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EXHIBIT 10.11
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into this day of April,
1998, by and between Talon Automotive Group, Inc., a Michigan corporation
("TAG") and its direct or indirect subsidiaries, VS Holdings, Inc., and Veltri
Holdings USA, Inc., (collectively "Debtor"), and Michael T. J. Veltri,
individually and as trustee of the Michael T. J. Veltri Revocable Living Trust
u/a/d December 17, 1992, a Michigan resident ("Secured Party").
RECITALS:
A. Debtor has entered into that certain Unconditional Guaranty (the
"Guaranty") of even date herewith to guaranty certain obligations of Veltri
Metal Products Co. ("VMP") to Secured Party.
B. In order to secure Debtor's financial obligations to Secured Party
pursuant to the Guaranty ("Veltri Indebtedness"), Debtor wishes to grant Secured
Party a security interest in all of its now owned or hereafter acquired assets
subject to the terms and conditions of this Agreement.
C. Debtor is in the process of completing an offering of up to $125,000,000
in senior subordinated notes pursuant to Rule 144A promulgated under the
Securities Act of 1933, as amended.
NOW, THEREFORE, in consideration of the above recitals, the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged and
agreed to, Debtor and Secured Party agree as follows:
1. GRANT OF SECURITY INTEREST. As Security for the prompt and complete
payment when due of the Veltri Indebtedness and the obligations of the Debtor
pursuant to the Agreement of even date herewith (the "Agreement"). Debtor hereby
grants to Secured Party a security interest in all assets of Debtor, including
but not limited to all of Debtor's right, title and interest in, to and under
the following, whether now owned or hereafter acquired (collectively, the
"Collateral"):
(i) all accounts as defined in Section 9-106 of the Uniform
Commercial Code (the "UCC") as from time to time in effect
in Michigan;
(ii) all contracts;
(iii) all equipment as defined in Section 9-109(2) of the UCC;
(iv) all general intangibles as defined in Section 9-106 of the
UCC;
(v) all inventory as defined in Section 9-109(4) of the UCC
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(vi) all books and records, data processing cards, tapes,
tabulating runs, programs and similar material evidencing,
securing or relating to any of the foregoing; and
(vii) to the extent not otherwise included, all proceeds, as
defined in Section 9-306 of the UCC, and products of any or
all of the foregoing.
Without limiting the generality of the foregoing, Debtor agrees that the Veltri
Indebtedness shall also include: (i) all costs, expenses and attorney fees which
are reasonably paid or incurred by Secured Party in the enforcement,
administration and collection of any Veltri Indebtedness, and in the protection,
maintenance and disposition of any Collateral; and (ii) all amounts payable
under this Security Agreement including, without limitation, Section 3.2 hereof.
2. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and warrants
to Secured Party that:
2.1 Good Standing; Location and Use of Collateral. Each Debtor is a
company duly organized, validly existing and in good standing under the
laws of the state of their incorporation, and is duly qualified to transact
business and is in good standing in each jurisdiction where such
qualification is necessary, except where the lack of such qualification
would not have a material adverse effect, and each has all the requisite
power and authority, corporate or otherwise, to conduct its business, to
own and operate its properties and to execute, deliver and perform all of
its obligations hereunder.
2.2 Authorization; Enforceability. This Security Agreement has been
duly executed and delivered by Debtor and constitutes the legal, valid and
binding obligation of Debtor, enforceable in accordance with its terms. The
execution and delivery of this Security Agreement does not constitute a
breach of any provision contained in Debtor's Article of Incorporation or
Bylaws or any material agreement or instrument to which Debtor is a party
or by which Debtor is bound.
2.3 Threatened or Pending Proceedings. To the best of Debtor's
knowledge, there are no actions or proceedings which are threatened or
pending against Debtor or any of its assets which might result in any
material adverse change in Debtor's financial condition or which might
materially adversely affect the Collateral or Debtor's business.
2.4 Ownership. Debtor owns all right to, title in, and interest in
all of the Collateral free and clear of any liens, pledges or other
encumbrances, except for Permitted liens (as hereinafter defined). As used
herein, "Permitted Liens" shall mean:
(a) the liens, claims, encumbrances and security interests
(collectively, "Liens") on any of the Collateral in favor of Comerica
Bank, as agent for itself and any other institutional lenders which
may participate with Comerica, or their successor lender(s) in
connection with any refinancing thereof (the "Banks"), and any other
person or entity permitted by Secured Party in writing;
(b) In accordance with Section 3.4 below, Liens for taxes,
assessments or governmental charges or claims not yet delinquent, or
Liens for taxes, assessments
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or governmental charges being contested in good faith and by
appropriate proceedings;
(c) Liens in respect of property or assets of Debtor which were
imposed by law in the ordinary course of business, such as carriers',
warehousemen's and construction liens and other similar liens arising
in the ordinary course of business, which are not delinquent or which
are being contested in good faith by appropriate proceedings;
(d) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other type of social security, or to secure the
performance of tenders, statutory obligations, surety bonds, bids,
leases, governmental contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of
business (exclusive of obligations in respect to the payment for
borrowed money or the equivalent);
(e) Liens of any judgment rendered which does not give rise to an
Event of Default (as defined below) and Liens created by deposits of
cash or cash equivalents permitting the Debtor to appeal court
judgments that are being contested in good faith by appropriate
proceedings and do not give rise to an Event of Default;
(f) Assignments, leases or subleases granted to others not
interfering in any material respect with the ordinary conduct of the
Debtor's business and not materially affecting the value of the
Collateral; and
(g) With respect to assets which Debtor may acquire after the
date hereof which become Collateral under this Agreement, purchase
money security interest or other Liens which are a result of seller
financing in the acquisition of all or substantially all of the assets
of a new subsidiary.
2.5 No Competing Filings. No security agreement, financing statement
or 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 with respect to any Permitted Liens or such as may
have been filed in favor of Secured Party, pursuant to this Security
Agreement.
3. COVENANTS. Debtor hereby covenants and agrees to and with Secured
Party, that until all of the Veltri Indebtedness is fully paid:
3.1 Further Documentation: Pledge of Instruments. At any time and from
time to time, upon the reasonable request of Secured Party, and at the sole
expense of Debtor, Debtor will execute and deliver any and all such
further documents including, without limitation, the filing of any
financing or continuation statements under the UCC. Debtor also hereby
authorizes Secured Party to file any mortgage, financing or continuation
statements without the signature of Debtor to the extent permitted by
applicable law. Subject to the prior rights of the Banks, if any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument (other
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than an instrument which constitutes Chattel Paper), such note
or instrument shall be pledged to Secured Party hereunder and shall be
duly endorsed in a manner reasonably satisfactory to Secured Party and
delivered to Secured Party.
3.2 Indemnification. In any suit, proceeding or action properly
brought by Secured Party under this Security Agreement relating to the
Collateral, including, without limitation, any license, account,
document, Chattel Paper, contract or lease, for any sum owing
thereunder, or to enforce any provisions of any license, account,
document, Chattel Paper, contract or lease, Debtor will save,
indemnify, defend and keep Secured Party harmless from and against any
and all expense, loss or damage suffered by reason of any and all
defense, set-off, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by Debtor
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 Debtor, and all such obligations of
Debtor shall be and remain enforceable against and only against Debtor
and shall not be enforceable against Secured Party. Debtor promises to
pay, and to hold Secured Party harmless from: (i) any and all
liabilities with respect to, or resulting from, any delay in paying any
and all excise, sales, transfer or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Security
Agreement; and (ii) damages (after deduction for any net tax savings or
third party recoveries to the extent either such item otherwise would
result in an excess recovery of Secured Party's damages) resulting from
any default in those transactions contemplated by the Agreement, except
to the extent Debtor is entitled to indemnity from Secured Party under
the Stock Purchase Agreement dated November 8, 1996 among Secured
Party, Maria Veltri and VMP (the "Stock Purchase Agreement").
3.3 Compliance. Debtor will comply, in all material respects,
with all applicable acts, rules, statutes, regulations, orders,
judgments, decrees and directions of any governmental authority
applicable to the Collateral or any part thereof or to the operation of
Debtor's business.
3.4 Payment of Taxes. Debtor will pay, prior to the imposition
of any penalties or interest, all taxes, assessments and governmental
charges or levies imposed upon the Collateral or in respect of its
income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no
such tax, assessment or governmental charge levy or claim need be paid
if the validity thereof is being contested in good faith by appropriate
proceedings, unless such proceedings involve the imminent sale,
seizure, forfeiture or loss or any material portion of the Collateral.
3.5 Limitation on Liens on Collateral. Other than Permitted
Liens, Debtor will not create, permit or suffer to exist, and will
defend at its sole cost and expense the Collateral against and take
such other action as is necessary to remove, any lien, mortgage,
pledge, assignment, security interest, charge or encumbrance of any
kind and any agreement to give or refrain from giving any of the
foregoing on the Collateral and, subject to the Permitted Liens, will
defend the right, title and interest of Secured Party in and to any of
the Collateral and in and to the Proceeds and Products thereof against
the claims and demands of any person or entity.
3.6 Maintenance of Insurance. Debtor will maintain insurance
policies insuring
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(i) the Collateral against loss or damage, however caused, and
(ii) Debtor against liability for personal injury and property damage
relating to the Collateral. Such insurance policies shall be in such
form and in such amounts and coverage as shall be reasonably
satisfactory to Secured Party, with losses payable to Secured Party as
its interest may appear under a standard non-contributory "mortgagee,"
"lender" or "Secured Party" clause. All such insurance policies shall
(i) contain a clause which provides that Secured Party's interest under
the policy will not be invalidated by any act or omissions of, or any
breach of warranty by, the insured, or by any change in the title,
ownership or possession of the insured property, or by the use of the
property for purposes more hazardous than is permitted in the policy,
and (H) provide that no cancellation, reduction in amount, change in
amount of deductible, or change in coverage thereof shall be effective
until at least thirty (30) days after receipt by Secured Party of
written notice thereof. Debtor shall provide Secured Party with prompt
notice of any claim in excess of $1,000,000 under any such insurance
policy. Debtor shall, if so requested by Secured Party and as often as
Secured Party may reasonably so request, provide Secured Party with
"certificates of insurance" or "insurance binders."
3.7 Limitation on Disposition. Debtor will not sell, transfer,
lease or otherwise dispose of any of the Collateral to the Banks or
anyone else (except inventory sold in the ordinary course of its
business, except for the sale of old and obsolete Collateral in
connection with the replacement thereof, and, on an annual basis,
except for Collateral having an aggregate value of less than
$1,000,000), or attempt to offer or contract to do so without the prior
written consent of Secured Party.
3.8 Further Identification of Collateral. Debtor will furnish
to Secured Party from time to time, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as Secured Party may reasonably request,
all in detail as Secured Party may reasonably require.
3.9 Performance by Secured Party of Debtor's Veltri
Indebtedness. If Debtor fails to perform or comply with any
term or condition contained herein and such failure shall continue for
a period of thirty (30) days after written notice thereof to Debtor
(except where Debtor disputes such notice in good faith, in which case
Secured Party shall have no right to act on behalf of Debtor until
such dispute is resolved), Secured Party shall have the right to
perform or comply, or otherwise cause performance or compliance, with
such term or condition and the reasonable expenses of Secured Party
incurred in connection with such performance or compliance, together
with interest thereon at the rate of two percent (2%) above prime as
reported in the Wall Street Journal, shall be payable by Debtor to
Secured Party on demand and shall constitute part of the Veltri
Indebtedness.
3.10 Right of Inspection. Secured Party shall have access upon
reasonable prior notice during normal business hours to the books and
records relating to the Collateral, and Secured Party or its
representatives may examine the same, take extracts therefrom and make
photocopies thereof (at Secured Party's expense), and Debtor agrees to
render to Secured Party such clerical and other assistance as may be
reasonably requested with regard thereto. Secured Party and its
representatives shall also have the right upon reasonable prior notice
to enter into and upon any premises where any of the Collateral is
located for the purpose of inspecting the same, observing its use or
otherwise protecting their interests therein.
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3.11 Maintenance of Equipment and Fixtures. Debtor will keep
and maintain each item of the Collateral in good operating condition
and repair, ordinary wear and tear excepted.
3.12 Conduct of Business. Debtor will not, whether in a single
transaction or a series of transactions, declare or pay dividends
(other than stock dividends or stock splits) on any stock, security or
other equity interests of Debtor, except for the (a) dividends to
Debtor's shareholders in payment of the federal and state income taxes
payable by such shareholders as a result of Debtor's election to be
taxed as an S Corporation (assuming that such shareholders are taxed at
the highest applicable rates), (b) a dividend in the amount of
$10,000,000 to be paid contemporaneously with the completion of the
Offering, and (c) dividends in amounts not to exceed the income of
Debtor and its subsidiaries (other than VS Holdings, Inc. and Veltri
Holdings USA, Inc.), but only to the extent that the same is replaced
with additional equity and/or indebtedness subordinated to Secured
Party.
3.13 Financial Statement and Information. Debtor will deliver
or cause to be delivered, copies of any and all quarterly and annual
financial statements and other financial statements relating to Debtor,
its business, its financial condition and the Collateral as Debtor may
prepare or cause to be prepared. Any such financial statements and
information shall be prepared in accordance with generally accepted
accounting principles, consistently applied.
3.14 Name Change. Debtor shall not change its corporate name
without first giving Security Party ten (10) days prior written notice.
3.15 Repayment of Loan. Debtor shall not repay any existing
outstanding loan to its shareholders, except to the extent that the
same are repaid out of the funds received in connection with the
Offering.
3.16 Future Subsidiaries. Debtor hereby undertakes to cause all
of its future wholly owned subsidiaries, as well as other subsidiaries
which receive funding from any of them directly or under lending
arrangements with Comerica Bank, or whose indebtedness is guaranteed by
Debtor, or any of them, to grant a security interest in favor of
Secured Party and to execute financing statement and mortgages, where
appropriate, to secure payment of the Veltri Indebtedness in the same
or substantially the same form hereby given.
4. EVENTS OF DEFAULT. Debtor shall be in default under this Security
Agreement upon the occurrence of any of the following events (individually
referred to herein as "Event of Default"):
4.1 A failure of the Debtor to pay, as and when due hereunder,
any of the Veltri Indebtedness. Notwithstanding anything herein
contained to the contrary, no Event of Default shall be deemed to have
occurred pursuant to this Section 4.1 unless such Event of Default
remains uncured ten (10) days after receipt of written notice thereof.
4.2 Debtor's failure to observe or perform any of the terms,
conditions and covenants of this Security Agreement, which failure is
not cured within thirty (30) days after receipt of written notice
thereof, unless such failure is not capable of cure in such thirty (30)
day period, in which case, Debtor shall have commenced such cure within
thirty (30) days of notice and be diligently and in good faith pursuing
the completion of any such cure;
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provided, however, that Debtor shall not be given any such
additional time beyond such original thirty (30) days to cure any
breach or violation of Section 3.12 of this Agreement.
4.3 If a judgment, decree or order for money damages in excess
of $1,000,000 (U.S.) not fully covered by insurance shall have been
entered by a court of competent jurisdiction against Debtor, or any
writ or warrant of execution, attachment, garnishment or any similar
process shall have been filed against any material part of the
Collateral, and such judgment, decree, order, writ or warrant of
execution, attachment, garnishment, or similar process shall have
remained unsatisfied, unvacated, unbonded or unstayed for a period of
sixty (60) days.
4.4 If Debtor (i) becomes insolvent or files a bankruptcy
petition, (ii) makes an assignment for the benefit of creditors, (iii)
is unable to pay or meet its obligations as they mature, (iv) applies
for or consents to the appointment of a custodian, trustee or receiver
for all or any portion of its properties, assets or the Collateral, if
any such custodian, trustee or receiver shall not be discharged within
sixty (60) days, or (v) bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
proceedings commenced against it under any law or statute of the United
States or any State thereof, which proceedings are not dismissed within
sixty (60) days.
4.5 If Comerica, as agent for itself and the Banks, shall
accelerate the indebtedness owed to it, and, after such acceleration,
Comerica, shall exercise its remedies, or commence foreclosure
proceedings by public or private sale, with respect to all or any
portion of the Collateral.
4.6 VMP's default under its general security agreement with
Secured Party dated November 2, 1996.
5. RIGHTS UPON DEFAULT. In addition to any other rights given to
Secured Party hereunder and applicable law, if any Event of Default shall
occur and be continuing:
5.1 Subject to the prior interests of the Banks pursuant to the
Intercreditor Agreement (as such term is defined in Section 21 below),
all payments received by Debtor which are Proceeds of or which are in
connection with any of the Collateral shall be held by Debtor in trust
for Secured Party, shall be segregated from other funds of Debtor and
shall immediately upon receipt by Debtor be turned over to Secured
Party in the same form as received by Debtor (duly endorsed by Debtor
to Secured Party, if required) including all original checks, drafts,
acceptances, notes and other evidence of payment related thereto; and
5.2 Subject to the prior interests of the Banks pursuant to the
Intercreditor Agreement, any and all such payments so received by
Secured Party (whether from Debtor or otherwise) may, in the sole
discretion of Secured Party, be held by Secured Party as collateral
security for, and/or at any time and from time to time thereafter,
applied in whole or in part by Secured Party against, all or any part
of the Veltri Indebtedness in such order and at such times as Secured
Party shall elect in its reasonable discretion. Any balance of such
payments held by Secured Party and remaining after payment in full of
all of the Veltri Indebtedness shall be paid over to the Debtor or to
whomsoever may be lawfully entitled to receive the same.
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6. REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default shall
occur and be continuing, subject to the prior interests and remedies of the
Banks pursuant to the Intercreditor Agreement, Secured Party shall have and may
exercise, in addition to all other rights and remedies granted to it in this
Security Agreement or in any other instrument or agreement securing, evidencing
or relating to the Veltri Indebtedness or available at law or in equity, any one
or more of the following rights and remedies:
6.1 All the rights and remedies upon default, in forfeiture and
otherwise available to secured parties under the UCC and other
applicable law.
6.2 Personally or by agents or attorneys, to take possession of
all or any part of the Collateral and/or render it unusable and
furthermore:
6.2. 1 \ Hold, store, keep idle, lease, operate, remove or
otherwise use or permit the use of the Collateral or any part thereof,
for such time and upon such terms as Secured Party may in its
discretion deem to be in its own best interests, and demand, collect
and retain all earnings and other sums due and to become due in respect
to the same from any party arising from such use and charging against
all receipts from the use of the same or from the sale thereof, all
costs, expenses, judgments, damages and other losses resulting from
such use.
6.2.2 Sell, lease, dispose of or cause to be sold, leased and
disposed of, all or any part of the Collateral at one or more public or
private sales, leasings or other dispositions, in such places and times
and on such terms and conditions as Secured Party in its discretion
determines to be in its own best interest. Debtor's rights, if any, to
all of the following are hereby expressly waived by Debtor to the
fullest extent permitted by law: (i) all notice or advertisement of
sale, lease or other disposition; (ii) any right or equity of
redemption; (iii) any obligation of a perspective purchaser or lessee
to inquire as the power and authority of Secured Party to sell, lease
or otherwise dispose of the Collateral; and (iv) the right to direct
the application of the Proceeds of sale.
Without limiting the generality of the foregoing, Debtor
expressly agrees that if any Event of Default exists, Secured Party,
without demand of performance or other demand, advertisement or notice
of any kind (except the notice, specified below, containing the time
and place of any public or private sale) to or upon Debtor or any other
person (all and each of which demands, advertisements and/or notices
are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or 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 units, lots
or parcels, in one or more contracts, at public or private sale or
sales, at any exchange broker's board or at any of Secured Party's
offices or elsewhere at such prices and on such terms as Secured Party
may deem in its reasonable discretion to be in its own best interests,
for cash or on credit or for future delivery without assumption of any
credit risk. Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which
equity of redemption Debtor hereby releases.
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Debtor agrees that Secured Party need not give more than twenty
(20) days notice (which notification shall be deemed given when mailed,
postage prepared, addressed to Debtor at its address set forth in this
Security Agreement for the giving of notices) of the time and place of
any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters.
Debtor agrees to pay all costs of Secured Party, including
reasonable attorneys' fees and expenses, incurred with respect to the
enforcement of any of the Veltri Indebtedness, the enforcement of
Secured Party's rights and remedies upon a violation of Section 3.12 of
this Agreement and the enforcement of any of Secured Party's rights
hereunder. Debtor hereby waives presentment, demand, protest or any
notice (to the extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral. Debtor also
expressly waives and releases all right to direct the order in which
any of the Collateral shall be sold in the event of any sale or sales
pursuant hereto and to have any of the Collateral marshaled upon any
foreclosure of any of the security interests granted in this Security
Agreement.
The Proceeds of any sale or other disposition of Collateral
shall be applied by Secured Party first upon all expenses authorized by
the UCC and all reasonable attorneys fees and other expenses incurred
by Secured Party; the balance of the Proceeds of such sale or other
disposition shall be applied to the payment of the Veltri Indebtedness,
first to interest then to principal; then, to any indebtedness of
Debtor secured by a subordinated security interest in the Collateral if
Secured Party is notified thereof in the time and manner provided in
the UCC and the surplus, if any, shall be paid over to Debtor or to
such other person or persons as may be entitled thereto under
applicable law. Debtor shall remain liable for any deficiency if the
Proceeds of any sale or disposition of the Collateral are insufficient
to pay all amounts to which Secured Party is entitled, Debtor shall
also remain liable for the fees and expenses of any attorneys employed
by Secured Party to collect such deficiency.
6.3 To institute legal proceedings to foreclose upon and
against the lien and security interests granted by this Security
Agreement and to recover judgment for all amounts then due and owing,
and to collect the same out of any of the Collateral or from the
proceeds of any sale or disposition thereof.
6.4 To enter upon the premises of Debtor or any other place or
places where the Collateral or any part thereof is found and to take
possession of the Collateral with or without demand and with or without
process of law.
6.5 To be entitled, to the extent provided by law, to have
appointed a custodian, trustee or receiver of the Collateral and to the
rents and profits derived therefrom. The Debtor hereby consents to the
appointment of such a custodian, trustee or receiver. This appointment
shall be in addition to any other rights, relief or remedies afforded
Secured Party. Such custodian, trustee or receiver, in addition to any
other rights to which he shall be entitled, shall be authorized to sell
any and all Collateral for the benefit of Secured Party, pursuant to
provisions of law, and Debtor shall remain liable to Secured Party for
any deficiency resulting from any such sale or disposition; and/or
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6.6 To set off and apply any and all obligations or indebtedness at any
time owing by Secured Party to or for the credit or the account of Debtor,
against any and all of the Veltri Indebtedness.
Notwithstanding anything contained in this Security Agreement to the
contrary, in the exercise of its rights under this Security Agreement, Secured
Party shall use that degree of care required by the UCC in the handling, storage
and disposition and shall take all such actions as may be reasonably necessary
to preserve the value of the Collateral and mitigate any loss of such value.
7. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
7.1 Appointment; Powers. Subject to the prior interests and remedies of
the Banks, if an Event of Default shall occur and be continuing, Debtor
irrevocably constitutes and appoints Secured Party, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in Secured Party's discretion, for the
purpose of carrying out the terms of this Security Agreement, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this Security
Agreement and, without limiting the generality of the foregoing, hereby gives
the Secured Party the power and right, on behalf of Debtor, without notice to or
assent by Debtor to do the following:
7.1.1 Pay or discharge taxes, liens, security interests or
other encumbrances levied, placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Security Agreement and to pay all or any part of costs
thereof and the premiums therefor; and
7.1.2 (a) ask, direct and demand any party liable for any
payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (b) collect and receive payment of and
receipt for any and all monies, claims and other amounts due and to
become due at any time in respect of or arising out of any Collateral;
(c) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments and notices in connection with accounts and other documents
relating to the Collateral; (d) in the name of Debtor, to its own name
or otherwise, take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
monies due under any Collateral; (e) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction for the purpose of collecting any monies due under any
Collateral or any part thereof or enforcing any other right in respect
of any Collateral; (f) defend any suit, action or proceeding brought
against Debtor with respect to any Collateral; (g) settle, compromise
or adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as Secured
Party may deem appropriate; (h) assign any copyright, patent or
trademark owned by Debtor (along with the goodwill of the business to
which such trademark pertains), for such term or terms, on such
conditions and in such manner, as Secured Party shall in its sole
discretion determine;
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(i) direct the appropriate U.S. Postal Service office or
offices to deliver all mail addressed to Debtor with respect
to accounts to Secured Party as such place or places as
Secured Party may indicate; and (j) generally sell, transfer,
pledge, make any agreement with respect to or otherwise deal
with any of the Collateral in such manner as is consistent
with the UCC and as fully and completely as though Secured
Party were the absolute owner thereof for all purposes, and
do, at Secured Party's option and Debtor's expense, at any
time or from time to time all acts and things which Secured
Party deems reasonably necessary to protect, preserve or
realize upon the Collateral and Secured Party's security
interest therein in order to affect the intent of this
Security Agreement, all as fully and effectively as Debtor
might do.
7.2 Limitation on Liabili1y. The powers conferred on Secured
Party hereunder are solely to protect its interests in the Collateral
and shall not impose any duty upon it to exercise any such powers.
Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be
responsible to Debtor for any act or failure to act, except for Secured
Party's own gross negligence or willful misconduct.
7.3 Powers Coupled With An Interest. All powers, authorizations
and agencies contained in this Security Agreement with respect to the
Collateral are irrevocable and are deemed powers coupled with an
interest. Debtor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof.
8. TERMINATION. This Security Agreement, and all security interests of
Secured Party in the Collateral, shall terminate upon the full and final payment
of the Earn Out Amount and the Note Amount, as defined in the Stock Purchase
Agreement. Upon the full and final termination of this Security Agreement,
Secured Party will execute and deliver to Debtor termination statements,
releases and other documents reasonably requested by Debtor to evidence the
termination of this Security Agreement and of Secured Party's security interest
in the Collateral.
9. VENUE: JURISDICTION. Debtor agrees that all actions or proceedings
arising in connection with this Security Agreement shall be filed and tried only
in the courts of Oakland County, Michigan or of the United States for the
Eastern District of Michigan, Southern Division. Debtor hereby irrevocably and
unconditionally consents to, itself and in respect of its property, the
jurisdiction and venue of such courts. Nothing herein shall affect the right of
Secured Party to serve process in any manner permitted by law or to commence
legal proceedings or otherwise proceed against Debtor in any other jurisdiction.
Debtor irrevocably waives any right it may have to assert the doctrine of forum
non conveniens or to object to venue to the extent any proceeding is brought in
accordance with this Section.
10. WAIVERS VOLUNTARY. The waivers contained in this Agreement are
freely, knowingly and voluntarily given by each party, without any duress or
coercion, after each party has consulted with its counsel and has carefully and
completely read all of the terms and provisions of this Agreement, specifically
including the waivers contained in this Section.
11. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three days after being deposited in the
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mail, postage prepaid, addressed as follows in the case of Debtor and Secured
Party, or to such other address as may be provided in writing:
Debtor: Talon Automotive Group, Inc.
900 Wilshire Drive
Suite 150
Troy, Michigan 48084
Attn: David Woodward
Secured Party: Michael T.J. Veltri
4530 River Trail
Bloomfield Hills, MI 48301
12. SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
13. NO WAIVER, CUMULATIVE REMEDIES. Secured Party shall not 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
Secured Party and then only to the extent therein set forth. A waiver by Secured
Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Secured Party would otherwise
have had on any future occasion. No failure to exercise, nor any delay in
exercising, on the part of Secured Party, 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 or in equity. 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 Secured Party or Debtor.
14. SUCCESSORS AND ASSIGNS. This Security Agreement and all of the
Veltri Indebtedness shall be binding upon the successors, assigns and
wholly-owned subsidiaries of Debtor, and shall, together with the rights and
remedies of Secured Party hereunder inure to the benefit of Secured Party and
his heirs or devisees; provided, however, that neither Debtor nor Secured Party
may assign any of their respective rights or any of the Veltri Indebtedness
hereunder without the prior written consent of the other party (which consent
shall not be unreasonably withheld), except that Secured Party may assign his
rights and obligations to a revocable living trust of which Secured Party is the
sole trustee during his lifetime.
15. COUNTERPARTS. This Security Agreement may be executed by the
parties hereto in any number of separate counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
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16. CONSTRUCTION. Neither this Security Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Secured Party,
whether under any rule of construction or otherwise. On the contrary, this
Security Agreement has been reviewed by each of the parties and their counsel
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
17. COMPLETE AGREEMENT. This Security Agreement represents the entire
agreement between Debtor and Secured Party relating to the subject matter
hereof, supersedes all prior agreements, commitments and understandings between
the parties hereto relating to the subject matter hereof, cannot be changed or
terminated orally, and shall be deemed effective as of the date hereof.
18. HEADINGS. Headings used in this Security Agreement are for
convenience of reference only and shall not constitute a part of this Security
Agreement for any other purpose or affect the construction of this Security
Agreement.
19. CHOICE OF LAW. The validity of this Security Agreement, its
construction, interpretation and enforcement and the rights of the parties
hereto shall be determined under, governed by and construed in accordance with
the laws of the State of Michigan, without regard to principles of conflicts of
law.
20. WAIVER OF JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE AND
AGREE THAT THERE MAY BE A CONSTITUTIONAL RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY CLAIM, DISPUTE OR LAWSUIT ARISING BETWEEN THEM, BUT THAT SUCH RIGHT MAY
BE WAIVED. ACCORDINGLY, THE PARTIES AGREE THAT NOTWITHSTANDING SUCH
CONSTITUTIONAL RIGHT, IN THIS COMMERCIAL MATTER THE PARTIES BELIEVE AND AGREE
THAT IT SHALL BE IN THEIR BEST INTEREST TO WAIVE SUCH RIGHT, AND, ACCORDINGLY,
HEREBY WAIVE SUCH RIGHT TO A JURY TRIAL, AND FURTHER AGREE THAT THE BEST FORUM
FOR BEARING ANY CLAIM, DISPUTE OR LAWSUIT, IF ANY, ARISING IN CONNECTION WITH
THIS AGREEMENT OR THE RELATIONSHIP BETWEEN SECURED PARTY AND DEBTOR, SHALL BE A
COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.
21. ACKNOWLEDGEMENT OF SUBORDINATION. Notwithstanding anything
contained herein to the contrary, Secured Party acknowledges and agrees that its
security interest in the Collateral is subordinate in all respects to the
security interest of the Banks in the Collateral to the extent provided in the
Intercreditor Agreement, dated as of the date hereof (the "Intercreditor
Agreement"), between Secured Party and the Banks and that all rights, remedies
and powers of Secured Party hereunder with respect to the Collateral (including
without limitation those set forth in Sections 5, 6 and 7 hereof) shall be
subject to and limited by the superior rights of the Banks to the extent
provided in the Intercreditor Agreement. In furtherance of the foregoing,
Secured Party agrees to execute and deliver to the Banks a subordination
agreement containing such terms as the Banks may reasonably request with respect
to the foregoing and any other matter to be covered thereby.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered as of the date first set forth above.
DEBTOR:
TALON AUTOMOTIVE GROUP, INC.
By: David J. Woodward
-------------------------------
Its:
-----------------------
OTHER PARTIES:
VS HOLDINGS, INC.
By: David J. Woodward
--------------------------------
Its:
-------------------------------
VELTRI HOLDINGS USA, INC.
By: David J. Woodward
--------------------------------
Its:
-------------------------------
SECURED PARTY:
Michael T.J. Veltri
-----------------------------------
Michael T.J. Veltri
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