EXHIBIT 4.6
CONFORMED COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 10, 2004, among ROCKFORD CORPORATION,
an Arizona corporation (the "Company"), and Audio Innovations, Inc., an Oklahoma
corporation ("AII" and, together with the Company, the "Grantors" and each
individually a "Grantor"), and BNY Western Trust Company, in its capacity as
collateral agent (and any successor collateral agent, the "Agent") for the
holders of the Notes (the "Holders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Indenture dated as of the date
hereof by and between Company and BNY Western Trust Company (the "Trustee"), as
from time to time amended, restated, supplemented or otherwise modified (the
"Indenture"), the Company has authorized issuance from time to time of 4.5%
Convertible Senior Subordinated Secured Notes due 2009 (the "Notes");
WHEREAS, the Grantors will receive substantial direct and indirect
benefits from the Indenture and the Notes issued thereunder;
WHEREAS, the Grantors have agreed to grant a continuing second
priority Lien on the Collateral (as hereinafter defined) to secure the
Obligations;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. The following terms shall have the following
respective meanings:
"Accounts" shall mean all present and future rights of any Grantor
to payment of a monetary obligation, whether or not earned by performance, which
is not evidenced by chattel paper or an instrument, (a) for property that has
been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b)
for services rendered or to be rendered, (c) for a secondary obligation incurred
or to be incurred, or (d) arising out of the use of a credit, charge or debit
card along with all information contained on or for use with such card.
"Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five percent (5%) or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five percent (5%) or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
percent (5%) or more of the equity interests and (c) any director or executive
officer of such Person. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common
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control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
"Agent's Commercial Judgment" means the commercially reasonable
judgment of the Agent as to credit or, where applicable, other matters, in each
case exercised in good faith.
"Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock, or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
"Collateral" shall have the meaning set forth in Section 2 hereof.
"Documents" means all documents as such term is defined in the UCC,
including bills of lading, warehouse receipts or other documents of title, now
owned or hereafter acquired by each Grantor.
"Direct Foreign Subsidiaries" shall mean, collectively, Rockford
(Europe) Elektronik Vertriebs GmbH, a German GmbH, and Rockford Foreign Sales
Corporation, a Barbados corporation, as the direct foreign Subsidiaries of the
Company.
"EBITDA" shall mean for any fiscal period, as applicable, of the
Company, the sum of operating income of the Company and its Subsidiaries on a
consolidated basis, excluding any non-recurring or special items, plus
depreciation and amortization expense deducted therefrom, as calculated by the
Company's chief financial officer consistent with the information presented in
the financial statements of the Company filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act.
"Equipment" mean all of each Grantor's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment and computer hardware and software, whether owned or
licensed, and including embedded software, vehicles, tools, furniture, fixtures,
all attachments, accessions and property now or hereafter affixed thereto or
used in connection therewith, and substitutions and replacements thereof,
wherever located.
"ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
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"ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower or any Borrower's Subsidiary under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
"Intellectual Property" shall mean all of each Grantor's now owned
and hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, service marks, trade names, trade styles, trademark
and service ▇▇▇▇ applications, and licenses and rights to use any of the
foregoing; all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to ▇▇▇ for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name
registrations; software and contract rights relating to software, in whatever
form created or maintained.
"Instruments" means all instruments as such term is defined in the
UCC, now owned or hereafter acquired by each Grantor.
"Inventory" shall mean all of each Grantor's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by such
Grantor as lessor; (b) are held by such Grantor for sale or lease or to be
furnished under a contract of service; (c) are furnished by such Grantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.
"Lien" means, with respect to any asset, any mortgage, deed of
trust, deed to secure debt, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset, whether or not filed, recorded
or otherwise perfected under applicable law (including any conditional sale or
other title retention agreement or any lease in the nature thereof); provided
that in no event shall an operating lease be deemed to constitute a Lien.
"Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the Notes, the Indenture, the Securities and all other obligations, liabilities
and indebtedness of every kind, nature and description owing by the Company
under the Securities, the Indenture, the Securities Purchase Agreement, the
Registration Rights Agreement and the Warrant Agent Agreement, in each case
whether now or hereafter existing, direct or indirect, absolute or contingent,
due or not due, primary or secondary, liquidated or unliquidated, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether or not arising on or after the
commencement of a proceeding under Title 11, U.S. Code or any similar federal or
state law for the relief of debtors (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding.
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"Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Grantor sponsors, maintains, or to which it makes, is making,
or is obligated to make contributions, or in the case of a Multiemployer Plan
has made contributions at any time during the immediately preceding six (6) plan
years.
"Real Property" shall mean all now owned and hereafter acquired real
property of each Grantor, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
"Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of each Grantor: (a) all Accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; and (c)
all payment intangibles of such Grantor and other contract rights, chattel
paper, instruments, notes, and other forms of obligations owing to such Grantor,
whether from the sale and lease of goods or other property, licensing of any
property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by such Grantor or to or for the
benefit of any third person (including loans or advances to any Affiliates or
Subsidiaries of such Grantor) or otherwise associated with any Accounts,
Inventory or general intangibles of such Grantor (including, without limitation,
choses in action, causes of action, tax refunds, tax refund claims, any funds
which may become payable to such Grantor in connection with the termination of
any Plan or other employee benefit plan and any other amounts payable to such
Grantor from any Plan or other employee benefit plan, rights and claims against
carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, casualty or any similar types of insurance and
any proceeds thereof and proceeds of insurance covering the lives of employees
on which such Grantor is a beneficiary).
"Records" shall mean all of each Grantor's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of such Grantor
with respect to the foregoing maintained with or by any other person).
"Required Holders" means such Holder(s) as are entitled to take
action or direct the Trustee pursuant to the terms of the Indenture.
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"Securities" shall have the meaning ascribed to it in the Securities
Purchase Agreement.
"Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
"UCC" means the Uniform Commercial Code, as in effect from time to
time, of the State of California or of any other state the laws of which are
required as a result thereof to be applied in connection with the issue of
perfection of security interests.
"Uniform Commercial Code jurisdiction" means any jurisdiction that
has adopted "Revised Article 9" of the UCC on or after July 1, 2001.
"Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
All other capitalized terms used but not otherwise defined herein
have the meanings given to them in the Indenture. All other undefined terms
contained in this Security Agreement, unless the context indicates otherwise,
have the meanings provided for by the UCC to the extent the same are used or
defined therein.
2. GRANT OF LIEN.
As security for all Obligations, each Grantor hereby grants to the
Agent, for the benefit of the Agent, the Trustee and the Holders, a continuing
security interest in, lien on, assignment of and right of set-off against, all
personal and real property and fixtures and interests in property and fixtures
of such Grantor, whether now owned or hereafter acquired or existing, and
wherever located (together with all other collateral security for the
Obligations at any time granted to or held or acquired by Agent, collectively,
the "Collateral"), including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and Equipment;
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(d) all Real Property and fixtures;
(e) all chattel paper (including all tangible and electronic chattel
paper);
(f) all Instruments (including all promissory notes);
(g) all Documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar instruments
and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of
Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of such Grantor now or hereafter held or received by
or in transit to Agent, any Holder or any of their respective Affiliates or at
any other depository or other institution from or for the account of such
Grantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise;
(l) all commercial tort claims;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.
Notwithstanding the generality of the foregoing, one-third of the Capital Stock
of each of the Direct Foreign Subsidiaries shall be excluded from "Collateral".
3. PERFECTION AND PROTECTION OF SECURITY INTEREST.
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(a) Each of the Grantors shall, at their own expense, perform all
steps reasonably requested by the Agent at any time to perfect, maintain,
protect, and enforce the Agent's Liens, including: (i) executing and filing
financing or continuation statements, and amendments thereof, in form and
substance reasonably satisfactory to the Agent; (ii) placing notations on such
Grantor's books of account to disclose the Agent's security interest; and (iii)
taking such other steps as are reasonably deemed necessary or desirable to
maintain and protect the Agent's Liens; provided that on the anniversary of the
Closing Date and within 30 days after the Agent's request therefor, the Company
shall furnish the Agent an Opinion of Counsel pursuant to Section 17.4 of the
Indenture, whether or not such Opinion of Counsel is required by the TIA. Each
Grantor agrees that a carbon, photographic, photostatic, or other reproduction
of this Security Agreement or of a financing statement is sufficient as a
financing statement.
(b) Each Grantor hereby irrevocably authorizes the Agent at any time
and from time to time to file in any filing office in any Uniform Commercial
Code jurisdiction any initial financing statements and amendments thereto that
(i) accurately describe the Collateral and (ii) contain any other information
required by part 5 of Article 9 of the UCC for the sufficiency or filing office
acceptance of any financing statement or amendment, including whether such
Grantor is an organization, the type of organization and any organization
identification number issued to such Grantor. Each Grantor agrees to furnish any
such information to the Agent promptly upon request. Each Grantor also ratifies
its authorization for the Agent to have filed in any Uniform Commercial Code
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.
(c) From time to time, each Grantor shall, upon the Agent's
reasonable request, execute and deliver confirmatory written instruments
pledging to the Agent, for the ratable benefit of the Agent and the Lenders, the
Collateral, but any Grantor's failure to do so shall not affect or limit any
security interest or any other rights of the Agent or any Lender in and to the
Collateral with respect to any Grantor. Subject to Section 20(f), so long as the
Indenture is in effect and until all Obligations have been fully satisfied, the
Agent's Liens shall continue in full force and effect in all Collateral.
(d) Terminations, Amendments Not Authorized. Each Grantor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of Agent and agrees that it will not do so
without the prior written consent of Agent, subject to such Grantor's rights
under Section 9-509(d)(2) of the UCC.
4. LOCATION OF COLLATERAL. (a) Each of the Grantors represents and
warrants to the Agent, the Trustee and the Holders that: (A) Schedule I is a
correct and complete list of the location of its chief executive office, the
location of its books and records, the locations of the Collateral, and the
locations of all of its other places of business. Each Grantor covenants and
agrees that it will not (i) maintain any Collateral at any location other than
those locations listed for such Grantor on Schedule I, (ii) otherwise change or
add to any of such locations, or (iii) change the location of its chief
executive office from the location identified in Schedule I, unless it gives the
Agent at least thirty (30) days' prior written notice thereof and
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executes any and all financing statements and other documents that the Agent
reasonably requests in connection therewith.
5. Jurisdiction of Organization. Schedule II hereto identifies each
Grantor's name as of the Closing Date as it appears in official filings in the
state of its incorporation or other organization, the type of entity of such
Grantor (including corporation, partnership, limited partnership or limited
liability company), organizational identification number issued by such
Grantor's state of incorporation or organization or a statement that no such
number has been issued and the jurisdiction in which the such Grantor is
incorporated or organized. Each Grantor has only one state of incorporation or
organization.
6. Title to, Liens on, and Sale and Use of Collateral. Each Grantor
represents and warrants to the Agent, the Trustee and the Holders and agrees
with the Agent, the Trustee and the Holders that: (a) such Grantor has rights in
and the power to transfer all of the Collateral free and clear of all Liens
whatsoever, except for Liens securing the Senior Facility and all Liens
permitted thereunder; (b) the Agent's Liens in the Collateral will not be
subject to any prior Lien except as set forth in the Indenture; and (c) such
Grantor will use, store, and maintain the Collateral with all reasonable care
and will use such Collateral for lawful purposes only.
7. Access and Examination. The Grantors shall permit representatives
and independent contractors of Agent access to their properties and records from
time to time upon the reasonable request of Agent.
8. Collateral Reporting. Each Grantor shall provide the Agent with
the following documents at the following times in form reasonably satisfactory
to the Agent: (a) upon request, copies of invoices in connection with the
Grantor's Accounts, customer statements, credit memos, remittance advices and
reports, deposit slips, shipping and delivery documents in connection with such
Grantor's Accounts and for Inventory and Equipment acquired by such Grantor,
purchase orders and invoices; (b) such other reports as to the Collateral of
such Grantor as the Agent shall in the Agent's Commercial Judgment request from
time to time; and (c) with the delivery of each of the foregoing, a certificate
of such Grantor executed by an officer thereof certifying as to the accuracy and
completeness of the foregoing. If either of the Grantor's records or reports of
the Collateral of type required to be delivered hereunder are prepared by an
accounting service or other agent, such Grantor hereby authorizes such service
or agent to deliver such records, reports, and related documents (but only to
the extent necessary to satisfy the foregoing reporting requirements) to the
Agent, for distribution to the Trustee and the Holders.
9. ACCOUNTS. Each Grantor hereby represents and warrants to the
Agent, the Trustee and the Holders, with respect to such Grantor's Accounts,
that each existing Account represents, and each future Account will represent, a
bona fide sale or lease and shipment of goods by such Grantor, or rendition of
services by such Grantor, in the ordinary course of such Grantor's business.
10. INVENTORY.
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Each Grantor represents and warrants to the Agent, the Trustee and
the Holders and agrees with the Agent, the Trustee and the Holders that all of
the Inventory owned by such Grantor is and will be held for sale or lease, or to
be furnished in connection with the rendition of services, in the ordinary
course of such Grantor's business, and is and will be fit for such purposes.
Each Grantor will keep its Inventory in good and marketable condition, except
for damaged or defective goods arising in the ordinary course of such Grantor's
business. Each Grantor agrees that all Inventory produced by such Grantor in the
United States of America will be produced in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. After and during the continuation of an Event of Default, each
Grantor will conduct a physical count of the Inventory at such times as the
Agent requests.
11. EQUIPMENT.
(a) Each Grantor represents and warrants to the Agent, the Trustee
and the Holders and agrees with the Agent, the Trustee and the Holders that all
of the Equipment owned by such Grantor is and will be used or held for use in
such Grantor's business, and is and will be fit for such purposes. Each Grantor
shall keep and maintain its Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof.
(b) Each Grantor shall promptly inform the Agent of any material
additions to or deletions from the Equipment. No Grantor shall permit any
Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Agent does not have a Lien. No Grantor will, without the
Agent's prior written consent, alter or remove any identifying symbol or number
on any of such Grantor's Equipment constituting Collateral.
12. Documents, Instruments, and Chattel Paper. Each Grantor
represents and warrants to the Agent and the Lenders that all Documents,
Instruments, and chattel paper describing, evidencing, or constituting
Collateral, and all signatures and endorsements thereon, are and will be
complete, valid, and genuine in all material respects.
13. Right to Cure. The Agent may, in its discretion, and shall, at
the direction of the Trustee (acting at the direction of the Required Holders),
pay any amount or do any act required of any Grantor hereunder or under the
Indenture or any other Security Document in order to preserve, protect, maintain
or enforce the Obligations, the Collateral or the Agent's Liens therein, and
which any Grantor fails to pay or do, including payment of any judgment against
such Grantor, any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord's or bailee's claim, and any other Lien upon or
with respect to the Collateral; provided, however, that the Agent shall be under
no obligation to take any action which in its sole discretion would subject the
Agent to personal or financial liability. Any payment made or other action taken
by the Agent under this Section 13 shall be without prejudice to any right to
assert an Event of Default hereunder and to proceed thereafter as herein
provided.
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14. LIMITED Power of Attorney. Each Grantor hereby appoints the
Agent and the Agent's designee as such Grantor's attorney, with power: (a) to
endorse such Grantor's name on any checks, notes, acceptances, money orders, or
other forms of payment or security that come into the Agent's or any Lender's
possession; (b) to sign such Grantor's name on any invoice, ▇▇▇▇ of lading,
warehouse receipt or other negotiable or non-negotiable Document constituting
Collateral, on drafts against customers, on assignments of Accounts, on notices
of assignment, financing statements and other public records and to file any
such financing statements by electronic means with or without a signature as
authorized or required by applicable law or filing procedure; (c) so long as any
Event of Default has occurred and is continuing, to notify the post office
authorities to change the address for delivery of such Grantor's mail to an
address designated by the Agent and to receive, open and dispose of all mail
addressed to such Grantor; (d) so long as any Event of Default has occurred and
is continuing, to send requests for verification of Accounts to customers; (e)
to complete in such Grantor's name or the Agent's name, any order, sale or
transaction, obtain the necessary Documents in connection therewith, and collect
the proceeds thereof; (f) to clear Inventory through customs in such Grantor's
name, the Agent's name or the name of the Agent's designee, and to sign and
deliver to customs officials limited powers of attorney in such Grantor's name
for such purpose; (g) to the extent that such Grantor's authorization given in
Section 3 of this Security Agreement is not sufficient, to file such financing
statements with respect to this Security Agreement, with or without such
Grantor's signature, or to file a photocopy of this Security Agreement in
substitution for a financing statement, as the Agent may deem appropriate and to
execute in such Grantor's name such financing statements and amendments thereto
and continuation statements which may require such Grantor's signature; and (h)
to do all things necessary to carry out the Indenture and this Security
Agreement. Each Grantor ratifies and approves all acts of such attorney. None of
Agent nor its attorneys will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law except for their willful misconduct.
This power, being coupled with an interest, is irrevocable until the Indenture
has been terminated and the Obligations have been fully satisfied.
15. THE AGENT'S AND HOLDERS' RIGHTS, DUTIES AND LIABILITIES.
(a) Each Holder hereby appoints BNY Western Trust Company to act as
the Agent for such Person under this Security Agreement and the other Security
Documents. Each Holder hereby irrevocably authorizes the Agent to take such
action on its behalf under the provisions of this Security Agreement and the
other Security Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto and the Agent shall hold all Collateral, charges and
collections received pursuant to this Security Agreement, for the ratable
benefit of the Holders. The Agent may perform any of its duties hereunder by or
through its agents or employees. As to any matters not expressly provided for by
this Security Agreement (including without limitation, collection of the Notes)
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Trustee or the Required Holders, and such instructions shall be binding;
provided, however, that the Agent shall not be required to take any action which
in the Agent's reasonable discretion exposes it to liability or which is
contrary to this Security Agreement or the other Security Documents or
applicable law unless the Agent is
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furnished with an indemnification reasonably acceptable to the Agent in its sole
discretion with respect thereto and the Agent shall not be responsible for any
misconduct or negligence on the part of any agents appointed with due care by
the Agent. The Agent shall have no duties or responsibilities except those
expressly set forth in this Security Agreement and the other Security Documents.
The Agent shall not be under any obligation to any Holder to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Security Agreement or any of the other Security
Documents. The Agent shall not have by reason of this Security Agreement a
fiduciary relationship in respect of any Holder; and nothing in this Security
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Security Agreement
except as expressly set forth herein.
(b) The Grantors assume jointly and severally all responsibility and
liability arising from or relating to the use, sale, license or other
disposition of the Collateral. The Obligations shall not be affected by any
failure of the Agent, the Trustee or any Holder to take any steps to perfect the
Agent's Liens or to collect or realize upon the Collateral, nor shall loss of or
damage to the Collateral release any Grantor from any of the Obligations.
Following the occurrence and during the continuation of an Event of Default, the
Agent may (but shall not be required to), and at the direction of the Required
Holders shall, without notice to or consent from any Grantor, ▇▇▇ upon or
otherwise collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take any other action with respect to the Collateral, any security therefor,
any agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of any Grantor for the
Obligations or under the Indenture or any other agreement now or hereafter
existing between the Agent and/or the Trustee or any Holder and any Grantor.
(c) It is expressly agreed by each Grantor that, anything herein to
the contrary notwithstanding, each 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. None of the Agent,
the Trustee nor any Holder 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, the Trustee or
any Holder of any payment relating to any contract or license pursuant hereto.
None of the Agent, the Trustee nor any Holder shall be required or obligated in
any manner to perform or fulfill any of the obligations of any 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.
16. COST AND EXPENSES; INDEMNIFICATION.
(a) The Grantors agree to pay to the Agent, for its benefit, on
demand, all reasonable costs and expenses that Agent pays or incurs in
connection with the negotiation, preparation, administration, enforcement, and
termination of this Security Agreement or any of
12
the other Security Documents, including: (a) all reasonable fees, expenses and
disbursements of any law firm or other counsel engaged by the Agent; (b) costs
and expenses (including reasonable attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Security Documents and the transactions
contemplated thereby; (c) costs and expenses of lien searches; (d) taxes, fees
and other charges for filing financing statements and continuations, and other
actions to perfect, protect, and continue the Agent's Liens (including costs and
expenses paid or incurred by the Agent in connection with the consummation of
this Security Agreement); (e) sums paid or incurred to pay any amount or take
any action required of the Grantors under this Agreement that the Grantors fail
to pay or take; and (f) costs and expenses of preserving and protecting the
Collateral. The foregoing shall not be construed to limit any other directly
contrary provisions of this Agreement regarding costs and expenses to be paid by
any Grantor.
(b) In any suit, proceeding or action brought by Agent, the Trustee
or any Holder to enforce its rights with respect to any Collateral for any sum
owing with respect thereto or to enforce any rights or claims with respect
thereto, each Grantor will jointly and severally save, indemnify and keep Agent,
the Trustee and Holders 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 any Person obligated on the Collateral, arising out of a breach by
any 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 such Grantor, except in the case of Agent, the Trustee or
any Holder, to the extent such expense, loss, or damage is determined by a court
of competent jurisdiction in a final nonappealable judgment to have resulted
primarily from the gross negligence or willful misconduct of Agent, the Trustee
or such Holder as finally determined by a court of competent jurisdiction. All
such obligations of the Grantors shall be and remain enforceable against and
only against each Grantor and shall not be enforceable against Agent, the
Trustee or any Holder.
17. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Indenture, and under any other instrument or
agreement securing, evidencing or relating to any of the Obligations, and
subject to the terms of the Intercreditor Agreement, if any Event of Default
shall have occurred and be continuing, Agent may exercise all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, each 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 such 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 UCC and other applicable law), may forthwith enter upon
the premises of such Grantor where any Collateral is located through self-help,
without judicial process, without first obtaining a final judgment or giving
such 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,
license, 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
13
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, the
Trustee or any Holder 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, the Trustee and Holders, the whole or any
part of said Collateral so sold, free of any right or equity of redemption,
which equity of redemption each 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 the Grantors' premises or elsewhere and
shall have the right to use the Grantors' premises without charge for such time
or times as Agent reasonably deems necessary or advisable.
(b) Each Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at a place or places designated by
Agent which are reasonably convenient to Agent and Grantor, whether at such
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 any Grantor to maintain
or preserve the rights of such 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, the
Trustee and Holders), 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 herein, in the Intercreditor Agreement and in the
Indenture, 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 the applicable Grantor. To the maximum
extent permitted by applicable law, each Grantor waives all claims, damages, and
demands against Agent, the Trustee or any Holder arising out of the
repossession, retention or sale of the Collateral except such as determined by a
court of competent jurisdiction in a final nonappealable judgment to have
resulted primarily from the gross negligence or willful misconduct of Agent, the
Trustee or such Holder. Each 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.
Each Grantor shall remain liable for any deficiency if the proceeds of any sale
or disposition of the Collateral are insufficient to pay all Obligations,
including any reasonable attorneys' fees or other out-of-pocket expenses
actually incurred by Agent, the Trustee or any Holder to collect such
deficiency.
(c) Except as otherwise specifically provided herein, each 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.
(d) To the extent that applicable law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Grantor acknowledges
and agrees that it is not commercially unreasonable for the Agent (a) to fail to
incur expenses reasonably deemed significant by the Agent to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not
14
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(c) to fail to exercise collection remedies against account debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
Persons, whether or not in the same business as such Grantor, for expressions of
interest in acquiring all or any portion of such Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (k) to purchase insurance or
credit enhancements to insure the Agent against risks of loss, collection or
disposition of Collateral or to provide to the Agent a guaranteed return from
the collection or disposition of Collateral, or (l) to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Agent in the
collection or disposition of any of the Collateral. Each Grantor acknowledges
that the purpose of this Section 17(d) is to provide non-exhaustive indications
of what actions or omissions by the Agent would not be commercially unreasonable
in the Agent's exercise of remedies against the Collateral and that other
actions or omissions by the Agent shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 17(d). Without
limitation upon the foregoing, nothing contained in this Section 17(d) shall be
construed to grant any rights to any Grantor or to impose any duties on Agent
that would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this Section 17(d).
18. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the purpose
of enabling Agent to exercise rights and remedies under Section 17 hereof
(including, without limiting the terms of Section 17 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, each Grantor hereby
grants to Agent, for the benefit of Agent, the Trustee and Holders, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to such Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by such 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.
19. LIMITATION ON AGENT'S AND HOLDERS' DUTY IN RESPECT OF
COLLATERAL.
(a) None of Agent, the Trustee or any Holder 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, the Trustee or such Holder, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.
15
(b) The Agent shall not be responsible for filing any financing or
continuation statements or recording any documents or instruments in any public
office at any time or times or otherwise perfecting or maintaining the
perfection of any security interest in the Collateral. The Agent shall be deemed
to have exercised reasonable care in the custody of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property and shall not be liable or responsible for any
loss or diminution in the value of any of the Collateral, by reason of the act
or omission of any carrier, forwarding agency or other agent or bailee selected
by the Agent in good faith.
(c) The Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Liens in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder, except to the extent such action or omission constitutes
gross negligence, bad faith or willful misconduct on the part of the Agent, for
the validity or sufficiency of the Collateral or any agreement or assignment
contained therein, for the validity of the title of the Grantors to the
Collateral, for insuring the Collateral or for the payment of taxes, charges,
assessments or Liens upon the Collateral or otherwise as to the maintenance of
the Collateral.
20. MISCELLANEOUS.
(a) REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any 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 any
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 or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
(b) NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and
deemed received, as provided for in the Indenture; provided, however that notice
to the Agent shall be delivered to the following address or such other address
as notified by the Agent from time to time:
BNY Western Trust Company
Attention: Corporate Trust Administration
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
16
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(c) 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 Indenture and the other Security Documents which, taken together, set
forth the complete understanding and agreement of Agent, the Trustee, the
Holders and the Grantors with respect to the matters referred to herein and
therein.
(d) NO WAIVER; CUMULATIVE REMEDIES. Neither Agent, the Trustee nor
any Holder 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, the Trustee or any Holder, 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 the Grantors.
(e) 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.
(f) TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 20(a)
hereof, this Security Agreement shall terminate upon the earlier of (i) payment
or satisfaction in full of all other Obligations (other than indemnification
Obligations as to which no claim has been asserted) or (ii) the Company's
furnishing of an Officer's Certificate to the Agent certifying that the
Company's average monthly EBITDA for any twelve consecutive months commencing
with the month ending June 30, 2004 has been positive.
(g) INTERCREDITOR AGREEMENT. Notwithstanding anything herein to the
contrary, the lien and security interest granted to the Trustee pursuant to this
Agreement and the exercise of any right or remedy by the Trustee hereunder are
subject to the provisions of the Intercreditor Agreement, dated as of June 10,
2004 (the "Intercreditor Agreement") among Congress Financial Corporation
(Western) as Senior Agent, BNY Western Trust Company, as
17
Trustee, and the Grantors. In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern.
(h) SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of the Grantors hereunder shall be binding upon the successors and
assigns of the Grantors (including any debtor-in-possession on behalf of any
Grantor) and shall, together with the rights and remedies of Agent, for the
benefit of Agent, the Trustee and Holders, hereunder, inure to the benefit of
Agent, the Trustee and Holders, all future holders of any instrument evidencing
any of the Obligations and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Obligations or any portion
thereof or interest therein shall in any manner affect the Lien granted to
Agent, for the benefit of Agent, the Trustee and Holders, hereunder. No Grantor
may assign, sell, hypothecate or otherwise transfer any interest in or
obligation under this Security Agreement.
(i) COUNTERPARTS. This Security Agreement may be authenticated in
any number of separate counterparts, each of which shall collectively and
separately constitute one and the same agreement. This Security Agreement may be
authenticated by manual signature, facsimile or, if approved in writing by
Agent, electronic means, all of which shall be equally valid.
(j) 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 CALIFORNIA AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. EACH GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN LOS ANGELES COUNTY, LOS ANGELES, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY GRANTOR,
AGENT, THE TRUSTEE AND HOLDERS PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF
THE OTHER SECURITY DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS; PROVIDED, THAT AGENT,
THE TRUSTEE, HOLDERS AND THE GRANTORS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF LOS ANGELES COUNTY,
LOS ANGELES, AND, PROVIDED, FURTHER, NOTHING IN THIS SECURITY 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. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH 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
18
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
GRANTOR AT THE ADDRESS SET FORTH IN SECTION 18.3 OF THE INDENTURE (SUCH NOTICE
TO AII BEING DELIVERED TO THE COMPANY IN CARE OF AII AT THE COMPANY'S ADDRESS
SET FORTH IN SECTION 18.3 OF THE INDENTURE) 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.
(k) 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
GRANTORS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE OTHER SECURITY DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
(l) 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.
(m) 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.
(n) BENEFIT OF HOLDERS. All Liens granted or contemplated hereby
shall be for the benefit of Agent, the Trustee and Holders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Obligations in accordance with the terms of the Indenture.
(o) INCORPORATION BY REFERENCE. All of the rights, protections,
immunities and privileges granted to the Trustee under the Indenture are
incorporated by reference herein and shall inure to the benefit of the Agent
herein.
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.
ROCKFORD CORPORATION, as a Grantor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: Chief Financial Officer
---------------------------------
AUDIO INNOVATIONS, INC., as a Grantor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: Chief Financial Officer
---------------------------------
BNY WESTERN TRUST COMPANY,
as Agent
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: V.P. & Bus. Group Manager
---------------------------------
SCHEDULE I
ROCKFORD CORPORATION
1. The chief executive office of Rockford Corporation is located at the
street address set forth below, which is in Maricopa County, in the State
of Arizona.
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▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
2. The books and records of Rockford Corporation pertaining to accounts,
contract rights, inventory, etc. are located at the following street
address:
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▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
3. In addition to the chief executive office, Rockford Corporation has
Collateral located at the addresses set forth below.
a. Rockford Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
b. Rockford Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
c. Rockford Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
d. Rockford Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
e. Rockford Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
f. Rockford Corporation
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▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
g. Rockford Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
h. Rockford Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
i. Rockford Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
j. Rockford Corporation
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
k. Rockford Corporation
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▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
l. Rockford (Europe) Elektronik Vertriebs GmbH
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇
m. MB Quart GmbH
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4. There are no other places of business or other locations of any assets
used by Rockford Corporation.
AUDIO INNOVATIONS, INC.
1. The chief executive office of Audio Innovations, Inc. is located at the
street address set forth below, which is in ▇▇▇▇▇ County, in the State of
Oklahoma.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
2. The books and records of Audio Innovations, Inc. pertaining to accounts,
contract rights, inventory, etc. are located at the following street
address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
3. In addition to the chief executive office, Audio Innovations, Inc. has
Collateral located at the addresses set forth below.
a. ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
b. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
c. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
d. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
e. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
4. There are no other places of business or other locations of any assets
used by Audio Innovations, Inc.
SCHEDULE II
Organizational Jurisdiction of
Name of Entity Type of Entity ID Number Incorporation
-------------- -------------- --------- -------------
Rockford Corporation Corporation 0131298-2 Arizona
Audio Innovations, Inc. Corporation 1900386865 Oklahoma