Company shall determine for any reason not to
register such equity securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities and, thereupon, shall not be obligated to register any
Registrable Securities in connection therewith (but shall nevertheless
pay the Registration Expenses in connection therewith); and
(c) if a Registration pursuant to this Section 9.1 involves an
underwritten offering, and the managing underwriter (or, in the case of
an offering that is not underwritten, a nationally recognized
investment banking firm) shall advise the Company in writing (with a
copy to each holder of Registrable Securities requesting Registration
thereof) that, in its opinion, the number of securities requested and
otherwise pro posed to be included in such Registration exceeds the
number which can be sold in such offering without materially and
adversely affecting the offering price, the Company will include
securities requested and otherwise proposed to be registered in such
Registration to the extent of the number which the Company is so
advised can be sold in such offering without such material adverse
effect on the following basis: (i) priority in a registration initiated
by a holder exercising a contractual right to demand such registration
shall be given (a) first, to the securities offered for the account of
such holder, ((b) second, pro rata among securities of the Company
requested to be registered by Greenwich or the Princes Gate Investors
(if not included in clause (a)), (c) third, pro rata among the
securities of the Company requested to be registered by the Management
Stockholders, and (d) fourth, to the securities offered for the account
of the Company, and (ii) priority in a registration initiated by the
Company in connection with the sale of its equity securities for its
own account shall be given (a) first, to securities offered
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<PAGE> 27
for the account of the Company, (b) second, pro rata among securities
of the Company requested to be registered by Greenwich and the Princes
Gate Investors, and (c) third, pro rata among securities of the Company
requested to be registered by the Management Stockholders.
Notwithstanding the foregoing, the Management Stockholders shall not be
entitled to participate in any such Registration pursuant to this
Section 9 to the extent that the managing underwriter (or, in the case
of an offering that is not underwritten, a nationally recognized
investment banking firm) shall determine in good faith that the
participation of management would adversely affect the marketability of
the securities being sold by Greenwich or the Company in such
Registration.
9.2. Registration Expenses. The Company shall pay all
Registration Expenses in connection with each Registration of Registrable
Securities requested pursuant to this Section 9. No Registration effected under
this Section 9 shall relieve the Company of its obligation to effect
Registrations pursuant to Section 8.
10. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the Registration of any Registrable
Securities under the Securities Act as provided in Sections 8 or 9, the Company
shall promptly:
(a) prepare and, as soon as practicable, and in any event
within 120 days thereafter, file with the Commission, a Registration
Statement with respect to such Registrable Securities, make all
required filings with the NASD and use its best efforts to cause such
Registration Statement to become effective;
(b) prepare and promptly file with the Commission such
amendments and post-effective amendments and supplements to such
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective for
so long as is required to comply with the provisions of the Securities
Act and to complete the disposition of all securities covered by such
Registration Statement in accordance with the intended method or
methods of disposition thereof, but in no
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<PAGE> 28
event for a period of more than six months after such Registration
Statement becomes effective;
(c) furnish to counsel selected by Greenwich or, if Greenwich
is not participating in such Registration, the Majority Holders (as
defined in Section 19.8), copies of all documents proposed to be filed
with the Commission in connection with such Registration, which
documents will be subject to the review of such counsel and Greenwich
or the Majority Holders, as the case may be, and the Company shall not
file any amendment or post-effective amendment or supplement to such
Registration Statement or the prospectus used in connection therewith
to which Greenwich or the Majority Holders, as the case may be, shall
have reasonably objected in writing on the grounds that such amendment
or supplement does not comply (explaining why) in all material respects
with the requirements of the Securities Act or of the rules or
regulations thereunder;
(d) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such Registration Statement
and of each such amendment and supplement thereto (in each case
including all exhibits and documents filed therewith) and such number
of copies of the prospectus included in such Registration Statement
(including each preliminary prospectus and any summary prospectus) and
any other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such seller in
accordance with the intended method or methods of disposition thereof;
(e) use its best efforts to register or qualify such
Registrable Securities covered by such Registration Statement under the
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may
be necessary or advisable to enable such seller to consummate the
disposition of such Registrable Securities in such jurisdictions in
accordance with the intended method or methods of disposition thereof,
provided that the Company shall
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<PAGE> 29
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not
so qualified, subject itself to taxation in any jurisdiction wherein it
is not so subject, or take any action which would subject it to general
service of process in any jurisdiction wherein it is not so subject;
(f) use its best efforts to cause all Registrable Securities
covered by such Registration Statement to be registered with or
approved by such other governmental agencies, authorities or
self-regulatory bodies as may be necessary by virtue of the business
and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition thereof;
(g) furnish to each seller of Registrable Securities a signed
counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced
in securities law matters, dated the effective date of the
Registration Statement (and, if such Registration includes an
underwritten public offering, the date of the closing under
the underwriting agreement), and
(ii) a "comfort" letter (unless such a letter is
pursuant to Section 11 and is not otherwise being furnished to
the Company), dated the effective date of such Registration
Statement (and if such Registration includes an underwritten
public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public
accountants who have issued an audit report on the Company's
financial statements included in the Registration Statement,
covering such matters as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and such
other matters as Greenwich or, if Greenwich is not participating in
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<PAGE> 30
the registration, the Majority Holders may reasonably request;
(h) notify each seller of any Registrable Securities covered
by such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event or existence of any fact as a result of which
the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and, as promptly as is practicable,
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement of the Company (in form complying with the provisions of
Section 11(a) of the Securities Act, and of Rule 158 under the
Securities Act) covering the period of at least 12 months, but not more
than 18 months, beginning with the first month after the effective date
of the Registration Statement;
(j) notify each seller of any Registrable Securities covered
by such Registration Statement (i) when the prospectus or any
prospectus supplement or post-effective amendment has been filed, and,
with respect to such Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by
the Commission for amendments or supplements to such Registration
Statement or to amend or to supplement such prospectus or for
additional information, (iii) of the issuance by the Commission of any
stop order suspending the
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<PAGE> 31
effectiveness of such Registration Statement or the initiation of any
proceedings for that purpose and (iv) of the suspension of the
qualification of such securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such
purposes;
(k) use every reasonable effort to obtain the lifting of any
stop order that might be issued suspending the effectiveness of such
Registration Statement at the earliest possible moment;
(l) use its best efforts (i) (A) to list such Registrable
Securities on any securities exchange on which the equity securities of
the Company are then listed or, if no such equity securities are then
listed, on an exchange selected by the Company, if such listing is then
permitted under the rules of such exchange, or (B) if such listing is
not practicable, to secure designation of such securities as a NASDAQ
"national market system security" within the meaning of Rule
11(A)(a)2-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or, failing that, to secure NASDAQ authorization for
such Registrable Securities, and, without limiting the foregoing, to
arrange for at least two market makers to register as such with respect
to such Registrable Securities with the NASD, and (ii) to provide a
transfer agent and registrar for such Registrable Securities not later
than the effective date of such Registration Statement;
(m) enter into such agreements and take such other actions as
Greenwich, or, if Greenwich is not participating in such Registration,
the Majority Holders, or the underwriters reasonably request in order
to expedite or facilitate the disposition of such Registrable
Securities, including, without limitation, preparing for, and
participating in, such number of "road shows" and all such other
customary selling efforts as the underwriters reasonably request in
order to expedite or facilitate such disposition; and
(n) use its reasonable best efforts to take all other steps
necessary to effect the Registration of such Registrable Securities
contemplated hereby.
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<PAGE> 32
11. Furnishing of Information; Reasonable Investigation. (a)
The Company may require each seller of any Registrable Securities as to which
any Registration is being effected to furnish to the Company such information
regarding such seller, its ownership of Registrable Securities and the
disposition of such Registrable Securities as the Company may from time to time
reasonably request in writing and as shall be required by law in connection
therewith. Each such holder agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such holder not materially misleading.
(b) In connection with the preparation and filing of each
Registration Statement registering Registrable Securities under the Securities
Act, the Company will give the holders of such Registrable Securities so to be
registered and their underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the preparation of such
Registration Statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each of them such access to the financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have issued audit reports on its financial
statements as shall be reasonably requested by such holders in connection with
such Registration Statement.
12. Amendments to Registration Statement. (a) The Company
agrees not to file or make any amendment to any Registration Statement with
respect to any Registrable Securities, or any amendment of or supplement to the
prospectus used in connection therewith, which refers to any seller of any
Registrable Securities covered thereby by name, or otherwise identifies such
seller as the holder of any Registrable Securities, without the consent of such
seller, such consent not to be unreasonably withheld, unless such disclosure is
required by law.
(b) Each holder of Registrable Securities agrees that upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 10(j), such holder will promptly discontinue such
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<PAGE> 33
holder's disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
10(j). If so directed by the Company, each holder of Registrable Securities will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, in such holder's possession of the prospectus covering
such Registrable Securities at the time of receipt of such notice. In the event
that the Company shall give any such notice, the period mentioned in Section
10(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of any Registrable Securities covered by such Registration Statement
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 10(j).
13. Underwritten Offerings.
13.1. Underwriting Agreement. If requested by the underwriters
for any underwritten offering by holders of Registrable Securities pursuant to a
Registration requested under Sections 8 or 9, the Company shall enter into an
underwriting agreement with the underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to Greenwich and to the
underwriters and to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in agreements
of this type, including, without limitation, indemnities to the effect and to
the extent provided in Section 16. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement. Any or all of the representations and warranties by, and the
agreements on the part of, the Company to and for the benefit of such under
writers shall be made to and for the benefit of such holders of Registrable
Securities.
13.2. Selection of Underwriters. If the Company at any time
proposes to register any of its securities under the Securities Act for sale for
its own account pursuant to an underwritten offering, the Company will have the
right to select the managing underwriter (which shall be of nationally
recognized standing) to administer the offering, but only with the approval of
Greenwich, such approval not to be
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unreasonably withheld, provided that whenever a registration requested pursuant
to Section 8 is for an underwritten offering, Greenwich will have the right to
select the managing underwriter (which shall be of nationally recognized
standing) to administer the offering.
14. Holdback Agreements. (a) If and whenever the Company
proposes to register any of its equity securities under the Securities Act for
its own account (other than on Forms S-4 or S-8 or any successor form) or is
required to use its best efforts to effect the Registration of any Registrable
Securities under the Securities Act pursuant to Sections 8 or 9, each holder of
Registrable Securities agrees not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities within seven days prior to and 90 days (unless advised by
the managing underwriter that a longer period, not to exceed 180 days, is
required, or such shorter period as the managing underwriter for any
underwritten offering may agree) after the effective date of the Registration
Statement relating to such Registration, except as part of such Registration.
(b) The Company agrees not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities within seven days prior
to and 90 days (unless advised by the managing underwriter that a longer period,
not to exceed 180 days, is required, or such shorter period as the managing
underwriter for any underwritten offering may agree) after the effective date of
such Registration Statement (except as part of such Registration or pursuant to
a Registration on Form S-4 or S-8 or any successor form). In addition, the
Company shall cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such securities,
whether outstanding on the date of this Agreement or issued at any time after
the date of this Agreement (other than any such securities acquired in a public
offering), to agree not to effect any such public sale or distribution of such
securities during such period, except as part of any such Registration if
permitted, and to cause each such holder to enter into a similar agreement to
such effect with the Company.
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15. No Grant of Future Registration Rights. The Company shall
not grant any other demand or incidental registration rights to any other Person
without the prior written consent of Greenwich.
16. Indemnification.
16.1. Indemnification by the Company. In the event of any
Registration of any Registrable Securities pursuant to this Agreement, the
Company shall indemnify and hold harmless (a) the seller of such Registrable
Securities, (b) the directors, officers, partners, employees, agents and
affiliates of such seller, (c) each Person who participates as an underwriter in
the offering or sale of such securities and (d) each Person, if any, who
controls (with the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) any of the foregoing against any and all losses, claims,
damages or liabilities (or actions or proceedings in respect thereof), joint or
several, directly or indirectly based upon or arising out of (i) any untrue
statement or alleged untrue statement of a fact contained in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein or used in connection with the offering of
securities covered thereby, or any amendment or supplement thereto, or (ii) any
omission or alleged omission to state a fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse each such indemnified party for any legal or any other expenses
reasonably incurred by them in connection with enforcing its rights hereunder or
under the underwriting agreement entered into in connection with such offering
or investigating, preparing, pursuing or defending any such loss, claim, damage,
liability, action or proceeding, except insofar as any such loss, claim, damage,
liability, action, proceeding or expense arises out of or is based upon an
untrue statement or omission made in such Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such seller expressly for use in the preparation thereof. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by such indemnified party and shall survive the transfer of such
Registrable Securities by
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such seller. The indemnity agreement contained in this Section 16 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
action or proceeding if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld).
16.2. Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
Registration Statement filed pursuant to Sections 8 or 9 that the Company shall
have received an undertaking satisfactory to it from each of the prospective
sellers of such Registrable Securities to indemnify and hold harmless,
severally, not jointly, in the same manner and to the same extent as set forth
in Section 16.1, the Company, its directors and officers and each Person, if
any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) the Company with respect to any statement or
alleged statement in or omission or alleged omission from such Registration
Statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such seller
expressly for use in the preparation of such Registration Statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
Person and shall survive the transfer of such Registrable Securities by such
seller. The indemnity agreement contained in this Section 16.2 shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, action
or proceeding if such settlement is effected without the consent of such seller
(which consent shall not be unreasonably withheld). The indemnity provided by
each seller of Registrable Securities under this Section 16.2 shall be limited
in amount to the net amount of proceeds actually received by such seller from
the sale of Registrable Securities pursuant to such Registration Statement.
16.3. Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement
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<PAGE> 37
of any action or proceeding involving a claim referred to in the preceding
paragraphs of this Section 16, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action or proceeding, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding paragraphs
of this Section 16, except to the extent that the indemnifying party is
materially prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate therein and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reason ably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof except for the reasonable fees and
expenses of any counsel retained by such indemnified party to monitor such
action or proceeding. Notwithstanding the foregoing, if such indemnified party
shall reasonably determine, based upon advice of its independent counsel, that a
conflict of interest may exist between the indemnified party and the
indemnifying party with respect to such action and that it is advisable for such
indemnified party to be represented by separate counsel, such indemnified party
may retain other counsel, reasonably satisfactory to the indemnifying party, to
represent such indemnified party, and the indemnifying party shall pay all
reasonable fees and expenses of such counsel. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of such
indemnified party, which consent shall not be unreasonably withheld, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
16.4. Indemnification Payments. Any indemnification required
to be made by an indemnifying party pursuant to this Section 16 shall be made by
periodic payments to the indemnified party during the course of the
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action or proceeding, as and when bills are received by such indemnifying party
with respect to an indemnifiable loss, claim, damage, liability or expense
incurred by such indemnified party.
16.5. Other Remedies. If for any reason the foregoing
indemnity is unavailable, or is insufficient to hold harmless an indemnified
party, other than by reason of the exceptions provided therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
actions, proceedings or expenses in such proportion as is appropriate to reflect
the relative benefits to and faults of the indemnifying party on the one hand
and the indemnified party on the other in connection with the offering of
Registrable Securities (taking into account the portion of the proceeds of the
offering realized by each such party) and the statements or omissions or alleged
statements or omissions which resulted in such loss, claim, damage, liability,
action, proceeding or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or omissions.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 16.5 except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 16.5 if such indemnification were enforceable under applicable law.
17. Stock Splits, etc. Each holder of Registrable Securities
agrees that it will vote to effect a stock split or combination with respect to
any Registrable Securities in connection with any Registration of such
Registrable Securities hereunder, or otherwise, if the managing under writer
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banker shall advise the Company in writing)
that
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in its opinion such a stock split or combination would facilitate or increase
the likelihood of success of the offering. The Company shall cooperate in all
respects in effecting any such stock split or combination.
18. Termination. Any party to, or Person who is subject to,
this Agreement which ceases to own shares of Common Stock and/or Vested Options
shall cease to be a party to, or Person who is subject to, this Agreement and
thereafter shall have no rights or obligations hereunder; provided, however,
that a Transfer of shares of Common Stock and/or Vested Options not explicitly
permitted under this Agreement shall not relieve a Stockholder of any of its
obligations hereunder. All rights and obligations pursuant to Sections 1, 2, 3,
4, 5, 6 and 7.1 of this Agreement shall terminate upon the date on which
Greenwich owns less than 50% of the amount of Common Stock held by it as of
immediately after the Effective Time, in each case calculated on a fully diluted
basis. All rights and obligations pursuant to Section 7.2 of this Agreement
shall terminate upon the closing of a Registration that covers (together with
prior Registrations) not less than 50% of the then outstanding shares of Common
Stock, calculated on a fully diluted basis. All rights and obligations under
this Agreement shall terminate as to any particular Registrable Securities at
such time as they cease to be Registrable Securities.
19. Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings.
19.1. "Affiliate" shall mean, with respect to any Person, (a)
any Person that directly or indirectly controls, is controlled by or under
common control with, such Person, or (b) any director, officer, partner, member
or employee of such Person or any Person specified in clause (a) above.
Notwithstanding the foregoing, none of The Travelers Insurance Company, The
Travelers Life and Annuity Company, Smith Barney Holdings Inc. or any of their
respective subsidiaries shall be deemed to be an Affiliate of the Company for
any purpose under Section 21.3 of this Agreement.
19.2. "Cause" means (i) the willful failure by the Management
Stockholder to perform substantially his
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duties as an employee of the Company or any Subsidiary (other than any such
failure due to physical or mental illness) after a demand for substantial
performance is delivered to the Management Stockholder by the executive to which
the Management Stockholder reports or by the Board, which notice identifies the
manner in which such executive or the Board, as the case may be, believes that
the Management Stockholder has not substantially performed his duties, (ii) the
Management Stockholder's engaging in willful and serious misconduct that is or
is expected to be injurious to the Company or any Subsidiary, (iii) the
Management Stockholder's having been convicted of, or entered a plea of guilty
or nolo contendere to, a crime that constitutes a felony, (iv) the willful and
material breach by the Management Stockholder of any written covenant or
agreement with the Company or any Subsidiary not to disclose any information
pertaining to the Company, any Subsidiary or any Affiliate or not to compete or
interfere with the Company, any Subsidiary or any Affiliate or (v) any willful
material violation by the Management Stockholder of any federal, state or
foreign securities laws; provided that in the event that the Management
Stockholder is employed by the Company or a Subsidiary under an effective
employment agreement on the date of determination and such employment agreement
shall contain a different definition of Cause, the definition of Cause contained
in such employment agreement shall be substituted for the definition set forth
above for all purposes hereunder.
19.3. "Closing" shall mean the date of the closing under the
Merger Agreement.
19.4. "Disability" The termination of the employment of any
Management Stockholder by the Company or any of its subsidiaries shall be deemed
to be by reason of a "Disability" if such Management Stockholder sustains an
illness or accident occurring during the period of such Management Stockholder's
employment which prevents such Management Stockholder from performing such
Management Stockholder's duties for a period in excess of 270 days (whether or
not consecutive) or 180 consecutive days, as the case may be, in any
twelve-month period during such period of employment.
19.5. "Equity Securities" shall mean, with respect to
Greenwich or the Management Stockholders, the
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<PAGE> 41
shares of Common Stock, and with respect to any Princes Gate Investor the
Warrants and the Warrant Shares.
19.6. "General Adjustment Percentage" means (v) at any time
prior to the second anniversary of the Closing, 20%, (w) at any time on or after
the second anniversary of the Closing and prior to the third anniversary of the
Closing, 40%, (x) at any time on or after the third anniversary of the Closing
and prior to the fourth anniversary of the Closing, 60%, (y) at any time on or
after the fourth anniversary of the Closing and prior to the fifth anniversary
of the Closing, 80% and (z) at any time thereafter, 100%.
19.7. "Good Reason" A termination of a Management
Stockholder's employment with the Company or any of its subsidiaries shall be
for "Good Reason" if such Management Stockholder voluntarily terminates his
employment with the Company or any of its subsidiaries within 60 days following:
(a) a material diminution, without the written consent of such
Management Stockholder, in the nature or scope of such Management
Stockholder's rights, authority, responsibilities and duties with the
Company;
(b) without the Management Stockholder's prior written
consent, a significant reduction by the Company or such subsidiary of
such Management Stockholder's current salary, other than any such
reduction which is part of a general salary reduction or other
concessionary arrangement affecting all employees or affecting the
group of employees of which the Management Stockholder is a member; or
(c) the taking of any action by the Company or such subsidiary
that would substantially diminish the aggregate value of the benefits
provided him or her under the Company's or any of its subsidiaries'
accident, disability, life insurance and any other employee benefit
plans in which he or she was participating on the date of such
Management Stockholder's execution of this Agreement, other than any
such reduction which is (i) required by law, (ii) implemented in
connection with a general concessionary arrangement affecting all
employees or
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<PAGE> 42
affecting the group of employees of which the Management Stockholder is
a member or (iii) generally applicable to all beneficiaries of such
plans;
provided that in the event that the Management Stockholder is employed by the
Company or a Subsidiary under an effective employment agreement on the date of
determination and such employment agreement shall contain a different definition
of Good Reason, the definition of Good Reason contained in such employment
agreement shall be substituted for the definition set forth above for all
purposes hereunder.
19.8. "Initial Public Offering" shall mean the initial public
offering of the Company's Common Stock following which the Company's Common
Stock is traded on the New York Stock Exchange, the American Stock Exchange or
the National Association of Securities Dealers Automated Quotation System.
19.9. "Majority Holders" shall mean with respect to any
Registration in which Greenwich is not participating, the holders of more than
50% of the Registrable Securities proposed to be sold in connection with such
Registration.
19.10. "Option" shall mean any option to acquire Common Stock
from the Company, whether granted pursuant to the Stock Option Plan, or
otherwise.
19.11. "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
19.12. "Princes Gate Investor" shall mean the Princes Gate
Stockholders and any of their permitted transferees.
19.13. "Prohibited Purchases Termination Date" shall mean (A)
in the case of the purchase of any shares of Common Stock and/or Vested Options
which is prohibited under the provisions of Section 5.1 hereof (other than under
clause (e) of Section 5), the first of the following to occur after the date
such prohibition is first established:
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<PAGE> 43
(i) an Initial Public Offering and (ii) the closing of any transaction pursuant
to which all of the indebtedness of the Company which is outstanding immediately
prior to such transaction is refinanced, refunded or replaced, and (B) in the
case of any purchase of any shares of Common Stock and/or Vested Options the
purchase of which is prohibited under the provisions of clause (e) of Section
5.1 hereof, the closing of an Initial Public Offering after the date on which
such prohibition under clause (e) of Section 5.1 is first established.
19.14. "Puttable Common Stock" means, with respect to any
Management Stockholder as of any date of determination, all shares of Common
Stock which have been held by such Management Stockholder for at least 180 days
as of such date of determination.
19.15. "Registrable Securities" shall mean (a) the shares of
Common Stock held by (i) Greenwich, (ii) subjection to Section 24, any Person to
whom Greenwich Transfers all or any of its shares of Common Stock, (iii) the
Management Stockholders, (iv) the Management Permitted Transferees or (v) any
other Person made a party hereto pursuant to the terms hereof (including any
such shares issued or issuable upon exercise of Options) and (b) any and all
shares of capital stock of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued or issuable in respect of, in exchange for, or in substitution for such
shares of Common Stock (including any such shares issued or issuable in respect
of, in exchange for or in substitution of Options), by reason of any stock
dividend, split or reverse split, or in connection with a combination of shares,
recapitalization, reclassification, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such Registration Statement, (ii) they shall have been
sold to the public pursuant to Rule 144 under the Securities Act or (iii) they
shall have ceased to be outstanding.
19.16. "Registration Expenses" shall mean all expenses
incident to the Company's performance of or
39
<PAGE> 44
compliance with any Registration pursuant to this Agreement, including, without
limitation, (a) Registration, filing and National Association of Securities
Dealers ("NASD") fees, (b) fees and expenses of complying with securities or
blue sky laws, (c) fees and expenses associated with listing securities on an
exchange or national market, (d) word processing, duplicating and printing
expenses, (e) messenger and delivery expenses, (f) transfer agents', trustees',
depositories', registrars' and fiscal agents' fees, (g) fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters, (h) reasonable
fees and disbursements of any one counsel retained by the sellers of Registrable
Securities, which counsel shall be designated by Greenwich, and if Greenwich is
not participating in such registration, by the Majority Holders, and (i) any
fees and disbursements of underwriters customarily paid by issuers or sellers
of securities, but excluding underwriting discounts and commissions and
transfer taxes, if any.
19.17. "Rollover Options" shall have the meaning specified in
the Merger Agreement
19.18. "Rollover Shares" shall have the meaning specified in
the Merger Agreement.
19.19. "Special Adjustment Percentage" means (x) at any time
prior to the second anniversary of the Closing, 33%, (y) at any time on or after
the second anniversary of the Closing and prior to the second anniversary of the
Closing, 66%, and (z) at any time thereafter, 100%.
19.20. "Subordinated Notes" shall mean the Company's 15%
Step-Up Subordinated Notes due May 6, 2009.
19.21. "Stock Option Plan" means the 1997 Telex Communication
Group, Inc. Stock Option Plan.
19.22. "Vested Options" shall have the meaning established
under the Stock Option Plan.
19.23. "Warrant" shall mean the warrants to purchase Common
Shares which may be issued from time to time to the Purchasers pursuant to the
Subordinated Notes.
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<PAGE> 45
19.24. "Warrant Issue Date" shall mean the date upon which
Warrants are first issued and outstanding.
19.25. "Warrant Shares" shall mean the Common Shares issued,
to any Purchaser upon exercise of the Warrants.
20. Stock Certificate Legend. A copy of this Agreement shall
be filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing shares of Common Stock owned by the
Stockholders shall bear upon its face the following legends, as appropriate:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO THE
STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND
SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO THE
ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS
EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT OF THE
ISSUER, DATED AS OF March 4, 1997 (THE "STOCKHOLDERS
AGREEMENT")."
(b) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
CONDITIONS, AS SPECIFIED IN THE STOCKHOLDERS
AGREEMENT, COPIES OF WHICH ARE ON FILE AT THE OFFICE
OF THE ISSUER AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST."
(c) "THE ISSUER WILL FURNISH WITHOUT CHARGE TO
EACH STOCKHOLDER WHO SO REQUESTS THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OR SERIES OF SHARES
41
<PAGE> 46
AUTHORIZED TO BE ISSUED AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS."
In addition, certificates representing shares of Common Stock owned by residents
of certain states shall bear any legends required by the laws of such states.
All Stockholders shall be bound by the requirements of such
legends. Upon a Registration of any shares of Common Stock, the certificate
representing the registered shares shall be replaced, at the expense of the
Company, with certificates not bearing the legends required by Sections 20(a)
and 20(b).
21. Covenants; Representation and Warranties.
21.1. No Other Arrangements or Agreements. Each Management
Stockholder hereby consents, in accordance with the applicable provisions of the
Stock Option Plan of Telex in existence on the date hereof, to having its
Rollover Options governed by the Stock Option Plan, except as provided above.
Each Management Stockholder hereby agrees that all arrangements or agreements of
any kind to which it is currently a party with respect to the shares of Common
Stock, including, but not limited to, arrangements or agreements with respect
to the acquisition, disposition or voting of shares of Common Stock or any
interest therein (whether or not such agreements and arrangements are with the
Company or any of its subsidiaries) shall be terminated in full as of the
Closing without liability to any other party thereto. Each Management
Stockholder agrees that it will not enter into any such arrangements or
agreements inconsistent with this Agreement.
21.2. New Management Stockholders. Each Stockholder hereby
agrees that any employee of the Company or any of its subsidiaries who after the
date of this Agreement is offered shares of Common Stock or holds Options shall,
as a condition precedent to the acquisition of such shares of Common Stock or
the exercise of such Options, as the case may be, (a) become a party to this
Agreement by executing the same and (b) if such employee is a resident of a
state with a community property system, cause such Management Stockholder's
spouse to execute a Spousal Waiver in the form of Exhibit A attached hereto and
deliver such Agreement and
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<PAGE> 47
Spousal Waiver, if applicable, to the Company at its address specified in
Section 30 hereof. Upon such execution and delivery, such employee shall be a
Management Stockholder for all purposes of this Agreement.
21.3. Limitation on Transactions with Affiliates. The Company
shall not, and shall not permit any subsidiary of the Company to enter into any
transaction with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction") unless (i) such Affiliate Transaction is on terms no
less favorable in all material respects to the Company or such subsidiary than
those that could be obtained at the time of such Affiliate Transaction in a
comparable arm's length transaction with a Person who is not an Affiliate of the
Company, and (ii) in the event such an Affiliate Transaction involves aggregate
payments or value of $10,000,000 or greater, (x) a majority of the Board,
including a majority of the disinterested directors if any (it being agreed that
John L. Hale shall qualify as a disinterested director in any Affiliate
Transaction in which payment is made or value is transferred to Greenwich or an
Affiliate of Greenwich), have determined in good faith that the criteria set
forth in clause (i) are satisfied and have approved the relevant Affiliate
Transaction and (y) the Company has obtained a written opinion of an investment
banking firm or an independent appraiser or accounting firm, in either case that
is nationally recognized in the United States of America, stating that the terms
of such Affiliate Transaction are fair to the Company and its Subsidiaries from
a financial point of view. The foregoing sentence will not apply to: (i) the
payment of reasonable and customary regular fees to directors of the Company and
its Subsidiaries, (ii) any transaction between the Company and a wholly owned
subsidiary or between wholly owned subsidiaries of the Company, (iii) any
transaction with an officer or member of the Board or any subsidiary of the
Company in the ordinary course of business involving indemnity arrangements,
(iv) the payment of any legal, accounting, investment banking and other
transaction expenses relating to the Merger and the transactions relating
thereto, including any such transaction expenses incurred by the Management
Stockholders, (v) any management consulting or financial advisory services
agreement between the Company or any subsidiary of the Company, on the one hand,
and Greenwich or any Affiliate of Greenwich, on the other hand, and (vi) any of
the agreements listed on Schedule B hereto.
43
<PAGE> 48
22. Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of each of the Company,
Greenwich, and, to the extent their interest would be adversely affected by such
amendment, Management Stockholders holding at least 66.67% of the shares of
Common Stock then held by all Management Stockholders, calculated on a fully
diluted basis.
23. Assignment.
23.1. Assignment by the Company. The Company shall have the
right to assign to one or more Permitted Assignees, and/or the right to cause
one or more Permitted Assignees to assume, all or any portion of its rights and
obligations under this Agreement, provided, that any such assignment or
assumption is accepted by the proposed assignee or assignees. If any right to
purchase of the Company herein is assigned to a Permitted Assignee or Permitted
Assignees pursuant to this Section 23.1, such Permitted Assignee or Permitted
Assignees shall be deemed to be the Company for purposes of such purchases under
the applicable sections of this Agreement.
23.2. Assignment Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, provided, that no Person shall be
permitted to assign any of its obligations pursuant to this Agreement without
the prior written consent of Greenwich, unless such assignment is in connection
with a Transfer explicitly permitted by this Agreement and, prior to such
assignment, such assignee complies with the requirements of Section 24.
24. Agreements to Be Bound. Notwithstanding anything to the
contrary contained in this Agreement, any Transfer (other than Transfers of
Registrable Securities under Section 9 of this Agreement by any Person shall be
permitted under the terms of this Agreement only if the transferee shall agree
in writing to be bound by the terms and conditions of this Agreement pursuant to
an instrument of assumption reasonably satisfactory in substance and form to the
Company and Greenwich. If Greenwich Transfers 100% of the shares of Common Stock
owned by it to a single Person, such Person shall be deemed to be Greenwich for
purposes of this Agreement. If Greenwich transfers less than
44
<PAGE> 49
100% of the Shares of Common Stock owned by it to any Person, then such Person
will be bound by all of the terms and obligations to which such Greenwich is
subject under this Agreement and will have only those rights of Greenwich under
this Agreement as Greenwich in its sole discretion shall determine.
25. Recapitalizations, Exchanges, etc. Affecting the Common
Stock. Except as otherwise provided herein, the provisions of this Agreement
shall apply to the full extent set forth herein with respect to the shares of
Common Stock (including any such shares issued or issuable upon exercise of
Options) and any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued or issuable in respect of, in exchange for, or in
substitution for such shares of Common Stock (including any such shares issued
or issuable in respect of, in exchange for or in substitution of Options or
Warrants), by reason of any stock dividend, split or reverse split, or in
connection with a combination of shares, recapitalization, reclassification,
merger, consolidation or other reorganization or otherwise, in which event
appropriate adjustments shall be made with respect to the relevant provisions of
this Agreement so as to fairly and equitably preserve as far as practicable the
original rights and obligations of the parties hereto under this Agreement.
Except as otherwise provided herein, this Agreement is not intended to confer
upon any Person, except for the parties hereto, any rights or remedies
hereunder.
26. Rule 144 etc. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act relating to any class of equity securities, the Company will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission thereunder, and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to
45
<PAGE> 50
time, or (b) any successor rule or regulation hereafter adopted by the
Commission.
27. Further Assurances. Each party hereto or Person subject
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or Person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
28. Governing Law. This Agreement and the rights and
obligations of the parties hereunder and the Persons subject hereto shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof.
29. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
30. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile, telex or
other standard form of telecommunications, by courier service, or by registered
or certified mail, postage prepaid, return receipt requested, addressed:
(a) If to the Company, to:
Telex Communications Group, Inc.
900 Aldrich Avenue South
Minneapolis, Minnesota 55420
Telecopy: (612) 887-5588
Attention: John A. Palleschi, Esq.
46
<PAGE> 51
with a copy to:
Greenwich Street Capital Partners LLC II
388 Greenwich Street
New York, New York 10033
Telecopy: (212) 816-0166
Attention: Nicholas E. Somers
and a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Andrew L. Sommer, Esq.
(b) If to Greenwich, to:
Greenwich Street Capital Partners LLC II
388 Greenwich Street, 36th Floor
New York, New York 10013
Telecopy: (212)816-0166
Attention: Nicholas E. Somers
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York New York 10022
Telecopy: (212) 909-6836
Attention: Andrew L. Sommer, Esq.
(c) If to a Management Stockholder, to such Management
Stockholder's address set forth in Schedule A
hereto
or to such other address or facsimile number as any party shall have specified
by notice to the other parties given in accordance with this Section 30.
47
<PAGE> 52
31. Headings; Execution in Counterpart. The headings and
captions contained herein are for convenience and shall not control or affect
the meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
32. Entire Agreement. This Agreement and the Securityholders
Agreement embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, representations, warranties, covenants or undertakings relating to
the shares of Common Stock, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties with respect to such subject matter.
33. Effect as to Princes Gate Investors. Neither the Company,
nor any other person shall have any obligations with respect to the Princes Gate
Investors under this Agreement prior to the Warrant Issue Date. Thereafter, all
provisions of this Agreement specifically relating to the Princes Gate Investors
shall become fully operative until the earlier of (a) the termination of this
Agreement pursuant to Section 18 hereof, and (b) the termination of the
Securityholders Agreement. Any action required or permitted to be taken by the
Princes Gate Investors hereunder shall be taken by a majority in interest of
such investors.
34. Injunctive Relief. The shares of Common Stock cannot
readily be purchased or sold in the open in the market, and for that reason,
among others, the Company and the Stockholders will be irreparably damaged in
the event this Agreement is not specifically enforced. Each of the parties
therefore agrees that in the event of a breach of any provision of this
Agreement, the aggrieved party may elect to institute and prosecute proceedings
in any court of competent jurisdiction to enforce specific performance or to
enjoin the continuing breach of this Agreement. Such remedies shall, however,
be cumulative and not exclusive, and shall be in addition to any other remedy
which the Company or the Stockholders may have. Each party hereto hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts in New York for the purposes of any
48
<PAGE> 53
suit, action or other proceeding arising out of or based upon this Agreement or
the subject matter hereof. Each party hereto hereby consents to service of
process by mail made in accordance with Section 30.
49
<PAGE> 54
IN WITNESS WHEREOF this Agreement has been signed by each of
the parties hereto on the date opposite such party's signature hereto, and shall
be effective as of the date first above written.
GST ACQUISITION CORP.
By: ______________________
Name:
Title:
GREENWICH II LLC
By: Greenwich Street Capital Partners,
L.P., its managing member
By: Greenwich Street Investments,
L.P., its general partner
By: Greenwich Street Investments,
Inc., General Partner
By: _______________________
Name:
Title:
JOHN L. HALE
_______________________
Name: John L. Hale
JOHN T. HISLOP
_______________________
Name: John T. Hislop
JOHN A. PALLESCHI
50
<PAGE> 55
_______________________________
Name: John A. Palleschi
KATHLEEN A. CURRAN
_______________________________
Name: Kathleen A. Curran
DAN M. DANTZLER
_______________________________
Name: Dan M. Dantzler
DANIEL G. WRIGHT
_______________________________
Name: Daniel G. Wright
JOSEPH P. WINEBARGER
_______________________________
Name: Joseph P. Winebarger
GLEN E. CAVANAUGH
51
<PAGE> 56
_______________________________
Name: Glen E. Cavanaugh
52
<PAGE> 57
EXHIBIT A
SPOUSAL WAIVER
_________________ [insert name of spouse] hereby waives and
releases any and all equitable or legal claims and rights, actual, inchoate or
contingent, which ___________ [insert he or she] may acquire with respect to the
disposition, voting or control of the shares of Common Stock subject to the
Stockholders and Registration Rights Agreement of Telex Communications Group,
Inc., dated as of ________ __,1997, as the same shall be amended from time to
time, except for rights in respect of the proceeds of any disposition of such
shares of Common Stock.
_______________________________
[signature of spouse]
i
<PAGE> 58
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
ROLLOVER SHARE ROLLOVER ROLLOVER
NAME CERTIFICATE NO. SHARES OPTIONS
---- --------------- -------------- ---------
<S> <C> <C> <C>
John Hale C-682 12,184 4,304
Dan M. Dantzler C-670 1,887 721
John A. Palleschi C-667 2,444 1,008
Joseph P. Winebarger C-672 2,327 610
Kathleen A. Curran C-676 268 309
Glen E. Cavanaugh C-674 1,074 1,237
John T. Hislop C-668 874 2,349
Daniel G. Wright C-678 604 1,562
</TABLE>
ii
<PAGE> 59
SCHEDULE B
Permitted Transactions with Affiliates
1. John L. Hale, John T. Hislop and John A. Palleschi have each entered into
5-year employment agreements with the Borrower effective at the Recapitalization
Closing Date.
2. Effective on the Recapitalization Closing Date, key employees of Telex will
participate in a new option plan, under which they will receive non-qualified
options to purchase shares of Common Stock of Telex.
iii
<PAGE> 1
Exhibit 10(b)
TRADEMARK LICENSE AGREEMENT
This AGREEMENT ("Agreement") entered into as of this 25th day of May, 1989
by and between MEMOREX TELEX CORPORATION, a Delaware corporation with its
principle place of business at 6422 East 41st Street, Tulsa, Oklahoma 74101
("Licensor") and TELEX COMMUNICATIONS, INC. (formerly TCI Acquisition Corp.), a
Delaware corporation with its principle place of business at 9600 Aldrich Avenue
South, Minneapolis, Minnesota 55420 ("Licensee").
WHEREAS, Licensor has beneficial and legal ownership rights in the
trademark "TELEX" and related trademarks and trade names, which have come to be
recognized by customers as constituting a desirable image of superior quality
products and thus possesses considerable value as goodwill;
WHEREAS, pursuant to an Asset Purchase Agreement dated as of the
date hereof (the "Asset Purchase Agreement"), Licensee has acquired all of the
assets of Licensor's wholly-owned subsidiary formerly known as Telex
Communications, Inc., including goodwill associated with the tradename "TELEX"
and related trademarks and trade names; and
WHEREAS, pursuant to the Asset Purchase Agreement, Licensor has
agreed to provide Licensee with a license to use the trademark "TELEX" and
related trademarks and trade names.
NOW, THEREFORE, in order to set forth the Licensee's rights to use
the Licensed Trademarks (as hereinafter defined) and TELEX trade name in its
businesses, and in consideration of the mutual terms, covenants and conditions
set forth herein, the parties agree as follows:
1. DEFINITIONS
(A) "Licensed Trademarks" shall mean the TELEX trademarks and
foreign language and composite trademarks thereof throughout the Territory,
including, without limitation, the Registered Licensed Trademarks, in which
Licensor has now or hereafter acquires rights, or may otherwise have the right
to license, with respect to the Licensed Products or the MTC Products (as
hereinafter defined).
(B) "Licensed Products" shall collectively include: (i) all those
products which Licensee is selling or has previously sold, or has approved for
sale, in
<PAGE> 2
conjunction with any of the Licensed Trademarks, including, without limitation,
the products identified in Schedule 1 attached hereto, including components
incorporated in such products and sold in conjunction therewith; (ii) any
products, including components incorporated in such products and sold in
conjunction therewith, not materially different from products described in
clause (i), that Licensee desires to sell in conjunction with any of the
Licensed Trademarks; and (iii) any other products (except for MTC Products),
including components incorporated in such products and sold in conjunction
therewith, that Licensee desires to sell in conjunction with any of the Licensed
Trademarks, subject to Section 3(C) hereof.
(C) "MTC Products" shall collectively include: (i) all those
products which Licensor is selling or has previously sold, or has approved for
sale, in conjunction with the trademark "TELEX," including components
incorporated in such products and sold in conjunction therewith; (ii) any
products, including components incorporated in such products and sold in
conjunction therewith, not materially different from products described in
clause (i), that Licensor desires to sell in conjunction with the trademark
"TELEX"; and (iii) any other products (except Licensed Products), including
components incorporated in such products and sold in conjunction therewith, that
Licensor desires to sell in conjunction with the trademark "TELEX," subject to
Section 3(C) hereof.
(D) "Registered Licensed Trademarks" shall mean the registrations
and applications for registration for the Telex trademarks listed on Schedule 1
hereto.
(E) The "Territory" of the rights granted to Licensee herein shall
mean the universe.
(F) The "Term" of the Licenses granted hereunder shall be perpetual.
(G) Licensor's "Affiliated Companies" include all companies (other
than Licensee and its Affiliated Companies) which are, or become during the
Term, directly or indirectly controlled by Licensor.
(H) Licensee's "Affiliated Companies" include all companies which
are, or become during the Term, directly or indirectly controlled by Licensee.
2. GRANT OF LICENSE
(A) Licensor hereby grants to Licensee and to its Affiliated
Companies, successors and permitted assigns to
2
<PAGE> 3
the full extent it has or may at any time hereafter acquire the right so to do,
and Licensee hereby accepts:
(i) the separate and exclusive royalty-free license within the
Territory to manufacture, cause to be manufactured, distribute, sell,
advertise and promote the Licensed Products in conjunction with Licensed
Trademarks, including the right to grant sub-licenses, subject to the
provisions of Section 4 hereof; and
(ii) the separate and exclusive, royalty-free right to use,
within the Territory, the trade name TELEX in its and its Affiliated
Companies' corporate and other business entity trade names, provided that
such corporate trade names shall not combine the term TELEX with the term
"Memorex" or synonyms thereof.
Nothing herein shall be construed to limit the absolute right of
Licensor to use throughout the universe the composite trademark and composite
trade name "Memorex Telex."
3. TRADEMARK WARRANTY; PRODUCT EXCLUSION
(A) Licensor represents and warrants that it is the legal or
beneficial owner of the Registered Licensed Trademarks.
(B) Neither Licensor nor Licensee shall use, or authorize the use
of, the Licensed Trademarks or TELEX trade name on or in association with any
new type of product which is likely to denigrate the image of the Licensed
Trademarks or TELEX trade name.
(C) Neither Licensor nor Licensee shall use, or authorize the use
of, Licensed Trademarks in conjunction with any new product materially different
from a product described in Sections 1(B)(i) and 1(B)(ii) hereof, in the case of
Licensee, or Sections 1(C)(i) or 1(C)(ii) hereof, in the case of Licensor, or
without the consent of the other party as provided herein. If Licensor or
Licensee desires to use any of the Licensed Trademarks in conjunction with such
a new type of product, Licensor or Licensee, as the case may be, will notify the
other party of such desired use at least 90 days prior to the introduction of
such new product. If such other party reasonably determines that such new
product is likely to denigrate the image of the Licensed Trademarks or the Telex
trade name, or is likely to materially compete with an existing or planned
product of such notified party, that party shall so notify the party
3
<PAGE> 4
proposing the new product within 30 days and the parties shall promptly consult
to resolve the matter. If the parties are unable to resolve the matter, the
matter shall be submitted to arbitration in accordance with Section 10 hereof.
4. SUBLICENSES
(A) Subject to this Section 4, Licensor may license, and Licensee
may sublicense, other persons with respect to the Licensed Trademarks. If either
Licensor or Licensee intends to grant a license or sublicense, as the case may
be, such party shall notify the other party to this Agreement in writing of its
intent at least ninety (90) days prior to the effectiveness of such other
license or sublicense. In the event that Licensor or Licensee, as the case may
be, determines that the grant of such other license or sublicense, as the case
may be, would materially conflict with, impair, dilute or in any manner derogate
the value of such party's rights in respect of the Licensed Trademarks, the
Licensor or Licensee, as the case may be, shall promptly notify the other party
in writing. Such notice shall stay the grant of such proposed other license or
sublicense pending resolution of the objection in accordance herewith. Licensor
and Licensee shall promptly consult regarding the objection. If the parties are
unable to resolve the matter within 30 days, either party may submit the dispute
to arbitration in accordance with Section 10 hereof.
(B) Any other licensee or sublicensee shall comply with the terms of
this Agreement applicable to the party granting such other license or
sublicense, as the case may be, and prior to the effectiveness of such other
license or sublicense, such other licensee or such sublicensee, as the case may
be, shall agree in writing to be so bound and to so comply with the terms of
this Agreement, including, without limitation, the provisions of Sections 3(B),
5 and 6 hereof. The Licensor and Licensee shall each guaranty the performance
hereunder of any of their respective other licensees or sublicensees, as the
case may be.
5. QUALITY OF LICENSED PRODUCTS
Licensor and Licensee agree that all Licensed Products and MTC
Products shall be of high quality to protect and enhance the prestige of the
Licensed Trademarks and TELEX trade name and the goodwill pertaining thereto.
4
<PAGE> 5
6. ADVERTISING
Licensee and Licensor hereby agree that any advertising, packaging
and promotional material used by either of them in connection with the Licensed
Products, or the MTC Products, as the case may be, will be substantially in
accord with the high level of similar materials previously used by it or its
predecessor company with respect to such businesses and will not knowingly
disparage the Licensed Trademarks or the TELEX trade name in any manner.
7. FUTURE DOCUMENTS, RECORDING AND TRADEMARK MAINTENANCE
(A) The parties agree to cooperate in the execution and delivery,
from time to time throughout the term of this Agreement, of any documents that
may be reasonably required or desirable to effectuate and carry out the purpose
and intent of this Agreement. Such documents shall include instruments required
to file, renew, assign, protect, perfect and maintain the Licensed Trademarks
and Licensor's ownership therein, or to provide for the granting of any license
or sublicense hereunder.
(B) Licensor shall use its reasonable best efforts to cause the
maintenance of the Registered Licensed Trademarks, at Licensor's cost and
expense. Licensor shall, at the request and expense of Licensee, use its
reasonable best efforts to obtain additional registrations of the trademark
Telex.
8. INFRINGEMENT AND OTHER ACTIONS
(A) The parties shall promptly notify each other of any claim that
is asserted, and of any action or proceeding that is threatened or commenced, in
which a third party (i) challenges the right of any of the parties hereto to use
or ownership of any of the Licensed Trademarks, or (ii) alleges that any
Licensed Trademark used pursuant to this Agreement infringes the trademark
rights of such third party, or (iii) in which the revocation, cancellation or
declaration of invalidity of any Licensed Trademark is sought. The parties shall
consult with respect to each such claim, action, or proceeding, the assertion of
counterclaims thereto and the settlement thereof and shall jointly defend, in
the name of Licensor and/or Licensee, each such action or proceeding that is
commenced. The party or parties whose use or ownership of the Licensed Trademark
or TELEX trade name is being challenged or whose products are covered by the
Licensed Trademarks or TELEX trade name being attacked
5
<PAGE> 6
shall be responsible for the legal expenses incurred in defending such actions
and proceedings and all damages and costs, if any, recovered by the third party.
The party responsible for such expenses (or, if applicable, the party
responsible for the greater proportion of such expenses) shall control any such
joint defense, provided that neither party shall agree to a settlement without
the consent, not unreasonably withheld, of the other party.
(B) The parties shall promptly notify each other of any infringement
or other violation by a third party of any of the Licensed Trademarks or TELEX
trade name. The parties shall consult with respect to any such infringement, and
any action or proceeding, including opposition and cancellation actions, that
may be brought against such infringement. The parties shall consult with respect
to taking appropriate action including the bringing of actions in the name of
Licensor and/or Licensee. If such action or proceeding is commenced by either
party, it shall promptly notify the other party. Licensor and Licensee shall
each be given an opportunity to participate in any such action or proceeding
with counsel of its choice, bearing its own legal and other costs of such
independent counsel. Should either party determine not to commence such action
or proceeding it shall promptly notify the other party. Should Licensor or
Licensee, as the case may be, then determine to initiate such action or
proceeding, the other party shall first be given 30 days notice, during which
time such party may reconsider and change its decision. Licensor or Licensee, as
the case may be, may then, after giving notice to the other party, at its or
their expense, initiate such action or proceedings in the name of Licensor
and/or the initiating party or parties. Each party shall provide reasonable
cooperation in any joint proceeding or action, including the defense of any
counterclaims, and may, if not a party to any proceeding or action, join in,
with counsel of its own choice, bearing its own legal and other costs. The party
bringing any action or proceeding under this Section 8(B) shall keep the other
party informed of the proceedings and give the other party an opportunity to
participate in any settlements, but the final decision as to whether to settle
the action or proceeding shall be made by the party or party bringing the action
or proceeding; provided, however, that neither party shall agree to a settlement
without the consent, not unreasonably withheld, of the other party, if such
other party reasonably determines that such settlement would materially impair
the rights of such other party to use or own any of the Licensed Trademarks. Any
recovery in any joint action or proceeding shall be applied first to reimburse
the parties for their reasonable legal expenses in bringing such action or
proceeding. The excess shall belong to the party initiating the action or
proceeding. If the
6
<PAGE> 7
action is brought jointly and the recovery is not sufficient to reimburse the
parties bringing the action for their reasonable legal expenses in such action,
the unreimbursed portion of such legal expenses shall be borne pro rata by each
of the parties.
(C) Except if resulting from a material breach of this Agreement,
the parties shall not have any claim or cause of action against the other
arising out of the manufacture, promotion or sale of any of the Licensed
Products or MTC Products. Furthermore, neither party shall have any claim
against the other, nor shall any party be entitled to be reimbursed (except
pursuant to the last sentence of Section 3(B) hereof) by the other party for any
costs, expenses or damages incurred or sustained by it, by reason of any third
party claiming, or any court or government agency finding, that any of the
Licensed Trademarks infringe the property rights of any third party.
(D) Except in respect of any third party claim of Licensed Trademark
or TELEX trade name infringement, Licensor and Licensee shall each indemnify
and hold the other harmless from any liability, loss, damage or expense
(including reasonable counsel fees) arising out of their or their respective
Affiliated Companies' or sublicensees' (or, in the case of Licensor, other
licensees') manufacture, promotion or sale of their respective products,
including, but not limited to, (i) any claim for injury or damage made by any
third party allegedly attributable to the use of the Licensed Products or MTC
Products, (ii) patent infringement or (iii) false advertising.
(E) If any claim or action is made or brought against Licensor or
Licensee by any third party which, under the provisions of Section 8(D), might
give rise to an obligation to indemnify such party, such party shall promptly
notify Licensor or Licensee, as the case may be, indicating the name of the
claimant or litigant and providing the details of the claim or action. Such
party shall promptly thereafter forward every process or pleading relating to
any such claim or action to the indemnitor under Section 8(D) and such
indemnitor shall have the right and obligation, at its expense and both with
counsel of its choice, to assume the defense of, assert any counterclaim with
respect to, and settle any such claim or action in such party's and/or the
indemnitor's name; provided, however, that if any counterclaim so asserted could
have the effect of imposing any obligation upon the other party, then such
counterclaim shall be covered by this indemnification and, if more than monetary
damages are involved, the prior consent of such party shall have been obtained
which shall not be unreasonably withheld.
7
<PAGE> 8
9. ASSIGNABILITY; SECURITY INTERESTS
(A) The rights granted under this Agreement may be assigned (a) by
either party, to the successor in interest or assignee of substantially all its
business or assets, or the surviving party of any merger or consolidation to
which it is a party or (b) by either party, to the successor in interest or
assignee of all of the business or assets of one or more of the assigning
party's product lines, provided that the assignee of any assignment under this
Section 9 has assumed all the assignor's obligations hereunder with respect to
the business or assigned product lines, as the case may be. The assigning party
under this Section 9 shall give the other party at least 60 days prior notice of
such assignment. Licensor and Licensee shall each guaranty the performance
hereunder by any of their respective assignees.
(B) Each party hereto acknowledges and agrees that the other party
may grant a security interest in its interest in the Licensed Trademarks and the
TELEX trade name to secure its obligations to the holder or holders of its
indebtedness. If it shall become necessary for any such holder or holders to
exercise its or their rights under such security interest, such rights shall be
subject to compliance with the obligations under this Trademark License
Agreement of the party which granted such security interest.
10. ARBITRATION
Any controversy or claim arising out of, or relating to this
Trademark License Agreement or its interpretation, performance or nonperformance
or any breach thereof, which the parties are unable to resolve between
themselves, shall first be submitted to arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association before a single
arbitrator in New York City who shall be a trademark specialist selected by the
parties. If the parties cannot agree on the selection of the arbitrator, the
parties shall each designate an arbitrator, the two of whom shall then agree
upon a third arbitrator. Each party shall bear its own costs in any such
proceeding. The decision of the arbitrator shall be final and binding upon the
parties and may be enforced in any court of competent jurisdiction.
11. GENERAL PROVISIONS
(A) This Trademark License Agreement embodies all the terms and
conditions among the parties hereto with respect to the Licensed Trademarks and
TELEX trade name and
8
<PAGE> 9
supersedes and cancels all previous agreements and understandings with respect
to the subject matter hereof. This Agreement may only be amended in a writing
signed by the parties hereto. There are no verbal statements, representations or
warranties that have not been embodied herein.
(B) The provisions of this Agreement are separate and divisible. If
any provision or part thereof is declared invalid or unenforceable, such
provision shall be deemed modified to the extent necessary to render it valid
and enforceable, and it shall not affect the validity or enforceability of any
remaining part or parts, all of which shall remain in full force and effect.
(C) The failure of any party at any time to require performance by
any other party of any term or condition hereof shall not in any manner affect
the right to require full performance at any time thereafter, nor shall the
waiver by a party of any default in the performance or observance of any term or
condition therein be taken as or held to be a waiver of any preceding or
subsequent default or as a waiver of the term or condition itself.
(D) Any notice, approval, consent, or other communications required
or permitted hereunder shall be in writing and shall be given by personal
delivery, telecopy or telex, with acknowledgement of receipt, or by prepaid
registered mail, return receipt requested, addressed to the party at its address
first hereinabove written to the attention of its General Counsel, or to any
other address that either party may subsequently designate by notice in
accordance with this paragraph. Notices and other communications hereunder shall
be deemed effective one day after dispatch if personally delivered, telexed or
telecopied, and three days after dispatch, if posted, subject to proof of
delivery.
(E) This Agreement does not, and shall not be deemed to, make any
party hereto the agent, partner, joint venturer or legal representative of any
other for any purpose whatsoever. Neither Licensor nor Licensee shall have the
right or authority to assume or create any obligations or responsibility
whatsoever, express or implied, on behalf of or in the name of the other, or to
bind the other in any respect whatsoever, except as may be herein provided.
(F) In the event that this Agreement or any portion thereof is
declared invalid by a court, agency, commission or other entity having
jurisdiction thereof, neither of the parties shall have any cause of action or
9
<PAGE> 10
claim against any of the others by reason of such declaration of invalidity.
(G) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(H) Neither of the parties hereto shall have any liability to the
others for consequential damages or lost profits.
(I) The headings given to the paragraphs of this Agreement are for
the convenience of the parties only and are not to be used in any interpretation
of this Agreement.
(J) This Agreement shall be binding upon and inure to the benefit of
each party and its respective successors and assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
right or benefit.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year set forth.
MEMOREX TELEX CORPORATION
Licensor By: /s/
--------------------------------
Licensee TELEX COMMUNICATIONS, INC.
(formerly TCI Acquisition Corp.)
By: /s/
-------------------------------
President
10
<PAGE> 11
SCHEDULE 1:
Registrations and applications as set forth on Annex 1 and the registrations and
applications for the TELEX Trademark registered in the following countries:
JP
AU
AT
BX
CA
DK
FI
FR
GR
IN
IT
MX
NO
ES
SE
CH
GB
CN
BR
NZ
<PAGE> 12
TELEX TELEX
STATUS: RENEWED
STATUS DATE: NOVEMBER 8, 1969.
U.S. CLASS: 21 INT. CLASS: 9
GOODS: RADIO PILLOW SPEAKERS, SOUND REPRODUCER HEAD
SETS, MAGNETIC SOUND REPRODUCER APPARATUS,
INTEROFFICE TELEPHONIC COMMUNICATION
APPARATUS AND ELECTRONIC PERSONAL HEARING AID
APPARATUS FOR INSTALLATION IN CHURCHES,
AUDITORIUMS AND THE LIKE
SER. NUMBER: 545.559 FILED: DECEMBER 26, 1947.
IN COMM: 011937
FIRST USED: JANUARY 1937.
PUBLISHED FOR OPPOSITION: JULY 26, 1949.
REG. NUMBER: 517.386
REGISTERED: NOVEMBER 8, 1949.
REGISTRANT: TELEX, INC. ST. PAUL, MINN.
RENEWED: NOVEMBER 8, 1969.
RENEWED TO: TELEX, INC. ST. PAUL, MINN.
U.S. REGISTRATIONS CLAIMED: 429310
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 50607 AGAINST (REG. NUMBER 0903900)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 51407 AGAINST TELEMAT (SER. NUMBER 72
/328305)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 51731 AGAINST TELETAX (SER. NUMBER 72
/348098)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 53021 AGAINST TELE COMPUTER (SER.
NUMBER 72 387676)
ADDITIONAL INFORMATION: PLAINTIFF IN CANCELLATION
ACTION NO. 16449 AGAINST TELEX (REG. NUMBER
1312520)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 76904 AGAINST TELEX WORLD LETTER (SFR.
NUM 73/614503)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 77806 AGAINST TELECT (SER. NUM 73
/672104)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 78861 AGAINST TELX ENTERTAINMENT (SER.
NUM 73 683384)
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 79099 AGAINST TELEMAX (SER. NUM 73
655685)
<PAGE> 13
STATUS: RENEWED STATUS DATE: AUGUST 18, 1973.
U.S. CLASS: 103 INT. CLASS: 37
SERVICES: MAINTAINING AND REPAIR OF ELECTRONIC DEVICES,
NAMELY, HEARING AID EQUIPMENT
[TELEX LOGO] SER. NUMBER: 618.410 FILED: SEPTEMBER 5, 1951.
IN COMM: SEPTEMBER 5, 1949.
FIRST USED: SEPTEMBER 5, 1949.
PUBLISHED FOR OPPOSITION: MAY 19, 1953
REG. NUMBER: 578.917 REGISTERED: AUGUST 18, 1953.
REGISTRANT: TELEX, INC., ST. PAUL, MN
RENEWED: AUGUST 18, 1973.
RENEWED TO: SAME
CLAIMS/DISCLAIMS: APPLICANT CLAIMS OWNERSHIP ON
REGISTRATIONS NO. 373.770, 429.310 & OTHERS.
- --------------------------------------------------------------------------------
TELEX TELEX
STATUS: REGISTERED STATUS DATE: OCTOBER 20, 1970.
U.S. CLASS: 26 INT. CLASS: 9
GOODS: DATA PROCESSING EQUIPMENT COMPUTER PERIPHERAL
EQUIPMENT & COMPUTER TERMINAL COMPUTERS DIGITAL TAPE
TRANSPORTS DISK STORAGE DRIVES & ELECTRONIC FILE
CONTROLS UNITS APPARATUS & INSTRUMENTS FOR DATA
ACQUISITION DATA TAPE RECORDERS ETC
SER. NUMBER: 323.386 FILED: APRIL 1, 1969.
IN COMM: 1940.
FIRST USED: 1940.
PUBLISHED FOR OPPOSITION: AUGUST 4, 1970.
REG. NUMBER: 901.195 REGISTERED: OCTOBER 20, 1970.
REGISTRANT: THE TELEX CORP., TULSA OKLA.
CLAIMS/DISCLAIMS: OWNER OF RNS 439.711 AND 517.386.
[TELEX LOGO] TELEX
STATUS: CANCELLED - SEC. 8
CANCELLATION DATE: JULY 17, 1984.
U.S. CLASS: 26 INT. CLASS: 9
GOODS: PROPORTIONAL DIVIDERS NAVIGATIONAL COMPUTERS
CALCULATORS AND PLOTTERS
SER. NUMBER: 47.996 FILED: MARCH 28, 1975.
IN COMM: SEPTEMBER 21, 1973.
FIRST USED: SEPTEMBER 21, 1973.
PUBLISHED FOR OPPOSITION: NOVEMBER 22, 1977.
REG. NUMBER: 1.085.335
REGISTERED: FEBRUARY 14, 1978.
REGISTRANT: THE TELEX CORPORATION, TULSA OKLA.
ASSIGNEE OF TELEX COMMUNICATIONS INC. MINNEAPOLIS,
MINN.
ASSIGNEE: TELEX CORPORATION, THE TULSA, OK 74101 USX
ASSIGNOR: TELEX COMMUNICATIONS INC. 9600 ALDRICH
AVENUE SOUTH MINNEAPOLIS MN 55420 USX
BRIEF: ASSIGNMENT OF ASSIGNORS INTEREST
RECORDED: OCTOBER 22, 1976.
ACKNOWLEDGED: OCTOBER 11, 1976.
REEL/FRAME: 296/771
CLAIMS/DISCLAIMS: OWNER OF RNS 901.195 & 905.501.
<PAGE> 14
TELEX TELEX
STATUS: REGISTERED
STATUS DATE: NOVEMBER 24, 1970.
U.S. CLASS: 21 INT. CLASS: 9
GOODS: AMPLIFIERS MICROPHONES RADIOS SPEAKERS
COMBINATION RADIO PHONOGRAPHS VIDEO TAPE
RECORDERS & REPRODUCERS & COMPONENTS & PARTS
OF ALL OF SAID EQUIPMENT
SER. NUMBER: 323.385 FILED: APRIL 1, 1969.
IN COMM: 1948.
FIRST USED: 1948.
PUBLISHED FOR OPPOSITION: SEPTEMBER 8, 1970.
REG. NUMBER: 902.922
REGISTERED: NOVEMBER 24, 1970.
REGISTRANT: TELEX CORPORATION, TULSA, OK
CLAIMS/DISCLAIMS: OWNER OF RNS 439.711 AND 517.386.
- -------------------------------------------------------------------------------
TELEX TELEX
STATUS: REGISTERED STATUS DATE: JANUARY 5, 1971.
U.S. CLASS: 26 INT. CLASS: 9
GOODS: DATA PROCESSING EQUIPMENT, COMPUTER
PERIPHERAL EQUIPMENT, AND COMPUTER TERMINAL
APPARATUS - NAMELY, COMPUTERS, DIGITAL TAPE
TRANSPORTS, DISK STORAGE DRIVES AND ELECTRONIC
FILE CONTROL UNITS. APPARATUS AND INSTRUMENTS
FOR DATA ACQUISITION - NAMELY, DATA TAPE
RECORDERS, DATA TAPE RECORDERS-REPRODUCERS,
OSCILLOGRAPHS AND GALVANOMETERS, EYE GLASSES
AND EYE GLASS FRAMES, AND COMPONENTS AND PARTS
FOR ALL OF SAID EQUIPMENT, APPARATUS AND
INSTRUMENTS
SER. NUMBER: 342.188 FILED: OCTOBER 30, 1969.
IN COMM: APRIL 1, 1968.
FIRST USED: APRIL 1, 1968.
PUBLISHED FOR OPPOSITION: OCTOBER 20, 1970.
REG. NUMBER: 905.501 REGISTERED: JANUARY 5, 1971
REGISTRANT: THE TELEX CORP., TULSA, OKLA.
CLAIMS/DISCLAIMS: OWNER OF RN 517.386.
<PAGE> 15
TELEX
STATUS: REGISTERED STATUS DATE: MARCH 2, 1971.
U.S. CLASS: 21 INT. CLASS: 9
GOODS: AMPLIFIERS, MICROPHONES, RADIOS, SPEAKERS, COMBINATION
RADIO-PHONOGRAPHS AND COMPONENTS AND PARTS FOR ALL OF SAID
EQUIPMENT
SER. NUMBER: 342.187 FILED: OCTOBER 30, 1969.
IN COMM: APRIL 1, 1968.
FIRST USED: APRIL 1, 1968.
PUBLISHED FOR OPPOSITION: DECEMBER 15, 1970.
REG. NUMBER: 908.989 REGISTERED: MARCH 2, 1971.
REGISTRANT: THE TELEX CORP. TULSA, OKLA.
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 76959 AGAINST ZELEX (SER. NUM 73/607945)
CLAIMS/DISCLAIMS: OWNER OF RN 517.386.
- -------------------------------------------------------------------------------
TELEX
STATUS: REGISTERED STATUS DATE: JUNE 8, 1971.
U.S. CLASS: 36 INT. CLASS: 9
GOODS: EQUIPMENT & APPARATUS FOR ELECTRONIC TREATMENT OF SOUND
SOUND RECORDERS REPRODUCERS PHONOGRAPHS TAPE DECKS TAPE
RECORDERS TAPE CARTIDEGS PLAYERS TAPE DUPLICATORS TAPES FOR
SOUND RECORDING & REPRODUCTION COMBINATION TAPE RECORDERS &
RADIOS ETC.
SER. NUMBER: 361.184 FILED: MAY 28, 1970.
IN COMM: 1948.
FIRST USED: 1948.
PUBLISHED FOR OPPOSITION: MARCH 23, 1971.
REG. NUMBER: 913.521 REGISTERED: JUNE 8, 1971
REGISTRANT: THE TELEX CORP. TULSA, OKLA.
CLAIMS/DISCLAIMS: OWNER OF RN 517,386.
<PAGE> 16
[TELEX LOGO] TELEX
STATUS: PUBLISHED
STATUS DATE: FEBRUARY 28, 1989.
U.S. CLASSES: 21-26-36 INT. CLASS: 9
GOODS: DATA PROCESSING EQUIPMENT, COMPUTER PERIPHERAL
EQUIPMENT AND COMPUTER TERMINAL APPARATUS - NAMELY,
AIRLINE RESERVATION TERMINALS, PLASMA DISPLAY UNITS,
DIGITAL TAPE TRANSPORTERS, DISK STORAGE DRIVE AND
ELECTRONIC FILE CONTROL UNITS, EQUIPMENT AND
APPARATUS FOR ELECTRONIC TREATMENT OF SOUND - NAMELY,
SOUND RECORDERS-REPRODUCERS, AMPLIFIERS,
MICROPHONES, RADIOS, SPEAKERS, PHONOGRAPHS, TAPE
DECKS, TAPE RECORDERS, TAPE CARTRIDGE PLAYERS, TAPE
DUPLICATORS, TAPES FOR SOUND RECORDING AND
REPRODUCTION AND PHONOGRAPHS, COMMUNICATION ANTENNAS,
AUDIOVISUAL PROJECTORS, AND PARTS FOR ALL OF THE SAID
EQUIPMENT
SER. NUMBER: 649.519 FILED: MARCH 16, 1987
IN COMM: APRIL 1, 1985.
FIRST USED: APRIL 1, 1985.
PUBLISHED FOR OPPOSITION: FEBRUARY 28, 1989.
APPLICANT: TELEX CORPORATION, THE (DEL CORPORATION):
TULSA, OK
U.S. REGISTRATIONS CLAIMED: 0517386, 0578917, 0901195,
0902276, 0902922, 0905501, 0908989, 0913521
CLAIMS/DISCLAIMS: (INT. CL 9) FIRST USED IN ANOTHER FORM
ON JANUARY, 1937 (INT. CL 9) FIRST USED IN ANOTHER
FORM ON JANUARY, 1937 (INT. CL 9) FIRST USED IN
COMMERCE IN ANOTHER FORM ON APRIL, 1968
- --------------------------------------------------------------------------------
TELEX TELEX
STATUS: REGISTERED
STATUS DATE: NOVEMBER 10, 1970.
U.S. CLASS: 44 INT. CLASS: 10
GOODS: PERSONAL HEARING DEVICES FOR AID OF DEAF OR
PARTIALLY DEAF PERSONS & COMPONENT PARTS THEREOF
SER. NUMBER 342.332 FILED: OCTOBER 31, 1969.
IN COMM: 011937
FIRST USED: JANUARY 1937.
PUBLISHED FOR OPPOSITION: AUGUST 25, 1970.
REG. NUMBER: 902.276
REGISTERED: NOVEMBER 10, 1970.
REGISTRANT: THE TELEX CORP. TULSA OKLA.
CLAIMS/DISCLAIMS: OWNER OF RN 517.386.
<PAGE> 17
- ----- STATUS: CANCELLED - SEC. 8
TELEX CANCELLATION DATE: OCTOBER 23, 1984.
- ----- U.S. CLASS: 37 INT. CLASS: 16
GOODS: CLIPBOARDS
SER. NUMBER: 103.901 FILED: OCTOBER 20, 1976.
IN COMM: SEPTEMBER 21, 1973.
FIRST USED: SEPTEMBER 21, 1973.
PUBLISHED FOR OPPOSITION: FEBRUARY 7, 1978.
REG. NUMBER: 1.090.303 REGISTERED: MAY 2, 1978.
REGISTRANT: THE TELEX CORPORATION, TULSA, INC.
ASSIGNEE OF TELEX COMMUNICATIONS INC.
MINNEAPOLIS, MINN.
ASSIGNEE: TELEX CORPORATION, THE TULSA, OK 74101 USX
ASSIGNOR: TELEX COMMUNICATIONS, INC. 9600 ALDRICH
AVENUE SOUTH MINNEAPOLIS, MN 55420 USX
BRIEF: ASSIGNMENT OF ASSIGNORS INTEREST
RECORDED: JANUARY 17, 1977.
ACKNOWLEDGED: JANUARY 6, 1977.
REEL/FRAME: 300/555
- --------------------------------------------------------------------------------
TELEX THE STATUS: CANCELLED - SEC. 8
PERIPHERAL CANCELLATION DATE: SEPTEMBER 16, 1980.
COMPANY WHERE U.S. CLASS: 103 INT. CLASS: 37
THE DIFFERENCE SERVICES: MAINTENANCE SERVICE AND REPAIR OF COMPUTER APPARATUS
BEGINS NAMELY, MAINTENANCE SERVICE AND REPAIR OF TAPE DRIVES, TAPE
ADAPTERS, CONTROLLERS, PRINTERS, DISC DRIVES AND DISC
CONTROLLERS
SER. NUMBER: 432.621 FILED: AUGUST 14, 1972.
IN COMM: JULY 12, 1972.
FIRST USED: JULY 12, 1972.
PUBLISHED FOR OPPOSITION: NOVEMBER 27, 1973.
REG. NUMBER: 979.138
REGISTERED: FEBRUARY 19, 1974.
REGISTRANT: TELEX COMPUTER PRODUCTS, INC. TULSA, OKLA.
CLAIMS/DISCLAIMS: OWNER OF RNS 901.195, 913.521 AND OTHERS.
TELE MIKE STATUS: CANCELLED - SEC. 08
TELEX CANCELLATION DATE: JULY 25, 1961.
U.S. CLASS: 21 INT. CLASS: 9
GOODS: MICROPHONES FOR BROADCASTING.
SER. NUMBER: 497.507 FILED: MARCH 1, 1946.
IN COMM: FEBRUARY 4, 1946.
PUBLISHED FOR OPPOSITION: FEBRUARY 11, 1947.
REG. NUMBER: 429.310 REGISTERED: APRIL 29, 1947.
REGISTRANT: TELEX INC. ST. PAUL, MINN.
REPUBLISHED SEC 12 (C): JUNE 7, 1955
REPUBLISHED BY: SAME BUT ST. PAUL MIN.
DISCLAIMS: MIKE.
<PAGE> 18
YOU'LL HEAR MORE FROM TELEX YOU'LL HEAR MORE FROM TELEX
STATUS: REGISTERED STATUS DATE: JULY 11, 1972.
U.S. CLASSES: 21-36 INT. CLASS: 9
GOODS: (U.S. CL. 21) RADIOS, HEADPHONES,
AMPLIFIERS, MICROPHONES, SPEAKERS, COMBINATION
RADIO-PHONOGRAPHS AND COMPONENTS AND PARTS
FOR ALL OF SAID EQUIPMENT (U.S. CL. 36) TAPE
RECORDERS AND PLAYERS AND COMPONENTS AND
PARTS FOR ALL OF SAID EQUIPMENT
SER. NUMBER: 373.960 FILED: OCTOBER 21, 1970.
IN COMM; 061970
FIRST USED: JUNE 1970.
PUBLISHED FOR OPPOSITION: APRIL 25, 1972.
REG. NUMBER: 937.454 REGISTERED: JULY 11, 1972.
REGISTRANT: THE TELEX CORP., TULSA, OKLAHOMA
ASSIGNEE: TELEX COMMUNICATIONS, INC., 9600
ALDRICH AVE., SOUTH MINNEAPOLIS, MN 55420
USX (DE CORPORATION)
ASSIGNOR: THE TELEX CORPORATION, 41ST AND
SHERIDAN RD., TULSA, OK 74145 USX
(DE CORPORATION)
BRIEF: ASSIGNMENT OF ASSIGNORS INTEREST
RECORDED: SEPTEMBER 19, 1973.
ACKNOWLEDGED: JULY 2, 1973.
REEL/FRAME: 241/590
ADDITIONAL INFORMATION: PLAINTIFF IN OPPOSITION
ACTION NO. 57495 AGAINST YOU'L HEAR GOOD
THINGS FROM US (SER. NUMBER 73/034681)
CLAIMS/DISCLAIMS: OWNER OF RNS 901.195,
908.989 AND OTHERS.
<PAGE> 19
TELEX Status: Registration
Registrant: Memorex Telex
Corporation
Series No: 902,276
TELEX Status: Application
Published 2/28/89
Registrant: The Telex
Corporation
Series No: 649,519
<PAGE> 1
EXHIBIT 10(c)
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of May 6, 1997 (the "Agreement"),
is entered by and between GST Acquisition Corp., Inc., a Delaware corporation
(the "Company"), and Greenwich Street Capital Partners, Inc., a Delaware
corporation ("Greenwich").
W I T N E S S E T H:
WHEREAS, the Company and its direct and indirect subsidiaries, whether
now existing or hereafter created or acquired, collectively referred to herein
as (the "Company Group") desire to receive financial and managerial advisory
services from Greenwich, and Greenwich desires to provide such services to the
Company Group; and
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
the parties hereto hereby agree as follows:
1. Engagement. Each member of the Company Group, jointly and severally,
hereby engage Greenwich as a consultant, and Greenwich hereby agrees to provide
financial and managerial advisory services to the Company Group, all on the
terms and subject to the conditions set forth below.
2. Services. (a) Greenwich hereby agrees during the term of this
Agreement to assist, advise and consult with the respective Boards of Directors
and management of each member of the Company Group and their subsidiaries in
such manner and on such business, management and financial matters, and provide
such other financial and managerial advisory services, as may be reasonably
requested from time to time by the respective Boards of Directors of the members
of the Company Group, including but not limited to assistance in:
(i) the raising of additional debt and equity capital from time to time for
the Company Group;
(ii) establishing and maintaining banking, consulting, advising and other
business relationships for the Company Group;
<PAGE> 2
(iii) developing and implementing corporate and business strategy and
planning for the Company Group, including plans and programs for
improving operating, marketing and financial performance, budgeting of
future corporate investments, acquisition and divestiture strategies,
and reorganizational programs;
(iv) providing individuals to serve as directors or officers of the Company
Group; and
(v) providing such other consulting and advisory services as the Company
Group may reasonable request.
(b) Each member of the Company Group will furnish Greenwich with such
information as Greenwich believes appropriate to its engagement hereunder (all
such information so furnished being referred to herein as the "Information").
Each member of the Company Group recognizes and confirms that (i) Greenwich will
use and rely primarily on the Information and on information available from
generally recognized public sources in performing the services to be performed
hereunder and (ii) Greenwich does not assume responsibility for the accuracy or
completeness of the Information and such other information.
3. Fee. In consideration of providing the foregoing services, the
Company will pay to Greenwich an annual advisory fee of $1,714,814 payable
semi-annually in advance (the "Fee"). If Greenwich or any of its affiliates or
designees invests additional equity in the Company Group or any of its
affiliates on one or more occasions after the date hereof, then, in each such
case, the Company Group and Greenwich will negotiate in good faith to effect a
mutually acceptable increase to such advisory fee.
4. Payment of Expenses. The Company Group will also reimburse Greenwich
promptly for Greenwich's reasonable out-of-pocket costs and expenses incurred by
Greenwich or its employees, agents or advisors in connection with the
performance of Greenwich's duties hereunder including but not limited to any
fees and expenses (a) of any reasonable legal, accounting or other professional
advisors to Greenwich engaged in connection with the services being provided
hereunder or (b) associated with the maintenance or operation of Greenwich II
LLC, a Delaware limited liability company (collectively, "Expenses").
5. Term, etc. (a) This Agreement shall be in effect until, and shall
terminate upon, the earlier to occur of (i) the tenth anniversary of the date
hereof and (ii) the date on which Greenwich Street Capital Partners, L.P.
directly or indirectly no longer
2
<PAGE> 3
owns any shares of the capital stock of the Company, and may be earlier
terminated by Greenwich, in its sole discretion, upon 15 days' prior written
notice to the Company.
(b) Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of any of the members of the
Company Group, the successor corporation (or other entity) formed by such
consolidation or into which such company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, such company
under this Agreement with the same effect as if such successor corporation had
been a party thereto. No such consolidation, merger or conveyance, transfer or
lease of all or substantially all of the assets of any of the Company Group
shall have the effect of terminating this Agreement or of releasing such company
or any such successor corporation from its obligations hereunder.
(c) Upon any termination of this Agreement, any accrued and unpaid
installment of the Fee or portion thereof (pro-rated, with respect to the month
in which such termination occurs, for the portion of such month that precedes
such termination), and any unpaid and unreimbursed Expenses that shall have been
incurred prior to such termination (whether or not such Expenses shall then have
become payable), shall be immediately paid or reimbursed, as the case may be, by
the Company.
6. Indemnification. The obligations of the parties hereto are in
addition to, and shall in no way reduce or limit, the obligations thereof under
the Indemnification Agreement, dated as of May 6, 1997, between Greenwich and
the Company with respect to such agreement, which shall remain in full force and
effect.
7. Independent Contractor Status. The parties agree that Greenwich
shall perform services hereunder as an independent contractor, retaining control
over and re sponsibility for its own operations and personnel. Neither Greenwich
nor any of its employees or agents shall, solely by virtue of this Agreement or
the arrangements hereunder, be considered employees or agents of any other party
hereto or any member of the Company Group nor shall any of them have authority
to contract in the name of any such person, except as expressly agreed to in
writing by such person.
8. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage pre-paid, (c)
sent by next day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
3
<PAGE> 4
(i) If to the Company Group, to:
GST Acquisition Corp.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attn.: Nicholas E. Somers
or to such other person or address as the Company shall furnish to Greenwich in
writing; and
(ii) If to Greenwich, to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nicholas E. Somers
with a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
or to such other person or address as Greenwich shall furnish to the Company in
writing.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery, on the day
after such delivery, (x) if by certified or registered mail, on the fifth
business day after the mailing thereof, (y) if by next-day or overnight mail
delivery, on the day delivered, or (z) if by telecopy or telegram, on the day on
which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.
9. Entire Agreement. This Agreement and the Indemnification Agreement
contain the complete and entire understanding and agreement of each party hereto
with respect to the subject matter hereof and supersede all prior and contempor
aneous understandings, conditions and agreements, oral or written, express or
implied, in respect of the subject matter hereof.
4
<PAGE> 5
10. Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
12. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns, provided that no party hereto may assign any of its
rights or obligations under this Agreement without the express written consent
of each other party hereto. By operation of merger, this Agreement shall be
binding upon and inure to the benefit of the surviving entity of a merger. This
Agreement is not intended to confer any right or remedy hereunder upon any
person other than the parties to this Agreement and their respective successors
and permitted assigns.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAW OF THE STATE OF NEW
YORK, REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS
OF LAWS.
14. Amendment; Waivers. No amendment, modification, supplement or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, supplement, discharge or waiver is
sought, and acknowledged by the other party. Any such waiver shall constitute a
waiver only with respect to the specific matter described in such writing and
shall in no way impair the rights of the party granting such waiver in any other
respect or at any other time. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity or otherwise.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
GST ACQUISITION CORP.
By:_____________________________________
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary
GREENWICH STREET CAPITAL PARTNERS,
INC.
By:_____________________________________
Name: Nicholas E. Somers
Title: Vice President and Treasurer
S-1
<PAGE> 1
EXHIBIT 10(d)
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, is entered into as of May 6, 1997 (the
"Agreement"), by and among GST Acquisition Corp., a Delaware corporation
("GST"), and Greenwich Street Capital Partners, Inc., a Delaware corporation
("Greenwich"). Capitalized terms used herein and not defined in Section 1 or
elsewhere in this Agreement have the respective meanings set forth in the
Recapitalization Agreement referred to below.
WHEREAS, Greenwich II LLC, a Delaware limited liability company
("G-II"), Telex Communications Group, Inc., a Delaware Corporation ("Holdings"),
have entered into a Recapitalization Agreement and Plan of Merger, dated as of
March 4, 1997 (the "Recapitalization Agreement"), providing for the
recapitalization (the "Recapitalization") of the Holdings, to be effected in
part through a merger of GST with and into Holdings (the "Merger"), subject to
the terms and conditions set forth therein;
WHEREAS, immediately following the Recapitalization, it is anticipated
that Telex Communications, Inc., a Delaware corporation and a wholly-owned
subsidiary of Holdings ("Telex"), will assume, among other things, the
obligations of Holdings (as successor to GST following the Merger
Recapitalization) under (i) the Indenture dated as of May 6, 1997 between GST
and Manufacturers and Traders Trust Company (the "Trustee"), as trustee (the
"Indenture") as supplemented by the First Supplemental Indenture, dated as of
May 6, 1997, among Holdings, Telex and the Trustee, and (ii) the Senior Credit
Facility (as defined in the Indenture), in consideration for Holdings (a) making
funds available to Telex to allow Telex to complete the tender offer for certain
existing notes of Telex and (b) making the Senior Credit Facility available to
the Company from and after the date of the Recapitalization;
WHEREAS, as of the date hereof, each of Greenwich and GST, has entered
into a Fee Agreement dated as of May 6, 1997 (the "Fee Agreement"), and
following the Recapitalization, each of Greenwich and Holdings intend to enter
into a Consulting Agreement, dated as of May 6, 1997 (the "Consulting
Agreement");
WHEREAS, at the request of GST, Holding and Telex (such companies,
together with any other direct or indirect subsidiaries of Holding or Telex, the
"Company Group"), Greenwich has performed and will perform for the benefit of
the Company Group, certain financial, management advisory and other services in
connection with the transactions contemplated by the Recapitalization Agreement
and the financing
<PAGE> 2
arrangements relating to such transactions, including but not limited to
services performed and to be performed in consultation with the (i) Company
Group officials, structuring and implementing a management organization designed
to meet the requirements of the Company Group upon consummation of the
Recapitalization, together with related compensation arrangements, (ii)
preparation, negotiation, execution and delivery of the Recapitalization
Agreement and other agreements, instruments and documents relating to the
transactions contemplated by the Recapitalization Agreement, (iii) preparation,
negotiation, execution and delivery of commitment, fee and engagement letters,
credit agreements, guarantees, pledge agreements and other security agreements,
offerings documents and other agreements, instruments and documents relating to
the financings to be entered into by the Company Group at the closing, (iv)
structuring, implementation and consummation of the foregoing transactions and
(v) retention of legal, accounting, environmental, insurance, employee benefits,
financial and other advisors and consultants in connection with the foregoing
(such services being referred to collectively as the "Services"), but not
including services to be performed by Greenwich pursuant to the Consulting
Agreement;
WHEREAS, the Company Group or one or more of their Subsidiaries from
time to time in the future may offer and sell or cause to be offered and sold
equity or debt securities (such offerings being hereinafter referred to as the
"Securities Offerings"), including (i) offerings of shares of capital stock of
the Company Group, and/or options to purchase such shares, to employees,
directors, managers and consul tants of and to Acquisition or any Subsidiary
(each, a "Management Offering"), and (ii) one or more offerings of debt
securities for the purpose of providing funds for the Recapitalization or for
refinancing any indebtedness of any of the Company Group or for other corporate
purposes;
WHEREAS, the parties hereto recognize the possibility that claims might
be made against and liabilities incurred by Greenwich or Related Persons (as
defined herein) or affiliates, under applicable securities laws or otherwise, in
connection with the Securities Offerings, or relating to other actions or
omissions of or by any of the Company Group, or relating to the provision by
Greenwich of management consulting, monitoring and financial advisory services
to any of the Company Group, and the parties hereto accordingly wish to provide
for Greenwich and Related Persons and affiliates to be indemnified in respect of
such claims and liabilities as herein provided;
WHEREAS, the parties hereto recognize that claims might be made against
and liabilities incurred by directors and officers of members of the Company
Group in connection with their acting in such capacity, and accordingly wish to
provide for such directors and officers to be indemnified to the fullest extent
permitted by law in respect of any such claims and liabilities; and
2
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements covenants and provisions herein set forth, the parties hereto
hereby agree as follows:
1. Definitions. (a) Whenever used in this Agreement, the following
terms shall have the respective meanings given to them below or in the other
Sections indicated below:
Claim: with respect to any Indemnitee, any claim against such
Indemnitee involving any Obligation with respect to which such Indemnitee
may be entitled to be defended and indemnified by the Company Group under
this Agreement.
Commission: the United States Securities and Exchange Commission.
Indemnitee: each of Greenwich, Greenwich Street Capital Partners, L.P.,
Greenwich Street Capital Partners Offshore Fund Limited, TRV Employees
Fund, L.P., The Travelers Insurance Company and The Travelers Life and
Annuity Company, G-II, their affiliates (within the meaning of the
Securities Act), their respective successors and assigns, and their
respective directors, officers, partners, employees, agents, advisors,
representatives and controlling persons (within the meaning of the
Securities Act), and each other person who is or becomes a director or an
officer of the Company Group or any Subsidiary.
Obligations: collectively, any and all claims, obligations,
liabilities, causes of action, actions, suits, proceedings, investigations,
judgments, assessments, decrees, losses, damages, reasonable fees, costs
and expenses (including interest, penalties and reasonable fees and
disbursements of attorneys, accountants, investment bankers and other
professional advisors), in each case whether incurred, arising or existing
with respect to third parties or otherwise at any time or from time to
time; provided that the term "Obligations" shall not include losses,
damages and related costs and expenses incurred (i) by any Indemnitee, in
its capacity as a shareholder of GST, upon its disposition of Common Stock
or otherwise resulting solely from and limited to any diminution in value
of Common Stock held by such Indemnitee or (ii) by GST and as a result of
any indemnity payment required to be made by GST pursuant to the
Recapitalization Agreement.
Related Document: any agreement, certificate, instrument or other
document to which the Company Group or any Subsidiaries may be a party or
by which they or any of their properties or assets may be bound or affected
from time to time relating in any way to the Recapitalization or the Merger
or any
3
<PAGE> 4
Securities Offering or any of the other transactions contemplated
thereby, including, in each case, as the same may be amended, modified,
waived or supplemented from time to time, (i) any registration statement
filed by or on behalf of the Company Group or any Subsidiary with the
Commission in connec tion with any Securities Offering, including all
exhibits, financial statements and schedules appended thereto, and any
submissions to the Commission in connec tion therewith, (ii) any
prospectus, preliminary or otherwise, included in such registration
statements or otherwise filed by or on behalf of the Company Group or any
Subsidiary in connection with any Securities Offering or used to offer or
confirm sales of their respective securities in any Securities Offering,
(iii) any private placement or offering memorandum or circular, or other
information or materials distributed by or on behalf of the Company Group,
any Subsidiary or any placement agent or underwriter in connection with any
Securities Offering, (iv) any federal, state or foreign securities law or
other governmental or regulatory filings or applications made in connection
with any Securities Offer ing, the Recapitalization or the Merger or any of
the transactions contemplated thereby, (v) any dealer-manager,
underwriting, subscription, purchase, stockholders, option or registration
rights agreement or plan entered into or adopted by the Company Group or
any Subsidiary in connection with any Securities Offering or (iv) any
quarterly, annual or current reports or financial statements filed by the
Company Group or any Subsidiary with the Commission or any other
governmental authority.
Subsidiary: (i) each corporation or other person or entity in which the
Company Group own or control, directly or indirectly, capital stock or
other equity interests representing at least 50% of the outstanding voting
stock or other equity interests, and (ii) any other affiliate of the
Company Group.
Transactions: (i) the Recapitalization (ii) the Merger, (iii) the
Credit Agreement, dated as of May 6, 1997, among GST, the several lenders
from time to time parties thereto, The Chase Manhattan Bank, as agent for
the lenders and Morgan Stanley Senior Funding, Inc., as documentation
agent, and (iv) the transaction contemplated thereby and related thereto.
(b) The words "hereby", "herein", "hereof", "hereunder" and words of
similar import refer to this Agreement as a whole and not merely to the specific
Section, paragraph or clause in which such word appears. All references herein
to Sections shall be deemed references to Sections of this Agreement unless the
context shall otherwise require. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." The
definitions given for terms in this Section 1 and elsewhere in this Agreement
shall apply equally to both the singular and plural forms of
4
<PAGE> 5
the terms defined. Whenever the context may require, any pronoun shall include
the cor responding masculine, feminine and neuter forms. Except as otherwise
expressly provided herein, all references to "dollars" or "$" shall be deemed
references to the lawful money of the United States of America.
2. Indemnification. (a) The Company Group (each, an "Indemnifying
Party" and collectively, the "Indemnifying Parties"), jointly and severally,
agree to indemnify, defend, hold harmless and reimburse each Indemnitee:
(i) from and against any and all Obligations in any way resulting from,
arising out of or in connection with, based upon or relating to (A) the
performance by Greenwich of management consulting, monitoring, financial
advisory or other services for the Company Group or any Subsidiary (whether
performed prior to the date hereof, hereafter, pursuant to the Fee
Agreement, the Consulting Agreement, or otherwise), except to the extent
that any such Obligation of any Indemnitee is found in a final judgment by
a court of competent jurisdiction to have resulted from the gross
negligence or intentional misconduct of such Indemnitee or its directors,
officers, partners, employees, agents, advisors, representatives or
controlling persons (within the meaning of the Securities Act) and, in each
case, acting in such capacity (with respect to any Indemnitee, its "Related
Persons"), (B) the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any other applicable securities or other
laws, in connection with any Securities Offering, any Related Document or
any of the transactions contemplated thereby, in each case, except to the
extent already indemnified for pursuant to Section 2(b), or (C) any other
action or failure to act of the Company Group, any Subsidiary or any of
their respective predecessors, whether such action or failure has occurred
or is yet to occur; and
(ii) to the fullest extent permitted by Delaware law, from and against
any and all Obligations in any way resulting from, arising out of or in
connection with, based upon or relating to (A) the fact that such
Indemnitee is or was a director or an officer of the Company Group or any
Subsidiary, as the case may be, or is or was serving at the request of such
corporation as a director, officer, employee or agent of or advisor or
consultant to another corporation, partnership, joint venture, trust or
other enterprise or (B) any breach or alleged breach by such Indemnitee of
his or her fiduciary duty as a director or an officer of the Company Group
or any Subsidiary, as the case may be;
in each case including any and all fees, costs and expenses (including
reasonable fees and disbursements of attorneys) incurred by or on behalf of any
Indemnitee in asserting, exercising or enforcing any of its rights, powers,
privileges or remedies in respect of this
5
<PAGE> 6
Agreement, the Fee Agreement or the Consulting Agreement (except to the extent
previously paid to Greenwich pursuant to the terms thereof).
(b) Without in any way limiting the foregoing Section 2(a), each of the
Indemnifying Parties agrees, jointly and severally, to indemnify, defend and
hold harmless each Indemnitee from and against any and all Obligations resulting
from, arising out of or in connection with, based upon or relating to
liabilities under the Securities Act, the Exchange Act, or any other applicable
securities or other laws, rules or regulations in connection with (i) the
inaccuracy or breach of or default under any representation, warranty, covenant
or agreement in any Related Document, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Related Document or (iii)
any omission or alleged omission to state in any Related Document a material
fact required to be stated therein or necessary to make the statements therein
not misleading. Notwithstanding the foregoing, none of the Indemnifying Parties
shall be obligated to indemnify such Indemnitee from and against any such
Obligation to the extent that such Obligation arises out of or is based upon an
untrue statement or omission made in such Related Document in reliance upon and
in conformity with written information furnished to the Company Group in an
instrument duly executed by such Indemnitee and specifically stating that it is
for use in the preparation of such Related Document.
3. Contribution. (a) Except to the extent that Section 3(b) is
applicable, if for any reason the indemnity provided for in Section 2(a) is
unavailable or is insuffi cient to hold harmless any Indemnitee from any of the
Obligations covered by such indemnity, then each of the Indemnifying Parties,
jointly and severally, shall contribute to the amount paid or payable by such
Indemnitee as a result of such Obligation in such proportion as is appropriate
to reflect (i) the relative fault of each of the Company Group and the
Subsidiaries, on the one hand, and such Indemnitee, on the other, in connection
with the state of facts giving rise to such Obligation, (ii) if such Obligation
results from, arises out of, is based upon or relates to any Securities
Offering, the relative benefits received by each of the Company Group and the
Subsidiaries, on the one hand, and such Indemnitee, on the other, from such
Securities Offering and (iii) if required by applicable law, any other relevant
equitable considerations.
(b) If for any reason the indemnity specifically provided for in
Section 2(b) is unavailable or is insufficient to hold harmless any Indemnitee
from any of the Ob ligations covered by such indemnity, and the indemnification
of such Obligations under Section 2(a)(i) is similarly unavailable or
insufficient, then the Indemnifying Parties, jointly and severally, shall
contribute to the amount paid or payable by such Indemnitee as a result of such
Obligation in such proportion as is appropriate to reflect (i) the relative
fault of each of the Company Group and the Subsidiaries, on the one hand, and
such Indemnitee, on the other, in connection with the information contained in
or omitted from
6
<PAGE> 7
any Related Document, which inclusion or omission resulted in the inaccuracy or
breach of or default under any representation, warranty, covenant or agreement
therein, or which information is or is alleged to be untrue, required to be
stated therein or necessary to make the statements therein not misleading, (ii)
the relative benefits received by the Company Group and the Subsidiaries, on the
one hand, and such Indem nitee, on the other, from such Securities Offering and
(iii) if required by applicable law, any other relevant equitable
considerations.
(c) For purposes of Section 3(a), the relative fault of each of the
Company Group and the Subsidiaries, on the one hand, and of the Indemnitee, on
the other, shall be determined by reference to, among other things, their
respective relative intent, knowledge, access to information and opportunity to
correct the state of facts giving rise to such Obligation. For purposes of
Section 3(b), the relative fault of each of the Company Group and the
Subsidiaries, on the one hand, and of the Indemnitee, on the other, shall be
determined by reference to, among other things, (i) whether the included or
omitted information relates to information supplied by the Company Group and the
Subsidiaries, on the one hand, or by such Indemnitee, on the other, and (ii)
their respec tive relative intent, knowledge, access to information and
opportunity to correct such inaccuracy, breach, default, untrue or alleged
untrue statement, or omission or alleged omission. For purposes of Section 3(a)
or 3(b), the relative benefits received by each of the Company Group and the
Subsidiaries, on the one hand, and the Indemnitee, on the other, shall be
determined by weighing the direct monetary proceeds to the Company Group and the
Subsidiaries, on the one hand, and such Indemnitee, on the other, from such
Securities Offering.
(d) The parties hereto acknowledge and agree that it would not be just
and equitable if contributions pursuant to Section 3(a) or 3(b) were determined
by pro-rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in such respective
Section. The Indemnifying Parties shall not be liable under Section 3(a) or
3(b), as applicable, for contribution to the amount paid or payable by any
Indemnitee except to the extent and under such circumstances any Indemnifying
Party would have been liable to indemnify, defend and hold harmless such
Indemnitee under the corresponding Section 2(a) or 2(b), as applicable, if such
indemnity were enforceable under applicable law. No Indemnitee shall be entitled
to contribution from any Indemnifying Party with respect to any Obliga tion
covered by the indemnity specifically provided for in Section 2(b) in the event
that such Indemnitee is finally determined to be guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) in
connection with such Obligation and the Indemnifying Parties are not guilty of
such fraudulent misrepresentation.
7
<PAGE> 8
4. Indemnification Procedures. (a) Whenever any Indemnitee shall have
actual knowledge of the reasonable likelihood of the assertion of a Claim, such
Indemnitee or, if requested, by any other Indemnitee on behalf of such
Indemnitee (in such capacity the "Indemnitee Representative"), shall notify any
Indemnifying Party in writing of the Claim (the "Notice of Claim") with
reasonable promptness after such Indemnitee has such knowledge relating to such
Claim and, in the case of the Indemnitee Representative, has notified Greenwich
thereof. The Notice of Claim shall specify all material facts known to the
Indemnitee Representative (or, if given by such Indemnitee, such Indemnitee)
that may give rise to such Claim and the monetary amount or an esti mate of the
monetary amount of the Obligation involved if the Indemnitee Representative (or,
if given by such Indemnitee, such Indemnitee) has knowledge of such amount or a
reasonable basis for making such an estimate. The failure of the Indemnitee or
the Indemnitee Representative, as applicable, to give such Notice of Claim shall
not relieve any Indemnifying Party of its indemnification obligations under this
Agreement except to the extent that such omission results in a failure of actual
notice to it and it is materially injured as a result of the failure to give
such Notice of Claim. The Indemnifying Parties shall, at their expense,
undertake the defense of such Claim with attorneys of their own choosing
satisfactory in all respects to the Indemnitee or the Indemnitee Representative,
as applicable. In the event the Indemnitee or the Indemnitee Representative
reasonably concludes that the Claim or the circumstances giving rise thereto may
present a conflict of interest between one or more of the Indemnifying Parties
and one or more Indemnitee, such Indemnitee or the Indemnitee Representative may
participate in such defense with counsel of its choosing at the expense of the
Indemnifying Parties. In the event that none of the Indemnifying Parties
undertakes the defense of the Claim within a reasonable time after the
Indemnitee or the Indemnitee Representative, as applicable, has given the Notice
of Claim, the Indemnitee or the Indemnitee Representative, as applicable, may,
at the expense of the Indemnifying Parties and after giving notice to any
Indemnifying Party of such action, undertake the defense of the Claim and
compromise or settle the Claim, all for the account of and at the risk of the
Indemnifying Parties. In the defense of any Claim, the Indemnifying Parties
shall not, except with the consent of the Indemnitee or the Indemnitee
Representative, as applicable, consent to entry of any judgment or enter into
any settlement that includes any injunctive or other non-monetary
relief, or that does not include as an unconditional term thereof the giving by
the person or persons asserting such Claim to such Indemnitee of a release from
all liability with respect to such Claim. In each case, the Indemnitee
Representative and each Indemnitee seeking indemnification hereunder will
cooperate with the Indemnifying Parties, so long as the Indemnifying Parties are
conducting the defense of the Claim, in the preparation for and the prosecution
of the defense of such Claim, including making available evidence within the
control of the Indemnitee Representative or such Indemnitee, as the case may be,
and persons needed as witnesses who are employed by Greenwich or such
Indemnitee, as the case may be, in each case as reasonably needed for such
defense and at actual cost (exclusive of
8
<PAGE> 9
overhead charges), which cost, to the extent reasonably incurred, shall be paid
by the Indemnifying Parties.
(b) The Indemnifying Parties hereby agree to advance costs and
expenses, including reasonable attorney's fees, incurred by any Indemnitee or
the Indemnitee Representative in defending any Claim in advance of the final
disposition of such Claim upon receipt of an undertaking by or on behalf of such
Indemnitee or the Indemnitee Representative to repay amounts so advanced if it
shall ultimately be determined that the relevant Indemnitee is not entitled to
be indemnified by any Indemnifying Party as authorized by this Agreement.
(c) Any Indemnitee seeking indemnification under this Agreement shall
notify the Indemnifying Parties in writing of the amount of any Claim actually
paid by such Indemnitee (the "Notice of Payment"). The amount of any Claim
actually paid by such Indemnitee shall bear simple interest at the rate equal to
The Chase Manhattan Bank's prime rate as of the date of such payment plus 2% per
annum, from the date any Indemnifying Party receives the Notice of Payment to
the date on which any Indemnifying Party shall repay the amount of such Claim
plus interest thereon to such Indemnitee.
5. Certain Covenants; Other Indemnities. The rights of each Indemnitee
to be indemnified under any other agreement, document, certificate or instrument
or applicable law are independent of and in addition to any rights of such
Indemnitee to be indemnified under this Agreement, provided that nothing
contained herein shall provide any Indemnitee a right to recover from any
Indemnifying Party in the aggregate any amount in excess of its Obligations. The
rights of each Indemnitee and the obligations of the Company Group hereunder
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnitee. The Company Group shall maintain the State of
Delaware as their state of incorporation and shall implement and maintain in
full force and effect any and all corporate charter and by-law provisions that
may be necessary or appropriate to enable them to carry out their obligations
hereunder to the fullest extent permitted by Delaware corporate law, including a
provision of their respective certificates of incorporation eliminating
liability of a director for breach of fiduciary duty to the fullest extent
permitted by Section 102(b)(7) (or any successor section thereto) of the General
Corporation Law of the State of Delaware, as it may be amended from time to
time.
9
<PAGE> 10
6. Notices. Notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(i) If to the Company Group, to:
Telex Communications Group, In
9600 Aldrich Avenue South
Minneapolis, Minnesota 55420
Attn.: John A. Palleschi, Esq.
or to such other person or address as the Company Group shall furnish to
Greenwich in writing.
(ii) If to Greenwich, to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nicholas E. Somers
with a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
or to such other person or address as Greenwich shall furnish to the Company
Group in writing.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery, on the day
after such delivery, (x) if by certified or registered mail, on the fifth
business day after the mailing thereof, (y) if by next-day or overnight mail
delivery, on the day delivered or (z) if by telecopy or telegram, on the day on
which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.
10
<PAGE> 11
7. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the law of the State of New
York, regard less of the law that might be applied under principles of conflicts
of laws, except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies, in which case such law shall apply.
8. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
9. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement shall be binding upon and inure
to the benefit of each party hereto, its successors and permitted assigns, and
each other Indemnitee. By operation of merger, this Agreement shall be binding
upon and inure to the benefit of the surviving entity of the merger. This
Agreement is not intended to confer any right or remedy hereunder upon any
person other than each of the parties hereto, their respective successors and
permitted assigns and each other Indemnitee. No amendment, modification,
supplement or discharge of this Agreement, and no waiver hereunder shall be
valid and binding unless set forth in writing and duly executed by the party or
other Indemnitee against whom enforcement of the amendment, modification,
supplement or discharge is sought and acknowledged by the other party. Neither
the waiver by any of the parties hereto or any other Indemnitee of a breach of
or a default under any of the provisions of this Agreement, nor the failure by
any party hereto or any other Indemnitee on one or more occasions, to enforce
any of the provisions of this Agreement or to ex ercise any rights, powers or
privileges hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any provisions hereof, or any
rights, powers or privileges hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that any party or
other Indemnitee may otherwise have at law or in equity or otherwise. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by their authorized representatives as of the date first above
written.
GST ACQUISITION CORP.
By:____________________________________
Name: Christine K. Vanden Beukel
Title: Vice President and Secretary
GREENWICH STREET CAPITAL PARTNERS, INC.
By:____________________________________
Name: Nicholas E. Somers
Title: Vice President and Treasurer
S-1
<PAGE> 1
EXHIBIT 10(e)
FEE AGREEMENT
This FEE AGREEMENT, dated as of May 6, 1997 (the "Agreement"), is
entered into between GST Acquisition Corp., a Delaware corporation ("GST") and
Greenwich Street Capital Partners, Inc., a Delaware corporation ("Greenwich").
W I T N E S S E T H:
WHEREAS, Greenwich II LLC, a Delaware limited liability company
("G-II"), GST and Telex Communications Group, Inc., a Delaware Corporation
("Holdings"), have entered into a Recapitalization Agreement and Plan of Merger,
dated as of March 4, 1997, as amended (the "Recapitalization Agreement"),
providing for the recapitalization of Holdings (the "Recapitalization"), to be
effected in part through a merger of GST with and into Holdings (the "Merger"),
subject to the terms and conditions set forth therein;
WHEREAS, immediately following the Recapitalization, it is anticipated
that Telex Communications, Inc., a Delaware corporation and a wholly-owned
subsidiary of Holdings ("Telex"), will assume, among other things, the
obligations of Holdings (as successor to GST following the Merger) under (i) the
Indenture dated as of May 6, 1997 between GST and Manufacturers and Traders
Trust Company (the "Trustee"), as trustee (the "Indenture"), as supplemented by
the First Supplemental Indenture, dated as of May 6, 1997, among Holdings, Telex
and the Trustee and (ii) the Senior Credit Facility (as defined in the
Indenture), in consideration for Holdings (a) making funds available to Telex to
allow Telex to complete the tender offer for certain existing notes of Telex and
(b) making the Senior Credit Facility available to Telex from and after the date
of the Recapitalization;
WHEREAS, it was determined that the success of Holdings and Telex
depends in large part on Telex's senior management and its ability to retain
other highly qualified management personnel;
WHEREAS, on the date hereof, GST and Greenwich have entered into an
Indemnification Agreement (the "Indemnification Agreement") and, following the
Recapitalization, each of Greenwich and Telex intend to enter into a Consulting
Agreement (the "Consulting Agreement");
WHEREAS, at the request of GST, Greenwich has performed and will
perform for the benefit of GST, Holding, Telex and the other direct and indirect
<PAGE> 2
subsidiaries of Holding (collectively, the "Company Group") certain financial,
management advisory and other services in connection with the transactions
contemplated by the Recapitalization Agreement and the financing arrangements
relating to such transactions, including but not limited to, services performed
and to be performed in connection with (i) the Company Group officials,
structuring and imple menting a management organization designed to meet the
requirements of the Company Group upon consummation of the Recapitalization,
together with related compensation arrangements, (ii) the preparation,
negotiation, execution and delivery of the Recapitalization Agreement and other
agreements, instruments and documents relating to the transactions contemplated
by the Recapitalization Agreement, (iii) the preparation, negotiation, execution
and delivery of commitment, fee and engagement letters, credit agreements,
guarantees, pledge agreements and other security agreements, offerings documents
and other agreements, instruments and documents, relating to the financings to
be entered into by the Company Group at the closing, (iv) any and all expenses
incurred with the structuring, implementation and consummation of the foregoing
transactions and (v) the retention of legal, accounting, environmental,
insurance, employee benefits, financial and other advisors and consultants in
connection with the foregoing (such services being referred to collectively as
the "Services"), but not including services to be performed by Greenwich
pursuant to the Consulting Agreement; and
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
the parties hereto hereby agree as follows:
1. Fee. At and subject to the closing under the Recapitalization
Agreement, the Company or its successor pursuant to the Merger shall pay to
Greenwich on behalf of all members of the Company Group as compensation for the
Services a fee of $2,500,000.00 payable in immediately available funds.
Greenwich shall deliver to the Company a fee statement as set forth in Exhibit A
hereto reasonably allocating the fee among the various Services performed on or
prior to the date hereof; provided that the fee shall not be subject to
reduction or challenge by GST, or to any refund by Greenwich based upon any
challenge by GST or any third party to the allocation.
2. Payment of Expenses. (a) The Company Group shall reimburse Greenwich
for such travel and other out-of-pocket expenses ("Expenses") as may be incurred
by Greenwich and its employees, agents and advisors in the course or on account
of rendering of the Services.
(b) GST shall pay the fees and expenses of any legal, accounting or
other professional advisors engaged by Greenwich to advise or assist Greenwich
or the Company Group in connection with (i) the Services, (ii) the formation of
G-II, the
2
<PAGE> 3
investment by the investors in G-II, the investment by G-II, or the status of
G-II or any of the investors in G-II, as an indirect shareholder of GST or (iii)
the management or operation of the Company Group.
3. Independent Contractor Status. The parties agree that Greenwich
shall perform services hereunder as an independent contractor, retaining control
over and responsibility for its own operations and personnel. Neither Greenwich
nor any of its employees or agents shall, solely by virtue of this Agreement or
the arrangements hereunder, be considered employees or agents of any other party
hereto or any member of the Company Group nor shall any of them have authority
to contract in the name of any such person, except as expressly agreed to in
writing by such person.
4. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage pre-paid, (c)
sent by next day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(i) If to the Company Group, to:
Telex Communications Group, Inc.
9600 Aldrich Avenue South
Minneapolis, Minnesota 55420
Attn.: John A. Palleschi, Esq.
or to such other person or address as the Company Group shall furnish to
Greenwich in writing; and
3
<PAGE> 4
(ii) If to Greenwich, to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nicholas E. Somers
with a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
or to such other person or address as Greenwich shall furnish to the Company
Group in writing.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery, on the day
after such delivery, (x) if by certified or registered mail, on the fifth
business day after the mailing thereof, (y) if by next-day or overnight mail
delivery, on the day delivered, or (z) if by telecopy or telegram, on the day on
which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.
5. Entire Agreement. This Agreement and the Indemnification Agreement,
dated as of May 6, 1997, between GST and Greenwich, contain the complete and
entire understanding and agreement of each party hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous
understandings, conditions and agreements, oral or written, express or implied,
in respect of the subject matter hereof.
6. Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.
7. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
8. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors
4
<PAGE> 5
and assigns, provided that no party hereto may assign any of its rights or
obligations under this Agreement without the express written consent of each
other party hereto. By operation of merger, this Agreement shall be binding upon
and inure to the benefit of the surviving entity of the Merger or any other
merger. This Agreement is not intended to confer any right or remedy hereunder
upon any person other than the parties to this Agreement and their respective
successors and permitted assigns.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAW OF THE STATE OF NEW
YORK, REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS
OF LAWS.
10. Amendment; Waivers. No amendment, modification, supplement or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, supplement, discharge or waiver is
sought, and acknowledged by the other party. Any such waiver shall constitute a
waiver only with respect to the specific matter described in such writing and
shall in no way impair the rights of the party granting such waiver in any other
respect or at any other time. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity or otherwise.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
GST ACQUISITION CORP.
By:_____________________________________
Name: Christine K. Vanden Beukel
Title: Vice President and Secretary
GREENWICH STREET CAPITAL PARTNERS, INC.
By:_____________________________________
Name: Nicholas E. Somers
Title: Vice President and Treasurer
S-1
<PAGE> 7
Exhibit A
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
36th Floor
New York, New York 10013
May 6, 1997
Gentlemen:
Pursuant to Section 1 of the Fee Agreement, dated as of ______, __,
1997 (the "Fee Agreement"), between Telex Communication Group, Inc., as
successor to GST Acquisition Corp. following the Recapitalization, and Greenwich
Street Capital Partners, Inc., set out below is our allocation of our fee among
the Services we have performed under the Fee Agreement. Capitalized terms used
herein without definition have the meaning given to such terms in the Fee
Agreement.
================================================================================
Fee Allocation
<TABLE>
<CAPTION>
FOR SERVICES AND ADVICE rendered in
connection with:
<S> <C>
1. Structuring and implementing, in consultation
with Company Group officials, a management
organization designed to meet the requirements
of the Company Group upon consummation of the
Recapitalization, together with related
compensation arrangements . . . . . . . . . . --------------
2. Preparation, negotiation, execution and
delivery of the RecapitalizationAgreement and other
agreements, instruments and documents, relating to
the transactions contemplated by the Recap-
</TABLE>
S-2
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
italization Agreement ................................. --------------
3. Preparation, negotiation, execution and delivery of
commitment, fee and engagement letters, credit
agreements, guarantees, pledge agreements and other
security agreements, and other agreements,
instruments and documents, relating to the financings
to be entered into (or assumed by) Holding and Telex
or its affiliates on or following the Recapitalization
and the Closing under the Recapitalization
Agreement ............................................. --------------
$ 2,500,000.00
==============
</TABLE>
S-3
<PAGE> 1
EXHIBIT 10(f)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into this 4th day of March, 1997 by and between JOHN L. HALE ("Executive") and
GST ACQUISITION CORP., a Delaware corporation. This Agreement shall only take
effect on the date of the closing (the "Closing") of the merger (the "Merger")
between GST Acquisition Corp. and Group. In this Agreement, the term "Group"
shall mean TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation and the
surviving corporation of the Merger, the term the "Company" shall mean TELEX
COMMUNICATIONS, INC., a Delaware corporation and a wholly-owned subsidiary of
Group, and the term "Employer" shall mean collectively the Company and Group.
1. Employment.
For the period set forth in paragraph 2 below (the Period of
Employment), and upon the other terms and conditions set forth in this
Agreement: (i) Group hereby employs Executive, and Executive hereby accepts
employment with Group, as Group's Chairman of the Board and Chief Executive
Officer; (ii) the Company hereby employs Executive, and Executive hereby accepts
employment with the Company, as the Company's Chairman of the Board and Chief
Executive Officer; and (iii) Executive shall be elected to Group's Board of
Directors and Group shall cause Executive to be elected to the Company's Board
of Directors.
2. Period of Employment.
The Period of Employment shall commence on the date of the
Closing and, subject only to the provisions of Paragraphs 9, 10 and 11 below,
shall continue until the close of business five (5) years from the date of the
Closing. If Executive's employment hereunder has not been previously terminated
prior to the expiration of the initial five-year Period of Employment, this
Agreement and the Period of Employment shall continue and extend for successive
annual periods and shall be subject to the terms and conditions of this
Agreement.
<PAGE> 2
3. The Position.
During the Period of Employment Executive shall serve as the
principal executive officer of both the Company and Group, reporting directly to
and only to the Board of Directors of the Company and Group, respectively, and
shall have the duties and responsibilities appropriate to such offices.
4. Duties.
Throughout the Period of Employment, Executive agrees to
devote Executive's full time and undivided attention during normal business
hours to the business and affairs of Employer and, in particular, to performance
of all the duties and responsibilities as Chief Executive Officer and Chairman
of the Board of the Company and Chief Executive Officer and Chairman of the
Board of Group, except for reasonable vacations and except for illness; but
nothing in this Agreement shall preclude Executive from devoting reasonable
periods required for:
a. serving as a director, trustee, or member of a committee of
any organization involving no conflict of interest with the interests
of Employer or in direct competition with Employer;
b. delivering lectures, fulfilling speaking engagements,
teaching at educational institutions or business organizations;
c. engaging in charitable and community activities; and
d. managing Executive's personal investments;
provided that such activities do not, individually or together, interfere with
the regular performance of Executive's duties and responsibilities under this
Agreement and do not in any way conflict with Employer's interests.
5. Compensation.
2
<PAGE> 3
a. For all services to be rendered by Executive pursuant to
this Agreement during the Period of Employment to the Company or Group:
i. Executive shall be paid as compensation a base annual
salary of $312,000 payable at the same intervals at which the Company's
executives are paid, but in no event less frequently than monthly, plus
any increase in base salary as determined by the Board of Directors of
the Company;
ii. Executive shall participate in a new Management Incentive
Compensation Plan to be approved by the Company's Board of Directors
immediately following the Closing, the terms of which shall be
substantially the same as the terms set forth in Schedule A;
iii. Executive shall be paid a special bonus of $157,928,
subject to adjustment as previously agreed by Executive, 30-days after
the Closing and on each of the next four (4) anniversaries of due date
of the initial payment, provided that on the date a payment is due,
Greenwich Street Capital Partners, Inc. or its Affiliates
(collectively, "GSCP") are in Control of Group and the Company and
there has not been an initial public offering of the Common Stock of
Group and provided further that Executive has not exercised his rights
under Section 2 of the Stockholders Agreement. "Affiliate" means an
Affiliate as defined in Section 19.1 of the Stockholders Agreement.
"Control" of a corporation means the direct or indirect ownership of
50% or more of the voting power, and of a partner ship or limited
liability company means the direct or indirect ownership of 50% or more
of the combined voting power of the company's outstanding voting
securities.
iv. Executive shall participate in the Cash Bonus Program to
be approved by the Company's Board of Directors immediately following
the Closing, the terms of which shall be substantially the same as the
terms set forth in Schedule B.
3
<PAGE> 4
b. Any increase in base salary or in annual incentive awards
or other compensation shall in no way diminish any other obligations of Employer
under this Agreement.
c. The compensation provided for in paragraph (a) above is in
addition to all other benefits, perquisites and other compensation provided for
in this Agreement.
6. Provisions for Perquisites.
During the Period of Employment, Executive shall be entitled
to perquisites including an appropriate office, secretarial and clerical staff,
and fringe benefits accorded generally to executive officers of Employer
pursuant to their policies, as well as to reimbursement, upon proper accounting,
of reasonable expenses and disbursements incurred by Executive in the course of
Executive's duties. In addition, Employer shall pay or provide the following:
a. Executive will be reimbursed for actual expenses incurred
by him in obtaining tax and investment assistance and advice, not to
exceed $2,000 in any calendar year during the Period of Employment.
b. During the Period of Employment, Employer shall pay to
Executive $700 per month as an automobile allowance and shall reimburse
Executive for actual expenses incurred in purchasing gasoline,
maintenance and insurance for such automobile.
c. During the Period of Employment, Executive shall be
entitled to four weeks' vacation per year. Executive may take such
vacation at such time so as not to interfere unreasonably with the
business of Employer. Annual unused vacation shall cumulate from year
to year.
7. Employment Benefit Plans.
a. Executive, Executive's dependents and beneficiaries,
including, without limitation, any beneficiary of a joint and survivor annuity
or other optional method of payment applicable to the payment of benefits under
the defined benefit or other pension plans of Employer, or any
4
<PAGE> 5
successor plans, shall be entitled to all payments and benefits and service
credit for benefits during the Period of Employment to which officers of
Employer, their dependents, and beneficiaries are entitled as the result of
their employment under the terms of employee benefit plans and practices of
Employer. Executive, and Executive's dependents, shall also be entitled to
participate in, be covered by and receive benefits under, Employer's long-term
disability, medical, dental, health, welfare, accidental death and
dismemberment, and life insurance plans, other present or equivalent successor
plans and practices of Employer, for which officers, their dependents, and
beneficiaries are eligible, if any, and its 401(k) Plan. Executive, his spouse
and his dependents shall also be entitled to all payments or other benefits
under any such plan or practice subsequent to the Period of Employment as a
result of participation in such plan or practice during the Period of
Employment, as provided in such plans. In addition, the Company shall reimburse
Executive pursuant to Executive Medical Reimbursement Plan for actual medical
and dental expenses incurred by Executive and his dependents during the Period
of Employment which are not covered by the Company's medical or dental plans;
provided, however, that in no event shall the Company be obligated to reimburse
Executive for more than $20,000 for such medical or dental expenses in any
calendar year.
b. Nothing in this Agreement shall preclude Employer from
amending or terminating any employee benefit plan or practice other than the
perquisites set forth in paragraphs 6(a), (b) and (c) and Executive Medical
Reimbursement Plan.
8. Stock Options.
Group shall grant to Executive options (the "Options") to
purchase shares of the Group's common stock, par value $.01 per share under the
Group's Management Stock Option Plan (the "Stock Option Plan"), to be adopted by
Group immediately following the Closing. The Stock Option Plan shall specify the
number of Options to be granted and dates on which and the terms and conditions
under which Options shall be awarded substantially in accordance with the terms
set forth in Schedule C.
5
<PAGE> 6
9. Effect of Death.
If Executive dies during the Period of Employment, the legal
representative of Executive shall be entitled to (i) the base salary provided
for in paragraph 5(a)(i) above for the month in which Executive's death shall
have occurred and the following month plus all accrued and unpaid vacation, at
the rate being paid at the time of death, (ii) the remaining installments of the
Special Bonus provided for in paragraph 5(a)(iii) above, payable only to the
extent and at such times as Executive would otherwise be entitled to the Special
Bonus in accordance with the terms of such paragraph, and (iii) a pro rata
portion of any bonus which would have been payable under the Management
Incentive Compensation Plan for the year in which Executive's death occurs
payable on the date bonuses under such Plan are otherwise payable. The Period of
Employment shall be deemed to have ended as of the close of business on the last
day of the month following the month in which death shall have occurred but
without prejudice to any payments otherwise due in respect of Executive's death.
10. Effect of Disability.
a. In the event of the Disability of Executive during the
Period of Employment, Executive shall be entitled to (i) all compensation,
benefits and perquisites hereunder through the effective date of his termination
of employment, (ii) an amount equal to the base salary provided for in paragraph
5(a)(i) above, at the rate being paid at the time of the commencement of
Disability, for the period of such Disability plus six (6) months from the end
of the period that establishes such Disability, as described in paragraph 10(c)
below, (iii) the remaining installments of the Special Bonus provided for in
paragraph 5(a)(iii) above, payable only to the extent and at such times as
Executive would otherwise be entitled to the Special Bonus in accordance with
the terms of such paragraph, and (iv) a pro rata portion of any bonus which
would have been payable under the Management Incentive Compensation Plan for the
year in which Executive's Disability occurs payable on the date bonuses under
such Plan are otherwise payable. The Period of Employment shall be deemed to
have ended as of the last day of the period that establishes Disability.
6
<PAGE> 7
b. The amount of any payments due under paragraph 10(a)(i)
shall be reduced by any payments to which Executive may be entitled for the same
period because of disability under any disability plan or insurance of Employer
or as the result of workers' compensation or non-occupational disability
payments.
c. The term "Disability", as used in this Agreement, shall
mean an illness or accident occurring during the Period of Employment which
prevents Executive from performing Executive's duties under this Agreement for
a period in excess of 270 days (whether or not consecutive) or 180 consecutive
days, as the case may be, in any twelve-month period during the Period of
Employment. The Period of Employment shall be deemed to have ended as of the
close of business on the last day of such period (either the 270th or 180th day,
as the case may be) but without prejudice to any payments due Executive in
respect of disability under paragraph 11(a) or otherwise due to Executive or
Executive's legal representative or beneficiary and without prejudice to
continue any medical insurance coverage, subject to the terms of the plan or
applicable law.
11. Provision of Severance Allowance.
a. Either Group or the Company may terminate the Period of
Employment and Executive's employment at any time during the Period of
Employment (i) for any reason upon thirty (30) days' notice to Executive and
(ii) immediately for Cause, as defined in paragraph 12(c) below. Executive may
terminate his employment hereunder at any time during the Period of Employment
upon sixty (60) days' written notice to the Company. If Executive's employment
is terminated by either Group or the Company during the Period of Employment
for any reason or if Executive terminates his employment hereunder during the
Employment Period, Employer shall pay Executive (i) all compensation, benefits
and per quisites accrued hereunder through the effective date of his termination
of employment, (ii) the remaining installments of the Special Bonus provided for
in paragraph 5(a)(iii) above, payable only to the extent and at such times as
Executive would otherwise be entitled to the Special Bonus in accordance with
the terms of such paragraph, and (iii) three times the base salary provided for
in paragraph 5(a)(i) above, at the rate being paid at the date of termination,
7
<PAGE> 8
plus three times the most recent fiscal year's incentive bonus compensation
provided for in paragraph 5(a)(ii) above, plus a pro rata portion of the highest
incentive bonus pay able under paragraph 5(a)(ii) above in the three most recent
fiscal years.
b. During the three-year period following a termination of
Executive's employment provided for in paragraph 11(a)(i) other than any
termination for Cause, Executive shall be entitled to: (i) receive the car
allowance and reimbursement of operating expenses, maintenance and insurance as
provided in paragraph 6(a) hereof; (ii) use of an office, appropriate for use by
an executive; and (iii) continued coverage under the Company's health, dental
and life insurance plans, as well as Executive Medical Reimbursement Plan,
providing reimbursement of up to $20,000 medical or dental expense not otherwise
covered by insurance. If and to the extent that such benefits shall not be
payable under any such plan by reason of Executive's no longer being an
employee, Group or the Company shall pay or provide for payment of such benefits
to Executive, Executive's dependents, and beneficiaries.
c. For the purpose of paragraph 11(a) above and any other
provision of this Agreement, termination of Executive's employment shall be
deemed to have been for Cause only
i. if termination of Executive's employment shall have been
the result of an act or acts of fraud, theft, or embezzlement on the
part of Executive which, if convicted, would constitute a felony, or
ii. if termination of Executive's employment results from
Executive's refusal to perform the duties appropriate to Executive's
position or a material breach by Executive of Paragraphs 13, 14 or 15
of this Agreement and Executive has been given written notice by the
Board of Directors of the Company with respect to such refusal or such
material breach and Executive continues to refuse unreasonably the
performance of the duties specified or to materially breach the
provisions of Paragraphs 13, 14 or 15 of this Agreement.
8
<PAGE> 9
12. Resignation.
If Executive's employment hereunder terminates (except due to
his death), Executive agrees to resign effective immediately upon termination of
the Period of Employment all positions as an officer or director of Group or the
Company. If Executive fails to deliver such resignation, the Boards of Directors
of Employer may deem Executive to have resigned pursuant to this paragraph 12
effective upon the termination of his employment.
13. Non-Disclosure.
Executive shall not at any time after the date hereof divulge,
provide, or make assessable to anyone, other than in connection with the
business of the Company, any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, materials, devises, materials, devices or ideas or other
know-how, whether patentable or not, with respect to any confidential or secret
aspects of the Company's business (including without limitation customer lists,
supplier lists and pricing arrangements with customers or suppliers or any
similar lists, arrangements or understandings, marketing plans, sales plans,
manufacturing plans, management organization information, data and other
information relating to members of the Board of Directors of Group and the
Company, management and GSCP), operating policies or manuals, business plans,
financial records, packaging designs or other financial, commercial, business or
technical information relating to the Employer or any of their subsidiaries or
information designated as confidential or proprietary that the Employer or any
of their subsidiaries may receive belonging to suppliers, customers or others
who do business with the Employer or any of their subsidiaries (collectively,
"Confidential Information"); provided, however, that Executive may disclose such
information (i) at the request of any governmental regulatory authority or in
connection with an examination of Executive by any such authority, (ii) pursuant
to subpoena or other court process, (iii) when required to do so in accordance
with the provisions of any applicable law or regulation, or (iv) if such
information has otherwise been made generally available to the public other than
by reason of Executive's breach of this paragraph 13. Upon the expiration of the
9
<PAGE> 10
Period of Employment or upon termination of Executive's employment, Executive or
his legal representative shall promptly deliver to the Company all property
relating to the business of the Company, including all Confidential Information,
and all copies thereof that are in the possession or control of Executive.
14. Inventions.
Executive shall promptly disclose to the Company all
processes, trademarks, inventions, improvements and discoveries related to the
business of the Company (collectively, "Developments") conceived or developed by
him or with others during the Period of Employment, if such Developments were
conceived or developed during the Company's business hours or through the use of
the Company's resources. All such Developments shall be the sole and exclusive
property of the Company. Executive, upon the request of and at the Company's
expense, shall assist the Company in obtaining patents thereon and execute all
documents and other instruments necessary or proper to obtain letters patent and
to vest the Company with full title thereto.
15. Post-Employment Activities
a. Covenant Not to Compete. Following termination of
Executive's employment by the Company or Group for Cause or by Executive for any
reason, Executive shall not compete, directly or indirectly, in any area of the
continental United States, with the business conducted by the Company or any of
its subsidiaries, whether as an employee, director, agent, principal,
stockholder or limited partner owning more than 5% of any class of securities or
equity of a corporation, association or partnership, or by maintaining any
other type of interest in or affiliation with or providing any assistance
whatsoever to, any other person, firm, corporation or entity in any business
located or doing business within the continental United States which at the time
of Executive's affiliation therewith is in direct competition with any facet of
the business then being conducted by the Company or any of its subsidiaries, for
a one-year period beginning on the date of Executive's departure and terminating
on the first anniversary of the date of his departure (the "Non-Compete
Period").
10
<PAGE> 11
b. Non-Solicitation of Employees. During (i) Executive's
employment with the Company or any of its subsidiaries or Affiliates and (ii)
for a two-year period beginning on the date of Executive's departure and
terminating on the second anniversary of the date of his departure, Executive
shall not directly or indirectly induce any employee of the Company or any of
its subsidiaries to terminate employment with such entity, and shall not
directly or indirectly, either individually or as owner, agent, employee,
consultant or otherwise, employ or offer employment to any person who is or was
employed by the Company or any of its subsidiaries, unless such person shall
have ceased to be employed by such entity for a period of at least six months.
c. Non-Solicitation of Customers and Suppliers. During (i)
Executive's employment with the Company or Group and (ii) the Non-Compete
Period, Executive shall not, directly or indirectly, interfere with the business
relationship of the Company or any of its subsidiaries, with any customer or
supplier, or prospective customer or supplier, with respect to which Executive
has had access to Confidential Information or with which Executive dealt in
connection with Executive's duties for Group, the Company or any of its
subsidiaries.
d. Injunctive Relief with Respect to Covenants. Executive
acknowledges that irreparable damage would result to Group and the Company if
the provisions of paragraphs 13, 14 and 15(a) through (c) were not specifically
enforced, and agrees that Group and the Company shall be entitled to any
appropriate legal, equitable or other remedy, including injunctive relief, a
restraining order or other equitable relief (without the requirement to post
bond) with respect to any failure of Executive to comply with the provisions of
such sections.
e. Severability; Reformation. In the event that one or more of
the provisions of this paragraph 15 shall become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining pro visions contained herein shall not be affected thereby. In the
event any provision of paragraph 13 or 15(a) through (c) is not enforceable in
accordance with its terms, such paragraph shall be reformed to make such
paragraph enforceable
11
<PAGE> 12
in a manner which provides the Company or any of its subsidiaries the maximum
rights permitted at law.
f. Waiver. Waiver by Group, the Company or any of its
subsidiaries of any breach or default by Executive of any of the terms of
paragraphs 13, 14 or 15(a) through (c) shall not operate as a waiver of any
other breach or default, whether similar to or different from the breach or
default waived. No waiver of any provision of paragraph 13, 14 or 15(a) through
(c) shall be implied from any course of dealing between the Company or any of
its subsidiaries and Executive or from any failure by the Company or any of its
subsidiaries to assert its rights hereunder on any occasion or series of
occasions.
16. Insurance.
The Company shall have the right at its own cost and expense
to apply for and to secure in its own name, or otherwise, life, health or
accident insurance or any or all of them covering Executive, and Executive
agrees to submit to usual and customary medical examination and otherwise to
cooperate with the Company in connection with the procurement of any such
insurance and any claims thereunder.
17. Notices.
All notices, requests and other communications pursuant to
this Agreement shall be in writing and shall be deemed to have been given if
delivered in person or by courier, the date delivered, and if sent by telegraph,
telex, facsimile transmission, the date sent, or if mailed by registered or
certified mail, postage prepaid, the date mailed, if sent, delivered or mailed
to the parties at the following addresses:
If to Executive:
John L. Hale
12300 Marion Lane Apt. 2308
Minnetonka, Minnesota 55305
12
<PAGE> 13
If to the Employer:
Telex Communications, Inc.
9600 Aldrich Avenue S.
Minneapolis, MN 55420
With a copy to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, N.Y. 10013
Attention: Nicholas E. Somers
Any party may, by written notice to the other, change the
address to which notices to such party are to be delivered, sent or mailed.
18. No Trust Created.
Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be construed to
create a trust fund of any kind. Any funds which may be set aside or provided
for in this Agreement shall continue for all purposes to be a part of the
general funds of Employer and no person other than Employer shall by virtue of
the provisions of this Agreement have any interest in such funds. To the extent
that any person acquires a right to receive payments from Employer under this
Agreement, such right shall be no greater than the right of any unsecured
general creditor of Employer.
19. Successor In Interest.
This Agreement and the rights and obligations hereunder shall
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of Employer by merger or consolidation or any purchaser or
assignee of all or substantially all of its assets, but, except to any such
successor, purchaser, or assignee of Employer, neither this Agreement nor any
rights or benefits hereunder may be assigned by either party hereto.
13
<PAGE> 14
20. Full Discharge of Company Obligations.
The amounts payable to Executive pursuant to paragraph 9, 10
and 11 following termination of his employment shall be in full and complete
satisfaction of Executive's rights under this Agreement but shall not affect
Executive's rights under any other agreement with Group or the Company. Such
amounts shall constitute liquidated damages with respect to any and all such
rights and claims and, upon Executive's receipt of such amounts, the Employer
shall be released and discharged from any and all liability to Executive in
connection with this Agreement or otherwise in connection with Executive's
employment with the Employer and their subsidiaries.
21. Arbitration of Disputes.
The parties agree that any controversy or claim arising out of
or relating to this Agreement, or any dispute arising out of the interpretation
or application of this Agreement, which the parties hereto are unable to
resolve, shall be finally resolved and settled exclusively by arbitration in
Minnesota by a single arbitrator under the American Arbitration Association's
Commercial Arbitration Rules then obtaining and in accordance with the
substantive laws of the State of Minnesota. If the parties cannot agree upon an
arbitrator out of the panel, then for the sole purpose of selecting an
arbitrator, each party (the Company and Group shall be considered collectively
one party) shall choose its own independent representative and those inde-
pendent representatives shall in turn choose the single arbitrator within thirty
(30) days of the date of the selection of the first independent representative.
The parties severally recognize and consent to the jurisdiction over each of
them by the courts of the State of Minnesota. The legal expenses of Executive
shall be reimbursed to Executive if an award is rendered in favor of Executive
or if the arbitrator finds that Executive acted reasonably and exercised good
faith in demanding arbitration of any such dispute.
22. Governing Laws.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of
14
<PAGE> 15
Minnesota applicable to agreements made and to be performed entirely in
Minneapolis, Minnesota.
23. Entire Agreement.
This Agreement shall constitute the entire agreement between
the parties superseding all prior agreements, other than the letter agreement,
dated April 15, 1992, between Group or the Company and Executive, and may not be
modified or amended and no waiver shall be effective unless by written document
signed by both parties hereto; provided, however, that any increase in base
salary, as provided in paragraph 5 hereof, shall become an amendment to this
Agreement when approved by the Board of Directors of the Company and recorded in
the approved minutes of such meeting.
IN WITNESS WHEREOF, the parties execute this Employment
Agreement as of the date first above written.
EXECUTIVE: GST ACQUISITION CORP.
_______________________________ By:_______________________________
John L. Hale
15
<PAGE> 16
[Letterhead of Telex]
April 15, 1992
John L. Hale, President
Telex Communications, Inc.
9600 Aldrich Avenue South
Minneapolis, Minnesota 55420
Re: Retirement Benefits
Dear John:
This letter ("Agreement") will serve to confirm the
understanding between you and Telex Communications, Inc. (the "Company") as to
your eligibility to receive the benefit of coverage under the Company's
retirement plans, a defined benefit pension plan and a 401(k) plan, from your
employment start date of October 25, 1991.
Under the Company's qualified retirement plans, participation
eligibility begins after completion of twelve full months of service with the
Company.
In order to provide you with the reasonable equivalent of
immediate service credit and eligibility under these retirement plans from the
date of hire, the Company hereby agrees to the following:
1. Upon your termination of eligibility under the Company's
defined benefit pension plan (as defined in such plan), a hypothetical
pension benefit calculation shall be made crediting one (1) additional
year of service to your pension service calculation. The difference
between the actual pension benefit lump sum payment option and the
hypothetical pension benefit lump sum payment option (subject to then
current IRS rules on maximum qualified pension plan benefits) shall
<PAGE> 17
be paid to you at the time of your leaving the pension plan.
2. With respect to the Company's 401(k) plan, a one-time
payment shall be made to you after calendar year 1992 to compensate you
for the lost tax benefit opportunity in not being able to contribute
funds up to the IRS 1992 maximum amount of $8,728 as a result of your
ineligibility until November 1, 1992. This one-time payment shall be
calculated as follows:
<TABLE>
<S> <C>
IRS Maximum Contribution Allowed $8,728.00
Less John L. Hale actual 1992
401(k) contribution, estimated
at 2,917.00
---------
$5,811.00
Multiplied by 40% marginal
income tax rate x .40
---------
One-time payment (estimated) $2,324.40
=========
</TABLE>
If this Agreement accurately represents our understanding,
please indicate your acceptance by signing and returning the enclosed extra copy
of this Agreement.
Sincerely,
TELEX COMMUNICATIONS, INC.
By __________________________________
Its__________________________________
* * * * *
ACCEPTED:
______________________________ Dated:_________________ , 1992
John L. Hale
2
<PAGE> 18
Schedule A
Telex Communications Group, Inc.
Management Cash Compensation Plan
Management Incentive Compensation (the "MIC Plan")
- Objective: The MIC Plan is intended to motivate key management
to achieve company objectives by providing a direct link
between the company objectives and incentive compensation
awards.
- Incentive Compensation Awards: Awards are
calculated as a percent of base salary based on
achieving certain performance hurdles as defined
below.
a. Threshold: 90% of objectives equal to 25% of
base salary
b. Target: 100% of objectives equal to 50% of
base salary
c. Upside: 110% of objectives equal to 75% of
base salary
d. Maximum: 120% of objectives equal to 100% of
base salary
- Performance Measurement: For top three senior
officers, there are two weighted components upon
which an award is based:
- 75% - quantitative comparison of objectives
against AOP
- corporate revenue
- corporate EBITDA
<PAGE> 19
- 25% - qualitative judgment by the CEO and Board of
Directors.
- For SBU executives, there are three weighted
components upon which an aware is based:
- 30% - quantitative comparison of objectives
against total company AOP
- 40% - quantitative comparison against SBU AOP
- SBU Revenue
- SBU Gross Profit
- SBU Operating Income
- 30% - qualitative judgment by CEO and Board
of Directors
- Other Participants - based on total company performance,
business unit performance, if applicable, and an evaluation of
individual performance.
- General Guidelines for MIC Plan
- Awards are earned based on company's audited
results
- AOP is to include an accrual for possible
award payout
- Awards are pro-rated for results between the
specified breakpoints (i.e. target, maximum,
upside and threshold)
- Awards above maximum are at the specified
maximum and there is no award below threshold
amount.
- Only with the recommendation of the CEO and
approval of the Board of Directors can a
participant be added.
2
<PAGE> 20
- Officers terminating due to death, disability,
retirement or for good reason are eligible to receive
a pro-rata award for the year, paid at the normal
date.
- Officers terminating voluntarily or terminated for
performance reasons or cause prior to the date of
payout are not eligible to receive an award.
3
<PAGE> 21
SCHEDULE B
Telex Communications Group, Inc.
Cash Bonus Plan
INITIAL INCENTIVE AWARD:
A cash bonus shall be paid to the following individuals no later than the first
anniversary of the Effective Time (as defined in the Recapitalization Agreement
and Plan of Merger, dated as of March __, 1997, by and among Greenwich II LLC,
GST Acquisition Corp. and Telex Communications Group, Inc.) in the amounts set
forth below:
<TABLE>
<CAPTION>
80% of AOP Achieved
-------------------
<S> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
ADDITIONAL AWARDS:
An additional cash bonus shall be paid to the following individuals on each of
the first five anniversaries of the Effective Time in the amounts set forth
below:
<PAGE> 22
<TABLE>
<CAPTION>
100% of AOP 105% of AOP
Achieved Achieved
----------- -----------
<S> <C> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
AOP shall be determined under the Management Incentive Compensation Plan.
An additional cash bonus shall be paid to the following individuals on the
earlier of the fifth anniversary of the Effective Time or a Change in Control
(as defined in the 1997 Telex Communications Group, Inc, Stock Option Plan) in
the amounts set forth below:
<TABLE>
<CAPTION>
110% of LTP 120% of LTP
Achieved Achieved
----------- -----------
<S> <C> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
LTP shall be determined as set forth in Schedule B to the Stock Option Plan.
2
<PAGE> 23
SCHEDULE C
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares
Available under Available under Available under
the Initial Option the Performance the Super
Grant Option Grant Performance
Option Grant
<S> <C> <C> <C>
Hale 6,658 6,593 5,356
</TABLE>
All numbers are subject to adjustment based on the final Merger Consideration
payable pursuant to Section 1.3(a) of the Merger Agreement and to reflect a
twenty-to-one stock split to become effective upon the Merger.
<PAGE> 1
Exhibit 10(g)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into this 4th day of March, 1997 by and between JOHN A. PALLESCHI ("Executive")
and GST ACQUISITION CORP. a Delaware corporation ("GST"). This Agreement shall
take effect only on the date of the closing (the "Closing") of the merger (the
"Merger") between GST and Group. In this Agreement, the term "Group" shall mean
TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation and the surviving
corporation of the Merger, the term the "Company" shall mean TELEX
COMMUNICATIONS, INC., a Delaware corporation and a wholly-owned subsidiary of
Group and the term "Employer" shall mean collectively the Company and Group.
1. Employment.
For the period set forth in paragraph 2 below (the Period of
Employment), and upon the other terms and conditions set forth in this
Agreement: (i) Group hereby employs Executive, and Executive hereby accepts
employment with Group, as Group's General Counsel and Vice President Corporate
Development; and (ii) the Company hereby employs Executive, and Executive hereby
accepts employment with the Company, as the Company's General Counsel and Vice
President Corporate Development.
2. Period of Employment.
The Period of Employment shall commence on the date of the
Closing and, subject only to the provisions of Paragraphs 9, 10, 11 and 12
below, shall continue until the close of business five (5) years from the date
of the Closing. If Executive's employment hereunder has not been previously
terminated prior to the expiration of the initial five-year Period of
Employment, this Agreement and the Period of Employment shall continue and
extend for successive annual periods and shall be subject to the terms and
conditions of this Agreement.
3. The Position.
During the Period of Employment Executive shall serve as an
executive officer of both the Company and Group, reporting directly to the
Chairman and Chief Executive
<PAGE> 2
Officer of the Company and Group, respectively, and shall have the duties and
responsibilities appropriate to such offices.
4. Duties.
Throughout the Period of Employment, Executive agrees to
devote Executive's full time and undivided attention during normal business
hours to the business and affairs of Employer and, in particular, to performance
of all the duties and responsibilities as General Counsel and Vice President
Corporate Development of the Company and General Counsel and Vice President
Corporate Development of Group, except for reasonable vacations and except for
illness; but nothing in this Agreement shall preclude Executive from devoting
reasonable periods required for:
a. serving as a director, trustee, or member of a committee of
any organization involving no conflict of interest with the interests
of Employer or in direct competition with Employer;
b. delivering lectures, fulfilling speaking engagements,
teaching at educational institutions or business organizations;
c. engaging in charitable and community activities; and
d. managing Executive's personal investments;
provided that such activities do not, individually or together, interfere with
the regular performance of Executive's duties and responsibilities under this
Agreement and do not in any way conflict with Employer's interests.
5. Compensation.
a. For all services to be rendered by Executive pursuant to
this Agreement during the Period of Employment to the Company or Group:
i. Executive shall be paid as compensation a base annual
salary of $129,000 payable at the same intervals at which the Company's
executives are paid, but in no
2
<PAGE> 3
event less frequently than monthly, plus any increase in base salary as
determined by the Board of Directors of the Company;
ii. Executive shall participate in a new Management Incentive
Compensation Plan to be approved by the Company's Board of Directors
immediately following the Closing, the terms of which shall be
substantially the same as the terms set forth in Schedule A;
iii. Executive shall be paid a special bonus of $31,678,
subject to adjustment as previously agreed by Executive, 30 days after
the Closing and, on each of the next four (4) anniversaries of due date
of the initial payment, provided that on the date a payment is due,
Greenwich Street Capital Partners, Inc. or its Affiliates
(collectively, "GSCP") are in Control of Group and the Company and
there has not been an initial public offering of the Common Stock of
Group (the "Special Bonus"). "Affiliate" means an Affiliate as defined
in Section 19.1 of the Stockholders Agreement. "Control" of a
corporation means the direct or indirect ownership of 50% or more of
the voting power, and of a partnership or limited liability company
means the direct or indirect ownership of 50% or more of the combined
voting power of the company's outstanding voting securities.
iv. Executive shall participate in the Cash Bonus Program to
be approved by the Company's Board of Directors immediately following
the Closing, the terms of which shall be substantially the same as the
terms set forth in Schedule B.
b. Any increase in base salary or in annual incentive awards
or other compensation shall in no way diminish any other obligations of
Employer under this Agreement.
c. The compensation provided for in paragraph (a) above is in
addition to all other benefits, perquisites and other compensation provided for
in this Agreement.
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<PAGE> 4
6. Provisions for Perquisites.
During the Period of Employment, Executive shall be entitled
to perquisites including an appropriate office, secretarial and clerical staff,
and fringe benefits accorded generally to executive officers of Employer
pursuant to their policies, as well as to reimbursement, upon proper accounting,
of reasonable expenses and disbursements incurred by Executive in the course of
Executive's duties. In addition, Employer shall pay or provide the following:
a. Executive will be reimbursed for actual expenses incurred
by him in obtaining tax and invest ment assistance and advice, not to
exceed $2,000 in any calendar year during the Period of Employment.
b. During the Period of Employment, Executive shall be
entitled to four weeks' vacation per year. Executive may take such
vacation at such time so as not to interfere unreasonably with the
business of Employer. Annual unused vacation shall cumulate from year
to year.
7. Employment Benefit Plans.
a. Executive, Executive's dependents and beneficiaries,
including, without limitation, any beneficiary of a joint and survivor annuity
or other optional method of payment applicable to the payment of benefits under
the defined benefit or other pension plans of Employer, or any successor plans,
shall be entitled to all payments and benefits and service credit for benefits
during the Period of Employment to which officers of Employer, their dependents,
and beneficiaries are entitled as the result of their employment under the terms
of employee benefit plans and practices of Employer. Executive, and Executive's
dependents, shall also be entitled to participate in, be covered by and receive
benefits under, Employer's long-term disability, medical, dental, health,
welfare, accidental death and dismemberment, and life insurance plans, other
present or equivalent successor plans and practices of Employer, for which
officers, their dependents, and beneficiaries are eligible, if any, and its
401(k) Plan. Executive, his spouse and his dependents shall also be entitled to
all payments or other benefits under any such
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<PAGE> 5
plan or practice subsequent to the Period of Employment as a result of
participation in such plan or practice during the Period of Employment, as
provided in such plans. In addition, the Company shall reimburse Executive
pursuant to Executive Medical Reimbursement Plan for actual medical and dental
expenses incurred by Executive and his dependents during the Period of
Employment which are not covered by the Company's medical or dental plans;
provided, however, that in no event shall the Company be obligated to reimburse
Executive in an amount greater than the amount to be designated by the Chief
Executive Officer and reasonably agreed to by Executive and Group for such
medical or dental expenses in any calendar year.
b. Nothing in this Agreement shall preclude Employer from
amending or terminating any employee benefit plan or practice other than the
perquisites set forth in paragraph 6 and Executive Medical Reimbursement Plan.
8. Stock Options.
Group shall grant to Executive options (the "Options") to
purchase shares of the Group's common stock, par value $.01 per share under the
Group's Management Stock Option Plan (the "Stock Option Plan"), to be adopted by
Group immediately following the Closing. The Stock Option Plan shall specify the
number of Options to be granted and dates on which and the terms and conditions
under which Options shall be awarded substantially in accordance with the terms
set forth in Schedule C.
9. Effect of Death.
If Executive dies during the Period of Employment, the legal
representative of Executive shall be entitled to (i) the base salary provided
for in paragraph 5(a)(i) above for the month in which Executive's death shall
have occurred and the following month plus all accrued and unpaid vacation, at
the rate being paid at the time of death, (ii) the remaining installments of the
Special Bonus provided for in paragraph 5(a)(iii) above, payable only to the
extent and at such times as Executive would otherwise be entitled to the Special
Bonus in accordance with such paragraph, and (iii) a pro rata portion of any
bonus which would have been payable under the Management Incentive Compensation
Plan for the
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<PAGE> 6
year in which Executive's death occurs, payable on the date bonuses under
such Plan are otherwise payable. The Period of Employment shall be deemed to
have ended as of the close of business on the last day of the month following
the month in which death shall have occurred but without prejudice to any
payments otherwise due in respect of Executive's death.
10. Effect of Disability.
a. In the event of the Disability of Executive during the
Period of Employment, Executive shall be entitled to (i) all compensation,
benefits and perquisites hereunder through the effective date of his termination
of employment, (ii) an amount equal to the base salary provided for in paragraph
5(a)(i) above, at the rate being paid at the time of the commencement of
Disability, for the period of such Disability plus six (6) months from the end
of the period that establishes such Disability, as described in paragraph 10(c)
below, (iii) the remaining installments of the Special Bonus provided for in
paragraph 5(a)(iii) above, payable in accordance with such paragraph only to the
extent and at such times as Executive would otherwise be entitled to the Special
Bonus, and (iv) a pro rata portion of any bonus which would have been payable
under the Management Incentive Compensation Plan for the year in which
Executive's Disability occurs, payable on the date bonuses under such Plan are
otherwise payable. The Period of Employment shall be deemed to have ended as of
the last day of the period that establishes Disability.
b. The amount of any payments due under paragraph 10(a)(i)
shall be reduced by any payments to which Executive may be entitled for the same
period because of disability under any disability plan or insurance of Employer
or as the result of workers' compensation or non-occupational disability
payments.
c. The term "Disability", as used in this Agree ment, shall
mean an illness or accident occurring during the Period of Employment which
prevents Executive from performing Executive's duties under this Agreement for
a period in excess of 270 days (whether or not consecutive) or 180 consecutive
days, as the case may be, in any twelve-month period during the Period of
Employment. The Period of Employment shall be deemed to have ended as of the
close of
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<PAGE> 7
business on the last day of such period (either the 270th or 180th day, as the
case may be) but without prejudice to any payments due Executive in respect of
disability under paragraph 11(a) or otherwise due to Executive or Executive's
legal representative or beneficiary and without prejudice to continue any
medical insurance coverage, subject to the terms of the plan or applicable law.
11. Provision of Severance Allowance.
a. Either Group or the Company may terminate the Period of
Employment and Executive's employment at any time during the Period of
Employment (i) for any reason upon thirty (30) days' notice to Executive and
(ii) immediately for Cause, as defined in paragraph 11(c) below. If Executive's
employment is terminated by either Group or the Company for any reason other
than for Cause or the death or Disability of Executive or if Executive's
employment is terminated by Executive for Good Reason during the Period of
Employment but prior to a Change in Control (as defined in paragraph 13) and
prior to the second anniversary of the date hereof, Employer shall pay Executive
(x) all compensation, benefits and perquisites accrued hereunder 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 paragraph 5(a)(i)
above at the rate being paid at the date of termination, (2) two times the most
recent fiscal year's incentive bonus compensation provided for in paragraph
5(a)(ii) above, and (3) a pro rata portion of the highest incentive bonus
payable under paragraph 5(a)(ii) above in the three most recent fiscal years,
and (z) the remaining installments of the Special Bonus provided for in
paragraph 5(a)(iii) above payable only to the extent and at such times as
Executive would otherwise be entitled to the Special Bonus in accordance with
such paragraph. If Executive's employment is terminated by either Group or the
Company for any reason other than for Cause or the death or Disability of
Executive, or if Executive's employment is terminated by Executive for Good
Reason during the Period of Employment but prior to a Change in Control (as
defined in paragraph 13) and after the second anniversary of the date hereof,
Employer shall pay Executive (x) all compensation, benefits and perquisites
accrued hereunder through the effective date of his termination of employment,
(y) a severance allowance equal to one year's
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<PAGE> 8
base salary at the rate being paid at the time of termination of Executive's
employment, commencing on the first day of the month following the month in
which the termination of Executive's employment becomes effective and continuing
on the first day of each month thereafter for a period of twelve (12)
consecutive months and (z) the remaining installments of the Special Bonus
provided for in paragraph 5(a)(iii) above payable only to the extent and at such
times as Executive would otherwise be entitled to the Special Bonus in
accordance with such paragraph.
b. During the twelve month period following a termination of
Executive's employment provided for in paragraph 11(a), Executive shall be
entitled to: (i) use of an office, appropriate for use by an executive; and (ii)
continued coverage under the Company's health, dental and life insurance plans,
as well as Executive Medical Reimbursement Plan, providing reimbursement of
medical or dental expense not otherwise covered by insurance in an amount agreed
to pursuant to Paragraph 7. If and to the extent that such benefits shall not be
payable under any such plan by reason of Executive's no longer being an
employee, Group or the Company shall pay or provide for payment of such benefits
to Executive, Executive's dependents, and beneficiaries.
c. For the purpose of paragraph 11(a) above and
any other provision of this Agreement, termination of
Executive's employment shall be deemed to have been for
Cause only
i. if termination of Executive's employment shall
have been the result of an act or acts of fraud, theft,
or embezzlement on the part of Executive which, if
convicted, would constitute a felony, or
ii. if termination of Executive's employment results from
Executive's refusal to perform the duties appropriate to Executive's
position or a material breach by Executive of the provisions of
paragraphs 15, 16 and 17 of this Agreement and Executive has been given
written notice by the Board of Directors of the Company with respect
to such refusal or such material breach and Executive continues to
refuse unreasonably the performance of the duties specified or to
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<PAGE> 9
materially breach the provisions of paragraphs 15, 16 and 17 of this
Agreement.
d. For purposes of paragraph 11(a) above and any other
provision of this Agreement, a termination of Executive's employment for Good
Reason shall mean a termination by Executive within 30 days following e. For
purposes of paragraph 11(a) above and any other provision of this Agreement, a
termination of Executive's employment for Good Reason shall mean a termination
by Executive within 30 days following
i. a material diminution, without the written consent of
Executive, in the nature or scope of Executive's rights, authority,
responsibilities and duties with the Company or Group;
ii. without Executive's prior written consent, a significant
reduction by the Company or Group of Executive's base annual salary as
provided for in paragraph 5(a)(i), other than any such reduction which
is part of a general salary reduction or other concessionary
arrangement affecting all employees or affecting the group of employees
of which Executive is a member;
iii. the taking of any action by the Company or Group that
would substantially diminish the aggregate value of the benefits
provided Executive under the Company's or Group's accident, disability,
life insurance and any other employee benefit plans in which Executive
was participating on the date hereof, other that any such reduction
which is (x) required by law, (y) implemented in connection with a
general concessionary arrangement affecting all employees or affecting
the group of employees of which Executive is a member or (z) generally
applicable to all beneficiaries of such plans; or
iv. a relocation of the Executive's principal office to a
location that is at least 50 miles farther from his principal residence
than his office on the date hereof.
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<PAGE> 10
12. Termination by Executive.
Executive may terminate his employment hereunder at any time
during the Period of Employment upon sixty (60) days' written notice to the
Company, and, without regard to whether such termination occurs prior to a
Change in Control, Executive shall be paid or accrue (as the case may be) (i)
all compensation, benefits and perquisites accrued hereunder through the
effective date of his termination of employment, plus (ii) the remaining
installments of the Special Bonus provided for in paragraph 5(a)(iii) above,
payable only to the extent and at such times as Executive would otherwise be
entitled to the Special Bonus under such paragraph. However, Executive shall not
be entitled to receive the severance allowance provided in paragraph 11(a) or
(b).
13. Effect of Change in Control
If following a Change in Control Executive's employment is
terminated by either Group or the Company during the Period of Employment for
any reason other than for Cause or the death or Disability of Executive, then
the Company shall pay Executive (i) all compensation, benefits and perquisites
accrued hereunder through the effective date of his termination of employment,
(ii) the remaining installments of the Special Bonus provided for in paragraph
5(a)(iii) above, payable only to the extent and at such times as Executive would
otherwise be entitled to the Special Bonus under such paragraph, plus (iii) a
severance allowance equal to two times the base salary provided for in paragraph
5(a)(i) above, at the rate being paid at the date of termination, plus two times
the most recent fiscal year's incentive bonus compensation provided for in
paragraph 5(a)(ii) above. "Change in Control" means the occurrence of any of the
following events: (i)the acquisition by any person, entity or "group" (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than any stockholder of the Company immediately after giving effect to the
Merger, or any Affiliate of any such stock holder, of 50% or more of the
combined voting power of the Company's then outstanding voting securities; (ii)
if at any time after the initial public offering of common stock of the Group,
(A) any "person" (as such term is used in Section 13(d) and 14(d) of the
Exchange Act), excluding for this
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<PAGE> 11
purpose GSCP, is or becomes the Beneficial Owner of more than thirty-five
percent (35%) of the total voting power of the Group or of the Company, (B) GSCP
beneficially owns a lesser percentage of the voting power of the Group or of the
Company and (C) GSCP does not have the right or ability by voting power,
contract or otherwise to elect or designate a majority of the Board or the Board
of Directors of such corporation in Control; (iii) if after the initial public
offering of the Stock of the Group, a change in the composition of the Board
occurs during any period of two consecutive years such that the directors who
were in office at the beginning of the period cease to constitute at least a
majority of the Board, unless the election of an individual by such Board or
whose nomination for election by the shareholders of the Group was approved by a
vote of at least two-thirds (66-2/3%) of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved; or (iv) more than 65% of the
total value of the assets of the Group are sold and the acquiror of such assets
is not GSCP, or an entity controlled by GSCP.
14. Resignation.
If Executive's employment hereunder terminates (except due to
his death), Executive agrees to resign effective immediately upon termination of
the Period of Employment all positions as an officer or director of Group or the
Company. If Executive fails to deliver such resignation, the Boards of Directors
of Employer may deem Executive to have resigned pursuant to this paragraph 14
effective upon the termination of his employment.
15. Non-Disclosure.
Executive shall not at any time after the date hereof divulge,
provide, or make assessable to anyone, other than in connection with the
business of the Company, any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, materials, devises, materials, devices or ideas or other
know-how, whether patentable or not, with respect to any confidential or secret
aspects of the Company's business (including without limitation customer lists,
supplier lists and pricing arrangements with
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<PAGE> 12
customers or suppliers or any similar lists, arrangements or understandings,
marketing plans, sales plans, manufacturing plans, management organization
information, data and other information relating to members of the Board of
Directors of Group and the Company, management and GSCP), operating policies or
manuals, business plans, financial records, packaging designs or other
financial, commercial, business or technical information relating to the
Employer or any of their subsidiaries or information designated as confidential
or proprietary that the Employer or any of their subsidiaries may receive
belonging to suppliers, customers or others who do business with the Employer or
any of their subsidiaries (collectively, "Confidential Information"); provided,
however, that Executive may disclose such information (i) at the request of any
governmental regulatory authority or in connection with an examination of
Executive by any such authority, (ii) pursuant to subpoena or other court
process, (iii) when required to do so in accordance with the provisions of any
applicable law or regulation, or (iv) if such information has otherwise been
made generally available to the public other than by reason of Executive's
breach of this paragraph 15. Upon the expiration of the Period of Employment or
upon termination of Executive's employment, Executive or his legal
representative shall promptly deliver to the Company all property relating to
the business of the Company, including all Confidential Information, and all
copies thereof that are in the possession or control of Executive.
16. Inventions.
Executive shall promptly disclose to the Company all
processes, trademarks, inventions, improvements and discoveries related to the
business of the Company (collectively, "Developments") conceived or developed by
him or with others during the Period of Employment, if such Developments were
conceived or developed during the Company's business hours or through the use of
the Company's resources. All such Developments shall be the sole and exclusive
property of the Company. Executive, upon the request of and at the Company's
expense, shall assist the Company in obtaining patents thereon and execute all
documents and other instruments necessary or proper to obtain letters patent and
to vest the Company with full title thereto.
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<PAGE> 13
17. Post-Employment Activities
a. Covenant Not to Compete. Following termination of
Executive's employment by the Company or Group for Cause or by Executive for any
reason, Executive shall not compete, directly or indirectly, in any area of the
continental United States, with the business conducted by the Company or any of
its subsidiaries, whether as an employee, director, agent, principal,
stockholder or limited partner owning more than 5% of any class of securities or
equity of a corporation, association or partnership, or by maintaining any
other type of interest in or affiliation with or providing any assistance
whatsoever to, any other person, firm, corporation or entity in any business
located or doing business within the continental United States which at the time
of Executive's affiliation therewith is in direct competition with any facet of
the business then being conducted by the Company or any of its subsidiaries, for
a one-year period beginning on the date of Executive's departure and terminating
on the first anniversary of the date of his departure (the "Non-Compete
Period").
b. Non-Solicitation of Employees. During (i) Executive's
employment with the Company or any of its subsidiaries or Affiliates and (ii)
for a two-year period beginning on the date of Executive's departure and termi-
nating on the second anniversary of the date of his departure, Executive shall
not directly or indirectly induce any employee of the Company or any of its
subsidiaries to terminate employment with such entity, and shall not directly or
indirectly, either individually or as owner, agent, employee, consultant or
otherwise, employ or offer employment to any person who is or was employed by
the Company or any of its subsidiaries, unless such person shall have ceased to
be employed by such entity for a period of at least six months.
c. Non-Solicitation of Customers and Suppliers. During (i)
Executive's employment with the Company or Group and (ii) the Non-Compete
Period, Executive shall not, directly or indirectly, interfere with the business
relationship of the Company or any of its subsidiaries, with any customer or
supplier, or prospective customer or supplier, with respect to which Executive
has had access to
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<PAGE> 14
Confidential Information or with which Executive dealt in connection with
Executive's duties for Group, the Company or any of its subsidiaries.
d. Injunctive Relief with Respect to Covenants. Executive
acknowledges that irreparable damage would result to the Group and Company if
the provisions of paragraphs 15, 16 and 17(a) through (c) were not specifically
enforced, and agrees that the Group or Company shall be entitled to any
appropriate legal, equitable or other remedy, including injunctive relief, a
restraining order or other equitable relief (without the requirement to post
bond) with respect to any failure of Executive to comply with the provisions of
such sections.
e. Severability; Reformation. In the event that one or more of
the provisions of this paragraph 17 shall become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining pro visions contained herein shall not be affected thereby. In the
event any provision of paragraph 15, 16 or 17(a) through (c) is not enforceable
in accordance with its terms, such paragraph shall be reformed to make such
paragraph enforce able in a manner which provides the Company or any of its
subsidiaries the maximum rights permitted at law.
f. Waiver. Waiver by Group, the Company or any of its
subsidiaries of any breach or default by Executive of any of the terms of
paragraphs 15, 16 or 17(a) through (c) shall not operate as a waiver of any
other breach or default, whether similar to or different from the breach or
default waived. No waiver of any provision of paragraph 15, 16 or 17(a) through
(c) shall be implied from any course of dealing between the Company or any of
its subsidiaries and Executive or from any failure by the Company or any of its
subsidiaries to assert its rights hereunder on any occasion or series of
occasions.
18. Insurance.
The Company shall have the right at its own cost and expense
to apply for and to secure in its own name, or otherwise, life, health or
accident insurance or any or all of them covering Executive, and Executive
agrees to submit to usual and customary medical examination and otherwise to
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<PAGE> 15
cooperate with the Company in connection with the procure ment of any such
insurance and any claims thereunder.
19. Notices.
All notices, requests and other communications pursuant to
this Agreement shall be in writing and shall be deemed to have been given if
delivered in person or by courier, the date delivered, and if sent by telegraph,
telex, facsimile transmission, the date sent, or if mailed by registered or
certified mail, postage prepaid, the date mailed, if sent, delivered or mailed
to the parties at the following addresses:
If to Executive:
John A. Palleschi
19890 Muirfield Circle
Shorewood, MN 55331
If to the Employer:
Telex Communications, Inc.
9600 Aldrich Avenue S.
Minneapolis, MN 55420
With a copy to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, N.Y. 10013
Attention: Nicholas E. Somers
Any party may, by written notice to the other, change the
address to which notices to such party are to be delivered, sent or mailed.
20. No Trust Created.
Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be construed to
create a trust fund of any kind. Any funds which may be set aside or provided
for in this Agreement shall continue for all purposes to be a part of the
general funds of Employer and no person other than
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<PAGE> 16
Employer shall by virtue of the provisions of this Agreement have any interest
in such funds. To the extent that any person acquires a right to receive
payments from Employer under this Agreement, such right shall be no greater than
the right of any unsecured general creditor of Employer.
21. Successor In Interest.
This Agreement and the rights and obligations hereunder shall
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of Employer by merger or consolidation or any purchaser or
assignee of all or substantially all of its assets, but, except to any such
successor, purchaser, or assignee of Employer, neither this Agreement nor any
rights or benefits hereunder may be assigned by either party hereto.
22. Full Discharge of Company Obligations.
The amounts payable to Executive pursuant to paragraphs 9, 10,
11, 12, and 13 following termination of his employment shall be in full and
complete satisfaction of Executive's rights under this Agreement but shall not
affect Executive's rights under any other agreement with Group or the Company.
Such amounts shall constitute liquidated damages with respect to any and all
such rights and claims and, upon Executive's receipt of such amounts, the
Employer shall be released and discharged from any and all liability to
Executive in connection with this Agreement or otherwise in connection with
Executive's employment with the Employer and their subsidiaries.
23. Arbitration of Disputes.
The parties agree that any controversy or claim arising out of
or relating to this Agreement, or any dispute arising out of the interpretation
or application of this Agreement, which the parties hereto are unable to
resolve, shall be finally resolved and settled exclusively by arbitration in
Minnesota by a single arbitrator under the American Arbitration Association's
Commercial Arbitration Rules then obtaining and in accordance with the
substantive laws of the State of Minnesota. If the parties cannot agree upon an
arbitrator out of the panel, then for the sole pur-
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<PAGE> 17
pose of selecting an arbitrator, each party (the Company and Group shall be
considered collectively one party) shall choose its own independent
representative and those independent representatives shall in turn choose the
single arbitrator within thirty (30) days of the date of the selection of the
first independent representative. The parties severally recognize and consent to
the jurisdiction over each of them by the courts of the State of Minnesota. The
legal expenses of Executive shall be reimbursed to Executive if an award is
rendered in favor of Executive or if the arbitrator finds that Executive acted
reasonably and exercised good faith in demanding arbitration of any such
dispute.
24. Governing Laws.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Minnesota applicable to agreements
made and to be performed entirely in Minneapolis, Minnesota.
25. Entire Agreement.
This Agreement shall constitute the entire agree ment between
the parties superseding all prior agreements between the Group or Company and
Executive, and may not be modified or amended and no waiver shall be effective
unless by written document signed by both parties hereto; provided, however,
that any increase in base salary, as provided in paragraph 5 hereof, shall
become an amendment to this Agree ment when approved by the Board of Directors
of the Company and recorded in the approved minutes of such meeting.
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<PAGE> 18
IN WITNESS WHEREOF, the parties execute this Employment
Agreement as of the date first above written.
EXECUTIVE:
___________________________________
John A. Palleschi
GST ACQUISITION CORP.
By:________________________________
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<PAGE> 19
SCHEDULE A
Telex Communications Group, Inc.
Management Cash Compensation Plan
Management Incentive Compensation (the "MIC Plan")
- Objective: The MIC Plan is intended to motivate key management
to achieve company objectives by providing a direct link
between the company objectives and incentive compensation
awards.
- Incentive Compensation Awards: Awards are
calculated as a percent of base salary based on
achieving certain performance hurdles as defined
below.
a. Threshold: 90% of objectives equal to 25% of
base salary
b. Target: 100% of objectives equal to 50% of
base salary
c. Upside: 110% of objectives equal to 75% of
base salary
d. Maximum: 120% of objectives equal to 100% of
base salary
- Performance Measurement: For top three senior
officers, there are two weighted components upon
which an award is based:
- 75% - quantitative comparison of objectives
against AOP
- corporate revenue
- corporate EBITDA
<PAGE> 20
- 25% - qualitative judgment by the CEO and Board of
Directors.
- For SBU executives, there are three weighted
components upon which an aware is based:
- 30% - quantitative comparison of objectives
against total company AOP
- 40% - quantitative comparison against SBU AOP
- SBU Revenue
- SBU Gross Profit
- SBU Operating Income
- 30% - qualitative judgment by CEO and Board
of Directors
- Other Participants - based on total company performance,
business unit performance, if applicable, and an evaluation of
individual performance.
- General Guidelines for MIC Plan
- Awards are earned based on company's audited
results
- AOP is to include an accrual for possible
award payout
- Awards are pro-rated for results between the
specified breakpoints (i.e. target, maximum,
upside and threshold)
- Awards above maximum are at the specified
maximum and there is no award below threshold
amount.
- Only with the recommendation of the CEO and
approval of the Board of Directors can a
participant be added.
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<PAGE> 21
- Officers terminating due to death, disability,
retirement or for good reason are eligible to receive
a pro-rata award for the year, paid at the normal
date.
- Officers terminating voluntarily or terminated for
performance reasons or cause prior to the date of
payout are not eligible to receive an award.
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<PAGE> 22
SCHEDULE B
TELEX COMMUNICATIONS GROUP, INC.
CASH BONUS PLAN
INITIAL INCENTIVE AWARD:
A cash bonus shall be paid to the following individuals no later than the first
anniversary of the Effective Time (as defined in the Recapitalization Agreement
and Plan of Merger, dated as of March __, 1997, by and among Greenwich II LLC,
GST Acquisition Corp. and Telex Communications Group, Inc.) in the amounts set
forth below:
<TABLE>
<CAPTION>
80% of AOP Achieved
-------------------
<S> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
ADDITIONAL AWARDS:
An additional cash bonus shall be paid to the following individuals on each of
the first five anniversaries of the Effective Time in the amounts set forth
below:
<PAGE> 23
<TABLE>
<CAPTION>
100% of AOP 105% of AOP
Achieved Achieved
----------- ------------
<S> <C> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
AOP shall be determined under the Management Incentive Compensation Plan.
An additional cash bonus shall be paid to the following individuals on the
earlier of the fifth anniversary of the Effective Time or a Change in Control
(as defined in the 1997 Telex Communications Group, Inc, Stock Option Plan) in
the amounts set forth below:
<TABLE>
<CAPTION>
110% of LTP 120% of LTP
Achieved Achieved
----------- -----------
<S> <C> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
LTP shall be determined as set forth in Schedule B to the Stock Option Plan.
2
<PAGE> 24
SCHEDULE C
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares
Available under Available under Available under
the Initial Option the Performance the Super
Grant Option Grant Performance
Option Grant
<S> <C> <C> <C>
Palleschi 1,631 1,934 1,570
</TABLE>
All numbers are subject to adjustment based on the final Merger Consideration
payable pursuant to Section 1.3(a) of the Merger Agreement and to reflect a
twenty-to-one stock split to become effective upon the Merger.
<PAGE> 1
Exhibit 10(h)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into this 4th day of March, 1997 by and between JOHN T. HISLOP ("Executive") and
GST ACQUISITION CORP., a Delaware corporation. This Agreement shall only take
effect on the date of the closing (the "Closing") of the merger (the "Merger")
between GST Acquisition Corp. and Group. In this Agreement, the term "Group"
shall mean TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation and the
surviving corporation of the Merger, the term the "Company" shall mean TELEX
COMMUNICATIONS, INC., a Delaware corporation and a wholly-owned subsidiary of
Group, and the term "Employer" shall mean collectively the Company and Group.
1. Employment.
For the period set forth in paragraph 2 below (the Period of
Employment), and upon the other terms and conditions set forth in this
Agreement: (i) Group hereby employs Executive, and Executive hereby accepts
employment with Group, as Group's Vice President and Chief Financial Officer;
and (ii) the Company hereby employs Executive, and Executive hereby accepts
employment with the Company, as the Company's Vice President and Chief Financial
Officer.
2. Period of Employment.
The Period of Employment shall commence on the date of the
Closing and, subject only to the provisions of Paragraphs 9, 10, 11 and 12
below, shall continue until the close of business five (5) years from the date
of the Closing. If Executive's employment hereunder has not been previously
terminated prior to the expiration of the initial five-year Period of
Employment, this Agreement and the Period of Employment shall continue and
extend for successive annual periods and shall be subject to the terms and
conditions of this Agreement.
3. The Position.
During the Period of Employment Executive shall serve as an
executive officer of both the Company and Group, reporting directly to the
Chairman and Chief Executive Officer of the Company and Group, respectively, and
shall
<PAGE> 2
have the duties and responsibilities appropriate to such offices.
4. Duties.
Throughout the Period of Employment, Executive agrees to
devote Executive's full time and undivided attention during normal business
hours to the business and affairs of Employer and, in particular, to performance
of all the duties and responsibilities as Vice President and Chief Financial
Officer of the Company and Vice President and Chief Financial Officer of Group,
except for reasonable vacations and except for illness; but nothing in this
Agreement shall preclude Executive from devoting reasonable periods required
for:
a. serving as a director, trustee, or member of a committee of
any organization involving no conflict of interest with the interests
of Employer or in direct competition with Employer;
b. delivering lectures, fulfilling speaking engagements,
teaching at educational institutions or business organizations;
c. engaging in charitable and community activities; and
d. managing Executive's personal investments;
provided that such activities do not, individually or together, interfere with
the regular performance of Executive's duties and responsibilities under this
Agreement and do not in any way conflict with Employer's interests.
5. Compensation.
a. For all services to be rendered by Executive pursuant to
this Agreement during the Period of Employment to the Company or Group:
i. Executive shall be paid as compensation a base annual
salary of $150,000 payable at the same intervals at which the Company's
executives are paid, but in no event less frequently than monthly, plus
any increase
2
<PAGE> 3
in base salary as determined by the Board of Directors of the Company;
ii. Executive shall participate in a new Management Incentive
Compensation Plan to be approved by the Company's Board of Directors
immediately following the Closing, the terms of which shall be
substantially the same as the terms set forth in Schedule A;
iii. Executive shall be paid a special bonus of $11,333,
subject to adjustment as previously agreed by Executive, 30 days after
the Closing and on each of the next four (4) anniversaries of due date
of the initial payment, provided that on the date a payment is due,
Greenwich Street Capital Partners, Inc. or its Affiliates
(collectively, "GSCP") are in Control of Group and the Company and
there has not been an initial public offering of the Common Stock of
Group (the "Special Bonus"). "Affiliate" means an Affiliate as defined
in Section 19.1 of the Stockholders Agreement. "Control" of a
corporation means the direct or indirect ownership of 50% or more of
the voting power, and of a partnership or limited liability company
means the direct or indirect ownership of 50% or more of the combined
voting power of the company's outstanding voting securities.
iv. Executive shall participate in the Cash Bonus Program to
be approved by the Company's Board of Directors immediately following
the Closing, the terms of which shall be substantially the same as the
terms set forth in Schedule B.
b. Any increase in base salary or in annual incentive awards
or other compensation shall in no way diminish any other obligations of Employer
under this Agreement.
c. The compensation provided for in paragraph (a) above is in
addition to all other benefits, perquisites and other compensation provided for
in this Agreement.
3
<PAGE> 4
6. Provisions for Perquisites.
During the Period of Employment, Executive shall be entitled
to perquisites including an appropriate office, secretarial and clerical staff,
and fringe benefits accorded generally to executive officers of Employer
pursuant to their policies, as well as to reimbursement, upon proper accounting,
of reasonable expenses and disbursements incurred by Executive in the course of
Executive's duties. In addition, Employer shall pay or provide the following:
a. Executive will be reimbursed for actual expenses incurred
by him in obtaining tax and investment assistance and advice, not to
exceed $2,000 in any calendar year during the Period of Employment.
b. During the Period of Employment, Executive shall be
entitled to four weeks' vacation per year. Executive may take such
vacation at such time so as not to interfere unreasonably with the
business of Employer. Annual unused vacation shall cumulate from year
to year.
7. Employment Benefit Plans.
a. Executive, Executive's dependents and beneficiaries,
including, without limitation, any beneficiary of a joint and survivor annuity
or other optional method of payment applicable to the payment of benefits under
the defined benefit or other pension plans of Employer, or any successor plans,
shall be entitled to all payments and benefits and service credit for benefits
during the Period of Employment to which officers of Employer, their dependents,
and beneficiaries are entitled as the result of their employment under the terms
of employee benefit plans and practices of Employer. Executive, and Executive's
dependents, shall also be entitled to participate in, be covered by and receive
benefits under, Employer's long-term disability, medical, dental, health,
welfare, accidental death and dismemberment, and life insurance plans, other
present or equivalent successor plans and practices of Employer, for which
officers, their dependents, and beneficiaries are eligible, if any, and its
401(k) Plan. Executive, his spouse and his dependents shall also be entitled to
all payments or other benefits under any such plan or
4
<PAGE> 5
practice subsequent to the Period of Employment as a result of participation in
such plan or practice during the Period of Employment, as provided in such
plans. In addition, the Company shall reimburse Executive pursuant to Executive
Medical Reimbursement Plan for actual medical and dental expenses incurred by
Executive and his dependents during the Period of Employment which are not
covered by the Company's medical or dental plans; provided, however, that in no
event shall the Company be obligated to reimburse Executive in an amount greater
than the amount to be designated by the Chief Executive Officer and reasonably
agreed to by Executive and Group for such medical or dental expenses in any
calendar year.
b. Nothing in this Agreement shall preclude Employer from
amending or terminating any employee benefit plan or practice other than the
perquisites set forth in paragraph 6 and Executive Medical Reimbursement Plan.
8. Stock Options.
Group shall grant to Executive options (the "Options") to
purchase shares of the Group's common stock, par value $.01 per share under the
Group's Management Stock Option Plan (the "Stock Option Plan"), to be adopted by
Group immediately following the Closing. The Stock Option Plan shall specify the
number of Options to be granted and dates on which and the terms and conditions
under which Options shall be awarded substantially in accordance with the terms
set forth in Schedule C.
9. Effect of Death.
If Executive dies during the Period of Employment, the legal
representative of Executive shall be entitled to (i) the base salary provided
for in paragraph 5(a)(i) above for the month in which Executive's death shall
have occurred and the following month plus all accrued and unpaid vacation, at
the rate being paid at the time of death, (ii) the remaining installments of the
Special Bonus provided for in paragraph 5(a)(iii) above, payable only to the
extent and at such times as Executive would otherwise be entitled to the Special
Bonus in accordance with such paragraph, and (iii) a pro rata portion of any
bonus which would have been payable under the Management Incentive Compensation
Plan for
5
<PAGE> 6
the year in which Executive's death occurs, payable on the date bonuses under
such Plan are otherwise payable. The Period of Employment shall be deemed to
have ended as of the close of business on the last day of the month following
the month in which death shall have occurred but without prejudice to any
payments otherwise due in respect of Executive's death.
10. Effect of Disability.
a. In the event of the Disability of Executive during the
Period of Employment, Executive shall be entitled to (i) all compensation,
benefits and perquisites hereunder through the effective date of his termination
of employment, (ii) an amount equal to the base salary provided for in paragraph
5(a)(i) above, at the rate being paid at the time of the commencement of
Disability, for the period of such Disability plus six (6) months from the end
of the period that establishes such Disability, as described in paragraph 10(c)
below, (iii) the remaining installments of the Special Bonus provided for in
paragraph 5(a)(iii) above, payable only to the extent and at such times as
Executive would otherwise be entitled to the Special Bonus in accordance with
such paragraph, and (iv) a pro rata portion of any bonus which would have been
payable under the Management Incentive Compensation Plan for the year in which
Executive's Disability occurs, payable on the date bonuses under such Plan are
otherwise payable. The Period of Employment shall be deemed to have ended as of
the last day of the period that establishes Disability.
b. The amount of any payments due under paragraph 10(a)(i)
shall be reduced by any payments to which Executive may be entitled for the same
period because of disability under any disability plan or insurance of Employer
or as the result of workers' compensation or non-occupational disability
payments.
c. The term "Disability", as used in this Agreement, shall
mean an illness or accident occurring during the Period of Employment which
prevents Executive from performing Executive's duties under this Agreement for a
period in excess of 270 days (whether or not consecutive) or 180 consecutive
days, as the case may be, in any twelve-month period during the Period of
Employment. The Period of
6
<PAGE> 7
Employment shall be deemed to have ended as of the close of business on the last
day of such period (either the 270th or 180th day, as the case may be) but
without prejudice to any payments due Executive in respect of disability under
paragraph 11(a) or otherwise due to Executive or Executive's legal
representative or beneficiary and without prejudice to continue any medical
insurance coverage, subject to the terms of the plan or applicable law.
11. Provision of Severance Allowance.
a. Either Group or the Company may terminate the Period of
Employment and Executive's employment at any time during the Period of
Employment (i) for any reason upon thirty (30) days' notice to Executive and
(ii) immediately for Cause, as defined in paragraph 11(c) below. If Executive's
employment is terminated by either Group or the Company during the Period of
Employment but prior to a Change in Control (as defined in paragraph 13) for any
reason other than for Cause or the death or Disability of Executive or if
Executive's employment is terminated by Executive for Good Reason during the
Period of Employment but prior to a Change in Control (as defined in paragraph
13) and prior to the second anniversary of the date hereof, Employer shall pay
Executive (x) all compensation, benefits and perquisites accrued hereunder
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
paragraph 5(a)(i) above, at the rate being paid at the date of termination, (2)
two times the most recent fiscal year's incentive bonus compensation provided
for in paragraph 5(a)(ii) above and (3) a pro rata portion of the highest
incentive bonus payable under paragraph 5(a)(ii) above in the most recent three
fiscal years, and (z) the remaining installments of the Special Bonus provided
for in paragraph 5(a)(iii) above payable only to the extent and at such times as
Executive would otherwise be entitled to the Special Bonus in accordance with
such paragraph. If Executive's employment is terminated by either Group or the
Company for any reason other than for Cause or the death or Disability of
Executive or if Executive's employment is terminated by Executive for Good
Reason during the Period of Employment but prior to a Change in Control (as
defined in paragraph 13) and after the second anniversary of the date hereof,
Employer shall pay Executive (x) all compensation,
7
<PAGE> 8
benefits and perquisites accrued hereunder through the effective date of his
termination of employment, (y) a severance allowance equal to one year's base
salary at the rate being paid at the time of the termination of Executive
employment, commencing on the first day of the month following the month in
which the termination of Executive's employment becomes effective and continuing
on the first day of each month thereafter for a period of twelve (12)
consecutive months and (z) the remaining installments of the Special Bonus
provided for in paragraph 5(a)((iii) above payable only to the extent and at
such times as Executive would otherwise be entitled to the Special Bonus in
accordance with such paragraph.
b. During the twelve month period following a termination of
Executive's employment provided for in paragraph 11(a), Executive shall be
entitled to: (i) use of an office, appropriate for use by an executive; and (ii)
continued coverage under the Company's health, dental and life insurance plans,
as well as Executive Medical Reimbursement Plan, providing reimbursement of
medical or dental expense not otherwise covered by insurance in an amount agreed
to pursuant to Paragraph 7. If and to the extent that such benefits shall not be
payable under any such plan by reason of Executive's no longer being an
employee, Group or the Company shall pay or provide for payment of such benefits
to Executive, Executive's dependents, and beneficiaries.
c. For the purpose of paragraph 11(a) above and any other
provision of this Agreement, termination of Executive's employment shall be
deemed to have been for Cause only
i. if termination of Executive's employment shall have been
the result of an act or acts of fraud, theft, or embezzlement on the
part of Executive which, if convicted, would constitute a felony, or
ii. if termination of Executive's employment results from
Executive's refusal to perform the duties appropriate to Executive's
position or a material breach by Executive of the provisions of
paragraphs 15, 16 and 17 of this Agreement and Executive has been given
written notice by the Board of Directors of the
8
<PAGE> 9
Company with respect to such refusal or such material breach and
Executive continues to refuse unreasonably the performance of the
duties specified or to materially breach the provisions of paragraphs
15, 16 and 17 of this Agreement.
d. For purposes of paragraph 11(a) above and any other
provision of this Agreement, a termination of Executive's employment for Good
Reason shall mean a termination by Executive within 30 days following
i. a material diminution, without the written consent of
Executive, in the nature or scope of Executive's rights, authority,
responsibilities and duties with the Company or Group;
ii. without Executive's prior written consent, a significant
reduction by the Company or Group of Executive's base annual salary as
provided for in paragraph 5(a)(i), other than any such reduction which
is part of a general salary reduction or other concessionary
arrangement affecting all employees or affecting the group of employees
of which Executive is a member;
iii. the taking of any action by the Company or Group that
would substantially diminish the aggregate value of the benefits
provided Executive under the Company's or Group's accident, disability,
life insurance and any other employee benefit plans in which Executive
was participating on the date hereof, other that any such reduction
which is (x) required by law, (y) implemented in connection with a
general concessionary arrangement affecting all employees or affecting
the group of employees of which Executive is a member or (z) generally
applicable to all beneficiaries of such plans; or
iv. a relocation of the Executive's principal office to a
location that is at least 50 miles farther from his principal residence
than his office on the date hereof.
9
<PAGE> 10
12. Termination by Executive.
Executive may terminate his employment hereunder at any time
during the Period of Employment upon sixty (60) days' written notice to the
Company, and, without regard to whether such termination occurs prior to a
Change in Control, Executive shall be paid or accrue (as the case may be) (i)
all compensation, benefits and perquisites accrued hereunder through the
effective date of his termination of employment, plus (ii) the remaining
installments of the Special Bonus provided for in paragraph 5(a)(iii) above.
However, Executive shall not be entitled to receive the severance allowance
provided in paragraph 11(a) or (b).
13. Effect of Change in Control
If following a Change in Control Executive's employment is
terminated by either Group or the Company during the Period of Employment for
any reason other than for Cause or the death or Disability of Executive, then
the Company shall pay Executive (i) all compensation, benefits and perquisites
accrued hereunder through the effective date of his termination of employment,
(ii) the remaining installments of the Special Bonus provided for in paragraph
5(a)(iii) above payable only to the extent and at such times as Executive would
otherwise be entitled to the Special Bonus in accordance with such paragraph,
plus (iii) a severance allowance equal to two times the base salary provided for
in paragraph 5(a)(i) above, at the rate being paid at the date of termination,
plus two times the most recent fiscal year's incentive bonus compensation
provided for in paragraph 5(a)(ii) above. "Change in Control" means the
occurrence of any of the following events: (i) the acquisition by any person,
entity or "group" (as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), other than any stockholder of the Company immediately after
giving effect to the Merger, or any Affiliate of any such stockholder, of 50% or
more of the combined voting power of the Company's then outstanding voting
securities; (ii) if at any time after the initial public offering of common
stock of the Group, (A) any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), excluding for this purpose GSCP, is or becomes the
Beneficial Owner of more than thirty-five percent (35%) of the total voting
power of the Group or of the Company, (B) GSCP beneficially
10
<PAGE> 11
owns a lesser percentage of the voting power of the Group or of the Company and
(C) GSCP does not have the right or ability by voting power, contract or
otherwise to elect or designate a majority of the Board or the Board of
Directors of such corporation in Control; (iii) if after the initial public
offering of the Stock of the Group, a change in the composition of the Board
occurs during any period of two consecutive years such that the directors who
were in office at the beginning of the period cease to constitute at least a
majority of the Board, unless the election of an individual by such Board or
whose nomination for election by the shareholders of the Group was approved by a
vote of at least two-thirds (66-2/3%) of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved; or (iv) more than 65% of the
total value of the assets of the Group are sold and the acquiror of such assets
is not GSCP, or an entity controlled by GSCP.
14. Resignation.
If Executive's employment hereunder terminates (except due to
his death), Executive agrees to resign effective immediately upon termination of
the Period of Employment all positions as an officer or director of Group or the
Company. If Executive fails to deliver such resignation, the Boards of Directors
of Employer may deem Executive to have resigned pursuant to this paragraph 14
effective upon the termination of his employment.
15. Non-Disclosure.
Executive shall not at any time after the date hereof divulge,
provide, or make assessable to anyone, other than in connection with the
business of the Company, any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, materials, devises, materials, devices or ideas or other
know-how, whether patentable or not, with respect to any confidential or secret
aspects of the Company's business (including without limitation customer lists,
supplier lists and pricing arrangements with customers or suppliers or any
similar lists, arrangements or understandings, marketing plans, sales plans,
manufacturing plans, management organization information, data and other
11
<PAGE> 12
information relating to members of the Board of Directors of Group and the
Company, management and GSCP), operating policies or manuals, business plans,
financial records, packaging designs or other financial, commercial, business or
technical information relating to the Employer or any of their subsidiaries or
information designated as confidential or proprietary that the Employer or any
of their subsidiaries may receive belonging to suppliers, customers or others
who do business with the Employer or any of their subsidiaries (collectively,
"Confidential Information"); provided, however, that Executive may disclose such
information (i) at the request of any governmental regulatory authority or in
connection with an examination of Executive by any such authority, (ii) pursuant
to subpoena or other court process, (iii) when required to do so in accordance
with the provisions of any applicable law or regulation, or (iv) if such
information has otherwise been made generally available to the public other than
by reason of Executive's breach of this paragraph 15. Upon the expiration of the
Period of Employment or upon termination of Executive's employment, Executive or
his legal representative shall promptly deliver to the Company all property
relating to the business of the Company, including all Confidential Information,
and all copies thereof that are in the possession or control of Executive.
16. Inventions.
Executive shall promptly disclose to the Company all
processes, trademarks, inventions, improvements and discoveries related to the
business of the Company (collectively, "Developments") conceived or developed by
him or with others during the Period of Employment, if such Developments were
conceived or developed during the Company's business hours or through the use of
the Company's resources. All such Developments shall be the sole and exclusive
property of the Company. Executive, upon the request of and at the Company's
expense, shall assist the Company in obtaining patents thereon and execute all
documents and other instruments necessary or proper to obtain letters patent and
to vest the Company with full title thereto.
12
<PAGE> 13
17. Post-Employment Activities
a. Covenant Not to Compete. Following termination of
Executive's employment by the Company or Group for Cause or by
Executive for any reason, Executive shall not compete, directly or
indirectly, in any area of the continental United States, with any
facet of the business conducted by the Company or any of its
subsidiaries, whether as an employee, director, agent, principal,
stockholder or limited partner owning more than 5% of any class of
securities or equity of a corporation, association or partnership, or
by maintaining any other type of interest in or affiliation with or
providing any assistance whatsoever to, any other person, firm,
corporation or entity in any business located or doing business within
the continental United States which at the time of Executive's
affiliation therewith is in direct competition with any facet of the
business then being conducted by the Company or any of its
subsidiaries, for a one-year period beginning on the date of
Executive's departure and terminating on the first anniversary of the
date of his departure (the "Non-Compete Period").
b. Non-Solicitation of Employees. During (i) Executive's
employment with the Company or any of its subsidiaries or Affiliates
and (ii) for a two-year period beginning on the date of Executive's
departure and terminating on the second anniversary of the date of his
departure, Executive shall not directly or indirectly induce any
employee of the Company or any of its subsidiaries to terminate
employment with such entity, and shall not directly or indirectly,
either individually or as owner, agent, employee, consultant or
otherwise, employ or offer employment to any person who is or was
employed by the Company or any of its subsidiaries, unless such person
shall have ceased to be employed by such entity for a period of at
least six months.
c. Non-Solicitation of Customers and Suppliers . During (i)
Executive's employment with the Company or Group and (ii) the
Non-Compete Period, Executive shall not, directly or indirectly,
interfere with the business relationship of the Company or any of its
subsidiaries, with any customer or supplier, or prospective customer or
supplier, with respect to which Executive has had access to
13
<PAGE> 14
Confidential Information or with which Executive dealt in connection
with Executive's duties for Group, the Company or any of its
subsidiaries.
d. Injunctive Relief with Respect to Covenants . Executive
acknowledges that irreparable damage would result to the Group and
Company if the provisions of paragraphs 15, 16 and 17(a) through (c)
were not specifically enforced, and agrees that the Group or Company
shall be entitled to any appropriate legal, equitable or other remedy,
including injunctive relief, a restraining order or other equitable
relief (without the requirement to post bond) with respect to any
failure of Executive to comply with the provisions of such sections.
e. Severability; Reformation . In the event that one or more
of the provisions of this paragraph 17 shall become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not be affected
thereby. In the event any provision of paragraph 15, 16 or 17(a)
through (c) is not enforceable in accordance with its terms, such
paragraph shall be reformed to make such paragraph enforceable in a
manner which provides the Company or any of its subsidiaries the
maximum rights permitted at law.
f. Waiver . Waiver by Group, the Company or any of its
subsidiaries of any breach or default by Executive of any of the terms
of paragraphs 15, 16 or 17(a) through (c) shall not operate as a waiver
of any other breach or default, whether similar to or different from
the breach or default waived. No waiver of any provision of paragraph
15, 16 or 17(a) through (c) shall be implied from any course of dealing
between the Company or any of its subsidiaries and Executive or from
any failure by the Company or any of its subsidiaries to assert its
rights hereunder on any occasion or series of occasions.
18. Insurance.
The Company shall have the right at its own cost and expense
to apply for and to secure in its own name, or otherwise, life, health or
accident insurance or any or all of them covering Executive, and Executive
agrees to submit to usual and customary medical examination and otherwise to
14
<PAGE> 15
cooperate with the Company in connection with the procurement of any such
insurance and any claims thereunder.
19. Notices.
All notices, requests and other communications pursuant to
this Agreement shall be in writing and shall be deemed to have been given if
delivered in person or by courier, the date delivered, and if sent by telegraph,
telex, facsimile transmission, the date sent, or if mailed by registered or
certified mail, postage prepaid, the date mailed, if sent, delivered or mailed
to the parties at the following addresses:
If to Executive:
John T. Hislop
5521 Auto Club Road
Bloomington, MN 55437
If to the Employer:
Telex Communications, Inc.
9600 Aldrich Avenue S.
Minneapolis, MN 55420
With a copy to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, N.Y. 10013
Attention: Nicholas E. Somers
Any party may, by written notice to the other, change the
address to which notices to such party are to be delivered, sent or mailed.
20. No Trust Created.
Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be construed to
create a trust fund of any kind. Any funds which may be set aside or provided
for in this Agreement shall continue for all purposes to be a part of the
general funds of Employer and no person other than
15
<PAGE> 16
Employer shall by virtue of the provisions of this Agreement have any interest
in such funds. To the extent that any person acquires a right to receive
payments from Employer under this Agreement, such right shall be no greater than
the right of any unsecured general creditor of Employer.
21. Successor In Interest.
This Agreement and the rights and obligations hereunder shall
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of Employer by merger or consolidation or any purchaser or
assignee of all or substantially all of its assets, but, except to any such
successor, purchaser, or assignee of Employer, neither this Agreement nor any
rights or benefits hereunder may be assigned by either party hereto.
22. Full Discharge of Company Obligations.
The amounts payable to Executive pursuant to paragraphs 9, 10,
11, 12, and 13 following termination of his employment shall be in full and
complete satisfaction of Executive's rights under this Agreement but shall not
affect Executive's rights under any other agreement with Group or the Company.
Such amounts shall constitute liquidated damages with respect to any and all
such rights and claims and, upon Executive's receipt of such amounts, the
Employer shall be released and discharged from any and all liability to
Executive in connection with this Agreement or otherwise in connection with
Executive's employment with the Employer and their subsidiaries.
23. Arbitration of Disputes.
The parties agree that any controversy or claim arising out of
or relating to this Agreement, or any dispute arising out of the interpretation
or application of this Agreement, which the parties hereto are unable to
resolve, shall be finally resolved and settled exclusively by arbitration in
Minnesota by a single arbitrator under the American Arbitration Association's
Commercial Arbitration Rules then obtaining and in accordance with the
substantive laws of the State of Minnesota. If the parties cannot agree upon an
arbitrator out of the panel, then for the sole pur-
16
<PAGE> 17
pose of selecting an arbitrator, each party (the Company and Group shall be
considered collectively one party) shall choose its own independent
representative and those independent representatives shall in turn choose the
single arbitrator within thirty (30) days of the date of the selection of the
first independent representative. The parties severally recognize and consent to
the jurisdiction over each of them by the courts of the State of Minnesota. The
legal expenses of Executive shall be reimbursed to Executive if an award is
rendered in favor of Executive or if the arbitrator finds that Executive acted
reasonably and exercised good faith in demanding arbitration of any such
dispute.
24. Governing Laws.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Minnesota applicable to agreements
made and to be performed entirely in Minneapolis, Minnesota.
25. Entire Agreement.
This Agreement shall constitute the entire agreement between
the parties superseding all prior agreements between the Group or Company and
Executive, and may not be modified or amended and no waiver shall be effective
unless by written document signed by both parties hereto; provided, however,
that any increase in base salary, as provided in paragraph 5 hereof, shall
become an amendment to this Agreement when approved by the Board of Directors of
the Company and recorded in the approved minutes of such meeting.
IN WITNESS WHEREOF, the parties execute this Employment
Agreement as of the date first above written.
EXECUTIVE:
___________________________
John T. Hislop
17
<PAGE> 18
GST ACQUISITION CORP.
By:________________________
18
<PAGE> 19
SCHEDULE A
Telex Communications Group, Inc.
Management Cash Compensation Plan
Management Incentive Compensation (the "MIC Plan")
- Objective: The MIC Plan is intended to motivate key management
to achieve company objectives by providing a direct link
between the company objectives and incentive compensation
awards.
- Incentive Compensation Awards: Awards are calculated as a
percent of base salary based on achieving certain performance
hurdles as defined below.
a.Threshold: 90% of objectives equal to 25% of base salary
b.Target: 100% of objectives equal to 50% of base salary
c.Upside: 110% of objectives equal to 75% of base salary
d.Maximum: 120% of objectives equal to 100% of base salary
- Performance Measurement: For top three senior officers, there
are two weighted components upon which an award is based:
- 75% - quantitative comparison of objectives against AOP
- corporate revenue
- corporate EBITDA
<PAGE> 20
- 25% - qualitative judgment by the CEO and Board of Directors.
- For SBU executives, there are three weighted components upon
which an aware is based:
- 30% - quantitative comparison of objectives against total
company AOP
- 40% - quantitative comparison against SBU AOP
- SBU Revenue
- SBU Gross Profit
- SBU Operating Income
- 30% - qualitative judgment by CEO and Board of Directors
- Other Participants - based on total company performance,
business unit performance, if applicable, and an evaluation of
individual performance.
- General Guidelines for MIC Plan
- Awards are earned based on company's audited results
- AOP is to include an accrual for possible award payout
- Awards are pro-rated for results between the specified
breakpoints (i.e. target, maximum, upside and threshold)
- Awards above maximum are at the specified maximum and there
is no award below threshold amount.
- Only with the recommendation of the CEO and approval of the
Board of Directors can a participant be added.
2
<PAGE> 21
- Officers terminating due to death, disability, retirement
or for good reason are eligible to receive a pro-rata award
for the year, paid at the normal date.
- Officers terminating voluntarily or terminated for
performance reasons or cause prior to the date of payout
are not eligible to receive an award.
3
<PAGE> 22
SCHEDULE B
TELEX COMMUNICATIONS GROUP, INC.
CASH BONUS PLAN
INITIAL INCENTIVE AWARD:
A cash bonus shall be paid to the following individuals no later than the first
anniversary of the Effective Time (as defined in the Recapitalization Agreement
and Plan of Merger, dated as of March __, 1997, by and among Greenwich II LLC,
GST Acquisition Corp. and Telex Communications Group, Inc.) in the amounts set
forth below:
<TABLE>
<CAPTION>
80% of AOP Achieved
-------------------
<S> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
ADDITIONAL AWARDS:
An additional cash bonus shall be paid to the following individuals on each of
the first five anniversaries of the Effective Time in the amounts set forth
below:
<PAGE> 23
<TABLE>
<CAPTION>
100% of AOP 105% of AOP
Achieved Achieved
----------- -----------
<S> <C> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
AOP shall be determined under the Management Incentive Compensation Plan.
An additional cash bonus shall be paid to the following individuals on the
earlier of the fifth anniversary of the Effective Time or a Change in Control
(as defined in the 1997 Telex Communications Group, Inc, Stock Option Plan) in
the amounts set forth below:
<TABLE>
<CAPTION>
110% of LTP 120% of LTP
Achieved Achieved
----------- -----------
<S> <C> <C>
Hale
Palleschi
Hislop
Cavanaugh
Wright
Dantzler
Levy
Winebarger
Curran
</TABLE>
LTP shall be determined as set forth in Schedule B to the Stock Option Plan.
2
<PAGE> 24
SCHEDULE C
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Shares Shares
Available under Available under Available under
the Initial the Performance the Super
Option Option Grant Performance
Grant Option Grant
<S> <C> <C> <C>
Hislop 1,163 1,827 1,322
</TABLE>
All numbers are subject to adjustment based on the final Merger Consideration
payable pursuant to Section 1.3(a) of the Merger Agreement and to reflect a
twenty-two-one stock split to become effective upon the Merger.
<PAGE> 1
EXHIBIT 12(a)
TELEX COMMUNICATIONS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes............. $23,577 $(4,284) $ 4,133 $ 5,217 $ 4,032
Interest expense.............................. 12,513 12,517 12,490 10,120 11,079
Interest portion of rent expense.............. 121 88 85 85 91
------- ------- ------- ------- -------
Adjusted income before income taxes........... $36,211 $ 8,321 $16,708 $15,422 $15,202
======= ======= ======= ======= =======
Fixed charges:
Interest expense............................ $12,513 $12,517 $12,490 $10,120 $11,079
Interest portion of rent expense............ 121 88 85 85 91
------- ------- ------- ------- -------
Total fixed charges........................... $12,634 $12,605 $12,575 $10,205 $11,170
======= ======= ======= ======= =======
Ratio of earnings to fixed charges............ 2.87 --(1) 1.33 1.51 1.36
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Earnings for Fiscal 1996 were inadequate to cover fixed charges by
$4,284,000. However, excluding the $13,785,000 special charges set forth in
footnote 2 on page 9, the ratio of earnings to fixed charges for Fiscal 1996
would have been 1.75.
<PAGE> 1
EXHIBIT 12(b)
TELEX COMMUNICATIONS, INC.
COMPUTATION OF EBITDA TO INTEREST EXPENSE
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
EBITDA........................................ $40,045 $30,036(1) $25,134 $23,035 $22,412
Interest expense.............................. 12,513 12,517 12,490 10,120 11,079
------- ------- ------- ------- -------
Ratio of EBITDA to interest expense........... 3.20 2.40 2.01 2.28 2.02
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Depreciation and amortization includes $13,345 of impairment write-off of
property, plant and equipment and intangible assets.
<PAGE> 1
Exhibit 21
Subsidiaries
TCI Exports, Ltd.
Telex Communications (SEA) PTE, Ltd.
Telex Communications (U.K.) Ltd.
Telex Communications, Ltd.
RTS Systems Incorporated
TCI Holding Corp.
Saguaro Electronica, S.A. de C.V.
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "The Summary
Historical and Pro Forma Financial Information" and "Experts" and to the
use of our report dated June 2, 1997, in the Registration Statement (Form S-4)
and related Prospectus of Telex Communications, Inc. for the registration of
$125,000,000 Senior Subordinated Notes.
Our audits also included the financial statement schedule of Telex
Communications, Inc. included in the registration statement (Form S-4). This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
July 2, 1997
<PAGE> 1
Exhibit 25
- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a Trustee
pursuant to Section 305(b)(2)___
---------
MANUFACTURERS AND TRADERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 16-0538020
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a national bank) identification No.)
One M&T Plaza
Buffalo, New York 14240-2399
(Address of principal executive offices) (Zip Code)
---------
TELEX COMMUNICATIONS, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 13-3521030
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
9600 Aldrich Avenue South
Bloomington, Minnesota 55420
(Address of principal executive offices) (Zip Code)
---------
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007
(Title of indenture securities)
- -----------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Superintendent of Banks of the State of New York, 2 World Trade Center,
New York, NY 10047 and Albany, NY 12203.
Federal Reserve Bank of New York, 33 Liberty Street, New York, NY
10045.
Federal Deposit Insurance Corporation, Washington, D.C. 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
[Items 3 through 15 omitted pursuant to General Instructions B to Form T-1]
1
<PAGE> 3
Item 16. List of Exhibits
Exhibit A. Organization Certificate of the Trustee as now in
effect (incorporated herein by reference to Exhibit 1,
Form T-1, Registration Statement No. 33-7309).
Exhibit B. Certificate of Authority of the Trustee to commence
business (incorporated herein by reference to Exhibit 2,
Form T-1, Registration Statement No. 33-7309).
Exhibit C. Authorization of the Trustee to exercise corporate trust
powers (incorporated herein by reference to Exhibit 3,
Form T-1, Registration Statement No. 33-7309).
Exhibit D. Existing By-Laws of the Trustee (incorporated herein by
reference to Exhibit 4, Form T-1, Registration
Statement No. 33-7309).
Exhibit E. Not Applicable.
Exhibit F. Consent of the Trustee (incorporated herein by reference
to Exhibit 6, Form T-1, Registration Statement No.
33-7309).
Exhibit G. Report of Condition of the Trustee.*
Exhibit H. Not Applicable.
Exhibit I. Not Applicable.
___________________________
* Filed Herewith
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Manufacturers and Traders Trust Company, a banking corporation
organized and existing under the laws of the State of New York, has duly caused
this statement of eligibility and qualification to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of Buffalo, and
State of New York, on the 1st day of July, 1997.
MANUFACTURERS AND TRADERS TRUST COMPANY
By: /s/ RUSSELL T. WHITLEY
----------------------------------------
Russell T. Whitley
Assistant Vice President
2
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: MANUFACTURERS AND TRADERS TRUST COMPANY CALL DATE: 3/31/97 ST-DK: 36-1300 FFIEC 031
Address: ONE M&T PLAZA Page RC-1
City, State Zip: BUFFALO, NY 14203-2399
FDIC Certificate No.: 00588
-----------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
__________
<TABLE>
<CAPTION>
----------
C400
------------ -------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1) ................................... 0081 375,823 1.a.
b. Interest-bearing balances(2) ............................................................ 0071 45,937 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. 1754 71,352 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ 1773 1,445,595 2.b.
3. Federal funds sold and securities purchased under agreements to resell ..................... 1350 20,926 3.
4. Loans and lease financing receivables: -------------------------- //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C).. RCFD 3122 9,078,160 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ..................... RCFD 3123 242,227 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ......................... RCFD 3128 0 ////////////////// 4.c.
--------------------------
d. Loans and leases, net of unearned income, //////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... 2125 8,835,933 4.d.
5. Trading assets (from Schedule RC-D) ........................................................ 3545 56,040 5.
6. Premises and fixed assets (including capitalized leases) ................................... 2145 122,627 6.
7. Other real estate owned (from Schedule RC-M) ............................................... 2150 6,742 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding ............................... 2155 1,267 9.
10. Intangible assets (from Schedule RC-M) ..................................................... 2143 72,719 10.
11. Other assets (from Schedule RC-F) .......................................................... 2160 157,570 11.
12. Total assets (sum of items 1 through 11) ................................................... 2170 11,212,532 12.
----------------------
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 5
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: MANUFACTURERS AND TRADERS TRUST COMPANY CALL DATE: 3/31/97 ST-BK: 36-1300 FFIEC 13
Address: ONE M&T PLAZA PAGE RC-2
City, State Zip: BUFFALO, NY 14203-2399
FDIC Certificate No.: 00588
-----------
0 0 5 8 8
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION>
-----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
LIABILITIES //////////////////
13. Deposits: //////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... RCON 2200 8,130,721 13.a.
-----------------------------
(1) Noninterest-bearing(1) ................................ RCON 6631 1,190,789 ////////////////// 13.a.(1)
(2) Interest-bearing ...................................... RCON 6636 6,929,932 ////////////////// 13.a.(2)
-----------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, //////////////////
part II) .............................................................................. RCFN 2200 225,440 13.b.
-----------------------------
(1) Noninterest-bearing ................................... RCFN 6631 0 ////////////////// 13.b.(1)
(2) Interest-bearing ...................................... RCFN 6636 225,440 ////////////////// 13.b.(2)
-----------------------------
14. Federal funds purchased and securities sold under agreements to repurchase................ RCFD 2800 1,525,312 14.
-------------------
15. a. Demand notes issued to the U.S. Treasury .............................................. RCON 2840 94,547 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. RCFD 3548 52,984 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under //////////////////
capitalized leases): //////////////////
a. With a remaining maturity of one year or less .................................... RCFD 2332 105,564 16.a.
b. With a remaining maturity of more than one year .................................. RCFD 2333 2,396 16.b.
17. Not applicable ........................................................................... //////////////////
18. Bank's liability on acceptances executed and outstanding ............................ RCFD 2920 1,267 18.
19. Subordinated notes and debentures(2) ................................................ RCFD 3200 175,000 19.
20. Other liabilities (from Schedule RC-G) .............................................. RCFD 2930 191,502 20.
21. Total liabilities (sum of items 13 through 20) ...................................... RCFD 2948 10,494,733 21.
22. Not applicable ........................................................................... //////////////////
EQUITY CAPITAL //////////////////
23. Perpetual preferred stock and related surplus ....................................... RCFD 3838 0 23.
24. Common stock ........................................................................ RCFD 3230 120,635 24.
25. Surplus (exclude all surplus related to preferred stock)............................. RCFD 3839 87,524 25.
26. a. Undivided profits and capital reserves ........................................... RCFD 3632 520,005 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ........... RCFD 8434 (10,365) 26.b.
27. Cumulative foreign currency translation adjustments ................................. RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) ................................... RCFD 3210 717,799 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21 //////////////////
and 28) ............................................................................. RCFD 3300 11,212,532 29.
-------------------
</TABLE>
<TABLE>
<S> <C> <C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that RCFD Number
best describes the most comprehensive level of auditing work performed -----------------
for the bank by independent external auditors as of any date during 1996 ...................... RCFD 6724 2 M.1.
-----------------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state
chartering authority)
- ------------
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
4
<PAGE> 1
Exhibit 99(a)
[FORM OF LETTER OF TRANSMITTAL]
TELEX COMMUNICATIONS, INC.
OFFER TO EXCHANGE ITS 10 1/2% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A, ("NEW NOTES"), WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT, FOR ANY AND ALL OUTSTANDING 10 1/2% SENIOR
SUBORDINATED NOTES DUE 2007 ("EXISTING NOTES"), PURSUANT TO THE PROSPECTUS
DATED ____________, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1997 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.
To: Manufacturers and Traders Trust Company, Exchange Agent
By Mail: One M & T Plaza By Facsimile: 716 842-4474
7th Floor
Buffalo, NY 14203 (For Eligible Institutions Only)
Attention: Russell Whitley
By Overnight Courier or By Hand to 4:30 p.m.:
By Hand after 4:30 p.m.:
Attention: Russell Whitley Attention: Russell Whitley
For Information Call:
716 842-5602
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
______________________
List below the Existing Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate number(s)
and principal amount of Existing Notes should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
Description of Existing Notes (1) (2) (3)
Tendered (4)
Principal Amount of
Aggregate Existing Notes Tendered
Principal Aggregate Principal in Exchange for
Name(s) and Address(es) of Certificate Amount of Amount of Existing certificated New
Registered Holder(s) Numbers(s)* Existing Notes Notes Tendered** Notes***
<S> <C> <C> <C> <C>
</TABLE>
- ----------
* Need not be completed by book-entry holders.
** Unless otherwise indicated in this column, the holder will be deemed to
have tendered the full aggregate principal amount represented by such
Existing Notes.
*** Unless otherwise indicated, the holder will be deemed to have tendered
Existing Notes in exchange for a beneficial interest in one or more
fully registered global notes, which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the
name of Cede & Co., its nominee.
<PAGE> 2
The undersigned acknowledges that he, she or it has received
and reviewed the Prospectus, dated ____________, 1997 (the "Prospectus"), of
Telex Communications, Inc. a Delaware corporation ("Telex"), and this Letter of
Transmittal (the "Letter of Transmittal"), which together constitute Telex's
offer (the "Exchange Offer") to exchange up to $125,000,000 aggregate principal
amount of its New Notes, which will have been registered under the Securities
Act of 1933, for a like principal amount of its outstanding Existing Notes. The
New Notes and the Existing Notes are collectively referred to as the "Notes."
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
The undersigned has completed the appropriate boxes above and
below and signed this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
This Letter of Transmittal is to be used either if
certificates of Existing Notes are to be forwarded herewith or if delivery of
Existing Notes is to be made by book-entry transfer to an account maintained by
the Exchange Agent at DTC, pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus. Delivery of this Letter of
Transmittal and any other required documents should be made to the Exchange
Agent. Delivery of documents to a book-entry transfer facility does not
constitute delivery to the Exchange Agent.
Holders whose Existing Notes are not immediately available or
who cannot deliver their Existing Notes and all other documents required hereby
to the Exchange Agent on or prior to the Expiration Date must tender their
Existing Notes according to the guaranteed delivery procedure set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering." See
Instruction 1.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED TO THE
EXCHANGE AGENT IN EXCHANGE FOR CERTIFICATED NEW NOTES.
Unless the undersigned (i) has completed item (4) in the box entitled
"Description of Existing Notes Tendered" and (ii) has checked the box above, the
undersigned will be deemed to have tendered Existing Notes in exchange for a
beneficial interest in one or more fully registered global certificates, which
will be deposited with, or on behalf of, DTC and registered in the name of Cede
& Co., its nominee. Beneficial interests in such registered global certificates
will be shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Book-Entry, Delivery and Form" as
set forth in the Prospectus.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ________________ [ ] The Depository Trust Company
Account Number _________________________________________________________________
Transaction Code Number ________________________________________________________
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ___________________________________________________
Window Ticket Number (if any) __________________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________________
Name of Eligible Institution that Guaranteed Delivery __________________________
If delivered by book-entry transfer:
Account Number __________________ Transaction Code Number ______________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER MAKING A MARKET IN EXISTING NOTES
WITH TELEX'S PRIOR WRITTEN CONSENT AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
MADE THERETO WITHIN 90 DAYS AFTER THE EXPIRATION DATE:
Name
Address ________________________________________________________________________
2
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to conditions of the Exchange Offer, the
undersigned hereby tenders to Telex the aggregate principal amount of Existing
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of Existing Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Exchange Agent, as agent of
Telex, all right, title and interest in and to such Existing Notes as are being
tendered hereby, and irrevocably constitutes and appoints the Exchange Agent as
the agent and attorney-in-fact of the undersigned to cause the Existing Notes
tendered hereby to be transferred and exchanged.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Existing Notes tendered hereby and to acquire the New Notes issuable upon the
exchange of such tendered Existing Preferred Stock, and that the Exchange Agent,
as agent of Telex, will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are accepted by the Exchange Agent, as agent of
Telex. The undersigned will, upon request, execute and deliver any additional
documents deemed by Telex or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment and transfer of the Existing Notes
tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on the interpretation of the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in Exxon Capital Holdings
Corporation (available May 13, 1988) or similar no-action letters issued to
third parties. Based on such interpretation of the staff of the SEC set forth in
such no-action letters, Telex believes that the New Notes issued in exchange for
the Existing Notes pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by a holder thereof (other than any such holder
that is an "affiliate" of Telex within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act")) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that (i) such New Notes are acquired in the ordinary course of such
holder's business, (ii) at the time of the commencement of the Exchange Offer
such holder has no arrangement with any person to participate in a distribution
of the New Notes and (iii) such holder is not engaged in, and does not intend to
engage, in a distribution of the New Notes. By tendering Existing Notes in
exchange for New Notes, each holder will represent to the Company that: (i) it
is not such an affiliate of the Company, (ii) any New Notes to be received by it
will be acquired in the ordinary course of business and (iii) at the time of the
commencement of the Exchange Offer it had no arrangement with any person to
participate in a distribution of the New Notes. If the undersigned is not a
broker-dealer or is a broker-dealer but will not receive New Notes for its own
account in exchange for Existing Notes, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes.
If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Existing Notes, where such Existing Notes were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The SEC has taken the position that such broker-dealers may fulfill their
prospectus delivery requirements with respect to the New Notes (other than a
resale of New Notes received in exchange for an unsold allotment from the
original sale of the
3
<PAGE> 4
Existing Notes) with the Prospectus. The Prospectus, as it may be amended or
supplemented from time to time, may be used by such broker-dealers for a period
of time, starting on the Expiration Date and ending on the close of business 90
days after the Expiration date in connection with the sale or transfer of such
New Notes. Telex has agreed that, for such period of time, it will make the
Prospectus (as it may be amended or supplemented) available to a broker-dealer
which, with Telex's prior written consent, makes a market in the Existing Notes
and receives New Notes pursuant to the Exchange Offer (each a "Participating
Broker-Dealer") for use in connection with any resale of such New Notes. By
acceptance of the Exchange Offer, each broker-dealer that receives New Notes
pursuant to the Exchange Offer hereby acknowledges and agrees to notify Telex
prior to using the Prospectus in connection with the sale or transfer of New
Notes and that, upon receipt of notice from Telex of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make the
statements therein not misleading, such broker-dealer will suspend use of the
Prospectus until (i) Telex has amended or supplemented the Prospectus to correct
such misstatement or omission and (ii) either Telex has furnished copies of the
amended or supplemented Prospectus to such broker-dealer or, if Telex has not
otherwise agreed to furnish such copies and declines to do so after such
broker-dealer so requests, such broker-dealer has obtained a copy of such
amended or supplemented Prospectus as filed with the SEC. Telex agrees to
deliver such notice and such amended or supplemented Prospectus promptly to any
Participating Broker-Dealer that has so notified Telex. Except as described
above, the Prospectus may not be used for or in connection with an offer to
resell, a resale or any other retransfer of New Notes.
The undersigned represents that (i) the New Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangements with any person to participate in
the distribution of such New Notes or, if such holder intends to participate in
the Exchange Offer for the purpose of distributing the New Notes, such holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, and (iii) (x) such holder is not (a) a
broker-dealer that will receive New Notes for its own account in exchange for
Existing Notes that were acquired as a result of market-making activities or
other trading activities, or (b) an "affiliate," as defined in Rule 405 under
the Securities Act, of Telex or (y) if such holder is such a broker-dealer or an
affiliate, such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
The undersigned, if a California resident, hereby further represents
and warrants that the undersigned (or the beneficial owner of the Existing Notes
tendered hereby, if not the undersigned) (i) is a bank, savings and loan
association, trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing trust (other
than a pension or profit-sharing trust of Telex, a self-employed individual
retirement plan, or individual retirement account), a corporation which has a
net worth on a consolidated basis according to its most recent audited financial
statements of not less than $14,000,000, or a wholly owned subsidiary of any of
the foregoing, and (ii) is acquiring the New Notes for its own account for
investment purposes (or for the account of the beneficial owner of such New
Notes for investment purposes).
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be
4
<PAGE> 5
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter of Transmittal.
The undersigned understands that tenders of the Existing Notes
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and Telex in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that if its Existing Notes are accepted
for exchange, interest on the New Notes will accrue from the last interest
payment date on which interest was paid on the Existing Notes surrendered in
exchange thereof, or if no interest has been paid, from the original date of
issuance of the Existing Notes.
The undersigned recognizes that unless the holder of Existing Notes
(i) completes item (4) of the Box entitled "Description of Existing Notes
Tendered" above and (ii) checks the box entitled "Check here if tendered shares
of Existing Notes are being delivered to the Exchange Agent in exchange for
certificated New Notes" above, such holder, when tendering such Existing Notes,
will be deemed to have tendered such Existing Notes in exchange for a beneficial
interest in one or more fully registered global certificates, which will be
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.,
its nominee. Beneficial interests in such registered global certificates will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Book-Entry, Delivery and Form" in
the Prospectus.
The undersigned recognizes that, under certain circumstances set
forth in the Prospectus under "The Exchange Offer--Conditions," Telex may not be
required to accept for exchange any of the Existing Notes tendered. Existing
Notes not accepted for exchange or withdrawn will be returned to the undersigned
at the address set forth below unless otherwise indicated under "Special
Delivery Instructions" below.
The undersigned acknowledges that by tendering the Existing Notes
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto, the undersigned agrees that once the Exchange Offer is consummated,
Telex shall not be obligated to file or prepare a Shelf Registration Statement
(as defined in the Exchange and Registration Rights Agreement, dated May 6, 1997
(the "Exchange and Registration Rights Agreement"), among Telex and the Initial
Purchasers, or take any other action provided in Sections 2 or 3 of the Exchange
and Registration Rights Agreement with respect to a Shelf Registration
Statement, and the undersigned hereby waives any requirement of the Exchange and
Registration Rights Agreement that Telex files, prepares or takes any other
action relating to a Shelf Registration Statement once the Exchange Offer is
consummated.
All questions as to the validity, form, eligibility (including time
of receipt) and acceptability of any tender will be determined by Telex, in its
sole discretion, and such determination will be final and binding. Unless waived
by Telex, irregularities and defects must be cured by the Expiration Date. Telex
shall not be obligated to give notice of any defects or irregularities in
tenders and shall not incur any liability for failure to give any such notice.
Unless otherwise indicated herein in the box entitled "Special
Issuance Instructions" below, the undersigned hereby requests that the New Notes
(and, if applicable, substitute certificates representing Existing Notes for any
Existing Notes not exchanged) be issued in the name of the
5
<PAGE> 6
undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, the undersigned hereby requests that the
New Notes (and, if applicable, substitute certificates representing Existing
Notes for any Existing Notes not exchanged) be sent to the undersigned at the
address shown above in the box entitled "Description of Existing Notes
Tendered."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
EXISTING NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE EXISTING NOTES AS SET FORTH IN SUCH BOX(ES) ABOVE.
6
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X ___________________________________ ___________________________________
X ___________________________________ ___________________________________
Signature(s) of Owner(s) Date
Area Code and Telephone Number _________________________________
If a holder is tendering any Existing Notes, this Letter of Transmittal must be
signed by the registered holders(s) as the name(s) appear(s) on the
certificate(s) for the Existing Notes or by any person(s) authorized to become
registered holders(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title below. See Instruction 3.
Name(s): _____________________________________________________________
______________________________________________________________________
(Please Type or Print)
Capacity: ____________________________________________________________
Address: _____________________________________________________________
______________________________________________________________________
(Include Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: _____________________________________________
(Authorized Signature)
______________________________________________________________________
(Title)
______________________________________________________________________
(Name of Firm)
Dated: _______________________________________________________________
<PAGE> 8
SPECIAL ISSUANCE INSTRUCTIONS (See
Instructions 3 and 4)
To be completed ONLY if New Notes (and, if applicable, substitute
certificates representing Existing Notes for any Existing Notes not exchanged)
are to be issued in the name of and sent to someone other than the person or
persons whose signature(s) appear(s) on this Letter of Transmittal above.
Issue New Notes to:
Name(s): ...................................................................
...................................................................
(Please Type or Print)
...................................................................
(Please Type or Print)
Address: ...................................................................
...................................................................
(Zip Code)
(Complete Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS (See
Instructions 3 and 4)
To be completed ONLY if certificates for New Notes (and, if
applicable, substitute certificates representing Existing Notes for any Existing
Notes not exchanged) are to be sent to someone other than the person or persons
whose signature(s) appear(s) on this Letter of Transmittal above or to such
person or persons at an address other than shown in the box entitled
"Description of Existing Notes Tendered" on this Letter of Transmittal above.
Mail New Notes to:
Name(s) ...................................................................
...................................................................
(Please Type or Print)
...................................................................
(Please Type or Print)
Address: ...................................................................
...................................................................
(Zip Code)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH,
THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF
SUCH EXISTING NOTES AND
<PAGE> 9
ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE> 10
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: EV INTERNATIONAL, INC.
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I--Taxpayer Identification Number
FORM W-9 Enter your taxpayer identification number in the
DEPARTMENT OF THE TREASURY appropriate box. For most individuals, this is your
INTERNAL REVENUE SERVICE social security number. If you do not have a num- ------------------------------------
ber, see how to obtain a "TIN" in the enclosed Social Security Number
Guidelines.
OR
NOTE: If the account is in more than one name, see
the chart on page 2 of the enclosed Guidelines to ------------------------------------
determine what number to give. Employer Identification Number
- ------------------------------------------------------------------------------------------------------------------------
Part II--For Payees Exempt from Backup Withholding (See enclosed Guidelines)
------------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
IDENTIFICATION NUMBER (TIN)
AND CERTIFICATION (1) the number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all interest
or dividends or the IRS has notified me that I am no longer subject to
backup withholding.
------------------------------------------------------------------------------------------
SIGNATURE DATE
--------------------------- ----------------------------------------------
</TABLE>
Certification Guidelines--You must cross out item (2) of the above certification
if you have been notified by the IRS that you are subject to backup withholding
because of underreporting of interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31 percent of all
payments made to me on account of the New Preferred Stock shall be retained
until I provide a Taxpayer Identification Number to the payer and that, if I do
not provide my Taxpayer Identification Number within sixty (60) days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31 percent of all reportable payments made to me thereafter will
be withheld and remitted to the Internal Revenue Service until I provide a
Taxpayer Identification Number.
SIGNATURE DATE
---------------------- -----------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW
NOTES . PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE> 11
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURE
The Letter of Transmittal is to be used to forward, and must accompany,
all certificates representing Existing Notes tendered pursuant to the Exchange
Offer. Certificates representing the Existing Notes in proper form for transfer
(or a confirmation of book-entry transfer of such Existing Notes into the
Exchange Agent's account at the book-entry transfer facility) as well as a
properly completed and duly executed copy of this Letter of Transmittal and all
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Existing Notes tendered must be in integral
multiples of $1000.
The method of delivery of this Letter of Transmittal, the Existing
Notes and all other required documents is at the election and risk of the
tendering holders, but the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. If such delivery is by mail, it is
recommended that registered or certified mail properly insured, with return
receipt requested, be used. In all cases, sufficient time should be allowed to
permit timely delivery.
If a holder desires to tender Existing Notes and such holder's Existing
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, Existing Notes (or a confirmation of book-entry transfer of
Existing Notes into the Exchange Agent's account at the book-entry transfer
facility) or other required documents to reach the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date, or such holder cannot complete
the procedure of book-entry transfer on a timely basis, such holder may
nevertheless tender Existing Notes if:
(a) such tender is made by or through an Eligible Institution
(as defined below);
(b) the Exchange Agent has received from such Eligible
Institution prior to 5:00 p.m., New York City time, on the Expiration
Date, a properly completed and duly executed Letter of Transmittal (of
facsimile thereof) and Notice of Guaranteed Delivery, substantially in
the form provided by Telex (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of such
Existing Notes and the principal amount of Existing Notes tendered,
stating that the tender is being made thereby and guaranteeing that,
within three New York Stock Exchange ("NYSE") trading days after the
execution of the Notice of Guaranteed Delivery, a Book-Entry
Confirmation and any other documents required by this Letter of
Transmittal and the instructions hereto, will be deposited by such
Eligible Institution with the Exchange Agent; and
(c) a Book-Entry Confirmation and all other required documents
required by the Letter of Transmittal are received by the Exchange
Agent within three NYSE trading days after the Notice of Guaranteed
Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Existing
Preferred Stock (or a timely confirmation of a book-entry transfer of Existing
Notes into the Exchange Agent's account at the book-entry transfer
<PAGE> 12
facility) or a Notice of Guaranteed Delivery from an Eligible Institution is
received by the Exchange Agent.
See "The Exchange Offer" in the Prospectus.
2. WITHDRAWALS
Any holder may withdraw a tender of Existing Notes prior to 5:00 p.m.,
New York City time on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent prior to
5:00 p.m., New York City time on the Expiration Date at one of its addresses set
forth herein. Any such notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility from which the Existing Notes
was tendered, identify the aggregate liquidation preference of the Existing
Notes to be withdrawn, and specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Existing Notes
and otherwise comply with the procedures of such facility. The Exchange Agent
will return properly withdrawn Existing Notes as soon as practicable following
receipt of notice of withdrawal. All questions as to the validity (including
time of receipt) of notices of withdrawals will be determined by Telex, in its
sole discretion, and such determination will be final and binding on all
parties. See "The Exchange Offer--Withdrawal of Tenders" in the Prospectus. If
Existing Notes have been tendered pursuant to the procedures for book-entry
transfer, any notice of withdrawal must specify the name and number of the
participant's account at DTC to be credited with the withdrawn Existing Notes or
otherwise comply with DTC's procedures. See "The Exchange Offer-Withdrawal of
Tenders" in the Prospectus.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the registered holder of the
Existing Notes tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal or any Existing Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should indicate when signing, and unless
waived by Telex, proper evidence satisfactory to Telex of their authority so to
act must be submitted.
The signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that the
signatures in this Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a firm
2
<PAGE> 13
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., or by a commercial bank or
trust company having an office or correspondent in the United States, or an
"eligible institution" within the meaning of Rule 17Ad-15 of the Securities
Exchange Act of 1934, as amended (each an "Eligible Institution"). If Existing
Notes are registered in the name of a person other than the signer of this
Letter of Transmittal, the Existing Notes surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by Telex in its sole
discretion, duly executed by the registered holder with the signature thereon
guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
Tendering holders of Existing Notes should indicate in the applicable
box the name and address to which New Notes issued pursuant to the Exchange
Offer are to be issued or sent, if different from the name or address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. If no such instructions are given, any New
Notes will be issued in the name of, and delivered to, the name or address of
the person signing this Letter of Transmittal and any Existing Notes not
accepted for exchange will be returned to the name or address of the person
signing this Letter of Transmittal.
5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9
Under the federal income tax laws, payments that may be made by Telex
on account of New Notes issued pursuant to the Exchange Offer may be subject
to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute
Form W-9 included in this Letter of Transmittal and either (a) provide the
correct taxpayer identification number ("TIN") and certify, under penalties of
perjury, that the TIN provided is correct and that (i) the holder has not been
notified by the Internal Revenue Service (the "IRS") that the holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer subject to
backup withholding; or (b) provide an adequate basis for exemption. If the
tendering holder has not been issued a TIN and has applied for one, or intends
to apply for one in the near future, such holder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, sign and
date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, Telex (or the
Transfer Agent with respect to the New Notes or a broker or custodian) may still
withhold 31% of the amount of any payments made on account of the New Notes
until the holder furnishes Telex or the Transfer Agent with Respect to the New
Notes, broker or custodian with its TIN. In general, if a holder is an
individual, the taxpayer identification number is the Social Security number of
such individual. If the Exchange Agent or Telex is not provided with the correct
TIN, the holder may be subject to a $50 penalty imposed by the IRS. Certain
holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such holder must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Exchange Agent. For further information
concerning backup withholding and instructions for completing the Substitute
Form W-9 (including how to obtain a taxpayer identification number if you do not
have one and how to complete the Substitute Form W-9 if Existing Notes are
registered in more than one name), consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
3
<PAGE> 14
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require Telex or the
Transfer Agent with respect to the New Notes, broker or custodian to withhold
31% of the amount of any payments made on account of the New Notes. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
6. TRANSFER TAXES
Telex will pay all transfer taxes, if any, applicable to the transfer
of Existing Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Existing Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Existing Notes tendered hereby, or if tendered
Existing Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Existing Notes to Telex or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes specified in this Letter
of Transmittal.
7. WAIVER OF CONDITIONS
Telex reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Existing Notes, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
their Existing Notes for exchange.
Neither Telex nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. INADEQUATE SPACE
If the space provided herein is inadequate, the aggregate principal
amount of Existing Notes being tendered and the certificate number or numbers
(if available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES
Any holder whose Existing Preferred Stock have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the address indicated
above for further instructions.
4
<PAGE> 15
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number indicated
above.
5
<PAGE> 1
EXHIBIT 99(b)
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
TELEX COMMUNICATIONS, INC.
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007
This form must be used by a holder of the 10 1/2% Senior
subordinated Notes due 2007 (the "Existing Notes") of Telex Communications,
Inc., a Delaware corporation ("Telex"), that wishes to tender Existing Notes to
the Exchange Agent pursuant to the guaranteed delivery procedures described in
"The Exchange Offer--Procedures for Tendering" of the Prospectus dated
_______________, 1997 (the "Prospectus") and in Instruction 1 to the
accompanying Letter of Transmittal. Any holder that wishes to tender Existing
Notes pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Capitalized
terms not defined herein have the meaning ascribed to them in the Prospectus or
the Letter of Transmittal.
To: Manufacturers and Traders Trust Company, Exchange Agent
By Mail: By Facsimile:
One M&T Plaza 716 842-4474
7th Floor
Buffalo, NY 14203
Attention: (For Eligible Institutions Only)
Russell Whitley
By Overnight Courier or By Hand to 4:30 p.m.:
By Hand after 4:30 p.m.:
Attention:
Attention: Russell Whitley
Russell Whitley
For Information Call:
716 842-5602
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Telex, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Existing Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 1 of the Letter of Transmittal.
The undersigned hereby tenders the Existing Notes listed below:
<PAGE> 2
<TABLE>
Certificate Number(s) (if known) of
Existing Preferred Stock or Account Aggregate Principal Amount Aggregate Principal
Number at the Book-Entry Facility Represented Amount Tendered
<S> <C> <C>
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
SIGN HERE
Name of Registered or Acting Holder: ___________________________________________
Signature(s): __________________________________________________________________
Name(s) (please print): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered
national securities exchange or of the National Associates of Securities
Dealers, Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, guarantees deposit with the Exchange Agent of the
Letter of Transmittal (or facsimile thereof), together with the Existing Notes
tendered hereby in proper form for transfer (or confirmation of the book-entry
transfers of such Existing Notes into the Exchange Agent's account at the
book-entry transfer facility described in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering" and in the Letter of Transmittal) and
any other required documents, all by 5:00 p.m., New York City time, on the fifth
business day following the Expiration Date.
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<PAGE> 3
SIGN HERE
Name of firm: __________________________________________________________________
Authorized Signature: __________________________________________________________
Name (please print): ___________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of this Notice of
Guaranteed Delivery and any other required documents to the Exchange Agent is at
the election and risk of the holder and the delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail, registered
or certified mail properly insured, with return receipt requested, is
recommended. In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedure, see
Instruction 1 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this
Notice of Guaranteed Delivery is signed by the registered holder(s) of the
Existing Notes referred to herein, the signature must correspond with the
name(s) written on the face of the Existing Notes without alteration,
enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is
signed by a participant of the book-entry transfer facility whose name appears
on a security position listing as the owner of Existing Notes, the signature
must correspond with the name shown on the security position listing as the
owner of the Existing Notes.
If this Notice of Guaranteed Delivery is signed by a person
other than the registered holder(s) of any Existing Notes listed or a
participant of the book-entry transfer facility, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name of
the registered holder(s) appears on the Existing Notes or signed as the name of
the participant shown on the book-entry transfer facility's security position
listing.
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<PAGE> 4
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
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