EXHIBIT 10.4
SECURITY AGREEMENT
THIS AGREEMENT made as of December 26, 1997, by and between
▇▇▇▇▇ ELECTRONICS, INC., an Indiana corporation, with a principal
place of business at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
("Debtor") and FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States having
an office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Secured Party"), as Agent for itself and each of the other
Lenders who are now or hereafter become parties to the
hereinafter defined Loan Agreement. Capitalized terms used but
not expressly defined herein shall have the meanings assigned
thereto in said Loan Agreement.
SECTION 1. RECITALS.
(a) Pursuant to the terms of that certain Loan Agreement
dated as of the date hereof between PCD Inc., a Massachusetts
corporation (the "Principal Debtor"), Secured Party and the
Lenders (as the same may be amended from time to time, the "Loan
Agreement"), Secured Party and the Lenders have agreed to make
loans to Principal Debtor in an aggregate principal amount not to
exceed $90,000,000.00, as evidenced by that certain Term Note A,
Term Note B and Revolving Credit Note of Principal Debtor dated
as of the date hereof; and
(b) Principal Debtor owns 100% of the issued and outstanding
capital stock of Debtor; and
(c) Debtor has, as of the date hereof, executed and
delivered to Secured Party that certain Unlimited Guaranty
pursuant to which Debtor has guaranteed payment and performance
of all of the Obligations of Principal Debtor (as such term is
defined in the Loan Agreement) (the "Guaranty"); and
(d) Debtor has concurrently granted to Secured Party a
security interest in all of Debtor's assets to secure its
obligations to Secured Party and/or the Lenders under the
Guaranty.
SECTION 2. THE SECURITY INTERESTS. (a) In order to
secure (i) payment and performance of all of the obligations of
Principal Debtor under the Loan Agreement and under the Notes,
(ii) the performance of all of the obligations of Debtor to
Secured Party contained herein, and (iii) the payment of all
other future advances and other obligations of Principal Debtor
or Debtor to Secured Party and/or the Lenders, including, without
limitation, any future loans and advances made to Principal
Debtor or Debtor by Secured Party and/or the Lenders prior to,
during or following any (a) application by Principal Debtor or
Debtor for or consent by Principal Debtor or Debtor to the
appointment of a receiver, trustee or liquidator of Principal
Debtor's or Debtor's property, (b) admission by Principal Debtor
or Debtor in writing of its inability to pay or failure generally
to pay its respective debts as they mature, (c) general
assignment by Principal Debtor or Debtor for the benefit of
creditors, (d) adjudication of Principal Debtor or Debtor as
bankrupt or (e) filing by Principal Debtor or Debtor of a
voluntary petition in bankruptcy or a petition or an answer
seeking reorganization or an arrangement with creditors or to
take advantage of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debts, dissolution or liquidation
statute, or an answer admitting the material allegations of a
petition filed against it in a proceeding under any such law (any
of the foregoing shall hereinafter be referred to as a
"Bankruptcy Event"), any interest accruing under the Notes and/or
the Loan Agreement after the commencement of a Bankruptcy Event
to the extent permitted by applicable law, and any and all other
indebtedness, liabilities and obligations of Principal Debtor or
Debtor to Secured Party and/or the Lenders of every kind and
description, direct, indirect or contingent, now or hereafter
existing, due or to become due (all of the foregoing being
hereinafter called the "Obligations"), Debtor hereby grants to
Secured Party for its benefit a continuing security interest in
the following described fixtures and personal property
(hereinafter collectively called the "Collateral"):
All fixtures and all tangible and intangible personal
property of Debtor, whether now owned or hereafter acquired by
Debtor, or in which Debtor may now have or hereafter acquire an
interest, including, without limitation, (a) all equipment
(including all machinery, tools and furniture), inventory and
goods (each as defined in the Uniform Commercial Code, if so
defined therein); (b) all accounts, accounts receivable, other
receivables, contract rights, chattel paper, and general
intangibles (including, without limitation, trademarks, trademark
registrations, trademark registration applications, servicemarks,
servicemark registrations, servicemark registration applications,
goodwill, tradenames, trade secrets, patents, patent
applications, leases, licenses, permits, copyrights, copyright
registrations, copyright registration applications, moral rights,
any other proprietary rights, exclusionary rights or intellectual
property and any renewals and extensions associated with any of
the foregoing, as each of the foregoing may be secured under the
laws now or hereafter in force and effect in the United States of
America or any other jurisdiction) of Debtor (each as defined in
the Uniform Commercial Code, if so defined therein); (c) all
instruments, documents of title, policies and certificates of
insurance, securities, bank deposits, deposit accounts, checking
accounts and cash of Debtor; (d) all accessions, additions or
improvements to, all replacements, substitutions and parts for,
and all proceeds and products of, all of the foregoing and (e)
all books, records and documents relating to any of the
foregoing.
(b) All Collateral consisting of accounts receivable,
contract rights, instruments, chattel paper and general
intangibles (each as defined in the Uniform Commercial Code) of
Debtor arising from the sale, delivery or provision of goods
and/or services, including, without limitation, all documents,
notes, drafts and acceptances, now owned by Debtor as well as any
and all thereof that may be hereafter acquired by Debtor and in
and to all returned or repossessed goods arising from or relating
to any contract rights, accounts or other proceeds of any sale or
other disposition of inventory, are sometimes hereinafter
collectively called the "Customer Receivables".
(c) The security interests granted pursuant to this SECTION
2 (the "Security Interests") are granted as security only and
shall not subject Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of Debtor under any
of the Collateral or any transaction which gave rise thereto.
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SECTION 3. DELIVERY OF PLEDGED SECURITIES, CHATTEL PAPER
AND DATABASE. All securities including, without limitation,
shares of stock and negotiable promissory notes, of Debtor,
whether now owned or hereafter acquired by Debtor, shall be
delivered to Secured Party by Debtor simultaneously with the
delivery hereof or, with respect to after acquired securities,
promptly after the same have been acquired by Debtor (which
securities are hereinafter called the "Pledged Securities") shall
be in suitable form for transfer by delivery, or shall be
accompanied by duly executed undated instruments of transfer or
assignments in blank, all in form and substance satisfactory to
Secured Party. EXHIBIT A attached hereto and made a part hereof
sets forth a complete description of all securities owned by
Debtor on the date hereof. Secured Party may at any time or from
time to time, at its sole discretion, require Debtor to cause any
chattel paper included in the Customer Receivables to be
delivered to Secured Party or any successor agent or
representative designated by it for the purpose of causing a
legend referring to the Security Interests to be placed on such
chattel paper and upon any ledgers or other records concerning
the Customer Receivables.
SECTION 4. FILING; FURTHER ASSURANCES. Debtor will, at
its expense, execute, deliver, file and record (in such manner
and form as Secured Party may reasonably require), or permit
Secured Party to file and record, any financing statements, any
carbon, photographic or other reproduction of a financing
statement or this Security Agreement (which shall be sufficient
as a financing statement hereunder), any specific assignments or
other paper that may be reasonably necessary or desirable, or
that Secured Party may reasonably request, in order to create,
preserve, perfect or validate any Security Interest or to enable
Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact to execute in
the name and behalf of Debtor such additional financing
statements as Secured Party may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF DEBTOR.
Debtor hereby represents and warrants to Secured Party that (a)
Debtor is, or to the extent that certain of the Collateral is to
be acquired after the date hereof, will be, the owner of the
Collateral free from any adverse Lien except as permitted under
the Loan Agreement; (b) except for such financing statements
identified on EXHIBIT C hereto and such financing statements
relating to Liens against Debtor specifically described in and
permitted by the Loan Agreement, no financing statement covering
the Collateral is on file in any public office, other than the
financing statements filed pursuant to this Security Agreement;
(c) all additional information, representations and warranties
contained in EXHIBIT B attached hereto and made a part hereof are
true, accurate and complete in all material respects on the date
hereof; and (d) there are no restrictions upon the voting rights
or the transfer of all or any of the Pledged Securities (other
than as may appear on the face of any certificate evidencing any
of the Pledged Securities or as may be imposed by any state or
local agency or government) and Debtor has the right to vote,
pledge, grant the Security Interest in and otherwise transfer the
Pledged Securities free of any encumbrances (other than
applicable restrictions imposed by any state or local agency or
government or Federal or state securities laws or regulations).
SECTION 6. COVENANTS OF DEBTOR. Debtor hereby covenants
and agrees with Secured Party that Debtor (a) will defend the
Collateral against all claims and demands of all persons at any
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time claiming any interest therein other than that of Secured
Party; (b) will provide Secured Party with prompt written notice
of (i) any change in the office where Debtor maintains its books
and records pertaining to the Customer Receivables, and (ii) the
movement or location of Collateral to or at any address other
than as set forth in EXHIBIT B attached hereto; (c) will promptly
pay any and all taxes, assessments and governmental charges upon
the Collateral prior to the date penalties attach thereto except
to the extent permitted under the Loan Agreement; (d) will
immediately notify Secured Party of any event causing a
substantial loss or diminution in the value of all or any
material part of the Collateral and the amount or an estimate of
the amount of such loss or diminution; (e) will have and maintain
insurance at all times in accordance with the provisions of the
Loan Agreement; (f) except in the ordinary course of business or
as otherwise permitted under the Loan Agreement, will not sell or
offer to sell or otherwise assign, transfer or dispose of the
Collateral or any interest therein, without the prior written
consent of Secured Party; (g) will keep the Collateral free from
any adverse Lien (other than Liens permitted under the Loan
Agreement) and in good order and repair, reasonable wear and tear
excepted, and will not waste or destroy the Collateral or any
part thereof; and (h) will not use the Collateral in violation of
the Loan Agreement or this Agreement.
SECTION 7. RECORDS RELATING TO COLLATERAL. Debtor will
keep its records concerning the Collateral, including the
Customer Receivables and all chattel paper included in the
Customer Receivables, at the location(s) set forth in EXHIBIT B
attached hereto or at such other place or places of business of
which Secured Party shall have been notified in writing no less
than ten (10) days in advance. Debtor will hold and preserve
such records and chattel paper and will, to the extent provided
in the Loan Agreement, (a) permit representatives of Secured
Party at any time during normal business hours to examine and
inspect the Collateral and to make abstracts from such records
and chattel paper, and (b) furnish to Secured Party such
information and reports regarding the Collateral as Secured Party
may from time to time reasonably request.
SECTION 8. RECORD OWNERSHIP OF PLEDGED SECURITIES. Debtor
will promptly give to Secured Party copies of any notices or
other communications received by Debtor with respect to Pledged
Securities registered in the name of Debtor. Upon the occurrence
of an Event of Default, Secured Party may cause any or all of the
Pledged Securities to be transferred of record into the name of
Secured Party (or a designee of Secured Party).
SECTION 9. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED
SECURITIES. Unless an Event of Default shall have occurred and
be continuing, Debtor shall be entitled, from time to time, to
collect and receive for its own use all dividends, interest and
other payments and distributions made upon or with respect to the
Pledged Securities, except:
(i) dividends of stock;
(ii) dividends payable in securities or other property
(except cash dividends);
(iii) other securities issued with respect to or in lieu of
the Pledged Securities (whether upon conversion of the
convertible securities included therein or through stock
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split, spin-off, split-off, reclassification, merger,
consolidation, sale of assets, combination of shares or
otherwise).
All of the foregoing, together with all new, substituted or
additional shares of capital stock, warrants, options or other
rights, or other securities issued in addition to or in respect
of all or any of the Pledged Securities shall be delivered to
Secured Party hereunder as required by SECTION 3 hereof, to be
held as Collateral pursuant to the terms hereof in the same
manner as the Pledged Securities delivered to Secured Party on
the date hereof.
SECTION 10. RIGHT TO VOTE PLEDGED SECURITIES. Unless an
Event of Default shall have occurred and be continuing, Debtor
shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Pledged
Securities and to exercise conversion rights with respect to the
convertible securities included therein, and Secured Party shall,
upon receiving a written request from Debtor accompanied by a
certificate signed by Debtor's principal financial officer
stating that no Event of Default has occurred, deliver to Debtor
or as specified in such request such proxies, powers of attorney,
consents, ratifications and waivers in respect of any Pledged
Securities which are registered in Secured Party's name, and make
such arrangements with respect to the conversion of convertible
securities as shall be specified in Debtor's request, such
arrangements to be in form and substance reasonably satisfactory
to Secured Party.
If an Event of Default shall have occurred and be
continuing, and provided Secured Party elects to exercise the
rights hereinafter set forth by notice to Debtor of such
election, Secured Party shall have the right, to the extent
permitted by law, and Debtor shall take all such action as may be
necessary or reasonably appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers and take
any other action with respect to all the Pledged Securities with
the same force and effect as if Secured Party were the absolute
and sole owner thereof.
SECTION 11. GENERAL AUTHORITY. Debtor hereby irrevocably
appoints Secured Party Debtor's lawful attorney (which
appointment shall be deemed a power coupled with an interest)
with full power of substitution, in the name of Debtor, for the
sole use and benefit of Secured Party, its successors and
assigns, but at Debtor's expense, to exercise, all or any of the
following powers with respect to all or any of the Collateral
during the existence and continuance of any Event of Default:
(i) to demand, ▇▇▇ for, collect, receive and give
acquittance for any and all monies due or to become due;
(ii) to receive, take, endorse, assign and deliver all
checks, notes, drafts, securities, documents and other
negotiable and non-negotiable instruments and chattel paper
taken or received by Secured Party;
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(iii) to settle, compromise, compound, prosecute or
defend any action or proceeding with respect thereto;
(iv) to sell, transfer, assign or otherwise deal in or
with the same or the proceeds or avails thereof or the
related goods securing the Customer Receivables, as fully
and effectually as if Secured Party were the absolute owner
thereof;
(v) to extend the time of payment of any or all thereof
and to make any allowance and other adjustments with
reference thereto;
(vi) to discharge any taxes or Liens at any time placed
thereon; and
(vii) to execute any document or form, in the name of
Debtor, which may be necessary or desirable in connection
with any sale of Pledged Securities by Secured Party,
including without limitation Form 144 promulgated by the
Securities and Exchange Commission;
provided, that Secured Party shall give Debtor not less than ten
(10) days' prior written notice of the time and place of any sale
or other intended disposition of any of the Collateral.
SECTION 12. EVENTS OF DEFAULT. Debtor shall be in default
under this Security Agreement upon the occurrence of any Event of
Default under the Loan Agreement.
SECTION 13. REMEDIES UPON EVENT OF DEFAULT. If any Event
of Default shall have occurred and be continuing, Secured Party
may exercise all the rights and remedies of a secured party under
the Uniform Commercial Code. Secured Party may require Debtor to
assemble all or any part of the Collateral and make it available
to Secured Party at a place to be designated by Secured Party
which is reasonably convenient. Secured Party shall give Debtor
ten (10) days' written notice of its intention to make any public
or private sale or sale at a broker's board or on a securities
exchange of the Collateral. At any such sale the Collateral may
be sold in one lot as an entirety or in separate parcels, as
Secured Party may determine. Secured Party shall not be
obligated to make any such sale pursuant to any such notice. To
the extent permitted by law, Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time
or place to which the same may be adjourned. Secured Party,
instead of exercising the power of sale herein conferred upon it,
may proceed by a suit or suits at law or in equity to foreclose
the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of
competent jurisdiction.
SECTION 14. APPLICATION OF COLLATERAL AND PROCEEDS. The
proceeds of any sale of, or other realization upon, all or any
part of the Collateral shall be applied in the following order of
priorities: (a) first, to pay the expenses of such sale or other
realization, including reasonable attorneys' fees, and all
expenses, liabilities and advances incurred or made by Secured
Party in connection therewith, and any other unreimbursed
expenses for which Secured Party may be reimbursed pursuant to
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SECTION 15; (b) second, to the payment of the Obligations in such
order of priority as Secured Party, in its sole discretion, shall
determine; and (c) finally, to pay to Debtor, or its successors
or assigns, or as a court of competent jurisdiction may direct,
any surplus then remaining from such proceeds.
SECTION 15. EXPENSES; SECURED PARTY'S LIEN. Debtor will
forthwith upon demand pay to Secured Party: (a) the amount of any
taxes which Secured Party may have been required to pay by reason
of the Security Interests (including any applicable transfer and
personal property taxes but excluding taxes in respect of Secured
Party's income and profits) or to free any of the Collateral from
any Lien thereon and (b) the amount of any and all reasonable
costs and expenses, including the reasonable fees and
disbursements of its counsel and of any agents not regularly in
its employ, which Secured Party may incur in connection with (i)
the collection or other disposition of any of the Collateral,
(ii) the exercise by Secured Party of any of the powers conferred
upon it hereunder, (iii) any default on Debtor's part hereunder
or (iv) any Bankruptcy Event.
SECTION 16. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. Upon the repayment and performance in full of all
the Obligations and the expiration or termination of any
obligations of Secured Party to advance funds to Debtor, or upon
the sale of any Collateral which is permitted under the Loan
Agreement or as otherwise consented to in writing by Secured
Party, the Security Interests on such sold Collateral shall
terminate and all rights to the Collateral shall revert to Debtor
or such other party as may be entitled thereto. Upon any such
termination of the Security Interests or release of Collateral,
Secured Party will execute and deliver to Debtor such documents
as Debtor shall reasonably request to evidence the termination of
the Security Interests or the release of such Collateral, as the
case may be. Notwithstanding the foregoing, this Security
Agreement shall be reinstated if at any time any payment made or
value received with respect to an Obligation is rescinded,
invalidated, declared to be fraudulent or preferential, or set
aside or is required to be repaid to a trustee, receiver or any
other party under any case or proceeding, voluntary or
involuntary, for the distribution, division or application of all
or part of the assets of Debtor or the proceeds thereof, whether
such case or proceeding be for the liquidation, dissolution or
winding up of Debtor or their respective businesses, a
receivership, insolvency or bankruptcy case or proceeding, an
assignment for the benefit of creditors or a proceeding by or
against Debtor for relief under the federal Bankruptcy Code or
any other bankruptcy, reorganization or insolvency law or any
other law relating to the relief of debtors, readjustment of
indebtedness, reorganization, arrangement, composition or
extension or marshalling of assets or otherwise, all as though
such payment had not been made or value received.
SECTION 17. NOTICES. All notices, requests, demands and
other communications provided for hereunder shall be in writing
and mailed or telefaxed or delivered to the applicable party in
the manner set forth in SECTION 9.6 of the Loan Agreement.
SECTION 18. MISCELLANEOUS. (a) No failure on the part of
Secured Party to exercise, and no delay in exercising, and no
course of dealing with respect to, any right, power or remedy
under this Security Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise by Secured Party of any
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right, power or remedy under this Security Agreement preclude any
other right, power or remedy. The remedies in this Security
Agreement are cumulative and are not exclusive of any other
remedies provided by law. Neither this Security Agreement nor
any provision hereof may be changed, waived, discharged or
terminated orally but only by a statement in writing signed by
the party against which enforcement of the change, waiver,
discharge or termination is sought.
(b) This Security Agreement shall be construed in
accordance with and governed by the laws of The Commonwealth of
Massachusetts, except as otherwise required by mandatory
provisions of law.
(c) This Security Agreement may be executed in several
counterparts, each of which shall be an original and all of which
shall constitute but one and the same Security Agreement.
SECTION 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(a) Except to the extent prohibited by applicable law,
Debtor irrevocably:
(i) agrees that any suit, action, or other legal proceeding
arising out of this Security Agreement or any of the Loans
may be brought in the courts of record of The Commonwealth
of Massachusetts or any other state(s) in which any of the
Collateral is located or the courts of the United States
located in The Commonwealth of Massachusetts or any other
state(s) in which any of the Collateral is located;
(ii) consents to the jurisdiction of each such court in any
such suit, action or proceeding; and
(iii) waives any objection which it may have to the laying
of venue of such suit, action or proceeding in any of such
courts.
For such time as any of the Obligations of Debtor to Secured
Party shall be unpaid in whole or in part and/or the Commitment
is in effect, Debtor irrevocably designates the registered agent
or agent for service of process of the Debtor as reflected on the
records of the Secretary of State of The Commonwealth of
Massachusetts as its registered agent, and, in the absence
thereof, the Secretary of State of The Commonwealth of
Massachusetts, as its agent to accept and acknowledge on its
behalf service of any and all process in any such suit, action or
proceeding brought in any such court and agrees and consents that
any such service of process upon such agent and written notice of
such service to Debtor by registered or certified mail shall be
taken and held to be valid personal service upon Debtor
regardless of where Debtor shall then be doing business and that
any such service of process shall be of the same force and
validity as if service were made upon it according to the laws
governing the validity and requirements of such service in each
such state and waives any claim of lack of personal service or
other error by reason of any such service. Any notice, process,
pleadings or other papers served upon the aforesaid designated
agent shall, within three (3) Business Days after such service,
be sent by the method provided therefor under SECTION 9.6 of the
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Loan Agreement to the Debtor at its address set forth in the Loan
Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN THE DEBTOR AND
SECURED PARTY WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 20. SEPARABILITY. If any provision hereof is
invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Secured
Party.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, this Security Agreement has been
executed by the parties hereto all as of the day and year first
above written.
▇▇▇▇▇ ELECTRONICS, INC.
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Treasurer
FLEET NATIONAL BANK, as Agent for
itself and the other Lenders
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
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