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EXHIBIT 10.42
EXECUTION COPY
(TESSCO)
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 24, 1997, between
TESSCO GROUP, 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 Credit Agreement dated as
of the date hereof by and among Code-Alarm, Inc., a Michigan corporation (in
such capacity, the "Borrower"), the other Persons signatory thereto as Credit
Parties, Agent and the Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the "Credit Agreement"),
Lenders have agreed to make the Loans to, and to incur Letter of Credit
Obligations for the benefit of, the Borrower;
WHEREAS, Grantor is currently a wholly-owned subsidiary of
Borrower and will derive direct and indirect economic benefits from the making
of the Loans and other financial accommodations provided to Borrower pursuant to
the Credit Agreement;
WHEREAS, Agent and Lenders are willing to make the Loans and
to incur Letter of Credit Obligations as provided for in the Credit Agreement,
but only upon the condition, among others, that Grantor shall have executed and
delivered to Agent, for itself and the ratable benefit of Lenders, that certain
Guaranty dated as of the date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the "Guaranty");
WHEREAS, in order to induce Agent and Lenders to enter into
the Credit Agreement and Loan Documents other than Litigation Collateral
Documents (hereinafter, "Loan Documents") and to induce Lenders to make the
Loans and to incur Letter of Credit Obligations as provided for in the Credit
Agreement, Grantor has agreed to grant to Agent, for the benefit of itself and
Lenders, a lien on and security interest in substantially all of its property as
security for such Guaranteed Obligations (as defined in the Guaranty).
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.
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2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Guaranteed Obligations and all other Obligations other
than Permitted Encumbrances and Litigation Obligations (hereinafter,
"Obligations") of Grantor hereunder and under each of the Loan Documents to
which it is a party, 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, 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"):
(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, and all
other deposit and other bank accounts and
all deposits therein;
(xiii) all money, cash or cash equivalents of
Grantor; and
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(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.
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
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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.
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 ▇▇▇▇▇ ▇ ▇▇▇▇ 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 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
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prior to all other Liens, except 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.
(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
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gives such consent, Grantor will concurrently therewith deliver to Agent such
additional financingstatements 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 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, 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
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respect to the Liens granted hereunder or under any Loan Document, (iii)
transferring Collateralto 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 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 ▇▇▇▇ 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.
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(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 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
▇▇▇ 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 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.
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(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.
(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 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
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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)
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
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insufficient to pay all Obligations, including any attorneys' fees or other
expenses incurred by Agent or any Lender to collect such deficiency.
(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. NOTICES. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication
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12
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.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor
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(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
fand 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 ▇▇▇▇ 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
▇▇▇▇ 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. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
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14
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.
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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.
TESSCO GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Title: President
-----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇
-------------------------------
Title: Duly Authorized Signatory
------------------------------
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16
SCHEDULE I
FILING JURISDICTIONS
1. UCC-1 Financing Statements:
Debtor: TESSCO GROUP, 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: TESSCO GROUP, INC.
Locations: (1) Oakland County, Michigan
(2) ▇▇▇▇▇▇▇▇▇▇ 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:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
II. Corporate Offices of Grantor:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
III. Warehouses:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
IV. Other Premises at which Collateral is Stored or Located:
None.
V. Locations of Records Concerning Collateral:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
19
SCHEDULE IV
PATENTS, TRADEMARKS AND COPYRIGHTS
None.
20
EXHIBIT A
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by Tessco
Group, 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 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)
21
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.
TESSCO GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Title: President
--------------------------
ATTEST:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
(SEAL)
Title: Vice President and CFO
--------------------------
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