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EX 10.49
[LITIGATION]
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 24, 1997, between CODE-ALARM,
INC., a Michigan corporation ("Grantor"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, in its capacity as Agent for Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Litigation L/C and Term Loan C Agreement
dated as of the date hereof by and among Grantor (in such capacity,
"Borrower"), Agent and the Persons signatory thereto from time to time as Term
Lenders (including all annexes, exhibits and schedules thereto, as from time to
time amended, restated, supplemented or otherwise modified, the "Credit
Agreement"), such Term Lenders (collectively, the "Lenders") have agreed to
incur Litigation Obligations for the benefit of the Borrower;
WHEREAS, in order to induce Agent and Lenders to enter into the Credit
Agreement and Litigation Collateral Documents (hereinafter, the "Loan
Documents") and to induce Lenders to incur Litigation L/C Obligations and
certain other Litigation Obligations, including the obligations constituting
Term Loan C, or to advance the Term Loan C, as provided for in the Credit
Agreement (collectively, hereinafter, "Obligations"), Grantor has agreed to
grant a continuing Lien on the Collateral (as hereinafter defined) to secure
the Obligations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Credit Agreement or in Annex A
thereto. All other undefined terms contained in this Security Agreement,
unless the context indicates otherwise, have the meanings provided for by the
Code to the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and observance
of all of the Grantor's Obligations, Grantor hereby grants, assigns, conveys,
mortgages, pledges, hypothecates and transfers to Agent, for itself and the
benefit of Lenders, a security interest in and lien upon all of its right,
title and interest in, to and under the following property, other than
Permitted Encumbrances, whether now owned by or owing to, or hereafter acquired
by or arising in favor of Grantor (including under any trade names, styles or
derivations thereof), and whether owned or consigned by or to, or leased from
or to, Grantor, and regardless of where located (all of which being hereinafter
collectively referred to as the "Collateral"):
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(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all goods;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) all Borrower Accounts, Concentration Accounts, Disbursement
Accounts, Funding Accounts, and all other deposit and other bank
accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all Proceeds and products of
the foregoing and all accessions to, substitutions and replacements for, and
rents and profits of, each of the foregoing.
(b) In addition, to secure the prompt and complete payment, performance
and observance of the Obligations and in order to induce Agent and Lenders as
aforesaid, Grantor hereby grants to Agent, for itself and the benefit of
Lenders, a right of setoff against the property of Grantor held by Agent or any
Lender, consisting of property described above in Section 2(a) now or hereafter
in the possession or custody of or in transit to Agent or any Lender, for any
purpose, including safekeeping, collection or pledge, for the account of
Grantor, or as to which Grantor may have any right or power.
(c) The liens and security interests granted to Agent, for itself and the
benefit of Lenders, pursuant to this Section 2 shall be, and shall be deemed to
be, subordinate in priority to all Liens of Agent and Lenders now or hereafter
securing the Obligations which do not
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constitute Litigation Obligations in accordance with Section 5.11 of the
Litigation L/C Agreement, which is incorporated herein by reference.
3. AGENT'S AND LENDERS' RIGHTS; LIMITATIONS ON AGENT'S AND LENDERS'
OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder. Neither Agent
nor any Lender shall have any obligation or liability under any Contract or
License by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by Agent or any Lender of any payment
relating to any Contract or License pursuant hereto. Neither Agent nor any
Lender shall be required or obligated in any manner to perform or fulfill any
of the obligations of Grantor under or pursuant to any Contract or License, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any
party under any Contract or License, or to present or file any claims, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.
(b) Agent may at any time after an Event of Default shall have occurred
and be continuing, without prior notice to Grantor, notify Account Debtors,
parties to the Contracts and obligors in respect of Instruments and Chattel
Paper, that the Accounts and the right, title and interest of Grantor in and
under such Contracts, Instruments and Chattel Paper have been assigned to
Agent, and that payments shall be made directly to Agent, for itself and the
benefit of Lenders. Upon the request of Agent, Grantor shall so notify Account
Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of Grantor
communicate with Account Debtors, parties to Contracts, obligors in respect of
Instruments and obligors in respect of Chattel Paper to verify with such
Persons, to Agent's satisfaction, the existence, amount and terms of any such
Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent and each Lender at any time and from time to time promptly
upon Agent's request the following reports with respect to Grantor: (i) a
reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial
balances; and (iv) a test verification of such Accounts as Agent may request.
Grantor, at its own expense, shall deliver to Agent the results of each
physical verification, if any, which Grantor may in its discretion have made,
or caused any other Person to have made on its behalf, of all or any portion of
its Inventory.
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4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that,
on the Closing Date and, unless otherwise specified below, as of each time
Grantor requests or accepts the proceeds of an Advance or Loan under the
Credit Agreement:
(a) Grantor is the sole owner of each item of the Collateral upon which it
purports to grant a Lien hereunder, and has good and marketable title thereto
free and clear of any and all Liens other than Permitted Encumbrances.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the Loan Documents, and (ii) in connection with any other
Permitted Encumbrances.
(c) This Security Agreement is effective to create a valid and continuing
Lien on and, upon the filing of the appropriate financing statements listed on
Schedule I hereto and, with respect to locations of Collateral established
after the Closing Date, such additional financing statements delivered to Agent
pursuant to Section 4(g), a perfected Lien in favor of Agent, for itself and
the benefit of Lenders, on the Collateral with respect to which a Lien may be
perfected by filing pursuant to the Code. Such Lien is prior to all other
Liens, except all Liens of Agent and Lenders now or hereafter securing the
Obligations which do not constitute Litigation Obligations and Permitted
Encumbrances that would be prior to Liens in favor of Agent for the benefit of
Agent and Lenders as a matter of law, and is enforceable as such as against any
and all creditors of and purchasers from Grantor (other than purchasers of
Inventory in the ordinary course of business). All action by Grantor necessary
or desirable to protect and perfect such Lien on each item of the Collateral
has been duly taken.
(d) As of the Closing Date, Schedule II hereto lists all Instruments and
Chattel Paper of Grantor, other than those having a face amount of less than
$5,000 individually and an aggregate face amount of less than $10,000. All
action by Grantor necessary or desirable to protect and perfect the Lien of
Agent on each item set forth on Schedule II (including the delivery of all
originals thereof to Agent and the legending of all Chattel Paper as required
by Section 5(b) hereof), and on all Instruments and Chattel Paper of Grantor
acquired after the Closing Date (other than those having a face amount of less
than $5,000 individually and less than $10,000 in the aggregate, including
those existing on the Closing Date), has been duly taken. The Lien of Agent,
for the benefit of Agent and Lenders, on the Collateral listed on Schedule II
hereto, and such Instruments and Chattel Paper acquired after the Closing Date,
is prior to all other Liens, except all Liens of Agent and Lenders now or
hereafter securing the Obligations which do not constitute Litigation
Obligations and Permitted Encumbrances that would be prior to the Liens in
favor of Agent as a matter of law, and is enforceable as such against any and
all creditors of and purchasers from Grantor.
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(e) Grantor's chief executive office, principal place of business,
corporate offices, and, as of the Closing Date, all warehouses
and premises where Collateral is stored or located and all locations of its
books and records concerning the Collateral, are set forth on Schedule III
hereto. Prior to Grantor's maintaining any Collateral at any other location,
Grantor shall have obtained Agent's written consent thereto and shall have
delivered to Agent signed financing statements with respect thereto and such
additional documentation as may be required by Section 4(g) hereto.
(f) With respect to the Accounts, except as specifically disclosed on the
most recent Collateral Report delivered to Agent, (i) they represent bona fide
sales of Inventory or rendering of services to Account Debtors in the ordinary
course of Grantor's business and are not evidenced by a judgment, Instrument or
Chattel Paper; (ii) there are no setoffs, claims or disputes existing or
asserted with respect thereto and Grantor has not made any agreement with any
Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by Grantor in the ordinary course of its business
for prompt payment and disclosed to Agent; (iii) to Grantor's knowledge, there
are no facts, events or occurrences which in any way impair the validity or
enforceability thereof or could reasonably be expected to reduce the amount
payable thereunder as shown on Grantor's books and records and any invoices,
statements and Collateral Reports delivered to Agent and Lenders with respect
thereto; (iv) Grantor has not received any notice of proceedings or actions
which are threatened or pending against any Account Debtor which might result
in any adverse change in such Account Debtor's financial condition; (v) Grantor
has no knowledge that any Account Debtor is unable generally to pay its debts
as they become due, (vi) the amounts shown on all invoices, statements and
Collateral Reports which may be delivered to the Agent with respect thereto are
actually and absolutely owing to Grantor as indicated thereon and are not in
any way contingent; (vii) no payments have been or shall be made thereon except
payments immediately delivered to the Borrower Accounts or the Agent as
required pursuant to the terms of Annex C to the Credit Agreement; and (viii)
to Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most recent
Collateral Report delivered to Agent pursuant to the terms of this Security
Agreement or the Credit Agreement, except as specifically disclosed on such
Collateral Report, (i) such Inventory is located at one of Grantor's locations
set forth on Schedule III hereto, or at such other locations with respect to
which Grantor shall have obtained Agent's prior written consent pursuant to
clause (ii) hereof and delivered to Agent additional financing statements and
other documents as may be required by clause (ii) hereof, (ii) no Inventory is
now, or shall at any time or times hereafter be stored at any other location
without Agent's prior written consent, and if Agent gives such consent,
Grantor will concurrently therewith deliver to Agent such additional financing
statements as may be required by Agent with respect thereto and obtain, to the
extent required by the Credit Agreement, bailee, consignee, landlord and
mortgagee agreements with respect thereto, (iii) Grantor has good, indefeasible
and merchantable title to such Inventory and
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such Inventory is not subject to any Lien or security interest or document
whatsoever except for the Lien granted to Agent, for the benefit of Agent and
Lenders, hereunder and pursuant to any other Security Agreement, and except for
Permitted Encumbrances, (iv) such Inventory is Eligible Inventory of good and
merchantable quality, free from any defects, (v) such Inventory is not subject
to any licensing, patent, royalty, trademark, trade name or copyright agreements
with any third parties which would require any consent of any third party upon
sale or disposition of that Inventory or the payment of any monies to any third
party as a precondition of such sale or other disposition, and (vi) the
completion of manufacture, sale or other disposition of such Inventory by Agent
following an Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or agreement to
which Grantor is a party or to which such property is subject.
(h) Grantor has no interest in, nor title to, any Patent, Trademark or
Copyright except as set forth in Schedule IV hereto or, with respect to such
property acquired or created after the Closing Date, as is described in writing
to Agent within thirty (30) days of Grantor's acquisition or creation thereof.
This Security Agreement is effective to create a valid and continuing Lien on
and, upon filing of the Copyright Security Agreements with the United States
Copyright Office and filing of the Patent Security Agreements and the Trademark
Security Agreements with the United States Patent and Trademark Office, and the
filing of appropriate financing statements listed on Schedule I hereto,
perfected Liens other than Permitted Encumbrances, in favor of Agent on
Grantor's Patents, Trademarks and Copyrights and such perfected Liens are
enforceable as such as against any and all creditors of and purchasers from
Grantor. Upon filing of the Copyright Security Agreements with the United
States Copyright Office and filing of the Patent Security Agreements and the
Trademark Security Agreements with the United States Patent and Trademark
Office and the filing of appropriate financing statements listed on Schedule I
hereto, all action necessary or desirable to protect and perfect Agent's Lien
on Grantor's Patents, Trademarks or Copyrights shall have been duly taken.
5. COVENANTS. Grantor covenants and agrees with Agent, for the benefit of
Agent and Lenders, that from and after the date of this Security Agreement and
until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from time
to time, upon the written request of Agent and at the sole expense of Grantor,
Grantor shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further actions as Agent may deem
desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment
to or for the benefit of Agent of any License or Contract held by Grantor or in
which Grantor has any rights not heretofore assigned, (ii) filing any financing
or continuation statements under the Code with respect to the Liens granted
hereunder or under any other Loan Document, (iii) transferring Collateral to
Agent's possession (for the benefit of Agent and Lenders) if such Collateral
consists of Chattel Paper, Instruments (subject to the provisions of Section
4(d)) or if a Lien on such
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Collateral can be perfected only by possession, and (iv) obtaining, or
using its best efforts to obtain, waivers of Liens, if any exist, from
landlords, bailees, consignees and mortgagees in accordance with the Credit
Agreement. Grantor also hereby authorizes Agent, for the benefit of Agent and
Lenders, to file any such financing or continuation statements without the
signature of Grantor to the extent permitted by applicable law. If any amount
payable under or in connection with any of the Collateral is or shall become
evidenced by any Instrument, such Instrument, other than checks and notes
received in the ordinary course of business, shall be duly endorsed in a manner
satisfactory to Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at
its own cost and expense, satisfactory and complete records of the
Collateral, including a record of any and all payments received and any
and all credits granted with respect to the Collateral and all other
dealings with the Collateral. Grantor shall mark its books and records
pertaining to the Collateral to evidence this Security Agreement and the
Liens granted hereby. Subject to the materiality exceptions set forth in
Section 4(d), Chattel Paper shall be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are subject
to the security interest of General Electric Capital Corporation, as
Agent, for the benefit of Agent and certain Lenders."
(c) Covenants Regarding Patent, Trademark and Copyright Collateral.
(i) Grantor shall notify Agent immediately if it knows or has reason
to know that any application or registration relating to any Patent,
Trademark or Copyright (now or hereafter existing) may become abandoned
or dedicated, or of any adverse determination or development (including
the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any court) regarding Grantor's ownership of
any Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(ii) In no event shall Grantor, either directly or through any
agent, employee, licensee or designee, file an application for the
registration of any Patent, Trademark or Copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency without giving Agent prior written notice
thereof, and, upon request of Agent, Grantor shall execute and deliver
any and all Patent Security Agreements, Copyright Security Agreements or
Trademark Security Agreements as Agent may request to evidence Agent's
Lien on such Patent, Trademark or Copyright, and the General Intangibles
of Grantor relating thereto or represented thereby.
(iii) Grantor shall take all actions necessary or requested by Agent
to maintain and pursue each application, to obtain the relevant
registration and to maintain the registration of each of the Patents,
Trademarks and Copyrights (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
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noncontestability and opposition and interference and cancellation
proceedings, unless Grantor shall determine that such Patent, Trademark
or Copyright is not material to the conduct of its business.
(iv) In the event that any of the Patent, Trademark or Copyright
Collateral is infringed upon, or misappropriated or diluted by a third
party, Grantor shall notify Agent promptly after Grantor learns thereof.
Grantor shall, unless Grantor shall reasonably determine that such
Patent, Trademark or Copyright Collateral is in no way material to the
conduct of its business or operations, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other
actions as Agent shall deem appropriate under the circumstances to
protect such Patent, Trademark or Copyright Collateral.
(d) Indemnification. In any suit, proceeding or action brought by
Agent or any Lender relating to any Account, Chattel Paper, Contract,
Document, General Intangible or Instrument for any sum owing thereunder
or to enforce any provision of any Account, Chattel Paper, Contract,
Document, General Intangible or Instrument, Grantor will save, indemnify
and keep Agent and Lenders harmless from and against all expense
(including reasonable attorneys' fees and expenses), loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out
of a breach by Grantor of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to, or in
favor of, such obligor or its successors from Grantor, except in the case
of Agent or any Lender, to the extent such expense, loss, or damage is
attributable to the gross negligence or willful misconduct of Agent or
such Lender as finally determined by a court of competent jurisdiction.
All such obligations of Grantor shall be and remain enforceable against
and only against Grantor and shall not be enforceable against Agent or
any Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in
respect of its Accounts, Chattel Paper, Contracts and Licenses and all
other agreements to which it is a party or by which it is bound relating
to the Collateral.
(f) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral
against, and take such other action as is necessary to remove, any Lien
on the Collateral except the Liens granted to Agent, for the benefit of
Agent and Lenders, hereunder and pursuant to any other Security Agreement
and Permitted Encumbrances, and will defend the right, title and interest
of Agent and Lenders in and to any of Grantor's rights under the
Collateral against the claims and demands of all Persons whomsoever.
(g) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or
contract to do so except as permitted by the Credit Agreement.
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(h) Further Identification of Collateral. Grantor will, if so requested
by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(i) Notices. Grantor will advise Agent promptly, in reasonable detail,
(i) of any Lien (other than Permitted Encumbrances) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Loan Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a power of
attorney (the "Power of Attorney") substantially in the form attached hereto as
Exhibit A. The power of attorney granted pursuant to the Power of Attorney is
a power coupled with an interest and shall be irrevocable until the Termination
Date. The powers conferred on Agent, for the benefit of Agent and Lenders,
under the Power of Attorney are solely to protect Agent's interests (for the
benefit of Agent and Lenders) in the Collateral and shall not impose any duty
upon Agent or any Lender to exercise any such powers. Agent agrees that (a) it
shall not exercise any power or authority granted under the Power of Attorney
unless an Event of Default has occurred and is continuing, and (b) Agent shall
account for any moneys received by Agent in respect of any foreclosure on or
disposition of Collateral pursuant to the Power of Attorney provided that none
of Agent nor any Lender shall have any duty as to any Collateral, and Agent and
Lenders shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers. NONE OF AGENT, LENDERS OR THEIR
RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES TO THE
EXTENT ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under this
Security Agreement, the Credit Agreement, the Loan Documents and under any
other instrument or agreement securing, evidencing or relating to any of the
Obligations, if any Event of Default shall have occurred and be continuing,
Agent may exercise all rights and remedies of a secured party under the Code.
Without limiting the generality of the foregoing, Grantor expressly agrees that
in any such event Agent, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale)
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to or upon Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code and other applicable law), may forthwith enter upon the
premises of Grantor where any Collateral is located through self-help, without
judicial process, without first obtaining a final judgment or giving Grantor or
any other Person notice and opportunity for a hearing on Agent's claim or
action and may collect, receive, assemble, process, appropriate and realize
upon the Collateral, or any part thereof, and may forthwith sell, lease,
assign, give an option or options to purchase, or sell or otherwise dispose of
and deliver said Collateral (or contract to do so), or any part thereof, in one
or more parcels at a public or private sale or sales, at any exchange at such
prices as it may deem acceptable, for cash or on credit or for future delivery
without assumption of any credit risk. Agent or any Lender shall have the
right upon any such public sale or sales and, to the extent permitted by law,
upon any such private sale or sales, to purchase for the benefit of Agent and
Lenders, the whole or any part of said Collateral so sold, free of any right or
equity of redemption, which equity of redemption Grantor hereby releases. Such
sales may be adjourned and continued from time to time with or without notice.
Agent shall have the right to conduct such sales on Grantor's premises or
elsewhere and shall have the right to use Grantor's premises without charge for
such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the Collateral and
make it available to Agent at places which Agent shall select, whether at
Grantor's premises or elsewhere. Until Agent is able to effect a sale, lease,
or other disposition of Collateral, Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for
the purpose of preserving Collateral or its value or for any other purpose
deemed appropriate by Agent. Agent shall have no obligation to Grantor to
maintain or preserve the rights of Grantor as against third parties with
respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies (for the
benefit of Agent and Lenders), with respect to such appointment without prior
notice or hearing as to such appointment. Agent shall apply the net proceeds
of any such collection, recovery, receipt, appropriation, realization or sale
to the Obligations as provided in the Credit Agreement, and only after so
paying over such net proceeds, and after the payment by Agent of any other
amount required by any provision of law, need Agent account for the surplus, if
any, to Grantor. To the maximum extent permitted by applicable law, Grantor
waives all claims, damages, and demands against Agent or any Lender arising out
of the repossession, retention or sale of the Collateral except to the extent
such arise out of the gross negligence or willful misconduct of Agent or such
Lender as finally determined by a court of competent jurisdiction. Grantor
agrees that ten (10) days' prior written notice by Agent of the time and place
of any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any attorneys' fees or other
expenses incurred by Agent or any Lender to collect such deficiency.
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The rights and remedies available to Agent and the Lenders pursuant to
this Section 7(a) shall be subject in all respects to the subordination
provisions set forth in Section 2(c) hereof and Section 5.11 of the Litigation
L/C Agreement.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7
hereof (including, without limiting the terms of Section 7 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Agent shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby
grants to Agent, for the benefit of Agent and Lenders, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by Grantor, and wherever the same may
be located, and including in such license access to all media in which any of
the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.
Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control. Neither Agent nor any Lender shall
have any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Agent or such Lender, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.
10. REINSTATEMENT. Notwithstanding anything contained herein to the
contrary, this Security Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of Grantor's assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded, avoided or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent transfer," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made.
Notwithstanding anything contained herein to the contrary in the event that any
payment, or any part thereof, is rescinded, avoided, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, avoided, reduced, restored or returned.
-11-
12
11. NOTICES. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any of the parties
by any other party, or whenever any of the parties desires to give and serve
upon any other party any communication with respect to this Security Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be given in the manner, and deemed
received, as provided for in the Credit Agreement.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement. This Security Agreement is to be read, construed and
applied together with the Credit Agreement and the Loan Documents which, taken
together, set forth the complete understanding and agreement of Agent, Lenders
and Grantor with respect to the matters referred to herein and therein.
13. NO WAIVER; CUMULATIVE REMEDIES. Neither Agent nor any Lender shall by
any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder, and no waiver shall be valid unless in writing,
signed by Agent and then only to the extent therein set forth. A waiver by
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Agent would otherwise have had
on any future occasion. No failure to exercise nor any delay in exercising on
the part of Agent or any Lender, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10 hereof,
this Security Agreement shall terminate upon the Termination Date.
-12-
13
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor (including any debtor-in-possession on behalf of Grantor) and shall,
together with the rights and remedies of Agent, for the benefit of Agent and
Lenders, hereunder, inure to the benefit of Agent and Lenders, all future
holders of any instrument evidencing any of the Obligations and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner affect the Lien granted to Agent, for the benefit
of Agent and Lenders, hereunder. Grantor may not assign, sell, hypothecate or
otherwise transfer any interest in or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one and the same agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES AMONG GRANTOR, AGENT AND LENDERS
PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE LOAN
DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND GRANTOR ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.
-13-
14
GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH ON ANNEX I TO THE CREDIT
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT DISPUTES
ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, LENDERS, AND
GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Security Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other party
hereto that it has discussed this Security Agreement and, specifically, the
provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Lenders. All Liens granted or contemplated hereby shall be
for the benefit of Agent and Lenders, and all proceeds or payments realized
from Collateral in accordance herewith shall be applied to the Obligations in
accordance with the terms of the Credit Agreement.
-14-
15
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
---------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
-----------------------------------
Name: Timothy S. Van Kirk
----------------------------
Title: Duly Authorized Signatory
---------------------------
16
SCHEDULE I
----------
FILING JURISDICTIONS
--------------------
1. UCC-1 Financing Statements:
Debtor: CODE-ALARM, INC.
Locations: (1) Secretary of State of California
(2) Secretary of State of Michigan
(3) Secretary of State of Texas
2. UCC Fixture Financing Statements:
Debtor: CODE-ALARM, INC.
Locations: (1) Oakland County, Michigan
(2) Williamson County, Texas
17
SCHEDULE II
-----------
INSTRUMENTS
-----------
None.
18
SCHEDULE III
------------
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING GRANTOR'S COLLATERAL
-------------------------------------------
I. Chief Executive Office and principal place of business of Grantor:
950 E. Whitcomb
Madison Heights, Michigan
II. Corporate Offices of Grantor:
950 E. Whitcomb
Madison Heights, Michigan
III. Warehouses:
950 E. Whitcomb
Madison Heights, Michigan
16742 Burke Lane
Huntington Beach, California
IV. Other Premises at which Collateral is Stored or Located:
300 Industrial Drive
Georgetown, Texas
V. Locations of Records Concerning Collateral:
950 E. Whitcomb
Madison Heights, Michigan
16742 Burke Lane
Huntington Beach, California
19
SCHEDULE IV
-----------
PATENTS, TRADEMARKS AND COPYRIGHTS
----------------------------------
PATENTS: CODE-ALARM
- --------------------
PATENT REGISTRATIONS
---------------------
Mark Patent No. Issue Date
---- ---------- ----------
AUTOMOBILE BURGLAR 4,740,775 4/26/88
ALARM
SECURITY SYSTEM 5,543,778 8/6/96
VEHICLE ANTITHEFT 4,107,543 8/15/78
SYSTEM
SECURITY SYSTEM 4,333,074 6/1/82
PATENT APPLICATIONS
Serial No. Filing Date
---------- -----------
08/624,146 5/28/93
08/774,954 4/19/93
08/842,374 4/23/97
08/838,684 4/9/97
20
PATENT LICENSES
---------------
Name of Agreement Parties/Purpose Date of Agreement
----------------- --------------- -----------------
MAGNADYNE/NUTEK: Code-Alarm licensed "Price" April 1996
Cross License patent to Magnadyne/Nutek;
Agreement Magnadyne/Nutek licensed "Chen"
patent to Code-Alarm
BULLDOG Code-Alarm, Inc. licensed September 1994
"Price" patent use to Bulldog
AUDIOVOX Code-Alarm, Inc. August 1994
licensed "Stouffer"
patent to Audiovox
AUDIOVOX: Cross Code-Alarm licensed use of August 1994
License Agreement "Price" patent to Audiovox;
Audiovox licensed use of "Posse"
patent to Code-Alarm
SHERWOOD Code-Alarm licensed use of January 1997
"Price" patent to Sherwood
21
TRADEMARKS: CODE-ALARM
- -----------------------
TRADEMARK REGISTRATIONS
------------------------
Mark Reg. No. Date
---- -------- ----
ELITE 1,709,313 8/18/92
The following table lists Code-Alarm's Common Law Trademarks. Where a federal
Trademark has been abandoned, the prior Registration Number and Registration
Date are included; where a federal Trademark Application has been abandoned,
the Serial Number and Filing Date are included.
Mark Prior Reg. No./Serial No. Prior Reg./Filing Date
---- ------------------------- ----------------------
MIRAGE 1,528,131 (cancelled) 3/7/89
CODE-ALARM 1,537,231 (cancelled) 5/2/89
SCORPION 1,588,738 (cancelled) 3/27/90
FOCUS BAND 74/360,227 (abandoned) 2/19/93
CRF 74/360,230 (abandoned) 2/19/93
INTERCEPT 74/020,162 (abandoned) 1/18/90
FALCON (abandoned)
LIVEWIRES Not Registered
MICRO-SHIELD Not Registered
NIGHTHAWK Not Registered
PREDATOR Not Registered
RADICAL AUDIO DESIGN Not Registered
RAD WIRES Not Registered
22
TRADEMARK APPLICATIONS
----------------------
Mark Serial No. Filing Date
---- ---------- -----------
CODE-ALARM 75/333,752 7/31/97
CODE-ALARM 75/333,753 7/31/97
CODE 75/333,754 7/31/97
CODE-ALARM and Design 75/333,755 7/31/97
CODE-ALARM 75/333,756 7/31/97
PRO 75/333,757 7/31/97
TRADEMARK LICENSES
------------------
Name of Agreement Parties Date of Agreement
----------------- ------- -----------------
None.
23
EXHIBIT A
---------
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by Code-Alarm, Inc., a
Michigan corporation ("Grantor") to General Electric Capital Corporation, a New
York corporation (hereinafter referred to as "Attorney"), as Agent for the
benefit of Agent and Lenders, under a Credit Agreement and a Security
Agreement, both dated as of October 24, 1997 and other related documents (the
"Loan Documents"). No person to whom this Power of Attorney is presented, as
authority for Attorney to take any action or actions contemplated hereby, shall
be required to inquire into or seek confirmation from Grantor as to the
authority of Attorney to take any action described below, or as to the
existence of or fulfillment of any condition to this Power of Attorney, which
is intended to grant to Attorney unconditionally the authority to take and
perform the actions contemplated herein, and Grantor irrevocable waives any
right to commence any suit or action, in law or equity, against any person or
entity which acts in reliance upon or acknowledges the authority granted under
this Power of Attorney. The power of attorney granted hereby is coupled with
an interest, and may not be revoked or canceled by Grantor without Attorney's
written consent.
Grantor hereby irrevocably constitutes and appoints Attorney (and all
officers, employees or agents designated by Attorney), with full power of
substitution, as Grantor's true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Grantor and in the
name of Grantor or in its own name, from time to time in Attorney's discretion,
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of the Loan Documents and, without limiting the generality of the
foregoing, Grantor hereby grants to Attorney the power and right, on behalf of
Grantor, without notice to or assent by Grantor, and at any time following the
occurrence and during the continuation of an Event of Default, to do the
following: (a) change the mailing address of Grantor, open a post office box on
behalf of Grantor, open mail for Grantor, and ask, demand, collect, give
acquittances and receipts for, take possession of, endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, and notices in connection
with any property of Grantor; (b) effect any repairs to any asset of Grantor,
or continue to obtain any insurance and pay all or any part of the premiums
therefor and costs thereof, and make, settle and adjust all claims under such
policies of insurance, and make all determinations and decisions with respect
to such policies; (c) pay or discharge any taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against Grantor or its
property; (d) defend any suit, action or proceeding brought against Grantor if
Grantor does not defend such suit, action or proceeding or if Attorney believes
that Grantor is not pursuing such defense in a manner that will maximize the
recovery to Attorney, and settle, compromise or adjust any suit, action, or
proceeding described above and, in connection therewith, give such discharges or
releases as Attorney may deem appropriate; (e) file or prosecute any claim,
litigation, suit or proceeding in any court of competent jurisdiction or before
any arbitrator, or take any other action otherwise
24
deemed appropriate by Attorney for the purpose of collecting any and all such
moneys due to Grantor whenever payable and to enforce any other right in respect
of Grantor's property; (f) cause the certified public accountants then engaged
by Grantor to prepare and deliver to Attorney at any time and from time to time,
promptly upon Attorney's request, the following reports: (1) a reconciliation of
all accounts; (2) an aging of all accounts, (3) trial balances, (4) test
verifications of such accounts as Attorney may request, and (5) the results of
each physical verification of inventory; (g) communicate in its own name with
any party to any Contract with regard to the assignment of the right, title and
interest of such Grantor in and under the Contracts and other matters relating
thereto; and (h) execute, in connection with sale provided for in any Loan
Document, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral and to otherwise direct such sale or
resale, all as though Attorney were the absolute owner of the property of
Grantor for all purposes, and to do, at Attorney's option and Grantor's expense,
at any time or from time to time, all acts and other things that Attorney
reasonably deems necessary to perfect, preserve, or realize upon Grantor's
property or assets and Attorney's Liens thereon, all as fully and effectively as
Grantor might do. Grantor hereby ratifies, to the extent permitted by law, all
that said Attorney shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor and
Grantor has caused its seal to be affixed pursuant to the authority of its
board of directors this 24th day of October, 1997.
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
---------------------------
ATTEST:
By: /s/ Craig S. Camalo
---------------------------------
(SEAL)
Title: Vice President and CFO
------------------------