<PAGE> 1
CONFORMED
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the nine months ended December 31, 1997 Commission File No. 333-30679
TELEX COMMUNICATIONS, INC.
(Exact name of Registrant 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, MINNEAPOLIS, MINNESOTA 55420
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (612) 884-4051
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
500 COMMON SHARES WERE OUTSTANDING AS OF DECEMBER 31, 1997
THIS DOCUMENT CONTAINS 13 PAGES.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELEX COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
December 31, December 31,
-----------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 42,737 $ 47,186 $ 125,390 $ 126,036
Cost of sales 23,744 27,877 71,886 73,231
------------ ----------- ---------- ----------
18,993 19,309 53,504 52,805
Operating expenses:
Engineering and development 2,088 1,898 6,706 5,289
Marketing 4,887 4,908 15,495 14,044
General and administrative 3,564 2,386 18,883 6,446
Corporate charges 430 0 1,122 0
Amortization of goodwill and other intangibles 412 413 1,356 1,236
------------ ----------- ---------- ----------
11,381 9,605 43,562 27,015
------------ ----------- ---------- ----------
Operating profit 7,612 9,704 9,942 25,790
Other income (expense):
Interest (6,262) (3,132) (19,328) (9,419)
Recapitalization 40 0 (6,710) 0
Other, net (49) 417 297 1,225
------------ ----------- ---------- ----------
Income (loss) before income taxes and extraordinary 1,341 6,989 (15,799) 17,596
Provision (benefit) for income taxes 537 2,725 (3,634) 6,861
------------ ----------- ---------- ----------
Income (loss) before extraordinary loss 804 4,264 (12,165) 10,735
Extraordinary loss on early retirement of debt, net - - (10,553) -
------------ ----------- ---------- ----------
Net income (loss) $ 804 $ 4,264 $ (22,718) $ 10,735
============ =========== ========== ==========
</TABLE>
See accompanying notes.
2
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TELEX COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
December 31 March 31,
1997 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 308 $ 35,742
Accounts receivable, net of allowance 25,655 29,459
Recoverable income taxes 7,976 -
Inventories 28,844 23,495
Deferred income taxes 2,813 2,813
Other 2,734 1,525
------------ -------------
Total current assets 68,330 93,034
Property, plant and equipment, net of accumulated deprecia 21,516 20,867
Deferred financing costs 9,745 2,525
Deferred income taxes 14,954 3,990
Intangible assets, net of accumulated amortization 19,043 20,400
------------ -------------
$ 133,588 $ 140,816
============ =============
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 9,589 $ 12,224
Revolving line of credit 3,296 -
Accrued wages and benefits 4,538 3,813
Pension accrual 1,805 1,535
Taxes other than income taxes 469 470
Other accrued liabilities 4,618 5,374
Accrued interest 2,844 2,504
Income taxes 614 2,991
Current maturities of long-term debt 8,000 -
------------ -------------
Total current liabilities 35,773 28,911
Long-term debt 232,000 100,000
Due to parent 3,759 3,502
Pension accrual 1,844 1,844
Other accrued liabilities 327 303
Shareholder's equity (deficit):
Common stock and capital in excess of par 3,781 20,001
Cumulative translation adjustment (53) -
Accumulated deficit (143,843) (13,745)
============= =============
Total shareholder's equity (deficit) (140,115) 6,256
============= =============
$ 133,588 $ 140,816
============= =============
</TABLE>
See accompanying notes
3
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TELEX COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-------------------------
OPERATING ACTIVITIES: 1997 1996
---- ----
<S> <C> <C>
Net income (loss) $ (22,718) $ 10,735
Adjustments to reconcile net income (loss) to cash flows from operations:
Depreciation 3,003 2,953
Amortization of intangibles and deferred financing costs 2,278 1,510
Provision for bad debts 167 225
Write-off of deferred financing costs 4,171 --
Transactions expense 6,712 --
Bond premium, consent and tender fees paid on early retirement of debt 15,093 --
Non-cash compensation expense from change in terms of options 7,410 --
Non-cash compensation expense from option grants 3,780 --
Deferred income taxes (10,964) --
Change in operating assets and liabilities:
Income taxes 684 1,005
Receivables 3,637 (3,162)
Inventories (5,349) (1,745)
Other current assets (1,208) (349)
Accounts payable and accrued expenses (2,397) 3,956
Accrued interest 340 3,021
Change in non-current liabilities 280 498
--------- ---------
Net cash provided by operating activities 4,919 18,647
--------- ---------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,280) (6,495)
Additions to equipment leased to customers (372) --
--------- ---------
Net cash (used in) investing activities (3,652) (6,495)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 115,000 --
Proceeds from issuance of 10.5% Notes 125,000 --
Change in revolving line of credit, net 3,296 --
Retirement of 12% Notes (100,000) --
Bond premium, consent and tender fees paid on early retirement of debt (15,093) --
Equity contribution from parent 108,353 --
Repurchase common stock and outstanding options (253,898) --
Deferred financing costs (12,312) --
FICA tax paid on change in terms of options (309) --
Transactions expense (6,712) --
--------- ---------
Net cash (used in) investing activities (36,675) --
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (26) (6)
--------- ---------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) (35,434) 12,146
Beginning of period 35,742 23,001
--------- ---------
End of period $ 308 $ 35,147
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Interest $ 16,179 $ 6,000
========= =========
Income taxes (refunds), net $ (408) $ 5,804
========= =========
</TABLE>
See accompanying notes.
4
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TELEX COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Telex Communications, Inc. ("Telex" or the "Company"), a Delaware
corporation, is a wholly owned subsidiary of Telex Communications Group,
Inc. ("TCG").
The condensed consolidated balance sheet as of December 31, 1997 and the
condensed consolidated statements of operations and cash flows for the
quarters and nine months ended December 31, 1997 and 1996, have been
prepared by the Company without being audited.
In the opinion of management, these financial statements reflect all
adjustments (which include only normal recurring accruals) necessary to
present fairly the financial position of Telex at December 31, 1997 and
the results of its operations and cash flows for all periods presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Therefore, these
statements should be read in conjunction with the more detailed
information, risk factors and financial statements, including the related
notes, included in the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on September 5, 1997 (the "Form S-4").
Unless otherwise defined herein, capitalized terms shall have the meaning
set forth in the Form S-4.
The results of operations for interim periods are not necessarily
indicative of results which will be realized for the full fiscal year.
2. Inventories consist of the following, in thousands:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
---- ----
<S> <C> <C>
Raw materials and parts $18,729 $15,097
Work in process 3,116 2,954
Finished products 6,999 5,444
------- -------
$28,844 $23,495
======= =======
</TABLE>
3. 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. The amount listed as "Due to parent" represents the tax
benefit Telex received from TCG.
4. The Company calculated its income tax provision for interim periods by
estimating its annual effective tax rate and applying this rate to the
income before income taxes for the interim period. The effective tax
(benefit) rate applied was 40.0% and 23.0% for the quarter and nine months
ended December 31, 1997. The effective tax rate for the same periods in
Fiscal 1997 was 39.0% and 39.0%, respectively.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
The statements in Part I of this Form 10-Q that are forward looking are based
on current expectations, and actual results may differ materially. Forward
looking statements involve numerous risks and uncertainties that could cause
actual results to differ materially, including, but not limited to: the timely
development and market acceptance of new products; the impact of competitive
products and pricing; the effect of changing general and industry specific
economic conditions; the Company's ability to access external sources of
capital; and such risks and uncertainties detailed from time-to-time in the
Company's Securities and Exchange Commission reports and filings.
RESULTS OF OPERATIONS
General. Telex Communications, Inc. ("Telex" or the "Company"), a Delaware
corporation, is a wholly owned subsidiary of Telex Communications Group, Inc.
("TCG"). TCG has no operations, and its principal asset is its investment in
the Company.
The following tables set forth, for the periods indicated, the Company's
net sales, in thousands:
<TABLE>
<CAPTION>
Quarter ended December 31, Nine months ended December 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales:
Professional Sound and Entertainment $ 15,489 $ 14,635 $ 45,951 $ 43,353
Multimedia/Audio Communications 13,489 19,491 39,677 45,534
RF/Communications 6,822 6,993 18,905 18,523
Hearing Instruments 6,937 6,067 20,857 18,626
-------- -------- -------- --------
Total net sales $ 42,737 $ 47,186 $125,390 $126,036
======== ======== ======== ========
</TABLE>
QUARTER AND NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE QUARTER AND
NINE MONTHS ENDED DECEMBER 31, 1996.
Net sales decreased $4.4 million (9.4%), and $0.6 million (0.5%) for the
quarter and nine months ended December 31, 1997, respectively, due to decreased
shipments in one of the four business segments, partially offset by increased
shipments in two of the four business segments.
Net sales of Professional Sound and Entertainment products increased $0.9
million (5.8%), and $2.6 million (6.0%) for the quarter and nine months ended
December 31, 1997, respectively, primarily due to increased shipments of
wireless intercom and microphone products. The increase in wireless intercom
and microphone shipments was primarily the result of new products introduced in
the fourth quarter of Fiscal 1997.
6
<PAGE> 7
Net sales of Multimedia/Audio Communications products decreased $6.0 million
(30.8%), and $5.9 million (12.9%) for the quarter and nine months ended
December 31, 1997, respectively, primarily as a result of decreased shipments
of computer audio and LCD projection products partially offset by increased
shipments of aircraft communications products. The decreased shipments for the
quarter and nine months of computer audio products was the result of a
significant drop in sales to one key customer beginning in the first quarter of
the current fiscal year. The decreased shipments for the quarter and nine
months of LCD projection products was primarily the result of increased
competition and the delay in the availability of certain new products.
Net sales of RF/Communications products decreased $0.2 million (2.4%), and
increased $0.4 million (2.1%) for the quarter and nine months ended December
31, 1997, respectively. The decrease for the quarter was the result of
decreased shipments of commercial antenna systems and talking book players to
the Library of Congress, while the increase for the nine months was the result
of increased shipments of CB microphones, commercial antenna systems and
talking book players to the Library of Congress
Net sales of Hearing Instruments products increased $0.9 million (14.3%), and
$2.2 million (12.0%) for the quarter and nine months ended December 31, 1997,
respectively. This improvement is due to higher unit volumes of the Company's
hearing aid and auditory trainer products.
Gross profit decreased $0.3 million (1.6%), and increased $0.7 million (1.3%)
for the quarter and nine months ended December 31, 1997, respectively. Gross
margin increased 3.5 percentage points from 40.9% for the quarter ended
December 31, 1996 to 44.4% for the quarter ended December 31, 1997. The rate
increase was the result of higher gross margins in the Professional Sound and
Entertainment and RF/Communications segments partially offset by slight
declines in gross margins for the Multimedia/Audio Communications and Hearing
Instruments segments.
Operating expenses for the quarter and nine months ended December 31, 1997 (not
including costs related to the Transactions of $1.8 million and $13.2 million,
respectively, and not including amortization of intangible assets), decreased
$0.1 million (0.6%), and $3.2 million (12.5%), respectively. Operating
expenses represented 21.4%, and 23.1% of net sales for the quarter and nine
months ended December 31, 1997, compared to 19.5% and 20.5% of net sales for
the same periods in Fiscal 1997. Engineering expenses increased by $0.2
million (10.0%), and $1.4 million (26.8%) for the quarter and nine months ended
December 31, 1997, respectively, primarily due to increased outside development
costs incurred to accelerate new product development. Marketing expenses were
flat for the quarter ended December 31, 1997, and increased $1.5 million
(10.3%) for the nine months ended December 31, 1997. The increase during the
nine months ended December 31, 1997 was the result of increased advertising and
marketing development costs associated with new products, and increased travel
and commission expenses in the first quarter of the current fiscal year.
Marketing expenses represented 11.4% and 12.4% of sales for the quarter and
nine months ended December 31, 1997, respectively, compared with 10.4% and
11.1% of sales for the same periods in Fiscal 1997.
Excluding the Transactions, general and administrative expenses decreased $0.7
million (27.5%), and $0.8 million (11.7%) for the quarter and nine months ended
December 31, 1997, respectively. Included in general and administrative
expenses for the quarter and nine months ended December
7
<PAGE> 8
31, 1997, were compensation charges of $1.8 million and $13.2 million,
respectively, associated with changes in the terms of the Rollover Options, new
option grants and special management bonus compensation. Corporate charges
include fees in the amount of $0.4 million and $1.1 million for the quarter and
nine months ended December 31, 1997, respectively, for consulting and
management services provided by GSCP under a management and services agreement.
Interest expense increased $3.1 million (99.9%), and $9.9 million (105.2%) for
the quarter and nine months ended December 31, 1997. The increase was due to
$1.7 million of loan fees paid in connection with a bridge loan commitment
related to the Transactions in the first quarter and an increase in average
outstanding indebtedness for the quarter and nine months ended December 31,
1997.
The Company calculates its income tax provision (benefit) for interim periods
by estimating its annual effective tax rate and applying this rate to the
income (loss) before income taxes for the interim periods. The effective tax
(benefit) rate applied was 40.0% and 23.0% for the quarter and nine months
ended December 31, 1997, respectively. The effective tax rate was 39.0% and
39.0% for the same periods in Fiscal 1997.
In connection with the Transactions, the Company in the first quarter of Fiscal
1998 recorded an extraordinary loss on the early retirement of debt consisting
of the bond premium, consent and tender fees, along with the write-off of
deferred financing costs associated with the repurchase and early retirement of
the Company's $100.0 million Senior Notes, which totaled $17.6 million ($10.6
million net of income taxes).
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $0.3 million
compared to $35.7 million at March 31, 1997. The ratio of current assets to
current liabilities decreased to 1.9 to 1.0 at December 31, 1997, compared to
3.2 to 1.0 at March 31, 1997. The decrease in cash and cash equivalents and
the ratio of current assets to current liabilities was the result of the
Transactions, which utilized $36.5 million of available cash.
The Company's principal source of funds has consisted of cash generated from
operating activities. Historically, the Company's principal non-operating uses
of cash have been for interest expense, repayments of long-term debt, capital
expenditures, and certain repurchases of TCG securities. Net cash provided by
operations for the nine months ended December 31, 1997, was $4.9 million versus
$18.6 million for the same period in Fiscal 1997. The decrease in cash
provided by operations was primarily the result of lower operating profits and
higher interest expense. Net cash used in financing activities for the nine
months ended December 31, 1997, was $36.7 million. There were no cash flows
from financing activities for the comparable period in Fiscal 1997. The net
cash used in financing activities was primarily for fees and expenses
associated with the Transactions of $6.7 million which were charged to
non-operating expense, deferred debt financing fees of $12.3 million and bond
premium, consent and tender fees paid on the early retirement of debt of $15.1
million.
Inventory increased $5.3 million (22.8%) at December 31, 1997 from March 31,
1997, primarily in preparation for new product launches scheduled for the first
six months of calendar year 1998. As the Company introduces new products, the
potential for inventory obsolescence is addressed
8
<PAGE> 9
by coordinating the phase out of products nearing the end of their salable
lives, conducting reviews for obsolescence and related liquidation measures,
and providing monthly provisions to ensure an adequate reserve is maintained.
The Company's expenditures for property, plant and equipment were $3.3 million
for the nine months ended December 31, 1997, compared to $6.5 million for the
same period in Fiscal 1997. In addition, the Company has capitalized $0.4
million of inventory leased to customers. The decrease in expenditures for the
nine months ended December 31, 1997, was anticipated, as the Company is nearing
completion of the project to replace and upgrade the Company's computer
information systems. The Company anticipates total expenditures for property,
plant and equipment for Fiscal 1998 will be approximately $5.0 million. This
amount includes approximately $2.7 million that management estimates is
required for maintenance levels of capital expenditures.
The Company has a Senior Secured Credit Facility consisting of a Term Loans
Facility of $115.0 million and an available $25.0 million commitment under a
Revolving Credit Facility, subject to a borrowing base calculation. As of
December 31, 1997, there was $115.0 million outstanding on the Term Loan
Facility and $3.3 million outstanding on the Revolving Credit Facility. Net
availability on the Revolving Credit Facility (computed by deducting
approximately $5.8 million of letters of credit outstanding) totaled $15.9
million at December 31, 1997, subject to borrowing base limitations. The
effective interest rate under the Company's Senior Secured Credit Facility for
the quarter and nine months ended December 31, 1997 was approximately 8.5% and
8.6%, respectively.
As a result of the Transactions, the Company's consolidated indebtedness at
December 31, 1997, increased to $243.3 million, compared to $100.0 million at
March 31, 1997. The degree to which the Company is leveraged could have
important consequences, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired; (ii) a substantial portion of the Company's cash flows from
operations must be dedicated to the payment of interest on the Company's
long-term debt and its other existing indebtedness; (iii) the agreements
governing the Company's long-term indebtedness contain certain restrictive
financial and operating covenants; (iv) the Company is substantially more
leveraged than certain of its competitors, which might place the Company at a
competitive disadvantage; (v) the Company may be hindered in its ability to
adjust rapidly to changing market conditions; and (vi) 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.
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.
9
<PAGE> 10
MANAGEMENT OF FOREIGN CURRENCY RISK
From time to time the Company enters into forward exchange contracts to hedge
inventory purchases denominated in Japanese yen for periods consistent with its
inventory purchase commitments. These foreign exchange contracts typically have
maturity dates which do not exceed one year and require the Company to exchange
U.S. dollars for Japanese yen at maturity, at rates agreed to at the inception
of the contracts. As of December 31, 1997, the Company had no foreign currency
forward 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. The Company believes that compliance with
current federal, state and local environmental protection laws and provisions
should not have a material adverse effect on the operating income or financial
condition of the Company. The assessment of materiality of such environmental
matters and claims is based on a gross determination of such charges that could
occur and does not give effect to possible third party recoveries.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION
On October 10, 1997, the Company completed the Exchange Offer of its
outstanding 10 1/2% Senior Subordinated Notes due 2007 (the "Existing Notes")
for new 10 1/2% Senior Subordinated Notes due 2007 (the "New Notes"). All of
the Existing Notes were tendered and accepted for exchange in the Exchange
Offer.
The New Notes were registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement on Form S-4, filed with
the Securities and Exchange Commission on September 5, 1997. The Existing
Notes were originally issued and sold in a transaction exempt from registration
under the Securities Act and resold to certain qualified institutional buyers
in reliance on, and subject to the restriction imposed pursuant to, Rule 144A
under the Securities Act. The terms of the New Notes are identical in all
material respects to the terms of the Existing Notes for which they were
exchanged pursuant to the Exchange Offer, except that the New Notes have been
registered under the Securities Act.
The Company entered into an Exchange Agreement and Plan of Merger, dated as of
January 30, 1998 (the "Exchange Agreement"), among Greenwich I LLC, a Delaware
limited liability company ("G-I"), Greenwich II LLC, a Delaware limited
liability company ("G-II"), EVI Audio Holdings, Inc., a Delaware corporation
("EVI Holdings"), TCG, the Company and EV International, Inc., a Delaware
Corporation ("EVI").
All of the parties to the Exchange Agreement are affilates of Greenwich
Street Capital Partners, Inc. In addition, Mssrs. Eckert and Abel and Ms. Vanden
Beukel were directors of the Company, EVI Holdings, TCG and EVI.
Pursuant to the Exchange Agreement (i) G-I contributed and exchanged
85,000 shares of EVI Holdings' common stock, par value $.001 per share and
13,000 shares of EVI Holdings' Class A Pay-In-Kind Preferred Stock, par value
$.01 per share, for 1,397,400 shares of TCG common stock, par value $.0005 per
share (the "Common Stock") and 13,000 shares of TCG Series A Pay-In-Kind
Preferred Stock, par value $.01 per share (the "Preferred Stock"),
respectively, (ii) EVI Holdings was merged with and into TCG (the "Merger"),
with TCG as the surviving corporation, (iii) effective as February 2, 1998, the
Company was merged with and into EVI (the "Subsequent Merger") with EVI as the
surviving corporation, a wholly-owned subsidiary of TCG, and (iv) EVI changed
its name to "Telex Communications, Inc.", in each case on the terms and
conditions described in the Exchange Agreement. As a result of the Subsequent
Merger, EVI (now known as Telex Communications, Inc.) assumed all of the
Company's assets, liabilities and obligations, including the obligations of the
Company under the New Notes and the Senior Secured Credit Facility. In
connection with the Subsequent Merger, (i) approximately $8.9 million
outstanding under EVI's senior secured credit agreement ($12.7 million net of
existing free cash at closing at EVI of $3.8 million) was paid in full and the
EVI senior credit agreement was terminated and such indebtedness and other
amounts outstanding were replaced with borrowings under the Company's revolving
credit facility of approximately $8.9 million, and (ii) certain changes were
made to the Senior Secured Credit Facility in order to amend, among other
provisions, the Company's existing minimum consolidated EBITDA, fixed charge
and leverage covenants.
The disclosure under this Item 5 is being provided in satisfaction of the
reporting requirements of Item 2, Acquisition or Disposition of Assets, of the
Form 8-K. Pursuant to the provisions of Item 7(b) (2) of the Form 8-K, the
pro-forma financial information has not been included in this Form 10-Q report
filing. The required pro-forma financial information will be filed under cover
of a report on Form 8-K within 60 days as required by the provisions of Item 7
(b) (2) of the Form 8-K.
11
<PAGE> 12
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2 Exchange Agreement and Plan of Filed herewith electronically
Merger, dated as of January 29,
1998, amoung Greenwich I LLC,
Greenwich II, LLC, EVI Audio
Holdings, Inc., Telex
Communications Group, Inc.,
Telex, Communications, Inc., and
EV International, Inc.
4 Second Supplemental Indenture, Filed herewith electronically
dated as of February 2, 1998,
made by EV International, Inc.
in favor of Manufacturers and
Traders Trust Company, as
trustee.
10 Amendment No.1 to the Telex Filed herewith electronically
Communications, Inc. Credit
Agreement, dated as of January
29, 1998, among Telex
Communications, Inc., Chase
Manhattan Bank, Morgan Stanley
Senior Funding, Inc. and the
several banks and other financial
institutions from time to time
parties thereto.
27 Financial data schedule Filed herewith electronically
(b) Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
TELEX COMMUNICATIONS, INC.
Dated: February 17, 1998 By: /s/ John L. Hale
----------------- --------------------------
John L. Hale
Chairman of the Board,
(President and Chief Executive Officer)
TELEX COMMUNICATIONS, INC.
Dated: February 17, 1998 By: /s/ John T. Hislop
----------------- --------------------
John T. Hislop
Vice President, Chief Financial
Officer, (Principal Financial &
Accounting Officer)
13
<PAGE> 1
EXHIBIT 2
EXCHANGE AGREEMENT AND PLAN OF MERGER
EXCHANGE AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
January 29, 1998, among Greenwich I LLC, a Delaware limited liability company
("G-I"), Greenwich II LLC, a Delaware limited liability company ("G-II"), EVI
Audio Holdings, Inc., a Delaware corporation ("EVI Holdings"), Telex
Communications Group, Inc., a Delaware corporation ("Telex Holdings"), Telex
Communications, Inc., a Delaware corporation ("TCI"), and EV International,
Inc., a Delaware corporation ("EVI").
RECITALS
WHEREAS, G-I desires to contribute and exchange (the "Exchange"), 85,000
shares of EVI Holdings' common stock, par value $.001 per share (the "EVI
Common Stock") and 13,000 shares of EVI Holdings' Class A Pay-In-Kind Preferred
Stock, par value $.01 per share (the "EVI Preferred Stock" and, together with
the EVI Common Stock, the "EVI Shares"), in exchange, respectively, for
1,397,400 shares of Telex Holdings' common stock, par value $.0005 per share
(the "Telex Common Stock") and 13,000 shares of Telex Holdings' Series A
Pay-In-Kind Preferred Stock, par value $.01 per share, with the terms, rights,
privileges and preferences set forth on the Certificate of Designation attached
hereto as Exhibit A (the "Telex Preferred Stock" and, together with the Telex
Common Stock, the "Telex Shares"), on the terms and conditions described in
this Agreement;
WHEREAS, immediately subsequent to the Exchange, EVI Holdings will be
merged with and into Telex Holdings pursuant to Section 253 of the General
Corporation Law of the State of Delaware (the "DGCL"), with Telex Holdings as
the surviving corporation (the "Short Form Merger");
WHEREAS, it is intended and agreed that the Exchange and the Short Form
Merger shall together be treated as a "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended;
WHEREAS, the day following the completion of the Exchange and the
Short Form Merger, TCI, a wholly owned subsidiary of Telex Holdings desires to
merge with and into EVI, a wholly owned subsidiary of EVI Holdings ("EVI"),
pursuant to Section 251 of the DGCL, with EVI as the surviving corporation (the
<PAGE> 2
"Subsequent Merger" and, together with the Short Form Merger, the "Mergers")
and, pursuant to such Subsequent Merger, each share of common stock, par value
$1.00 per share, of TCI outstanding and issued shall, upon consummation of the
Subsequent Merger, without any action on the part of the holder thereof, be
canceled and retired and cease to exist, each share of common stock, par value
$.01 per share, of EVI outstanding and issued, upon consummation of the
Subsequent Merger, without any action on the part of the holder thereof, shall
remain outstanding and issued as such shares of the surviving corporation, and
the surviving corporation shall be renamed Telex Communications, Inc;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto intending legally to be bound agree as
follows:
ARTICLE I
EXCHANGE OF SHARES
1.1 Exchange of Shares. Subject to the terms and conditions hereof,
G-I shall contribute 85,000 shares of EVI Common Stock and 13,000 shares of EVI
Preferred Stock to Telex Holdings in exchange, respectively, for 1,397,400
shares of Telex Common Stock and 13,000 shares of Telex Preferred Stock at the
Closing in the manner set forth in Section 1.2 hereof.
1.2 Closing. The closing of the Exchange and the Short Form Merger
(the "Closing") shall take place at the offices of Debevoise & Plimpton, 875
Third Avenue, New York, New York 10022 at 3:30 p.m. on January 30, 1998, or on
such other date as the parties may agree to in writing. At the Closing:
(a) G-I shall deliver to Telex Holdings, free and clear of any
liens, stock certificates representing 85,000 shares of EVI Holdings
Common Stock and 13,000 shares of EVI Holdings Preferred Stock;
(b) Telex Holdings shall deliver to G-I, free and clear of any
liens, stock certificates representing 1,397,400 shares of Telex b)
Holdings Common Stock and 13,000 shares of Telex Preferred Stock;
(c) Telex Holdings shall file a certificate of merger with respect
to the Short Form Merger with the Secretary of State of the
State of Delaware in
2
<PAGE> 3
accordance with Sections 253 and 103 of the General Corporation Law of
the State of Delaware (the "GCL"); and
(d) Telex Holdings shall file (i) an amendment (the "Charter
Amendment") to its Certificate of Incorporation with the Secretary of
State of the State of Delaware to provide that the authorized capital
of Telex Holdings shall be increased to 7 million shares of Telex
Common Stock and to create 200,000 shares of "blank check" preferred
stock, and (ii) the Certificate of Designation for the Telex Preferred
Stock.
1.3 Closing of Subsequent Merger. The closing of the Subsequent
Merger shall take place at the offices of Debevoise & Plimpton, 875 Third
Avenue, New York, New York, on the business day next following the date of the
Closing. At such subsequent closing, EVI shall file the certificate of merger
attached hereto as Exhibit B with the Secretary of State of the State of
Delaware in accordance with Sections 251 and 103 of the GCL.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF G-I AND EVI HOLDINGS
Each of G-I, EVI Holdings and EVI jointly and severally represent and
warrant to G-II, Telex Holdings and TCI as follows, except that the
representation and warranty in Section 2.2 is only made by G-I to Telex
Holdings:
2.1 Authorization, Execution and Delivery. Such party has all
necessary power and authority to enter into and perform its obligations under
this Agreement and the transactions contemplated hereby. The execution,
delivery and performance of this Agreement, by such party has been duly and
validly authorized by all necessary action on its part and this Agreement has
been duly executed and delivered by such party. This Agreement constitutes the
legal, valid and binding obligation of such party, enforceable against such
party in accordance with its respective terms, except as limited by laws
affecting the enforcement of creditors' rights generally or equitable
principles.
2.2 Title to Shares. Upon delivery of and exchange of the EVI
Shares at the Closing as provided for in this Agreement, Telex Holdings will
acquire good and valid title to all such EVI Shares being contributed to it by
G-I, free and clear of all liens, other than any liens created by or on behalf
of Telex Holdings.
3
<PAGE> 4
2.3 Capital Structure. The authorized capital stock of EVI Holdings
consists of 300,000 shares of EVI Common Stock and 100,000 shares of Preferred
Stock. At the close of business on January 29, 1998 (i) 85,000 shares of EVI
Common Stock were issued and outstanding, 13,000 shares of EVI Preferred Stock
were issued and outstanding, and there were outstanding warrants to acquire 535
shares of EVI Common Stock. Except as set forth above, there are no securities
presently outstanding which are convertible into, or exchangeable for or
carrying the right to acquire, equity securities or EVI Holdings, or
subscriptions, warrants, options, or other rights or arrangements obligating
EVI Holdings to issue, transfer or dispose of any of its equity securities.
2.4 SEC Documents; Undisclosed Liabilities. EVI has filed a
Registration Statement on Form S-4 which was declared effective by the
Securities and Exchange Commission ("SEC") on September 30, 1997, and since
such date has filed all required reports, schedules, forms, statements and
other documents with the SEC (the "EVI SEC Documents"). As of their respective
dates, the EVI SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended or the Securities
Exchange Act of 1934, as amended, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such EVI SEC
Documents, and none of the EVI SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of EVI included in the EVI SEC Documents 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 (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of EVI and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). EVI Holdings' sole asset consists of the capital
stock of EVI. Except (i) as set forth in the EVI SEC Documents and (ii) for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the EVI SEC Documents, neither EVI Holdings nor any
of its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting to be recognized or disclosed on a consolidated balance sheet of EVI
Holdings and its consolidated subsidiaries or in the notes thereto which,
4
<PAGE> 5
individually or in the aggregate, is material to EVI Holdings and its
subsidiaries, taken as a whole.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF G-II AND TELEX HOLDINGS
G-II and Telex Holdings jointly and severally represent and warrant
to G-I, EVI Holdings and EVI as follows, except that the representation and
warranty in Section 3.2 is only made by Telex Holdings to G-I:
3.1 Authorization, Execution and Delivery. Such party has all
necessary power and authority to enter into and perform its obligations under
this Agreement and the transactions contemplated hereby. The execution,
delivery and performance of this Agreement, by such party has been duly and
validly authorized by all necessary action on its part and this Agreement has
been duly executed and delivered by such party. This Agreement constitutes the
legal, valid and binding obligation of such party, enforceable against such
party in accordance with its respective terms, except as limited by laws
affecting the enforcement of creditors' rights generally or equitable
principles.
3.2 Title to Shares. Upon delivery of and exchange of the Telex
Shares at the Closing as provided for in this Agreement, G-I will acquire good
and valid title to all such Telex Shares being contributed to it by G-II, free
and clear of all liens, other than any liens created by or on behalf of G-I.
3.3 Capital Structure. The authorized capital stock of Telex
Holdings consists of 5,000,000 shares of Telex Holdings Common Stock. Pursuant
to the Charter Amendment, Telex Holdings proposes to increase the number of
shares of Telex Common Stock to 7,000,000 and to create 200,000 shares of
preferred stock, par value $.01 per share. At the close of business on January
28, 1998, 3,040,740 shares of Telex Common Stock were issued and outstanding,
and there were outstanding options to acquire 1,011,460 shares of Telex Common
Stock and warrants to acquire 9,405 shares of Telex Common Stock. Except as
set forth above, there are no securities presently outstanding which are
convertible into, or exchangeable for or carrying the right to acquire, equity
securities or Telex Holdings, or subscriptions, warrants, options, or other
rights or arrangements obligating Telex Holdings to issue, transfer or dispose
of any of its equity securities.
5
<PAGE> 6
3.4 SEC Documents; Undisclosed Liabilities. TCI has filed a
Registration Statement on Form S-4 which was declared effective by the
Securities and Exchange Commission ("SEC") on September 5, 1997, and since such
date has filed all required reports, schedules, forms, statements and other
documents with the SEC (the "TCI SEC Documents"). As of their respective
dates, the TCI SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended or the Securities
Exchange Act of 1934, as amended, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such TCI SEC
Documents, and none of the TCI SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of TCI included in the TCI SEC Documents 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 (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of TCI and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Telex Holdings' sole asset consists of the capital
stock of TCI. Except (i) as set forth in the TCI SEC Documents, (ii) for Telex
Holdings' 15% Step-Up Subordinated Notes due 2009 and (iii) for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the TCI SEC Documents, neither Telex Holdings nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting to be
recognized or disclosed on a consolidated balance sheet of Telex Holdings and
its consolidated subsidiaries or in the notes thereto which, individually or in
the aggregate, is material to Telex Holdings and its subsidiaries, taken as a
whole.
6
<PAGE> 7
ARTICLE IV
MISCELLANEOUS
4.1 Further Assurances. From time to time on and after the date of
the Closing, each party hereto agrees that it will execute and deliver or cause
to be executed and delivered all such further assignments, assurances or other
instruments, and shall take or cause to be taken all such further actions, as
may be necessary or desirable to consummate the Exchange and the other
transactions contemplated by this Agreement.
4.2 Termination. This Agreement may be terminated and the Exchange
canceled at any time prior to the date of the Closing by G-I and G- II. In the
event of such termination, this Agreement shall become void and have no effect,
without any liability on the part of any party hereto or its directors, member,
officers or stockholders in respect of this Agreement.
4.3 Survival. None of the representations and warranties in this
Agreement shall survive the Closing.
4.4 Amendment. At any time prior to the Closing, the parties
hereto may by written agreement amend, modify or supplement any provision of
this Agreement.
4.5 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
4.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
4.7 Miscellaneous. The headings set forth herein are for
convenience only and shall not be used in interpreting the text of the section
in which they appear. This Agreement constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof. This Agreement
may be executed in separate counterparts, each of which shall be deemed to be
an original and all of which when taken together shall constitute one and the
same instrument.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
GREENWICH I LLC
By:/s/ Christine K. Vanden Beukel
-------------------------------------
Name: Christine K. Vanden Beukel
Title:
GREENWICH II LLC
By:/s/ Christine K. Vanden Beukel
-------------------------------------
Name: Christine K. Vanden Beukel
Title:
EVI AUDIO HOLDINGS, INC.
By:/s/ Christine K. Vanden Beukel
-------------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President and Secretary
EV INTERNATIONAL, INC.
By:/s/ Christine K. Vanden Beukel
-------------------------------------
Name: Christine K. Vanden Beukel
Title: Secretary
8
<PAGE> 9
TELEX COMMUNICATIONS GROUP, INC.
By:/s/ John A. Palleschi
-------------------------------------
Name: John A. Palleschi
Title: Vice President, Secretary
and General Counsel
TELEX COMMUNICATIONS, INC.
By:/s/ John A. Palleschi
-------------------------------------
Name: John A. Palleschi
Title: Vice President, Secretary
and General Counsel
9
<PAGE> 1
EXHIBIT 4
----------------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of February 2, 1998
to
INDENTURE
Dated as of May 6, 1997
by
EV INTERNATIONAL, INC.
in favor of
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
----------------------------------
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE dated as of February 2, 1998, made by EV
INTERNATIONAL, INC., a Delaware corporation, ("EV International"), in favor of
MANUFACTURERS AND TRADERS TRUST COMPANY, a New York trust company, as trustee
(the "Trustee") for the holders of the Securities referred to below.
W I T N E S S E T H
WHEREAS, Telex Communications, Inc., a Delaware corporation ("Telex"),
and the Trustee are parties to an indenture dated as of May 6, 1997 (as
modified by the First Supplemental Indenture thereto, the "Indenture"), under
which $125,000,000 aggregate principal amount of Telex's 10 1/2% Senior
Subordinated Notes due 2007 (the "Securities") are issued and outstanding;
WHEREAS, Telex and EV International, along with their respective
corporate parents and certain other parties, have entered into an Exchange
Agreement and Plan of Merger (the "Exchange and Merger Agreement") pursuant to
which (i) such corporate parents are expected to merge and (ii) Telex will be
merged with and into EV International (the "Merger"), with EV International
continuing as the surviving corporation of the Merger;
WHEREAS, in connection with the Merger, EV International will, by
operation of law, succeed to all of the obligations and liabilities of Telex,
including, without limitation, all of Telex's obligations and liabilities as
obligor under the Indenture and the Securities;
WHEREAS, upon completion of the Merger, EV International will change
its name to "Telex Communications, Inc.";
WHEREAS, Section 5.1 of the Indenture provides that EV International
shall, in connection with the foregoing, execute and deliver to the Trustee a
supplemental indenture for the purpose of evidencing the assumption by EV
International of the obligations of Telex under the Indenture and the
Securities; and
WHEREAS, the execution and delivery of this Second Supplemental Indenture
has been authorized by Board Resolutions of the Board of Directors of EV
International;
2
<PAGE> 3
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, it is agreed, for the equal and proportionate benefit of
all holders of the Securities, as follows:
ARTICLE ONE
REPRESENTATIONS OF TELEX AND EV INTERNATIONAL
EV International represents and warrants for the benefit of 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
Second 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. EV International hereby expressly assumes all of the
obligations of Telex 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 Telex 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 Telex to be performed or
observed under the Indenture and the Securities.
SECTION 2.2. EV International shall succeed to and be substituted for
Telex under the Indenture and the Securities, with the same effect as if EV
International had been named as the "Company" therein.
3
<PAGE> 4
SECTION 2.3. Due to EV International's name change to "Telex
Communications, Inc.", the Securities shall continue to bear the name "Telex
Communications, Inc." as obligor thereunder.
ARTICLE THREE
MISCELLANEOUS
SECTION 3.1. By its acknowledgment of this Second Supplemental
Indenture, the Trustee accepts the modification of the Indenture effected by
this Second Supplemental Indenture, but only upon the terms and conditions set
forth in the Indenture. Without limiting the generality of the foregoing, (i)
the Trustee assumes no responsibility for the correctness of the recitals
herein contained, which shall be taken as the statements of Telex and EV
International and (ii) makes no representation and shall have no responsibility
as to the validity and sufficiency of this Second Supplemental Indenture or the
proper authorization or the due execution hereof by EV International and Telex.
SECTION 3.2. If and to the extent that any provision of this Second
Supplemental Indenture limits, qualifies or conflicts with another provision
included in this Second Supplemental Indenture, or in the Indenture, which is
required to be included in this Second 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 3.3. Except as expressly amended by the Second 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 Second 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.
SECTION 3.4. Nothing in this Second Supplemental Indenture is intended
to or shall provide any rights to any parties other than those expressly
contemplated by this Second Supplemental Indenture.
SECTION 3.5. Capitalized terms not otherwise defined herein shall have
the meaning set forth in the Indenture.
4
<PAGE> 5
SECTION 3.6. THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 3.7. 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 3.8. This Second Supplemental Indenture shall become effective
as of the effective time of the Merger.
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned has caused this Second Supplemental
Indenture to be duly executed as of the day and year first above written.
EV INTERNATIONAL, INC. (TO BE
RENAMED TELEX
COMMUNICATIONS, INC.)
By:/s/ Christine K. Vanden Beukel
--------------------------------
Name: Christine K. Vanden Beukel
Title: Secretary
Acknowledged by the Trustee, as of the day
and year first above written:
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By: Russell T. Whitley
---------------------------
Name: Russell T. Whitley
Title: Assistant Vice President
6
<PAGE> 1
EXHIBIT 10
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of January 30, 1998 (this " Amendment"), to
the Credit Agreement, dated as of May 6, 1997 (the "Telex Credit Agreement"),
among TELEX COMMUNICATIONS, INC., a Delaware corporation ("Telex" or the
"Borrower"), 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 (in such capacity, the "Documentation
Agent"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Telex Credit Agreement, the Lenders have
agreed to make, and have made, certain loans and other extensions of credit to
Telex;
WHEREAS, pursuant to the Credit Agreement, dated as of February 10,
1997 (as amended, supplemented or otherwise modified, the "EVI Credit
Agreement"), among EV International, Inc., a Delaware corporation ("EVI"), the
several banks and other financial institutions from time to time parties
thereto (the "EVI Lenders") and The Chase Manhattan Bank, as administrative
agent for the Lenders thereunder, the EVI Lenders agreed to make, and have
made, certain loans and other extensions of credit to EVI;
WHEREAS, pursuant to an Exchange Agreement and Plan of Merger, dated
as of January 30, 1998 (together with all other documents delivered in
connection therewith, the "Telex/EVI Merger Documents"), EVI Audio Holding,
Inc., a Delaware corporation ("EVI Holdings") and the direct parent of EVI, and
Telex Communications Group, Inc., a Delaware corporation ("Holdings") and the
direct parent of Telex, desire to effectuate a transaction pursuant to which
first, all of the Capital Stock of EVI Holdings will be contributed to Holdings
in exchange for like Capital Stock of Holdings (the "Exchange") and second, EVI
Holdings will merge with and into Holdings (the "Holding Company Merger"), with
Holdings continuing as the surviving corporation;
WHEREAS, pursuant to the Telex/EVI Merger Documents, EVI and Telex
desire to effectuate a merger (the " Borrower Merger"; the Borrower Merger
collectively with the Holding Company Merger, the "Telex/EVI Mergers") of Telex
with and into EVI, with EVI continuing as the surviving corporation, becoming a
wholly-owned subsidiary of Holdings and changing its name to Telex
Communications, Inc.;
WHEREAS, as a result of the Borrower Merger, EVI will assume all of
the obligations of Telex under the Telex Credit Agreement by operation of law
and become the borrower under the Telex Credit Agreement;
WHEREAS, as a result of the Borrower Merger, each of the Subsidiaries
of Telex will become Subsidiaries of EVI;
<PAGE> 2
2
WHEREAS, in connection with the Telex/EVI Mergers, all of the amounts
outstanding under the EVI Credit Agreement will be paid in full and the EVI
Credit Agreement will be terminated and such indebtedness and other amounts
will be replaced or refunded with indebtedness incurred from time to time under
the Telex Credit Agreement;
WHEREAS, in connection with the Telex/EVI Mergers, Telex and EVI have
requested, and, upon this Amendment becoming effective, the Lenders have
agreed, that certain provisions of the Telex Credit Agreement be amended in the
manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Telex Credit Agreement
and used herein shall have the meanings given to them in the Telex Credit
Agreement.
2. Amendments to Subsection 1.1. (a) Subsection 1.1 of the
Telex Credit Agreement is hereby amended by deleting therefrom the definitions
of the following defined terms in their respective entireties and inserting in
lieu thereof the following new definitions:
""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, (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, and (l) all nonrecurring
restructuring or other charges and transaction fees relating to the
Telex/EVI Mergers, including any such nonrecurring charges which may
reasonably be classified as restructuring charges but are not
classified as restructuring charges under GAAP. For the avoidance of
doubt, Consolidated EBITDA shall be determined on a pro forma basis
for any period prior to the Telex/EVI Mergers to include in the
calculation thereof the EBITDA of EVI and its Subsidiaries."
<PAGE> 3
3
(b) Subsection 1.1 of the Telex Credit Agreement is hereby amended by
inserting the following new definitions in the appropriate alphabetical order:
""Amendment": Amendment No. 1, dated as of January 30, 1998,
to this Agreement.
"Borrower Merger": the merger of the Borrower with and into
EVI, with EVI continuing as the surviving corporation and changing its
name to Telex Communications, Inc. and becoming the Borrower
hereunder.
"EVI": EV International, Inc., a Delaware corporation.
"EVI Senior Subordinated Indenture": the Indenture, dated as
of March 24, 1997, between EVI and The Bank of New York, as trustee,
as the same may be amended, supplemented or otherwise modified in
accordance with the terms of this Agreement, pursuant to which the EVI
Senior Subordinated Notes were issued.
"EVI Senior Subordinated Notes": the notes issued under the
EVI Senior Subordinated Indenture.
"EVI Senior Subordinated Notes Documents": the collective
reference to the EVI Senior Subordinated Notes and the EVI 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 an " EVI Senior Subordinated Note Document."
"Exchange": the contribution of all of the Capital Stock of
EVI Holdings to Holdings in exchange for like Capital Stock of
Holdings.
"Holding Company Merger": the merger, following the Exchange,
of EVI Holdings with and into Holdings, with Holdings continuing as
the surviving corporation.
"Telex/EVI Mergers": the collective reference to the Borrower
Merger, the Exchange and the Holding Company Merger."
3. Amendment to Subsection 3.1. Subsection 3.1 of the Telex
Credit Agreement is hereby amended by deleting the amount "$10,000,000" each
place it appears therein and inserting in lieu thereof the amount
"$15,000,000".
4. Amendments to Subsection 8.1. (a) Subsection 8.1(a) of the
Telex Credit Agreement is hereby amended by deleting the table set forth at the
end of thereof in its entirety and inserting in lieu thereof the following new
table:
<PAGE> 4
4
<TABLE>
<CAPTION>
"Date Amount
---- ------
<S> <C>
March 31, 1998 $52,000,000
June 30, 1998 $52,000,000
September 30, 1998 $52,000,000
December 31, 1998 $52,000,000
March 31, 1999 $54,000,000
June 30, 1999 $54,000,000
September 30, 1999 $58,000,000
December 31, 1999 $62,000,000
March 31, 2000 $66,000,000
June 30, 2000 $66,000,000
September 30, 2000 $70,000,000
December 31, 2000 $70,000,000
March 31, 2001 $74,000,000
June 30, 2001 $74,000,000
September 30, 2001 $78,000,000
December 31, 2001 $78,000,000
March 31, 2002 $82,000,000
June 30, 2002 $82,000,000
September 30, 2002 $86,000,000
December 31, 2002 $86,000,000
March 31, 2003 $90,000,000
June 30, 2003 $90,000,000
September 30, 2003 $94,000,000
December 31, 2003 $94,000,000
March 31, 2004 $98,000,000
June 30, 2004 $98,000,000
September 30, 2004 $102,000,000
December 31, 2004 $102,000,000"
</TABLE>
(b) Subsection 8.1(b) of the Telex Credit Agreement is hereby amended
by deleting the table set forth at the end of thereof in its entirety and
inserting in lieu thereof the following new table:
<TABLE>
<CAPTION>
"Date Ratio
---- -----
<S> <C>
September 30, 1998 1.0 to 1
December 31, 1998 1.0 to 1
March 31, 1999 1.0 to 1
June 30, 1999 1.0 to 1
September 30, 1999 1.0 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
</TABLE>
<PAGE> 5
5
<TABLE>
<CAPTION>
"Date Ratio
----- -----
<S> <C>
March 31, 2001 1.05 to 1
June 30, 2001 1.05 to 1
September 30, 2001 1.05 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) Subsection 8.1(c) of the Telex Credit Agreement is hereby amended
by deleting the table set forth at the end of thereof in its entirety and
inserting in lieu thereof the following new table:
<TABLE>
<CAPTION>
"Date Ratio
---- -----
<S> <C>
March 31, 1998 6.75 to 1
June 30, 1998 6.75 to 1
September 30, 1998 6.50 to 1
December 31, 1998 6.50 to 1
March 31, 1999 6.00 to 1
June 30, 1999 6.00 to 1
September 30, 1999 6.00 to 1
December 31, 1999 6.00 to 1
March 31, 2000 5.50 to 1
June 30, 2000 5.50 to 1
September 30, 2000 5.50 to 1
December 31, 2000 5.50 to 1
March 31, 2001 5.25 to 1
June 30, 2001 5.25 to 1
September 30, 2001 5.25 to 1
December 31, 2001 5.25 to 1
March 31, 2002 5.00 to 1
June 30, 2002 5.00 to 1
September 30, 2002 5.00 to 1
December 31, 2002 5.00 to 1
March 31, 2003 4.50 to 1
June 30, 2003 4.50 to 1
September 30, 2003 4.50 to 1
</TABLE>
<PAGE> 6
6
<TABLE>
<CAPTION>
"Date Ratio
----- -----
<S> <C>
December 31, 2003 4.50 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>
5. Amendments to Subsection 8.2. (a) Subsection 8.2 of the
Telex Credit Agreement is hereby amended by deleting clause (b) thereof in its
entirety and inserting in lieu thereof the following new clause (b):
"(b) Indebtedness under the Senior Subordinated Indenture or
evidenced by the Senior Subordinated Notes or under the EVI Senior
Subordinated Indenture or evidenced by the EVI 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);".
(b) Subsection 8.2 of the Telex Credit Agreement is hereby amended by
deleting the amount "$3,000,000" from clause (m) thereof and inserting in lieu
thereof the amount "$4,000,000".
6. Amendment to Subsection 8.3. Subsection 8.3 of the Telex
Credit Agreement is hereby amended by deleting the amount "$3,000,000" from
clause (j) thereof and inserting in lieu thereof the amount "$4,000,000".
7. Amendment to Subsection 8.4. Subsection 8.4 of the Telex
Credit Agreement is hereby amended by inserting the following new clause (o) at
the end thereof:
"(o) Guarantee Obligations made by the Borrower or any of its
Subsidiaries to enable customers of the Borrower or any of its
Subsidiaries to obtain financing for the purchase of goods or services
of the Borrower or any of its Subsidiaries, provided that the
aggregate amount of all such Guarantee Obligations shall not at any
one time exceed $1,000,000."
8. Amendment to Subsection 8.5. Subsection 8.5 of the Telex
Credit Agreement is hereby amended by inserting the following new clause (d) at
the end thereof:
"(d) the Telex/EVI Mergers."
9. Amendment to Subsection 8.6. Subsection 8.6 of the Telex
Credit Agreement is hereby amended by deleting clause (h) therefrom in its
entirety and inserting in lieu thereof the following new clause (h):
"(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, (iii) the sale of the vacant land
<PAGE> 7
7
owned by the Borrower in Burnsville, Minnesota, (iv) the sale of the
Borrower's Oklahoma City, Oklahoma facility, (v) the sale of the
Borrower's Sun Valley, California facility, (vi) the sale of
Borrower's Sylmar, California facility and/or (vii) the sale of all or
any part of the assets or Capital Stock of the Subsidiary or
Subsidiaries comprising the Borrower's amateur antennae business,
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)."
10. Amendments to Subsection 8.7. (a) Subsection 8.7 of the
Telex Credit Agreement is hereby amended by deleting clause (b) thereof in its
entirety and inserting in lieu thereof the following new clause (b):
"(b) (i) 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 as of the Effective Date in an
aggregate amount which shall not exceed $32,800,000, and (ii) the
Borrower may pay cash dividends in an amount sufficient to allow
Holdings to pay all fees and expenses incurred in connection with (w)
the solicitation of consents to the Telex/EVI Mergers and the
Amendment from the Lenders, (x) the solicitation of consents to
amendments to the Senior Subordinated Notes and the EVI Senior
Subordinated Notes in connection with the Telex/EVI Mergers from the
holders of the Senior Subordinated Notes and the holders of the EVI
Senior Subordinated Notes, (y) the legal fees related to the Telex/EVI
Mergers, the Amendment and the solicitations of such consents and (z)
all fees and expenses related to any fairness opinion obtained in
connection with the Telex/EVI Mergers, in an aggregate amount which,
together with all other such fees and expenses of the Borrower in
connection with the transactions expressly contemplated by the
Amendment, shall not exceed $4,000,000 (exclusive of any such fees and
costs associated with obtaining any such consents from such holders of
the Senior Subordinated Notes and the EVI Senior Subordinated Notes);"
(b) Subsection 8.7 of the Telex Credit Agreement is hereby amended by
deleting clause (e) thereof in its entirety and inserting in lieu thereof the
following new clause (e):
"(e) the Borrower may pay cash dividends in amount sufficient
to allow Holdings to repurchase shares of its common stock or rights,
options 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."
11. Amendment to Subsection 8.8. Subsection 8.8 of the Telex
Credit Agreement is hereby amended by deleting the table set forth therein in
its entirety and inserting in lieu thereof the following new table:
<PAGE> 8
8
<TABLE>
<CAPTION>
"Test Period Amount
----------- ------
<S> <C>
Effective Date - March 31, 1998 $11,000,000
April 1, 1998 - March 31, 1999 $11,000,000
April 1, 1999 - March 31, 2000 $13,000,000
April 1, 2000 - March 31, 2001 $13,000,000
April 1, 2001 - March 31, 2002 $14,000,000
April 1, 2002 - March 31, 2003 $15,000,000
April 1, 2003 - March 31, 2004 $15,000,000
April 1, 2004 - March 31, 2005 $15,000,000"
</TABLE>
12. Amendment to Subsection 8.9. Subsection 8.9 of the Telex
Credit Agreement is hereby amended by deleting the amount "$5,000,000"
contained in clause (k) thereof and inserting in lieu thereof the amount
"$7,500,000".
13. Amendment to Subsection 8.12. Subsection 8.12 of the Telex
Credit Agreement is hereby amended by deleting such subsection in its entirety
and inserting in lieu thereof the following new subsection 8.12:
"8.12 Limitation on Optional Payments and Modifications of
Debt Instruments and Other Documents. (a) Make any repurchase (other
than by an exchange which would be permitted under subsection 8.12(c))
or redemption of any of the Senior Subordinated Notes or the EVI
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, or the EVI Senior
Subordinated Notes and the EVI Senior Subordinated Note Indenture, as
the case may be, respectively, only to the extent permitted under the
subordination provisions, if any, applicable thereto.
(b) In the event of the occurrence of a Change of Control,
repurchase the Senior Subordinated Notes or the EVI Senior
Subordinated Notes or any portion of either 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, including
by an exchange, any of the provisions of any of the Senior
Subordinated Notes, the Senior Subordinated
<PAGE> 9
9
Notes Documents, the EVI Senior Subordinated Notes or the EVI 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 the EVI 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 EVI Senior Subordinated Notes or the
interests of the Lenders under this Agreement or any other
Loan Document in any material respect;
provided that, the Borrower may effect any such amendment, supplement,
waiver or other modification, including by an exchange, and may make
payments or provide other compensation in connection therewith, in
order to merge or otherwise combine, or increase the consistency of,
the Senior Subordinated Note Indenture and the EVI Senior Subordinated
Note Indenture and the indebtedness outstanding thereunder, so long as
such merger or other combination, or such increase in consistency,
would not adversely affect, in the reasonable judgment of the
Administrative Agent, the interests of the Lenders under this
Agreement or any other Loan Document in any material respect.
14. Consent to Merger. Each Lender party hereto hereby consents
to the Telex/EVI Mergers, the assumption by EVI of the obligations of Telex
under Telex Credit Agreement and the Loan Documents and the other transactions
expressly contemplated hereby.
15. Conditions to Effectiveness. Except as provided in clause (a)
below, this Amendment shall become effective on the date (the "Amendment
Effective Date") on which all of the following conditions have been satisfied
or waived:
<PAGE> 10
10
(a) Execution and Delivery. EVI, Telex, the Administrative Agent
and the Required Lenders shall have executed and delivered to the
Administrative Agent this Amendment.
(b) Termination of the EVI Credit Agreement. All amounts
outstanding under the EVI Credit Agreement shall have been paid in full and all
outstanding lending commitments under the EVI Credit Agreement shall have been
terminated.
(c) Corporate Structure. The corporate and capital structure of
each Loan Party after the Telex/EVI Mergers (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.
(d) Telex/EVI Mergers. Each of the Telex/EVI Merger Documents
shall have been executed and delivered on terms and conditions reasonably
satisfactory to the Administrative Agent and no material provision thereof
shall have been waived by any party thereto, amended, supplemented or otherwise
modified (except as may be so reasonably satisfactory to the Administrative
Agent). The sources and uses of funds for the Telex/EVI Mergers shall be
consistent with the description thereof set forth in the Confidential
Information Memorandum dated January 1998.
(e) Fees. The Administrative Agent shall have received, for the
account of each consenting Lender, a fee equal to .125% of the Commitments of
such Lender and the Administrative Agent shall have received for its own
account such other fees as have been agreed to in writing between Telex and
Chase.
(f) Approvals. All governmental and third party approvals
(including landlords' and other consents) necessary or reasonably advisable in
connection with the Telex/EVI Mergers 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 Telex/EVI Mergers.
(g) 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 Amendment
Effective Date for which quarterly financial statements of the Borrower are
available, and after giving effect to the Telex/EVI Mergers. The Lenders shall
be reasonably satisfied with respect to all material and direct contingent
liabilities of the Borrower after the Telex/EVI Mergers, including any
indebtedness or guarantees thereof and any tax and similar governmental
liabilities.
(h) 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
<PAGE> 11
11
personal property of EVI and its Subsidiaries in any of the jurisdictions set
forth in Schedule 14(h) to this Amendment, and the results of such search shall
not reveal any liens other than liens permitted by subsection 8.3 of the Telex
Credit Agreement.
(i) 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 Telex, EVI and the other Loan Parties, in form and
substance reasonably satisfactory to the Administrative Agent;
(ii) the executed legal opinions of special local counsel in
each jurisdiction reasonably requested by the Administrative Agent
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.
(j) 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 14(h), necessary or, in the reasonable
opinion of the Administrative Agent, advisable to perfect the Liens created by
the Security Documents shall have been completed or shall be ready to be
completed promptly following the Amendment Effective Date, and all agreements,
statements and other documents relating thereto shall be in form and substance
reasonably satisfactory to the Administrative Agent.
(k) New Pledged Stock; Stock Powers; New Pledged Notes;
Endorsements. The Administrative Agent shall have received:
(i) the certificates representing all of the Capital Stock of
EVI and the Subsidiaries of EVI which had been pledged as collateral
security for the obligations under the EVI Credit 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 notes (if
any) which had been pledged as collateral security for the obligations
under the EVI Credit 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.
<PAGE> 12
12
(l) Mortgages. The Administrative Agent shall have received a
Mortgage with respect to each parcel of real property pledged as collateral
security for the obligations under the EVI Credit Agreement (the "New Mortgaged
Properties"), executed and delivered by a duly authorized officer of the owner
thereof.
(m) Surveys. The Administrative Agent shall have received, and
the title insurance company issuing the policy referred to in Section 16(a)
hereof (the "Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of each of the New Mortgaged Properties for which
a map or plat of an as-built survey was not received by the Administrative
Agent in connection with the EVI Credit Agreement certified to the
Administrative Agent and the Title Insurance Company in a manner reasonably
satisfactory to them, dated a date reasonably satisfactory to the
Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor reasonably satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats and
the surveys on which they are based shall be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following: (i) the locations on such sites of all the buildings, structures
and other improvements and the established building setback lines; (ii) the
lines of streets abutting the sites and width thereof; (iii) all access and
other easements appurtenant to the sites necessary to use the sites; (iv) all
roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the sites, whether recorded,
apparent from a physical inspection of the sites or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) if the site is described as
being on a filed map, a legend relating the survey to said map.
(n) Borrowing Certificate. The Administrative Agent shall have
received, with a photocopy for each Lender, a Borrowing Base Certificate,
substantially in the form of Exhibit J to the Telex Credit Agreement, 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.
(o) 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 of Holdings, Telex, EVI
Holdings, EVI and each of their respective Subsidiaries authorizing, as
applicable, the execution, delivery and performance of this Amendment and the
Telex/EVI Merger Documents to which it is or will be a party as of the
Amendment Effective Date, certified by the Secretary or an Assistant Secretary
of such Person as of the Amendment 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.
<PAGE> 13
13
(p) Incumbency Certificates of the Loan Parties. The
Administrative Agent shall have received, with a photocopy for each Lender, a
certificate of each of Holdings, Telex, EVI Holdings, EVI and each of their
respective Subsidiaries, dated the Amendment Effective Date, as to the
incumbency and signature of the officers of such Person 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 Person.
(q) 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 of Holdings, Telex, EVI Holdings, EVI and
each of their respective Subsidiaries, certified as of the Amendment Effective
Date as complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Person.
(r) Flood Insurance. With respect to any of the New 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 owner
thereof as required pursuant to Section 208.8(e)(3) of Regulation H of the
Board.
(s) Revised Schedule 5.16. The Administrative Agent shall have
received, with a copy for each Lender, a revised Schedule 5.16 to the Telex
Credit Agreement, revised to show the Subsidiaries of Borrower after giving
effect to the Telex/EVI Mergers, the jurisdiction of their incorporation and
the direct or indirect ownership interest of the Borrower therein.
16. Covenants.
(a) Title Insurance Policies. Within 30 days after the Amendment
Effective Date, the Borrower shall deliver to the Administrative Agent in
respect of each of the New Mortgaged Properties a mortgagee's title policy (or
policies) or marked up unconditional binder for such insurance dated the
Amendment 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 New Mortgaged
Property encumbered thereby free and clear of all defects and encumbrances,
except those permitted by subsection 8.3 of the Telex Credit Agreement 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 Borrower shall also deliver to the Administrative Agent
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 Borrower shall also deliver to the Administrative Agent a
<PAGE> 14
14
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.
(b) Compliance with Subsections 7.10(a) and (b) of the Telex
Credit Agreement. Within 30 days after the Amendment Effective Date, the
Borrower shall comply in all respects with the requirements of subsection
7.10(a) and (b) of the Telex Credit Agreement to the extent it has not done so
prior to the Amendment Effective Date, and each Lender party hereto hereby
waives any Default or Event of Default which may have arisen or could arise
under the Telex Credit Agreement as a result of the Borrower failing to comply
with such subsections prior to the date which is 30 days after the Amendment
Effective Date.
17. General.
(a) Representation and Warranties. To induce the Administrative
Agent and the other Lenders parties hereto to enter into this Amendment, the
Borrower hereby represents and warrants to the Administrative Agent and all the
other Lenders that (i) as of the date hereof and after giving effect to the
Telex/EVI Mergers, the representations and warranties set forth in Section 5 of
the Telex Credit Agreement are true and correct in all material respects, (ii)
after giving effect to this Amendment, no Default or Event of Default shall
have occurred and be continuing and (iii) after giving effect to the Telex/EVI
Mergers and this Amendment, the obligations of the Borrower under the Telex
Credit Agreement, any Notes and the other Loan Documents constitute "Senior
Indebtedness" under and as defined in the EVI Senior Subordinated Indenture and
the obligations of each Guarantor under the Guarantee and Collateral Agreement
constitute "Guarantor Senior Indebtedness" of such Guarantor under and as
defined in the EVI Senior Subordinated Indenture.
(b) Assumption of Obligations. EVI hereby assumes all of the
obligations of Telex under the Telex Credit Agreement, the Notes and the other
Loan Documents, effective upon the effectiveness of this Amendment on the
Amendment Effective Date.
(c) Affirmation of Guarantees. Each Guarantor party hereto hereby
consents to the Telex/EVI Mergers and the execution, delivery and effectiveness
of this Amendment and reaffirms its obligations under the Guarantee and
Collateral Agreement.
(d) Payment of Expenses. The Borrower agrees to pay or reimburse
the Administrative Agent for all its reasonable out-of-pocket costs and
expenses incurred in connection with this Amendment, any other documents
prepared in connection herewith and the transactions contemplated hereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent.
<PAGE> 15
15
(e) Counterparts. This Amendment may be executed in two or more
counterparts (including by facsimile transmission), each of which shall
constitute an original, but all of which when taken together shall constitute
but one instrument.
(f) Headings. Section headings used in this Amendment are for
convenience of reference only, are not part of this Amendment and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Amendment.
(g) Continuing Effect of Loan Documents. This Amendment shall not
constitute an amendment or waiver of any other provision of the Telex Credit
Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of the Borrower
that would require a waiver or consent of the Lenders or the Administrative
Agent. Except as expressly amended, modified and supplemented hereby, the
provisions of the Telex Credit Agreement and the other Loan Documents are and
shall remain in full force and effect.
(h) GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE> 16
16
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
<PAGE> 17
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
TELEX COMMUNICATIONS, INC.
By: /s/ John A. Palleschi
---------------------------
Title: Vice President
<PAGE> 18
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
TELEX COMMUNICATIONS GROUP, INC.
By: /s/ John A. Palleschi
------------------------------------
Title: Vice President
<PAGE> 19
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
EV INTERNATIONAL, INC. (to be renamed
"Telex Communications, Inc." after the
Amendment Effective Date)
By: /s/ Christine K. Vanden Beukel
-----------------------------------
Title: Secretary
<PAGE> 20
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
TCI HOLDINGS CORP.
By: /s/ John A. Palleschi
-----------------------------------
Title: Vice President
<PAGE> 21
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: /s/ Lawrence Palumbo, Jr.
-----------------------------------
Title: Vice President
<PAGE> 22
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
MORGAN STANLEY SENIOR FUNDING, INC.
as Documentation Agent and as a Lender
By: /s/ Michael A. Hart
-----------------------------------
Title: Principal
<PAGE> 23
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
THE TRAVELERS INSURANCE COMPANY
By: /s/ John W. Petchler
-----------------------------------
Title: Second Vice President
<PAGE> 24
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
BANKBOSTON, N.A.
By: /s/ Linda Alto
-----------------------------------
Title: Vice President
<PAGE> 25
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
THE BANK OF NEW YORK
By: /s/ Richard A. Raffetto
-----------------------------------
Title: Vice President
<PAGE> 26
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Kurt D. Egertson
-----------------------------------
Title: Vice President
<PAGE> 27
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
HELLER FINANCIAL, INC.
By: /s/ Kathi J. Inorio
-----------------------------------
Title: Vice President
<PAGE> 28
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By: /s/ Shuichi Tajima
-----------------------------------
Title: Deputy General Manager
<PAGE> 29
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
-----------------------------------
Title: Senior Manager
Loan Operations
<PAGE> 30
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By: /s/ Frank H. Madden, Jr.
-----------------------------------
Title: Vice President
By: /s/ G. Kevin Dooley
-----------------------------------
Title: Vice President
<PAGE> 31
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Lynn Callicott Baranski
-----------------------------------
Title: Authorized Signatory
<PAGE> 32
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
FLOATING RATE PORTFOLIO
BY: CHANCELLOR LGT SENIOR SECURED
MANAGEMENT, INC., As Attorney-in-
Fact
By: /s/ Gregory L. Smith
-----------------------------------
Title: Managing Director
<PAGE> 33
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
THE ING CAPITAL SENIOR SECURED HIGH
INCOME FUND, L.P.
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By: /s/ Kathleen A. Lenarcic
-----------------------------------
Title: Vice President &
Portfolio Manager
<PAGE> 34
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
PRIME INCOME TRUST
By: /s/ Rafael Scolari
-----------------------------------
Title:
<PAGE> 35
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
CRESCENT/MACH I PARTNERS, L.P.
by: TCW ASSET MANAGEMENT COMPANY
ITS INVESTMENT MANAGER
By: /s/ Mark L. Gold
-----------------------------------
Title: Managing Director
<PAGE> 36
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
DEEPROCK & COMPANY
By: EATON VANCE MANAGEMENT,
AS INVESTMENT ADVISOR
By: /s/ Barbara Campbell
-----------------------------------
Title: Assistant Treasurer
<PAGE> 37
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Thomas C. Hunt
-----------------------------------
Title: Assistant Portfolio Manager
<PAGE> 38
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
KZH HOLDING CORPORATION III
By: /s/ Virginia Conway
-----------------------------------
TItle: Authorized Agent
<PAGE> 39
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
KZH HOLDING CORPORATION II
By: /s/ Virginia Conway
-----------------------------------
Title: Authorized Agent
<PAGE> 40
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
INDOSUEZ CAPITAL FUNDING III, LIMITED
BY: INDOSUEZ CAPITAL, AS PORTFOLIO
ADVISOR
By: /s/ Francoise Berthelot
-----------------------------------
Title: Vice President
<PAGE> 41
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
PAMCO CAYMAN LTD.
BY: PROTECTIVE ASSET MANAGEMENT COMPANY
AS COLLATERAL MANAGER
By: /s/ James Dondoro
-----------------------------------
Title: President
<PAGE> 42
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
KZH-CRESCENT CORPORATION
By: /s/ Virginia Conway
-----------------------------------
Title: Authorized Agent
<PAGE> 43
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
KZH-SOLEIL CORPORATION
By: /s/ Virginia Conway
-----------------------------------
Title: Authorized Agent
<PAGE> 44
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT &
RESEARCH, AS INVESTMENT
ADVISOR
By: Barbara Campbell
--------------------------
Title: Assistant Treasurer
<PAGE> 45
AMENDMENT NO. 1 TO TELEX CREDIT AGREEMENT
SCHEDULE 14(h)
LIEN SEARCH AND UCC FILING
JURISDICTIONS
See Schedule 5.14 to the EVI Credit Agreement.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
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<SECURITIES> 0
<RECEIVABLES> 25,655
<ALLOWANCES> 0
<INVENTORY> 28,844
<CURRENT-ASSETS> 68,330
<PP&E> 21,516
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<TOTAL-ASSETS> 133,588
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<BONDS> 125,000
0
0
<COMMON> 3,781
<OTHER-SE> (143,896)
<TOTAL-LIABILITY-AND-EQUITY> 133,588
<SALES> 125,390
<TOTAL-REVENUES> 125,390
<CGS> 71,886
<TOTAL-COSTS> 71,886
<OTHER-EXPENSES> 43,562
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<INTEREST-EXPENSE> 19,328
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