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EXHIBIT 10.50
[LITIGATION]
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 Litigation L/C and Term Loan C
Agreement dated as of the date hereof by and among Code-Alarm, Inc., a Michigan
corporation (in such capacity, the "Borrower"), Agent and the Persons signatory
thereto from time to time as Term Lenders (including all annexes, exhibits and
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the "Credit Agreement"), such Term Lenders (collectively,
the "Lenders") have agreed to incur Litigation Obligations for the benefit of
the Borrower;
WHEREAS, Grantor is currently a wholly-owned subsidiary of Borrower
and will derive direct and indirect economic benefits from financial
accommodations provided to Borrower pursuant to the Credit Agreement;
WHEREAS, Agent and Lenders are willing to incur Litigation
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 Litigation Collateral Documents (hereinafter, "Loan
Documents") and to induce Lenders to incur Litigation L/C Obligations and
certain other Litigation Obligations, including the obligations constituting
Term Loan C, or to advance the Term Loan C, as provided for in the Credit
Agreement (collectively, hereinafter, "Obligations"), Grantor has agreed to
grant 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:
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1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement or in
Annex A thereto. All other undefined terms contained in this Security
Agreement, unless the context indicates otherwise, have the meanings provided
for by the Code to the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the 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;
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(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
(xiv) to the extent not otherwise included, all Proceeds and
products of the foregoing and all accessions to, substitutions and replacements
for, and rents and profits of, each of the foregoing.
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce Agent and
Lenders as aforesaid, Grantor hereby grants to Agent, for itself and the
benefit of Lenders, a right of setoff against the property of Grantor held by
Agent or any Lender, consisting of property described above in Section 2(a) now
or hereafter in the possession or custody of or in transit to Agent or any
Lender, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which Grantor may have any right or power.
(c) The liens and security interests granted to Agent, for itself
and the benefit of Lenders, pursuant to this Section 2 shall be, and shall be
deemed to be, subordinate in priority to all Liens of Agent and Lenders now or
hereafter securing the Obligations which do not constitute Litigation
Obligations in accordance with Section 5.11 of the Litigation L/C Agreement,
which is incorporated herein by reference.
3. AGENT'S AND LENDERS' RIGHTS; LIMITATIONS ON AGENT'S AND LENDERS'
OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder. Neither Agent
nor any Lender shall have any obligation or liability under any Contract or
License by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by Agent or any Lender of any payment
relating to any Contract or License pursuant hereto. Neither Agent nor any
Lender shall be required or obligated in any manner to perform or fulfill any
of the obligations of Grantor under or pursuant to any Contract or License, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any
party under any Contract or License, or to present or file any claims, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.
(b) Agent may at any time after an Event of Default shall have
occurred and be continuing, without prior notice to Grantor, notify Account
Debtors, parties to the Contracts
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and obligors in respect of Instruments and Chattel Paper, that the Accounts and
the right, title and interest of Grantor in and under such Contracts,
Instruments and Chattel Paper have been assigned to Agent, and that payments
shall be made directly to Agent, for itself and the benefit of Lenders. Upon
the request of Agent, Grantor shall so notify Account Debtors, parties to
Contracts and obligors in respect of Instruments and Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent and each Lender at any time and from time to time promptly
upon Agent's request the following reports with respect to Grantor: (i) a
reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial
balances; and (iv) a test verification of such Accounts as Agent may request.
Grantor, at its own expense, shall deliver to Agent the results of each
physical verification, if any, which Grantor may in its discretion have made,
or caused any other Person to have made on its behalf, of all or any portion of
its Inventory.
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 all Liens of Agent and Lenders now or
hereafter securing the Obligations which do not constitute Litigation
Obligations and Permitted Encumbrances that would be prior to Liens in favor of
Agent for the benefit of Agent and Lenders as a matter of law, and is
enforceable as such as against any and all creditors of and purchasers from
Grantor (other than purchasers of Inventory in the ordinary
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course of business). All action by Grantor necessary or desirable to protect
and perfect such Lien on each item of the Collateral has been duly taken.
(d) As of the Closing Date, Schedule II hereto lists all Instruments
and Chattel Paper of Grantor, other than those having a face amount of less
than $5,000 individually and an aggregate face amount of less than $10,000.
All action by Grantor necessary or desirable to protect and perfect the Lien of
Agent on each item set forth on Schedule II (including the delivery of all
originals thereof to Agent and the legending of all Chattel Paper as required
by Section 5(b) hereof), and on all Instruments and Chattel Paper of Grantor
acquired after the Closing Date (other than those having a face amount of less
than $5,000 individually and less than $10,000 in the aggregate, including
those existing on the Closing Date), has been duly taken. The Lien of Agent,
for the benefit of Agent and Lenders, on the Collateral listed on Schedule II
hereto, and such Instruments and Chattel Paper acquired after the Closing Date,
is prior to all other Liens, except all Liens of Agent and Lenders now or
hereafter securing the Obligations which do not constitute Litigation
Obligations and Permitted Encumbrances that would be prior to the Liens in
favor of Agent as a matter of law, and is enforceable as such against any and
all creditors of and purchasers from Grantor.
(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
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with respect thereto are actually and absolutely owing to Grantor as indicated
thereon and are not in any way contingent; (vii) no payments have been or shall
be made thereon except payments immediately delivered to the Borrower Accounts
or the Agent as required pursuant to the terms of Annex C to the Credit
Agreement; and (viii) to Grantor's knowledge, all Account Debtors have the
capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Collateral Report delivered to Agent pursuant to the terms of this
Security Agreement or the Credit Agreement, except as specifically disclosed on
such Collateral Report, (i) such Inventory is located at one of Grantor's
locations set forth on Schedule III hereto, or at such other locations with
respect to which Grantor shall have obtained Agent's prior written consent
pursuant to clause (ii) hereof and delivered to Agent additional financing
statements and other documents as may be required by clause (ii) hereof, (ii)
no Inventory is now, or shall at any time or times hereafter be stored at any
other location without Agent's prior written consent, and if Agent gives such
consent, Grantor will concurrently therewith deliver to Agent such additional
financing statements as may be required by Agent with respect thereto and
obtain, to the extent required by the Credit Agreement, bailee, consignee,
landlord and mortgagee agreements with respect thereto, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, for the benefit of Agent and Lenders, hereunder and
pursuant to any other Security Agreement, and except for Permitted
Encumbrances, (iv) such Inventory is Eligible Inventory of good and
merchantable quality, free from any defects, (v) such Inventory is not subject
to any licensing, patent, royalty, trademark, trade name or copyright
agreements with any third parties which would require any consent of any third
party upon sale or disposition of that Inventory or the payment of any monies
to any third party as a precondition of such sale or other disposition, and
(vi) the completion of manufacture, sale or other disposition of such Inventory
by Agent following an Event of Default shall not require the consent of any
Person and shall not constitute a breach or default under any contract or
agreement to which Grantor is a party or to which such property is subject.
(h) Grantor has no interest in, nor title to, any Patent, Trademark
or Copyright except as set forth in Schedule IV hereto or, with respect to such
property acquired or created after the Closing Date, as is described in writing
to Agent within [thirty (30)] days of Grantor's acquisition or creation
thereof. This Security Agreement is effective to create a valid and continuing
Lien on and, upon filing of the Copyright Security Agreements with the United
States Copyright Office and filing of the Patent Security Agreements and the
Trademark Security Agreements with the United States Patent and Trademark
Office, and the filing of appropriate financing statements listed on Schedule I
hereto, perfected Liens, other than Permitted Encumbrances, in favor of Agent
on Grantor's Patents, Trademarks and Copyrights and such perfected Liens are
enforceable as such as against any and all creditors of and purchasers from
Grantor. Upon filing of the Copyright Security Agreements with the United
States Copyright Office and filing of the Patent Security Agreements and the
Trademark Security Agreements with the United States Patent and Trademark
Office and the filing of appropriate financing
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statements listed on Schedule I hereto, all action necessary or desirable to
protect and perfect Agent's Lien on Grantor's Patents, Trademarks or Copyrights
shall have been duly taken.
5. COVENANTS. Grantor covenants and agrees with Agent, for the
benefit of Agent and Lenders, that from and after the date of this Security
Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of
the rights and powers herein granted, including (i) using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment
to or for the benefit of Agent of any License or Contract held by Grantor or in
which Grantor has any rights not heretofore assigned, (ii) filing any financing
or continuation statements under the Code with respect to the Liens granted
hereunder or under any Loan Document, (iii) transferring Collateral to Agent's
possession (for the benefit of Agent and Lenders) if such Collateral consists
of Chattel Paper, Instruments (subject to the provisions of Section 4(d)) or if
a Lien on such 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
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development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark
Office, the United States Copyright Office or any court) regarding Grantor's
ownership of any Patent, Trademark or Copyright, its right to register the
same, or to keep and maintain the same.
(ii) In no event shall Grantor, either directly or through any agent,
employee, licensee or designee, file an application for the registration of any
Patent, Trademark or Copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
without giving Agent prior written notice thereof, and, upon request of Agent,
Grantor shall execute and deliver any and all Patent Security Agreements,
Copyright Security Agreements or Trademark Security Agreements as Agent may
request to evidence Agent's Lien on such Patent, Trademark or Copyright, and
the General Intangibles of Grantor relating thereto or represented thereby.
(iii) Grantor shall take all actions necessary or requested by Agent
to maintain and pursue each application, to obtain the relevant registration
and to maintain the registration of each of the Patents, Trademarks and
Copyrights (now or hereafter existing), including the filing of applications
for renewal, affidavits of use, affidavits of 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
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court of competent jurisdiction. All such obligations of Grantor shall be and
remain enforceable against and only against Grantor and shall not be
enforceable against Agent or any Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of
its Accounts, Chattel Paper, Contracts and Licenses and all other agreements to
which it is a party or by which it is bound relating to the Collateral.
(f) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except the Liens granted to Agent, for the benefit of Agent and Lenders,
hereunder and pursuant to any other Security Agreement and Permitted
Encumbrances, and will defend the right, title and interest of Agent and
Lenders in and to any of Grantor's rights under the Collateral against the
claims and demands of all Persons whomsoever.
(g) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(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
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shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers. NONE OF AGENT, LENDERS OR THEIR RESPECTIVE
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE
RESPONSIBLE TO GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF
ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES TO THE EXTENT ATTRIBUTABLE
TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A
COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the Loan Documents and under any
other instrument or agreement securing, evidencing or relating to any of the
Obligations, if any Event of Default shall have occurred and be continuing,
Agent may exercise all rights and remedies of a secured party under the Code.
Without limiting the generality of the foregoing, Grantor expressly agrees that
in any such event Agent, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) 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
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rights of Grantor as against third parties with respect to Collateral while
Collateral is in the possession of Agent. Agent may, if it so elects, seek the
appointment of a receiver or keeper to take possession of Collateral and to
enforce any of Agent's remedies (for the benefit of Agent and Lenders), with
respect to such appointment without prior notice or hearing as to such
appointment. Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale to the Obligations as
provided in the Credit Agreement, and only after so paying over such net
proceeds, and after the payment by Agent of any other amount required by any
provision of law, need Agent account for the surplus, if any, to Grantor. To
the maximum extent permitted by applicable law, Grantor waives all claims,
damages, and demands against Agent or any Lender arising out of the
repossession, retention or sale of the Collateral except to the extent such
arise out of the gross negligence or willful misconduct of Agent or such Lender
as finally determined by a court of competent jurisdiction. Grantor agrees
that ten (10) days' prior written notice by Agent of the time and place of any
public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any attorneys' fees or other
expenses incurred by Agent or any Lender to collect such deficiency.
The rights and remedies available to Agent and the Lenders pursuant
to this Section 7(a) shall be subject in all respects to the subordination
provisions set forth in Section 2(c) hereof and Section 5.11 of the Litigation
L/C Agreement.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For
the purpose of enabling Agent to exercise rights and remedies under Section 7
hereof (including, without limiting the terms of Section 7 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Agent shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby
grants to Agent, for the benefit of Agent and Lenders, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by Grantor, and wherever the same may
be located, and including in such license access to all media in which any of
the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF
COLLATERAL. Agent and each Lender shall use reasonable care with respect to
the Collateral in its possession or under its control. Neither Agent nor any
Lender shall have any other duty as to any Collateral in its possession or
control or in the possession or control of any agent or
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12
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 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,
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13
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 (including any debtor-in-possession on behalf of Grantor)
and shall, together with the rights and remedies of Agent, for the benefit of
Agent and Lenders, hereunder, inure to the benefit of Agent and Lenders, all
future holders of any instrument evidencing any of the Obligations and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner affect the Lien granted to Agent, for the benefit
of Agent and Lenders, hereunder. Grantor may not assign, sell, hypothecate or
otherwise transfer any interest in or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and
separately constitute one and the same agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN ▇▇▇▇
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
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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 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.
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15
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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16
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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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
18
SCHEDULE II
INSTRUMENTS
None.
19
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:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
20
SCHEDULE IV
PATENTS, TRADEMARKS AND COPYRIGHTS
None.
21
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)
22
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 fullyand 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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