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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 24, 1997
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Code-Alarm, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Michigan
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(State of Other Jurisdiction of Incorporation)
016441 38-2334695
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(Commission File Number) (IRS Employer Identification No.)
950 E. Whitcomb, Madison Heights, Michigan 48071
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(Address of Principal Executive Offices) (Zip Code)
(248) 583-9620
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Item 1. Changes in Control of Registrant.
(b) A change in control might occur at a later date as a
consequence of the transactions described in Item 5 of this report.
Item 5. Other Events.
On October 27, 1997 Code-Alarm, Inc. ("Company") closed an equity
private placement for $6,999,850 and refinanced its senior secured debt. The
transactions are outlined below. A fuller description of the terms and
conditions of the transactions and related transactions is set forth in the
transaction documents filed herewith.
EQUITY INVESTMENT
On October 27, 1997, Code-Alarm, Inc. ("Company") sold to Pegasus
Partners, L.P. ("PP") and Pegasus Related Partners, L.P. ("PRP"; PP and PRP are
collectively referred to as
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"Pegasus") in a private placement under the Securities Act of 1933, as amended
(the "Securities Act"), 55,000 units (the "Units") for $6,999,850 ($127.27 per
Unit). The Units were sold pursuant to a Unit Purchase Agreement (the
"Purchase Agreement") filed herewith. Each Unit consists of one share of
Series A-1 Preferred Stock and warrants ("Attached Warrants") to purchase
Common Stock. PP purchased 15,275 Units, and PRP purchased 39,725 Units. The
rights, preferences and privileges of the Series A Preferred Stock (consisting
of Series A-1 Preferred Stock and Series A-2 Preferred Stock) are set
forth on the Certificate of Designation (the "Series A Certificate") filed
herewith, which Series A Certificate was approved by Company's Board of
Directors at its meeting on October 21, 1997, pursuant to the authority given
to the Board by Company's Articles of Incorporation, and, having been filed
with the State of Michigan, constitutes an amendment to Company's Articles of
Incorporation.
For each Unit, the Attached Warrants (the form of which is filed
herewith) entitle the holder to purchase 67.842746 shares of Common Stock. This
number of shares may increase up to an aggregate of 72.2525247) if, at the time
of exercise of the Attached Warrant, there are accrued and unpaid dividends on
the Series A Preferred Stock forming part of the Unit and those dividends are
payable at the enhanced rate as a consequence of a "Triggering Event" discussed
below. The exercise price per share of each Attached Warrant is $1.8759559. The
exercise price and number of shares into which Attached Warrants are exercisable
are subject to antidilution protection as discussed below. If there is no
repurchase of Units by Company, Pegasus could receive up to 3,731,351 shares of
Common Stock upon exercise of the Attached Warrants (assuming no antidilution
adjustment and there are no accrued and unpaid dividends on the Series A
Preferred Stock at the time of any exercise of the Attached Warrant) or up to
3,973,889 shares of Common Stock upon such exercise (assuming no antidilution
adjustment and exercise on the day before a dividend payment date with dividends
accruing at the enhanced rate due to a "Triggering Event").
SERIES A PREFERRED STOCK
SERIES. The Series A Certificate creates 400,000 shares of Series A
Preferred Stock ("Series A Preferred"), which is divided into two series,
Series A-1 Preferred Stock ("Series A-1 Preferred") and Series A-2 Preferred
Stock ("Series A-2 Preferred"), with each such series consisting of 200,000
shares. The rights, preferences and privileges of the Series A-1 Preferred and
the Series A-2 Preferred are identical except with respect to certain voting
rights as discussed below. If Pegasus transfers the Series A-1 Preferred to
any non-affiliate, the stock will convert to Series A-2 Preferred on a share
for share basis. Series A-1 Preferred Stock may only be transferred as part of
a Unit with Attached Warrants.
DIVIDENDS. Series A Preferred will accrue dividends at a rate of 10%
of stated value per year, payable semi-annually on April 15 and October 15 of
each year. Stated value is $127.27 (the purchase price of a Unit). Dividends
for any partial period will be pro rated. The dividend is payable at the
option of Company in cash or in additional Units (consisting of Series A
Preferred of the same series and an Attached Warrant), with the number of Units
issuable equal to the amount of the dividend divided by the stated value of the
Series A Preferred. If a dividend
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is not paid when due, dividends will also be calculated on the unpaid dividend.
The dividend on the Series A Preferred has a preference over the dividends on
any Common Stock or other junior stock. In addition, dividends on common or
any other junior stock cannot be paid without the consent of the Series A-1
Preferred. If a "Triggering Event" (discussed below) occurs, dividends are
payable at the rate of 13% of stated value per annum.
LIQUIDATION. In the event of any bankruptcy, liquidation, dissolution
or winding up of Company, each share of Series A Preferred has a liquidation
preference equal to the greater of (i) its stated value plus accrued but unpaid
dividends or (ii) if a Triggering Event has occurred because the amendment to
Company's Articles of Incorporation increasing the number of shares of
authorized common stock to 20 million has not become effective or if Company
has failed to issue Common Stock upon exercise of the Attached Warrants, all
cash and other dividends, distributions and other payments which are paid or
payable to a holder of shares of Common Stock for which Attached Warrants held
by the holder of the Series A Preferred are exercisable at that time, plus
$.01. The Series A Preferred liquidation preference is senior to any
distribution to the holders of Common Stock or other junior stock.
VOTING. The holders of Series A-1 Preferred will have the right,
voting together as a separate class, to elect two members of Company's Board of
Directors, which is expanded from 7 to 9 members. When Pegasus and its
affiliates no longer hold at least 25% of the 55,000 shares of Series A-1
Preferred originally issued to Pegasus (without taking into account any
dividends paid in kind), the Series A-1 Preferred will no longer have the right
to elect any directors, and the Board will be reduced to 7 members.
So long as Pegasus and its affiliates hold at least 25% of the 55,000
shares of Series A-1 Preferred issued to Pegasus (without taking into account
any dividends paid in kind), Company may not, without the approval of the
holders of a majority of the Series A-1 Preferred voting together as a separate
class:
1. amend, repeal or modify the Articles of Incorporation or
Bylaws in a way that adversely affects the Series A Preferred;
2. authorize a Realization Event (a liquidation, reorganization,
merger, sale or transfer of all or substantially all of Company's or any
subsidiary's assets) or a purchase or acquisition by Company or any of its
subsidiaries of any of their stock (except the repurchase of the Units, the
Attached Warrants, the Shortfall Warrants (discussed below) and Litigation
Warrants (discussed below) and the Common Stock issuable upon exercise of these
warrants);
3. declare or pay or set aside for payments any dividend or
distribution on Common Stock or any other junior stock or redeem or repurchase
any Common Stock or other junior stock;
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4. issue new capital stock or rights to acquire capital stock
other than pursuant to the: exercise of options under the 1987 stock option
plan; issuance of warrants or Common Stock issuable upon their exercise under
the new stock option plan discussed below; issuance of warrants to General
Electric Capital Corporation ("GECC") and Common Stock upon exercise thereof;
issuance of the Litigation Warrants discussed below; issuance of Common Stock
upon exercise of the Attached Warrants, the Shortfall Warrants and the
Litigation Warrants; issuance of Series A Preferred Stock as in kind dividends;
issuance of Series B Preferred Stock; and the issuance of equity securities the
proceeds of which are intended to be, and are immediately, used to redeem all
outstanding shares of Series A Preferred and at least one-half of all
outstanding Attached Warrants.
5. make investments in assets or equity of other companies if
the investment exceeds 10% of the assets of Company and its subsidiaries as of
the end of the previous fiscal year or the income of Company and its
subsidiaries will change by more than 10% because of the acquisition;
6. incur debt for borrowed money (including lease obligations
but not including trade debt) over an aggregate of $1 million;
7. amend the stock option plans or adopt new ones;
8. modify or enter into any employment agreement or other
compensation arrangement with any officer or director of Company or any
subsidiary;
9. create an executive or other committee of the Board of
Directors of Company or any subsidiary;
10. change in any material respect the nature of the business of
Company or any subsidiary; or
11. enter into any transaction with any affiliate of Company or
any subsidiary.
If a "Triggering Event" occurs, holders of Series A-1 Preferred have
the right to vote on all matters requiring action by Company's stockholders,
voting together as a single class with the holders of the Common Stock, with
each such Series A-1 Preferred holder entitled to a number of votes equal to
three votes multiplied by the number of shares of Common Stock which such
holder would have received upon exercise of such holder's Attached Warrants.
"Triggering Events" are (i) failure to redeem Series A Preferred Stock as
required, or, if repurchase is not permitted, Company fails to fulfill its
registration obligations (discussed below), (ii) failure to pay dividends on
the Series A Preferred Stock, (iii) failure to obtain approval of the Series A
Preferred Stock with respect to the transactions specified above, (iv) failure
of shareholders to approve the amendment increasing the amount of authorized
Common Stock to 20 million and to have such amendment become effective by May
31, 1998, (v) failure to issue Common Stock
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upon exercise of the Attached Warrants, (vi) breach of Company obligations
under the Registration Rights Agreement (discussed below), and (vi) a material
breach of certain obligations or certain representations of Company under the
Purchase Agreement.
REPURCHASE/REDEMPTION. At any time prior to October 19, 1998,
provided an amendment to Company's Articles of Incorporation increasing the
number of authorized shares of Common Stock to 20 million has become effective,
Company has the right to purchase all (but not less than all) the Series A
Preferred outstanding, one-half of the Attached Warrants not representing
accrued and unpaid dividends and any Attached Warrants representing accrued and
unpaid dividends at a price of 117.5% of the stated value of the shares of
Series A Preferred less cash dividends previously paid.
At any time after October 27, 1999, if Company has not exercised the
repurchase rights discussed in the preceding paragraph, Company may repurchase
all outstanding shares of Series A Preferred, all outstanding Attached
Warrants which are part of Units and all outstanding Common Stock into which
Attached Warrants have been exercised (other than Common Stock sold pursuant to
registration under the Securities Act or sold pursuant to Rule 144 -
"Nonpurchasable Stock") at a price equal to the greater of (i) the number of
shares of Common Stock for which the Attached Warrants are then exercisable
plus the number of shares of Common Stock which have been issued upon exercise
of Attached Warrants multiplied by the current market value (based upon the
previous 20 trading days) of the Common Stock or (ii) the amount necessary to
yield for each Unit (other than Units which have been transformed into
Nonpurchasable Stock) an annual return of 35% (including cash dividends
previously paid).
The right of Company to redeem Series A Preferred, Attached Warrants
and Common Stock issued upon exercise of Attached Warrants may not be exercised
until the earlier of (i) the date which is six months and one day following the
issuance to Pegasus of Litigation Warrants, provided that on or before that
date Pegasus is unconditionally released in full from any unused portion of the
Litigation Guaranty, or (ii) such time as Pegasus is unconditionally released
in full from the Litigation Guaranty (discussed below), provided no Litigation
Warrants have been issued prior to such release.
At any time after three years and six months following October 27,
1997, each holder of Series A Preferred may demand that Company redeem all (but
not less than all) Series A Preferred and Attached Warrants held by that
holder. The purchase price is the market price of the Common Stock for which
such Attached Warrants are then exercisable. If a Realization Event (as
defined above) occurs between the time of the demand for redemption and the
redemption date, then the holder shall receive the higher of (i) the market
price of the Common Stock or (ii) the amount equal to the cash which would have
been received upon the occurrence of the Realization Event had such warrants
been exercised immediately prior to the event. If Company is prohibited from
making the repurchase by any agreements evidencing indebtedness for borrowed
money or if repurchase would cause a default in such obligations or would
violate applicable law, Company must use reasonable best efforts to remove the
restrictions. If Company notifies the holder that, despite Company's best
efforts Company cannot fund the
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repurchase, Company must, at the request of the holder, register the Common
Stock for which the Attached Warrants which will not be repurchased may be
exercised. If Company will be redeeming Series A-1 Preferred in an amount
which would result in the loss of voting rights, but not all such Series A-1
Preferred is being redeemed, then the holder of the Series A-1 Preferred may
require Company to redeem only such lesser number of shares of Series A-1
Preferred as will not result in a loss of voting rights.
REMEDIES. Upon the occurrence of certain Triggering Events (see
discussion above), certain remedies (in addition to those noted above) are
afforded the holders of Series A Preferred. If an amendment to Company's
Articles of Incorporation increasing the number of authorized shares of Common
Stock to 20 million is not effective by May 31, 1998 and thereafter until it is
so adopted and effective or if Company fails to issue Common Stock upon
exercise of Attached Warrants, holders of Series A Preferred will be
entitled to receive all dividends, distribution and other payments which would
be paid or payable to a holder of the number of Common Shares for which the
Attached Warrants held by such Series A Preferred holder are exercisable. If
the amendment to the Articles as set forth in the preceding sentence is not
effective by May 31, 1998 and until it is thereafter adopted, dividends on
Series A Preferred to the extent permitted by law must be paid in cash. If a
Triggering Event occurs, Company's right of first refusal with respect to
certain transfers for value of Series A Preferred Stock and/or Units to third
parties not affiliated or associated with Pegasus shall cease.
TRANSFERS. Shares of Series A-1 Preferred Stock may only be
transferred together with the same number of Attached Warrants.
ATTACHED WARRANTS
If Company exercises its rights to repurchase the Series A Preferred,
the Attached Warrants not repurchased will have a term of seven years. If
Company has not repurchased the Series A Preferred, the term of the Attached
Warrants will not expire.
If Company has not exercised its rights to redeem Series A Preferred,
the exercise price of the Attached Warrants must be paid by delivery of Series
A Preferred Stock with a stated value plus accrued and unpaid dividends equal
to the exercise price. If, however, Company has exercised its rights to redeem
Series A Preferred, then the exercise price is payable at the option of the
holder in either cash or by a surrender of "in the money warrants."
The number of shares of Common Stock into which Attached Warrants are
exercisable and the exercise price are subject to adjustment, if a dividend is
payable to the holders of Common Stock in Common Stock, if the Common Stock is
subdivided or combined or if a dividend is paid on the Common Stock in cash,
evidence of indebtedness, securities or rights to acquire securities. If
additional shares of Common Stock or rights to acquire additional shares of
Common Stock or securities convertible into Common Stock, other than specified
permitted issuances, are issued for less than the greater of the then current
exercise price or the then
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current market price of the Common Stock, then the exercise price and number of
shares into which the Attached Warrants are exercisable shall be subject to
weighted-average antidilution protection. If, at any time prior to the
approval of an amendment to Company's Articles of Incorporation authorizing an
increase in the number of authorized shares of Company Common Stock to 20
million, Company pays or makes any dividend or distribution on Common Stock
which is not otherwise accounted for by the antidilution provisions of the
Attached Warrants, then that dividend or distribution shall also be paid or
made to the holders of the warrants as if the warrants had been exercised.
Company is required to reserve from its authorized but unissued shares
of Common Stock a sufficient number of shares of Common Stock to permit
exercise in full of all Attached Warrants. Company has reserved 2,267,421
shares of Common Stock for exercise of Attached Warrants and Shortfall
Warrants, but Company needs to authorize additional shares of Common Stock to
permit exercise in full of these warrants. Thus, Company's Board of Directors
has approved an amendment to Company's Articles of Incorporation for
presentation at the next stockholders meeting increasing the number of
authorized shares of Common Stock from 5 million to 20 million.
As indicated above, Attached Warrants can only be transferred as part
of Units with shares of Series A Preferred. If Company has repurchased Units
prior to October 19, 1998, this restriction shall no longer apply.
Attached Warrants are subject to repurchase at the option of the holder
after three years and six months from October 27, 1997, as indicated above.
SHORTFALL WARRANTS
Pegasus and GECC have entered into a Limited Supplemental Guaranty
(filed herewith) pursuant to which Pegasus guarantees up to $4 million of the
indebtedness of Company and its subsidiaries under the Credit Agreement (other
than that covered by the Litigation Guaranty discussed below). In exchange,
Pegasus has received warrants to purchase 1 million shares of Common Stock (the
"Shortfall Warrants," the form of which is filed herewith). PP is receiving
Shortfall Warrants to purchase 277,727 shares of Common Stock and PRP is
receiving Shortfall Warrants to purchase 722,273 shares of Common Stock,
subject to antidilution protection. The Shortfall Warrants have a term of
seven years and an exercise price of $1.8759559 per share.
If Pegasus is fully and unconditionally released from the Limited
Supplemental Guaranty, Company has a right to repurchase portions of the
outstanding Shortfall Warrants as follows: within the first six months after
October 27, 1997, 75% of outstanding Shortfall Warrants; within 6 to 9 months
after October 27, 1997, 50% of outstanding Shortfall Warrants; and within 9 to
12 months after October 27, 1997, 25% of outstanding Shortfall Warrants. The
purchase price is $.0001 per share of Common Stock into which the repurchased
warrants are exercisable. The purchase period is restricted in the same manner
that repurchase of Series A Preferred Stock is
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restricted during the first year as provided above; however, to the extent such
restriction is in effect, the time to repurchase is extended to a date thirty
days after the restriction lapses. If, as a consequence of the exercise of
Shortfall Warrants, the repurchase cannot be accomplished, then Company shall
have the right to repurchase a number of shares of Common Stock equal to the
number of shares of Common Stock into which the Shortfall Warrants which would
have been repurchased were exercised.
The exercise price of the Shortfall Warrants is payable in cash or by
surrender of in the money warrants. The Shortfall Warrants have the same
antidilution protection as is outlined above with respect to the Attached
Warrants.
At any time after three years and six months following October 27,
1997, each holder of a Shortfall Warrant may demand that Company redeem all or
a portion of the Shortfall Warrants held by that holder. The purchase price is
the market price of the Common Stock for which such Shortfall Warrants are then
exercisable. If a Realization Event (as defined above) has occurred between
the time of the demand for redemption and the redemption date, then the holder
shall receive the higher of (i) the market price of the Common Stock or (ii)
the amount equal to the cash which would have been received upon the occurrence
of the Realization Event had such warrants been exercised immediately prior to
the event, less the exercise price payable with respect to the number of shares
being redeemed. If Company is prohibited from making the repurchase by any
agreements evidencing indebtedness for borrowed money or if repurchase would
cause a default in such obligations or would violate applicable law, Company
must use reasonable best efforts to remove the restrictions. If Company
notifies the holder that, despite Company's best efforts, Company cannot fund
the repurchase, Company must at the request of the holder register the Common
Stock for which the Shortfall Warrants which will not be repurchased may be
exercised.
LITIGATION WARRANTS
If, at the request of Company, Pegasus provides Company with financing
(including, by way of illustration, a guaranty of Company's obligations, such
financing being termed the "Litigation Guaranty") for a judgment, appeal bond
or settlement in connection with the litigation pending in the United States
District Court for the Eastern District of Michigan known as Code Alarm, Inc.
v. Electromotive Technology Corporation, case number 87-CV-74022-DT (the
"Patent Litigation"), as contemplated in the Limited Litigation Guaranty
between Pegasus and GECC (filed herewith), then Company has agreed to issue
Pegasus warrants to purchase Common Stock (the "Litigation Warrants," the form
of which is filed herewith). For each $1 million financed, up to a maximum of
$12 million, Company will issue to Pegasus Litigation Warrants which will
increase Pegasus' aggregate ownership interest in the Company by 2%, on a fully
diluted basis. The exercise price for each one percent is $164,731. The
Litigation Warrants will expire seven years from October 27, 1997. If
Litigation Warrants were issued for a guaranty of $12 million by Pegasus, the
Litigation Warrants, together with the Attached Warrants and the Shortfall
Warrants held by Pegasus, if exercised, would represent approximately 78% of the
shares of Common Stock of Company on a fully diluted basis (assuming no
additional Attached Warrants have been issued, all dividends on Series A
Preferred are paid in cash, no changes have resulted by reason
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of the antidilution provisions of the warrants and no Attached Warrants or
Shortfall Warrants have been repurchased).
If Company repurchases all outstanding Units and the Common Stock for
which Attached Warrants have previously been exercised pursuant to its rights of
repurchase, then simultaneously therewith Company, at its option, has a right to
repurchase 95% of the outstanding Litigation Warrants and 95% of the shares of
Common Stock for which Litigation Warrants have been exercised (other than any
such shares which have been sold to a person or entity that is not an associate
or an affiliate of the initial holder). The purchase price is the number of
shares of Common Stock into which the all of the Litigation Warrants (whether
repurchased or not) are exercisable plus the number of shares of Common Stock
for which Litigation Warrants have been exercised (whether repurchased or not,
but not including shares sold to parties other than affiliates or associates),
multiplied by the current market price of a share of Common Stock, less the
exercise price of Litigation Warrants repurchased.
The exercise price of Litigation Warrants is payable in cash or by
surrender of in the money warrants. The Litigation Warrants have the same
antidilution protection as is outlined above with respect to the Attached
Warrants.
At any time after three years and six months following October 27,
1997, each holder of Litigation Warrants may demand that Company redeem all or
a portion of the Litigation Warrants held by that holder. The purchase price
is the market price of the Common Stock for which such Litigation Warrants are
then exercisable. If a Realization Event (as defined above) has occurred
between the time of the demand for redemption and the redemption date, then the
holder shall receive the higher of (i) the market price of the Common Stock or
(ii) the amount equal to the cash which would have been received upon the
occurrence of the Realization Event had such warrants been exercised
immediately prior to the event, less the exercise price payable with respect to
the number of shares being redeemed. If Company is prohibited from making the
repurchase by any agreements evidencing indebtedness for borrowed money or if
repurchase would cause a default in such obligations or would violate
applicable law, Company must use reasonable best efforts to remove the
restrictions. If Company notifies the holder that, despite Company's best
efforts, Company cannot fund the repurchase, Company must at the request of the
holder register the Common Stock for which the Shortfall Warrants which will
not be repurchased may be exercised.
PURCHASE AGREEMENT
The Purchase Agreement contains a number of covenants requiring
Company to take specified actions. Company is required to obtain term life
insurance in the amount of $5 million on Rand Mueller, Company President.
Company is required to seek shareholder approval by May 31, 1998 of an amendment
to its Articles of Incorporation increasing the number of shares of its
authorized Common Stock to 20 million. If Company issues any securities (other
than specified permitted issuances) which do not result in adjustment of the
Attached Warrants pursuant to their antidilution provisions, then Pegasus is
given a preemptive right to
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purchase up to a portion of such securities which would maintain the percentage
ownership in Company represented by Attached Warrants then held. The new
securities will be sold to Pegasus at the price and on the terms on which
Company is proposing to sell such securities to third parties. Until the
earlier of six months and one day following the issuance of Litigation Warrants
(provided that on or before that date Pegasus is unconditionally released in
full from any unused portion of the Litigation Guaranty) or such time as
Pegasus is unconditionally released from its Litigation Guaranty (provided no
Litigation Warrants have been issued), Company shall not permit a Realization
Event to occur.
Pegasus is prohibited from selling or transferring Units, Attached
Warrants, Shortfall Warrants or Litigation Warrants as provided in the Unit
Purchase Agreement.
If Company has not exercised its right to repurchase Units by October
19, 1998, and if any holder of Units desires to transfer for value any Units
to a third party which is not an affiliate or associate of that holder, then
Company or its designee shall have a right to purchase those Units on the same
terms and conditions as the holder is offering to the third party.
The conditions to closing of the equity financing by Pegasus included:
1. Execution of employment agreements or amendments to
existing agreements for Messrs. Mueller and Camalo in forms acceptable to
Pegasus (discussed below and filed herewith);
2. Adoption of a new non-qualified stock option plan for
management providing options to purchase 1,317,178 shares of Common Stock. The
Board adopted such a plan, the 1997 Stock Option Plan (filed herewith), and
made grants thereunder (see discussion below).
3. Company's Board of Directors irrevocably exempt both
(a) the transaction with Pegasus and (b) Pegasus, itself, and its affiliate
from the application of Chapter 7A of the Michigan Business Corporation Act
("MBCA"). Section 7A precludes certain types of transactions, so-called
business combinations, of a Michigan corporation with a ten percent shareholder
unless an advisory statement from the corporation's board of directors and
supermajority approval by the corporation's shareholders are first obtained.
Pursuant to Section 782(1)(b) of MBCA, Company's Board of Directors adopted a
resolution irrevocably providing that any business combination with Pegasus or
its affiliates enacted after Pegasus becomes an interested shareholder is
exempt from the requirements of Section 7A;
4. Company's Board of Directors amend Company's Bylaws
to exempt Company from the application of Chapter 7B of the MBCA. Section 7B
denies voting rights to shares of Michigan corporations that, when added to a
person's preexisting shares, increase the person's voting power to one-fifth or
more of the voting power of the corporation in the election of directors,
unless the corporation's shareholders (excluding the interested shareholders)
approve a
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resolution granting such rights. Company's Board of Directors amended the
Bylaws to make Section 7A inapplicable to Company;
5. Adoption of an amendment to Company's Bylaws
increasing the number of directors to permit the appointment of the two
directors which the Series A Preferred has the right to elect. Company's Board
of Directors adopted an amendment to the Bylaws which provides that the Board
of Directors shall consist of seven members, plus the aggregate number of
directors that the holders of each series of Preferred Stock are entitled to
elect;
6. Company's Board of Directors adopt a resolution
approving an amendment of the articles increasing the authorized Common Stock
to 20 million shares. To protect against the possibility that the shareholders
may not approve the amendment, warrant holders are given rights to receive
dividends and distributions as if they were owners of Common Stock. In
addition, Pegasus required that the Robyn L. Mueller Trust, the Kenneth M.
Mueller Charitable Remainder Trust and Rand W. Mueller agree to vote their
shares of Common Stock in favor of this amendment (this agreement is filed
herewith).
7. The Robyn L. Mueller Trust agrees (pursuant to an agreement
filed herewith) not to sell or dispose of a number of shares in any 12 month
period in excess of 20% of the number of shares of Company Common Stock
beneficially held by it at the beginning of each such 12 month period. Rand W.
Mueller agrees not to sell more than 20% of his shares of Company Common Stock
for a five year period. These obligations terminate on the earlier of five
years or when Pegasus and its successors and assigns no longer hold 25% of the
55,000 Units originally issued under the Purchase Agreement.
8. Grant of registration rights (see discussion below).
SENIOR SECURED CREDIT FACILITY
Company has replaced its senior secured debt facility with a new
facility as set forth in (i) the Credit Agreement dated as of October 24, 1997
among Company as Borrower, certain of Company's subsidiaries as other "Credit
Parties", GECC as Lender and Agent and other Lenders who may become parties
thereto (the "Credit Agreement") filed herewith (including attached exhibits
and annexes) and (ii) the Litigation L/C and Term Loan C Agreement dated as of
October 24, 1997 between Company as Borrower, GECC as Lender and Agent (the
"Litigation Agreement"), filed herewith (together with related collateral
documents). Under the Credit Agreement and the Litigation Agreement, GECC is
currently the only Lender, but GECC has the right to assign or sell
participations in the facility. A Lender's participation must be at least $5
million of the total facility.
The facility is composed of the following: (i) a revolving loan of up
to $12 million (the "Revolving Credit"), (ii) a $1.5 million term loan ("Term
Loan A"), (iii) a loan of up to $3 million to pay a final judgment in the
current Patent Litigation ("Term Loan B"), (iv) in lieu
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<PAGE> 12
of Term Loan B and pursuant to the Litigation Agreement, up to $12 million to
procure a letter of credit to secure a supersedeas or appeal bond or similar
obligation in order to appeal a judgment of the U.S. District Court in the
Patent Litigation, provided that such judgment is not in excess of $12 million
(the "Litigation L/C"), and (v) if the Litigation L/C is paid or alternatively
if the Litigation L/C is not incurred or is terminated prior to its being
drawn, a loan of up to $12 million to facilitate payment of a settlement or
final judgment of the Patent Litigation ("Term Loan C"). The Shortfall
Warrants are being issued as consideration for a guaranty by Pegasus of $4
million of the Revolving Credit. If the Litigation L/C is issued, the
Litigation Warrants will be issued to Pegasus as consideration for its guaranty
of the Litigation L/C and Term Loan C.
Borrower is Company. Each U.S. subsidiary of Company, including
Tessco Group, Inc., Anes, Inc, Chapman Security Systems, Inc. and Intercept
Systems, Inc., is guarantying the obligations of Company under the facility.
All assets of Company and its U.S. subsidiaries are being pledged to GECC on a
combined basis to secure the facility. Company has also pledged the stock of
its U.S. subsidiaries to GECC. The facility is also secured by a pledge of one
share of Company's Series B Preferred Stock as discussed below.
The first loans under the facility were drawn down on October 27,
1997. The term of the facility is 3 years, with the outstanding balance of all
loans being due at that time. Term Loan A is amortized over three years in
equal quarterly payments plus interest. Term Loan B, if issued, will be
amortized over three years in equal quarterly installments plus interest. Term
Loan C, if issued, will be payable in quarterly installments equal to the
lesser of $250,000 or one-twelfth of its aggregate original principal amount.
A condition to the issuance of Term Loan B is that if the judgment
exceeds $3 million, Company shall have received the balance from net capital
contributions or net proceeds from a subordinated loan.
Interest may be based on the index rate or LIBOR. If based on the
index rate, the rates are index plus 1.5% for the Revolving Credit, index plus
1.75% for the Term Loan A, and index plus 2% for Term Loan B and Term Loan C.
The LIBOR rates are LIBOR plus 3.25% for the Revolving Credit, LIBOR plus 3.5%
for the Term Loan B, and LIBOR plus 3.75% for Term Loan B and Term Loan C.
The default interest rate is an additional 2%.
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<PAGE> 13
The fees payable by Company in connection with the facility include a
closing fee, an annual monitoring fee, a letter of credit fee (other than the
Litigation L/C) of 2%, a Litigation L/C fee of 3%, and an unused facility fee of
0.4%.
Mandatory prepayments include: (i) if Company issues stock or any
debt securities, 100% of the net proceeds shall be used to prepay the
obligations or collateralize letter of credit obligations or the Litigation
L/C; (ii) if any asset is sold including stock of a subsidiary, the net
proceeds (including payment of senior liens on the asset sold) shall be used to
prepay the obligations; (iii) 100% of excess cash flow shall be applied to Term
Loan B or Term Loan C if either is outstanding; (iv) if proceeds of any money
judgment or other payment arising out of any litigation involving patents or
intellectual property are received, then either (i) 50% of such proceeds shall
be used to prepay the loans or cash collateralize the Litigation L/C (provided
neither Term Loan B or Term Loan C is outstanding and the Litigation L/C shall
not have been used) or (ii) 100% of such proceeds shall be used to prepay Term
Loan B or Term Loan C or to collateralize the Litigation L/C.
The Credit Agreement and Litigation Agreement contain representations,
covenants (including financial covenants) and events of default. Any
repurchase of Units, Attached Warrants, Shortfall Warrants or Litigation
Warrants requires the consent of GECC.
PEGASUS PURCHASE AND OTHER RIGHTS
GECC has granted to Pegasus pursuant to the letter dated October 27,
1997 filed herewith, the right to purchase the facility if the loans are
accelerated. The obligation to sell expires on the sixty-first day following
notice of acceleration given to Pegasus by GECC. The purchase price is 100% of
all obligations under the facility. In the Litigation Guaranty, the Lenders
and Agent agreed not to waive or modify certain provisions of the documents
evidencing the senior debt facility without the prior written consent of
Pegasus.
WARRANT PURCHASE AGREEMENT AND WARRANTS
In connection with providing the facility, Company and GECC entered
into a Warrant Purchase Agreement dated as of October 24, 1997, filed herewith.
Pursuant to that agreement, Company sold to GECC in a private placement under
the Securities Act warrants (the "GECC Warrants"), filed herewith. The GECC
Warrants entitle the holder to purchase 131,718 shares of Common Stock at an
exercise price of $1.8759559 per share. The number of shares of Common
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<PAGE> 14
Stock into which the GECC Warrants are exercisable and the exercise price are
subject to adjustment for dilutive events as described above for the Attached
Warrants; however, the issuance of the Litigation Warrants is also a dilutive
event. The GECC Warrants have a 7 year term, and their exercise price may be
paid in cash or with in-the-money warrants.
SERIES B PREFERRED STOCK PLEDGE
As additional security for its loans, GECC required that Company
create a series of preferred stock designated Series B Preferred Stock and
cause one share of that stock to be pledged to GECC. As a consequence,
Company's Board of Directors adopted a resolution, pursuant to the authority
given to it in Company's Articles of Incorporation, approving a certificate of
designation of Series B Preferred Stock (the "Series B Certificate"), which
certificate has been filed with the State of Michigan, has become part of
Company's Articles of Incorporation and is filed herewith. Only one share of
Series B Preferred Stock is authorized. The share of Series B Preferred Stock
is entitled to dividends at the rate of $1.00 per year, has a liquidation
preference over Common Stock of $10 plus accrued but unpaid dividends, and is
subject to repurchase by Company in an amount equal to its liquidation
preference when all obligations under the Credit Agreement have been paid and
all commitments under the Credit Agreement have been terminated. The Series B
Preferred has the following voting rights: (i) if there is an event of default
under the Credit Agreement and the obligations thereunder are accelerated, then
the number of directors of Company shall be increased to one more than the
number of directors then authorized and the Series B Preferred Stock shall be
entitled to elect all these new directors; (ii) without the consent of the
Series B Preferred Stock, Company shall not amend, repeal, modify or supplement
any provision of its Articles of Incorporation, any certificate setting forth
the rights, preferences and privileges of any capital stock or Bylaws, if such
amendment, repeal, modification or supplement would adversely affect the
powers, designations, preferences or other rights of the Series B Preferred
Stock; and (iii) only such other voting rights as are required by law.
On October 23, 1997, Company sold for $10.00 to Craig Camalo the share
of Series B Preferred Stock. Company has a right to repurchase the share for
$10.00, plus accrued and unpaid dividends after the Credit Agreement is
terminated and all obligations thereunder have been paid in full. Mr. Camalo
has pledged that share of Series B Preferred Stock to GECC pursuant to a Pledge
Agreement filed herewith.
REGISTRATION RIGHTS
Company has entered into a Registration Rights Agreement with GECC and
Pegasus, filed herewith, pursuant to which Pegasus and GECC will receive
specified registration rights with respect to registrable securities. Pegasus
will receive the right to require that Company on five occasions register
shares of Common Stock and GECC will have one such right (at least 50,000
shares must be registered). There must be 6 months between such demand
registrations.
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<PAGE> 15
Company's Board of Directors has a right to postpone a registration for up to
60 days. In addition, Pegasus and GECC are granted the right to participate in
any other registration of Common Stock which Company undertakes (other than a
registration on form S-4 or S-8 or a registration filed in connection with a
dividend reinvestment plan) for itself or for a person having demand
registration rights, but subject to underwriter cutbacks. All expenses of
registration (including one counsel for the registering holders), except
brokerage fees and commissions, will be paid by Company. Company is prohibited
from granting registration rights to any other person which are inconsistent
with those being granted to Pegasus and GECC. Pegasus and GECC may transfer
the registration rights with any transfer of the registrable securities. The
registration rights expire when there are no more registrable securities.
Registrable securities include (i) Common Stock issued upon exercise of the
Attached Warrants, Shortfall Warrants, Litigation Warrants and GECC Warrants
and (ii) Common Stock issued or issuable with respect to the Common Stock
referred to in clause (i) upon any stock split, dividend, recapitalization or
similar event, but excluding Common Stock sold in a public offering or sold in
a transaction exempt from the registration requirements of the Securities Act
such that all transfer restrictions and legends are removed.
1997 STOCK OPTION PLAN
As noted above, Company's Board of Directors adopted on October 21,
1997 a non-qualified stock option plan filed herewith. The Board granted
options as follows: options to purchase 790,306 shares of Common Stock to
Rand Mueller, options to purchase 200,624 shares to Peter Stouffer, options to
purchase 200,624 shares to Michael Schroeder, and options to purchase 125,624
shares to Craig Camalo. The options are exercisable at $1.88 per share,
payable in cash or by surrender of in the money options. One-third of the
options granted to each person vest on each of the third, fourth and fifth
anniversaries from the date of grant; however, if a change of control as
in the plan occurs, all options immediately vest. A condition to the
exercise of the grants is an amendment to Company's Articles of Incorporation
increasing the number of shares of Common Stock to 20 million.
Options vest and are exercisable only if the fair market value of Company's
Common Stock or its value in a change of control shall have reached or exceeded
the price specified during the period of time specified, measured from the date
of adoption of the plan:
From Plan Adoption Price
Up to 1 year $2 3/8
1 to 2 years $3
2 to 3 years $3 7/8
3 to 4 years $5
4 to 5 years $6 5/8
5 to 6 years $8 5/8
after 6 years $11 1/2
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<PAGE> 16
Options which are canceled or terminated cannot be reissued.
AGREEMENTS WITH DIRECTORS AND MANAGEMENT
KENNETH M. MUELLER - DIRECTOR
Company entered into an amended agreement (filed herewith) dated
October 1, 1997 with Kenneth M. Mueller, pursuant to which he will
provide consulting services, including with respect to public relations and
special projects. Mr. Mueller also agrees to continue to serve as a Director
of Company. For such services, Company will pay Mr. Mueller $14,000 per year,
which amount includes payment for his services as a Director. The agreement
has a three year term, that automatically renews for one year periods if not
terminated.
RAND W. MUELLER - CHAIRMAN OF THE BOARD, DIRECTOR, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
Rand W. Mueller's employment agreement was amended as of May 20, 1997
and as of October 15, 1997 (the amendments are filed herewith). His
employment term was extended to May 31, 2001, and automatically
continues for successive one year periods thereafter, unless at least 24 months
prior to such termination Company gives notice that the employment will not be
continued. Mr. Mueller's annual salary is $500,000 starting on October 1,
1997. In addition, Mr. Mueller will receive an annual incentive bonus equal to
5% of operating income after the first $5 million of Company operating income.
PETER J. STOUFFER - DIRECTOR AND VICE PRESIDENT OF MANUFACTURING AND
ENGINEERING
Peter J. Stouffer and Company entered into an employment agreement as
of May 20, 1997 (filed herewith), with employment term provisions the same as
those in Rand W. Mueller's employment agreement described above. Mr.
Stouffer is to serve as Vice President of Manufacturing and Engineering. The
annual salary is $105,000. Company will pay Mr. Stouffer an annual bonus equal
to 1% of the first $1 million of Company operating income, and 2% of all
additional operating income. Mr. Stouffer will also be entitled to a bonus
based on the increase in shareholder value (the price of Company Common Stock).
Mr. Stouffer is subject to non-competition and confidentiality obligations
during his employment and for two years after termination of employment.
MICHAEL P. SCHROEDER - VICE PRESIDENT OF SALES AND MARKETING
Michael P. Schroeder and Company entered into an employment agreement
as of May 20, 1997 (filed herewith), with employment term provisions
the same as those in Rand W. Mueller's employment agreement discussed above.
Mr. Schroeder is to serve as Vice President of Sales and Marketing. His annual
salary is $90,000. He will be entitled to the same bonus arrangements and
subject to
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<PAGE> 17
the same non-competition and confidentiality obligations as those is Mr.
Stouffer's agreement discussed above.
CRAIG S. CAMALO - VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER, TREASURER
AND SECRETARY
Craig S. Camalo and Company entered into an employment agreement as of
May 20, 1997, with employment term provisions the same as those in Rand W.
Mueller's employment agreement discussed above. Mr. Camalo is to serve as Vice
President of Finance and Chief Financial Officer. His annual salary is
$100,000. He will be entitled to the same bonus arrangements as those in Mr.
Stouffer's agreement discussed above. Mr. Camalo is subject to non-competition
and confidentiality obligations during his employment and for six months after
termination of employment.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
3.1.1 Certificate of Designation, Numbers, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series A
Preferred Stock of Code-Alarm, Inc. ("Company").
3.1.2 Certificate of Designation, Numbers, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series A
Preferred Stock of Company.
3.2.1 Bylaws of Company, as amended.
10.40 Credit Agreement dated as of October 24, 1997 (the "Credit
Agreement") among Company, General Electric Capital
Corporation ("GECC"), in its capacity as a "Lender", and the
other financial institutions which may from time to time
become parties to the Credit Agreement (GECC, in such
capacity, and such other financial institutions being
sometimes hereinafter referred to collectively as the
"Lenders" and individually as a "Lender"), and GECC, in its
separate capacity as agent for the Lenders (the "Agent") with
Exhibits and Annexes attached.
10.41 Security Agreement dated as of October 24, 1997 executed by
Company in favor of the Agent and the Lenders (Credit
Agreement).
10.42 Security Agreement dated as of October 24, 1997 executed by
Tessco Group, Inc. ("Tessco"), in favor of the Agent and the
Lenders (Credit Agreement).
10.43 Guaranty dated as of October 24, 1997 executed by Tessco in
favor of Agent and the Lenders (Credit Agreement).
10.44 Pledge Agreement dated as of October 24, 1997 executed by
Company in favor of the Agent and the Lenders (Credit
Agreement).
10.45 Pledge Agreement dated as of October 24, 1997 executed by
Craig S. Camalo in favor of the Agent and the Lenders (Credit
Agreement).
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<PAGE> 18
10.46 Patent Security Agreement dated October 24, 1997 executed by
Company in favor of the Agent and the Lenders (Credit
Agreement).
10.47 Contribution Indemnification and Subordination Agreement dated
October 24, 1997 among the Credit Parties (Credit Agreement).
10.48 Litigation L/C and Term Loan C Agreement (the "Litigation
Agreement") dated as of October 24, 1997 among Company, Agent
and other financial institutions which may from time to time
become parties to the Litigation Agreement as Term Lenders.
10.49 Security Agreement dated October 2, 1997 executed by the
Company in favor of the Agent and the Term Lenders (Litigation
Agreement).
10.50 Security Agreement dated October 24, 1997 executed by Tessco
in favor of the Agent and the Term Lenders (Litigation
Agreement).
10.51 Guaranty dated as of October 24, 1997 executed by Tessco in
favor of the Agent and the Term Lenders (Litigation Agreement).
10.52 Pledge Agreement dated as of October 24, 1997 executed by
Company in favor of the Agent and the Term Lenders (Litigation
Agreement).
10.53 Pledge Agreement dated as of October 24, 1997 executed by
Craig S. Camalo in favor of the Agent and the Terms Lenders
(Litigation Agreement).
10.54 Patent Security Agreement dated as of October 24, 1997
executed by Company in favor of the Agent and the Term Lenders
(Litigation Agreement).
10.55 Warrant Purchase Agreement dated as of October 24, 1997
executed by GECC and Company.
10.56 Warrant to Purchase Common Stock of Company issued to GECC and
executed by Company.
10.57 Unit Purchase Agreement dated as of October 27, 1997 among
Company, Pegasus Partners, L.P. ("PP"), Pegasus Related
Partners, L.P. ("PRP").
10.58 Letter granting PP and PRP the right to purchase accelerated
obligations executed by GECC and acknowledged by Company.
10.59 Registration Rights Agreement dated as of October 27, 1997
among Company, PP, PRP and GECC.
10.60 Form of Attached Warrant to purchase Common Stock of Company.
10.61 Form of Shortfall Warrant to purchase Common Stock of Company.
10.62 Form of Litigation Warrant to purchase Common Stock of
Company.
10.64 Limited Supplemental Guaranty dated as of October 24, 1997 by
and among PP, PRP and GECC.
10.65 Limited Litigation Guaranty dated as of October 24, 1997 by
and among PP, PRP and GECC.
10.66 Company's 1997 Stock Option Plan.
10.67 Letter Agreement dated as of October 27, 1997 among Robyn L.
Mueller Trust, the Kenneth M. Mueller Charitable Remainder
Unitrust, Mr. Rand Mueller, PP, PRP and Company.
10.68 Amendment No.4 to Employment Agreement between Company and
Rand W. Mueller dated May 20, 1997, and Amendment No. 5 to
Employment Agreement between Company and Rand W. Mueller dated
May 29, 1997.
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<PAGE> 19
10.69 Employment Agreement dated May 20, 1997 between Company and
Craig S. Camalo.
10.70 Employment Agreement dated May 20, 1997 between Company and
Peter Stouffer.
10.71 Employment Agreement dated May 20, 1997 between Company and
Michael Schroeder.
10.72 Letter Agreement dated October 1, 1997 between Company and
Kenneth M. Mueller.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
CODE-ALARM, INC.
------------------------------
Date: November 10, 1997
By: /s/ RAND W. MUELLER
---------------------------
RAND W. MUELLER
President
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<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1.1 Certificate of Designation, Numbers, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series A
Preferred Stock of Code-Alarm, Inc. ("Company").
3.1.2 Certificate of Designation, Numbers, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series A
Preferred Stock of Company.
3.2.1 Bylaws of Company, as amended.
10.40 Credit Agreement dated as of October 24, 1997 (the "Credit
Agreement") among Company, General Electric Capital
Corporation ("GECC"), in its capacity as a "Lender", and the
other financial institutions which may from time to time
become parties to the Credit Agreement (GECC, in such
capacity, and such other financial institutions being
sometimes hereinafter referred to collectively as the
"Lenders" and individually as a "Lender"), and GECC, in its
separate capacity as agent for the Lenders (the "Agent") with
Exhibits and Annexes attached.
10.41 Security Agreement dated as of October 24, 1997 executed by
Company in favor of the Agent and the Lenders (Credit
Agreement).
10.42 Security Agreement dated as of October 24, 1997 executed by
Tessco Group, Inc. ("Tessco"), in favor of the Agent and the
Lenders (Credit Agreement).
10.43 Guaranty dated as of October 24, 1997 executed by Tessco in
favor of Agent and the Lenders (Credit Agreement).
10.44 Pledge Agreement dated as of October 24, 1997 executed by
Company in favor of the Agent and the Lenders (Credit
Agreement).
10.45 Pledge Agreement dated as of October 24, 1997 executed by
Craig S. Camalo in favor of the Agent and the Lenders (Credit
Agreement).
10.46 Patent Security Agreement dated October 24, 1997 executed by
Company in favor of the Agent and the Lenders (Credit
Agreement).
10.47 Contribution Indemnification and Subordination Agreement dated
October 24, 1997 among the Credit Parties (Credit Agreement).
10.48 Litigation L/C and Term Loan C Agreement (the "Litigation
Agreement") dated as of October 24, 1997 among Company, Agent
and other financial institutions which may from time to time
become parties to the Litigation Agreement as Term Lenders.
10.49 Security Agreement dated October 2, 1997 executed by the
Company in favor of the Agent and the Term Lenders (Litigation
Agreement).
10.50 Security Agreement dated October 24, 1997 executed by Tessco
in favor of the Agent and the Term Lenders (Litigation
Agreement).
10.51 Guaranty dated as of October 24, 1997 executed by Tessco in
favor of the Agent and the Term Lenders (Litigation Agreement).
10.52 Pledge Agreement dated as of October 24, 1997 executed by
Company in favor of the Agent and the Term Lenders (Litigation
Agreement).
10.53 Pledge Agreement dated as of October 24, 1997 executed by
Craig S. Camalo in favor of the Agent and the Terms Lenders
(Litigation Agreement).
10.54 Patent Security Agreement dated as of October 24, 1997
executed by Company in favor of the Agent and the Term Lenders
(Litigation Agreement).
10.55 Warrant Purchase Agreement dated as of October 24, 1997
executed by GECC and Company.
10.56 Warrant to Purchase Common Stock of Company issued to GECC and
executed by Company.
10.57 Unit Purchase Agreement dated as of October 27, 1997 among
Company, Pegasus Partners, L.P. ("PP"), Pegasus Related
Partners, L.P. ("PRP").
10.58 Letter granting PP and PRP the right to purchase accelerated
obligations executed by GECC and acknowledged by Company.
10.59 Registration Rights Agreement dated as of October 27, 1997
among Company, PP, PRP and GECC.
10.60 Form of Attached Warrant to purchase Common Stock of Company.
10.61 Form of Shortfall Warrant to purchase Common Stock of Company.
10.62 Form of Litigation Warrant to purchase Common Stock of
Company.
10.64 Limited Supplemental Guaranty dated as of October 24, 1997 by
and among PP, PRP and GECC.
10.65 Limited Litigation Guaranty dated as of October 24, 1997 by
and among PP, PRP and GECC.
10.66 Company's 1997 Stock Option Plan.
10.67 Letter Agreement dated as of October 27, 1997 among Robyn L.
Mueller Trust, the Kenneth M. Mueller Charitable Remainder
Unitrust, Mr. Rand Mueller, PP, PRP and Company.
10.68 Amendment No.4 to Employment Agreement between Company and
Rand W. Mueller dated May 20, 1997, and Amendment No. 5 to
Employment Agreement between Company and Rand W. Mueller dated
May 29, 1997.
10.69 Employment Agreement dated May 20, 1997 between Company and
Craig S. Camalo.
10.70 Employment Agreement dated May 20, 1997 between Company and
Peter Stouffer.
10.71 Employment Agreement dated May 20, 1997 between Company and
Michael Schroeder.
10.72 Letter Agreement dated October 1, 1997 between Company and
Kenneth M. Mueller.
<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF SERIES A
PREFERRED STOCK
OF
CODE ALARM INC.
Code Alarm Inc. (the "Corporation"), a corporation organized
and existing under the Michigan Business Corporation Act, hereby certifies
that, pursuant to the provisions of Section 302 of the Michigan Business
Corporation Act, its Board of Directors, at a meeting duly held on October 21,
1997, adopted the following resolution:
WHEREAS, the Board of Directors of the Corporation is
authorized by the Restated Articles of Incorporation to issue up to 500,000
shares of preferred stock in one or more series and, in connection with the
creation of any series, to fix by the resolutions providing for the issuance of
shares the powers, designations, preferences and relative, participating,
optional or other rights of the series and the qualifications, limitations or
restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to such authority, to authorize and fix the terms and
provisions of one series, consisting of two sub-series, of preferred stock and
the number of shares constituting such series and sub-series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized a series of preferred stock on the terms and with the provisions
herein set forth on Annex A attached to this resolution.
/s/ Rand Mueller
--------------------------
Name: Rand Mueller
Title: President
ATTEST:
/s/ Craig S. Camalo
- -------------------------
Name: Craig S. Camalo
Title: Secretary
<PAGE> 2
ANNEX A
SERIES A PREFERRED STOCK
The powers, designations, preferences and relative,
participating, optional or other rights of the Series A Preferred Stock of Code
Alarm Inc. (the "Corporation") are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series
A Preferred Stock." The Series A Preferred Stock shall be issuable in two
sub-series, which shall be designated as "Series A-1 Preferred Stock" and
"Series A-2 Preferred Stock" and which shall be the same in all respects except
as otherwise specified below. The Series A Preferred Stock shall have no par
value per share. The number of authorized shares constituting this series
shall be 400,000 shares, 200,000 of which shall be Series A-1 Preferred Stock
and 200,000 of which shall be Series A-2 Preferred Stock. Shares of the Series
A Preferred Stock shall have a stated value of $127.27 per share (the "Stated
Value").
2. DIVIDENDS.
(a) Right to Receive Dividends. Holders of the Series A
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Corporation (the "Board of Directors"), to the extent
permitted by the Michigan Business Corporation Act, cumulative dividends at the
rate, in the form, at the times and in the manner set forth in this Section 2.
Such dividends shall accrue on any given share from the day of issuance of such
share and shall accrue from day to day at the rate specified in Section 2(c)
below whether or not earned or declared.
(b) Form of Dividend. Except as provided in Section
10(c), any dividend payment made with respect to the Series A Preferred Stock
may be made, at the sole discretion of the Board of Directors, in cash out of
funds legally available for such purpose or by issuing the number of units
("Units") consisting of one share of Series A Preferred Stock (of the same
sub-series as those held by the holder entitled to the dividend) and one
warrant (together with other warrants in substantially the same form issued to
holders of Series A Preferred Stock, a form of which is available for
inspection at the Corporation, the "Attached Warrants") to purchase such number
of shares of the Corporation's common stock, no par value (the "Common Stock")
for which the other Attached Warrants held by such holder are exercisable at
such time, in the form attached as Exhibit B-1 to the Unit Purchase Agreement
dated as of the date of initial issuance of shares of Series A Preferred Stock
(the "Issuance Date"), among the Corporation, Pegasus Partners, L.P. and
Pegasus Related Partners, L.P., a copy of which is available for inspection at
the Corporation (the "Unit Purchase Agreement"), equal to the amount of the
dividend divided by the Stated Value. Any such dividend payment may be made,
in the sole discretion of the Board of Directors, partially in cash and
partially in Units determined in accordance with the preceding formula;
provided, that, in the event that any such dividend payment is made partially
<PAGE> 3
in cash and partially in Units, each holder of Series A Preferred Stock shall
receive a ratable amount of cash and Units that is proportionate to the amount
of Series A Preferred Stock held by such holder on which such dividend is paid.
All shares of Series A Preferred Stock and Attached Warrants comprising Units
issued as a dividend shall be fully paid and nonassessable.
(c) Dividend Rate. The dividend rate on the Series A
Preferred Stock shall be 10% per annum of the Stated Value per share plus all
accrued and unpaid dividends as of the most recent Dividend Payment Date (as
defined below) (after giving effect to payments made on such date); provided,
that, upon the occurrence and during the continuance of any Triggering Event
(as defined in Section 7 hereof), the dividend rate on the Series A Preferred
Stock shall be 13% per annum of the Stated Value per share plus all accrued and
unpaid dividends as of the most recent Dividend Payment Date (as defined below)
(after giving effect to payments made on such date) (such rate, as applicable,
the "Dividend Rate").
(d) Payment of Dividends. Dividends shall be payable
semi-annually in arrears, when and as declared by the Board of Directors, on
April 15 and October 15 of each year, commencing April 15, 1998 (each such
semiannual payment date, a "Dividend Payment Date"), except that if any such
date is a Saturday, Sunday or legal holiday then such dividend shall be payable
on the first immediately succeeding calendar day which is not a Saturday,
Sunday or legal holiday. Dividends shall accrue on each share of Series A
Preferred Stock from the date of issuance of such share and, after payment of
a dividend as required hereunder, from and after each such Dividend Payment
Date based on the number of days elapsed and a 365-day year. The dividend
payable on the first Dividend Payment Date with respect to any share of Series
A Preferred Stock shall be the pro rata portion of the Dividend Rate based upon
the number of days from and including the Issuance Date, up to and including
such first Dividend Payment Date and a 365-day year. Each dividend shall be
paid to the holders of record of shares of the Series A Preferred Stock as they
appear on the books of the Corporation on such record date, which record date
shall be not more than 45 days nor fewer than 10 days preceding the respective
Dividend Payment Date, as shall be fixed by the Board of Directors. Any
dividend payable on any Dividend Payment Date to any holder of record of shares
of Series A Preferred Stock shall be reduced by the amount of any dividend
payments made to such holder pursuant to Section 8(b) hereof during the
six-month period preceding such Dividend Payment Date.
(e) Dividend Preference. Dividends on the Series A
Preferred Stock shall be payable before any dividends or distributions or other
payments shall be paid or set aside for payment upon the common stock, no par
value, of the Corporation (the "Common Stock") or any other stock ranking on
liquidation or as to dividends or distributions junior to the Series A
Preferred Stock (any such stock, together with the Common Stock, being referred
to hereinafter as "Junior Stock"), other than a dividend, distribution or
payment paid solely in shares of Common Stock or other Junior Stock that is not
Redeemable Stock (as defined below). If at any time dividends on the
outstanding Series A Preferred Stock at the rate set forth herein shall not
have been paid or declared and set apart for payment with respect to all
preceding and current periods, the amount of the deficiency shall be fully paid
or declared and set apart for payment, before any dividend, distribution or
payment shall be declared or paid upon or set apart for the
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shares of any other class or series of Junior Stock or Parity Securities (as
defined below), other than a dividend, distribution or payment paid solely in
shares of Common Stock or other Junior Stock that is not Redeemable Stock. The
term "Redeemable Stock" shall mean any equity security that by its terms or
otherwise is required to be redeemed for cash at any time or is redeemable for
cash at the option of the holder thereof at any time.
If there shall be outstanding shares of any Parity Securities,
no full dividends shall be declared or paid or set apart for payment on any
such Parity Securities for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum or
additional shares of Series A Preferred Stock as permitted hereunder
sufficient for the payment thereof set apart for such payment on the Series A
Preferred Stock for all dividend periods terminating on or prior to the date of
payment of such dividends; provided that in no event shall any dividends be
declared or paid in cash on Parity Securities unless dividends in cash of not
less than a ratable amount are declared and paid on Series A Preferred Stock.
The term "Parity Securities" shall mean any class or series of capital stock
which is entitled to share ratably with the Series A Preferred Stock in the
payment of dividends, including accumulations, if any, and, in the event that
the amounts payable thereon on liquidation are not paid in full, are entitled
to share ratably with the Series A Preferred Stock in any distribution of
assets; provided that Parity Securities shall not include any shares of Series
A Preferred Stock issued as dividends pursuant to this Section 2.
If dividends on the Series A Preferred Stock and on any other
series of Parity Securities are in arrears, in making any dividend payment on
account of such arrears, the Corporation shall make payments ratably (and
ratably as to cash, in-kind or other payments) upon all outstanding shares of
the Series A Preferred Stock and shares of such other Parity Securities in
proportion to the respective amounts of dividends in arrears on the Series A
Preferred Stock and on such other series of Parity Securities to the date of
such dividend payment.
Notwithstanding any other provision of this Section 2, the
Corporation may pay scheduled and accrued dividends on its Series B Preferred
Stock, pursuant to the terms of the Series B Certificate of Designation (as
hereinafter defined).
3. LIQUIDATION PREFERENCE.
In the event of any bankruptcy, liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, each holder of
Series A Preferred Stock at the time thereof shall be entitled to receive,
prior and in preference to any distribution of any of the assets or funds of
the Corporation to the holders of the Common Stock or other Junior Stock by
reason of their ownership of such stock, an amount per share of Series A
Preferred Stock equal to the greater of (x) the Stated Value plus any accrued
and unpaid dividends to the date of liquidation or (y) subject to the
applicability of Section 8(b), the amount per share determined in accordance
with such Section 8(b) plus $.01. If the assets and funds legally available
for distribution among the holders of Series A Preferred Stock shall be
insufficient to permit the payment to the holders of the full aforesaid
preferential amount, then the assets and funds shall be distributed ratably
among holders of Series A Preferred Stock in proportion to the number of shares
of Series A Preferred Stock owned by each holder. If the assets and funds of
the Corporation available for distribution to stockholders upon any bankruptcy,
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, shall be insufficient to permit the payment
to holders
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<PAGE> 5
of the full aforesaid preferential amount and amounts payable to holders of
outstanding Parity Securities, the holders of Series A Preferred Stock and the
holders of such other Parity Securities shall share ratably (and ratably as to
cash, in-kind or other distributions) in any distribution of assets of the
Corporation in proportion to the full respective preferential amounts to which
they are entitled.
Notwithstanding any other provision of this Section 3, the
Corporation may redeem or repurchase shares of Series B Preferred Stock
pursuant to the terms of the Series B Certificate of Designation.
4. VOTING RIGHTS.
In addition to any voting rights provided elsewhere herein or
in the Corporation's Restated Articles of Incorporation, as it may be amended
or restated from time to time (the "Articles of Incorporation"), and any voting
rights provided by law, the holders of shares of Series A-1 Preferred Stock
shall have the following voting rights:
(a) Election of Directors.
(i) Subject to the terms hereof, the holders of
the Series A-1 Preferred Stock, voting as a single class in accordance with
Section 4(d), shall have the right, at any time on or after the day after the
Issuance Date, to elect two directors (in addition to the directors elected by
holders of Common Stock or any other capital stock of the Corporation).
(ii) Any director elected by the holders of
shares of Series A-1 Preferred Stock shall be referred to herein as a
"Series A-1 Preferred Director." Subject to Section 4(a)(v), the initial terms
of the two directors to be appointed pursuant to Section 4(a)(i) will commence
upon their election by the Series A-1 Preferred Stock and shall expire at the
2000 annual meeting of stockholders of the Corporation. Upon expiration of the
initial terms of such Series A-1 Preferred Directors, so long as the Series A-1
Preferred Stock is outstanding, the holders of the Series A-1 Preferred Stock
shall have the right, subject to Section 4(a)(v), to elect two Series A-1
Preferred Directors to replace such directors in the same manner described
above in Section 4(a)(i). Subject to Section 4(a)(v), a Series A-1 Preferred
Director so elected shall hold office for a term expiring at the annual meeting
of stockholders in the third year following the election of such director.
Notwithstanding the foregoing, but subject to Section 4(a)(v), a Series A-1
Preferred Director elected under Section 4(a)(i) shall serve until such Series
A-1 Preferred Director's successor is duly elected and qualified or until such
director's earlier removal as provided in Section 4(a)(iii) or death or
resignation and, in the event a vacancy
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occurs, a replacement Series A-1 Preferred Director shall be selected as
provided in Section 4(a)(i).
(iii) A Series A-1 Preferred Director may
be removed by, and shall not be removed except by, the vote of the holders of
record of a majority of the outstanding shares of Series A-1 Preferred Stock,
voting together as a single class.
(iv) The Corporation shall at all times
reserve and keep available a sufficient number of vacant seats on the Board of
Directors solely for the purpose of enabling the holders of the Series A-1
Preferred Stock to designate Series A-1 Preferred Directors as provided in this
Section 4(a).
(v) The right of the holders of Series
A-1 Preferred Stock to elect two directors pursuant to this Section 4(a) shall
terminate at such time as the initial holder of Series A-1 Preferred Stock and
its affiliates (as such term is defined in Section 776(1) of the Michigan
Business Corporation Act) no longer hold at least 25% of the initially issued
number of shares of Series A-1 Preferred Stock (without regard to in-kind
dividends paid thereon) and at such time the term of any Series A-1 Preferred
Director shall immediately terminate.
(b) Certain Corporate Actions.
So long as the initial holder of Series A-1 Preferred
Stock and its affiliates (as such term is defined in Section 776(1) of the
Michigan Business Corporation Act) collectively hold at least 25% of the
initially issued number of shares of Series A-1 Preferred Stock (without regard
to in-kind dividends paid thereon), the Corporation shall not, and shall not
permit any of its subsidiaries to, without first obtaining the affirmative vote
or written consent of the holders of a majority of the shares of Series A-1
Preferred Stock, voting as a single class in accordance with Section 4(d):
(A) amend, repeal, modify or supplement any
provision of the Restated Articles of Incorporation (including any certificate
of designation forming a part thereof), the Bylaws of the Corporation, as in
effect on the Issuance Date, or any successor articles of incorporation or
bylaws or this Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series A Preferred Stock
(this "Certificate of Designation"), if such amendment, repeal, modification or
supplement in any way adversely affects the powers, designations, preferences
or other rights of the Series A Preferred Stock, including, without limitation,
to increase the size of the Board of Directors to more than nine (9) members
(except to the extent the holders of Series B Preferred Stock have rights to
elect directors in accordance with the terms of the Certificate of Designation,
Number, Powers, Preferences and Relative Participating, Optional and Other
Rights of Series B Preferred Stock, as in effect on the Issuance Date (the
"Series B Certificate of Designation");
(B) authorize or effect, in a single transaction
or through a series of related transactions, (1) a liquidation, winding up or
dissolution of the
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Corporation or adoption of any plan for the same; (2) any reorganization of the
capital of the Corporation or any of its subsidiaries, reclassification of the
capital stock of the Corporation or any of its subsidiaries, consolidation or
merger by the Corporation or any of its subsidiaries with or into another
corporation or other entity (other than a merger of any of the Corporation's
wholly-owned subsidiaries with or into the Corporation, where the Corporation
is the surviving corporation), or sale, transfer or other disposal of all or
substantially all of the property, assets or business of the Corporation or any
of its subsidiaries except to the Corporation (each, a "Realization Event"); or
(3) any direct or indirect purchase or other acquisition by the Corporation or
any of its subsidiaries of any capital stock (other than repurchase of the
Units, the Series A Preferred Stock, the Attached Warrants and Common Stock
issued upon exercise thereof, pursuant to the terms hereof and of the Unit
Purchase Agreement, repurchase of the Shortfall Warrants (as defined in the
Unit Purchase Agreement), the Litigation Warrants (as defined in the Unit
Purchase Agreement) and Common Stock issued upon exercise of the Shortfall
Warrants or the Litigation Warrants, pursuant to the terms of the Shortfall
Warrants or Litigation Warrants, as the case may be, and redemption of the
shares of Series B Preferred Stock of the Corporation, pursuant to the Series B
Certificate of Designation);
(C) declare or pay or set aside for payment any
dividend or distribution or other payment (other than a dividend or
distribution paid solely in shares of Common Stock or other Junior Stock that
is not Redeemable Stock or a scheduled and accrued dividend on the Series B
Preferred Stock pursuant to the terms of the Series B Certificate of
Designation) upon the Common Stock or upon any other Junior Stock, nor redeem,
purchase or otherwise acquire any Common Stock or other Junior Stock for any
consideration (or pay or make available any moneys, whether by means of a
sinking fund or otherwise, for the redemption of or other distribution or
payment with respect to any shares of any Common Stock or other Junior Stock),
except by conversion or exchange of Common Stock or other Junior Stock for such
stock that is not Redeemable Stock;
(D) authorize or permit the Corporation or any
subsidiary of the Corporation to issue any capital stock or any options,
warrants or other rights exchangeable or exercisable therefor, other than (i)
shares of Series A Preferred Stock and Attached Warrants on the Issuance Date
or in payment of dividends as provided in Section 2 above, (ii) pursuant to the
exercise of options issued under the Corporation's 1987 Stock Option Plan,
(iii) pursuant to the grant and exercise of options under the Corporation's
1997 Stock Option Plan (the "1997 Stock Option Plan"), as described in Section
3.01(n) of the Unit Purchase Agreement, provided that the Charter Amendment (as
defined in the Unit Purchase Agreement) has (1) been approved and adopted by
the Corporation's stockholders, (2) been filed with the Department of Consumer
and Industry Services of the State of Michigan and (3) become effective, (iv)
the issuance of shares of Series A-2 Preferred Stock in accordance with this
Certificate of Designation, (v) the issuance of Common Stock upon exercise of
Attached Warrants, (vi) the issuance to General Electric Capital Corporation on
the Issuance Date of warrants to purchase Common Stock and the issuance of
Common Stock upon the exercise of such warrants,
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(vii) the issuance to Craig Camalo on the Issuance Date of one share of Series
B Preferred Stock, (viii) the issuance of Shortfall Warrants and Litigation
Warrants and the issuance of Common Stock upon exercise of any Shortfall
Warrants or Litigation Warrants, (ix) the issuance of equity securities, the
proceeds of which are intended to be and are immediately used to redeem all of
the outstanding shares of Series A Preferred Stock and at least one-half of all
of the outstanding Attached Warrants, and (x) in payment of dividends or
distributions payable solely in shares of Common Stock or other Junior Stock
that is not Redeemable Stock, to the extent permitted in Section 4(b)(C);
(E) authorize or permit the purchase by the
Corporation or any subsidiary of assets or of equity or other interests in any
other entity in one or a series of transactions if:
(i) the Corporation's and its
subsidiaries' investments in such assets or equity exceed 10 percent of the
total assets of the Corporation and its subsidiaries consolidated as of the end
of the most recently completed fiscal year; or
(ii) the Corporation's and its
subsidiaries' income from continuing operations before income taxes,
extraordinary items and cumulative effect of a change in accounting principles
as a result of the purchase of such assets or equity exceeds 10 percent of such
income of the Corporation and its subsidiaries consolidated for the most
recently completed fiscal year.
(F) incur, or allow any subsidiary to incur,
indebtedness for borrowed money (including, without limitation, any capitalized
lease obligations, accounts receivable financing or other asset-backed
financing), any guarantee or other similar contingent obligation or any lease
financing (whether a capitalized lease, operating lease, pursuant to a sale
leaseback arrangement or otherwise) other than (i) incurrence after the initial
issuance date of the Series A-1 Preferred Stock of additional indebtedness not
exceeding $1,000,000 in the aggregate at any one time outstanding (other than
any indebtedness owing to General Electric Capital Corporation and the other
lenders pursuant to the Credit Agreement dated as of the Issuance Date (as in
effect on such date) among the Corporation, Tessco Group, Inc., General
Electric Capital Corporation and the other credit parties and lenders signatory
thereto), (ii) the incurrence of indebtedness, the proceeds of which are
intended to be and are immediately used to redeem all of the outstanding shares
of Series A Preferred Stock and at least one-half of all of the outstanding
Attached Warrants, (iii) the guarantee by Tessco Group, Inc. of certain
obligations of the Corporation to Pegasus Partners, L.P. and Pegasus Related
Partners, L.P. pursuant to a guarantee dated as of the Issuance Date and (iv)
any indebtedness, guarantee or similar contingent obligation relating to the
Litigation Guarantee (as defined in the Unit Purchase Agreement);
(G) modify or enter into, or allow any subsidiary
to modify or enter into, any employment agreement, non-competition agreement,
bonus or stock
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issuance arrangements or other compensation (including, without limitation,
fringe benefit) arrangements with any officer or director of the Corporation or
any subsidiary or any person performing functions similar to that of an officer
or director;
(H) amend, supplement, restate, revise, waive or
otherwise modify (a) the Corporation's 1987 Stock Option Plan, as in effect on
the Issuance Date or (b) the 1997 Stock Option Plan or reallocate the options
issued under the 1997 Stock Option Plan;
(I) create or adopt any stock option plan, stock
appreciation rights plan, bonus plan or similar plan (other than the 1997 Stock
Option Plan) that is not in existence as of the Issuance Date;
(J) create an executive or other committee of the
Board of Directors of the Corporation or any subsidiary or adopt rules
governing the election of members of such committee;
(K) change in any material respect the nature of
the business of the Corporation and its subsidiaries taken as a whole;
(L) enter into any transaction, or any agreement
or understanding with any affiliate of the Corporation or any subsidiary
thereof, other than a wholly-owned subsidiary of the Corporation; or
(M) agree to do any of the foregoing.
(c) Additional Voting Rights. Upon the occurrence and
during the continuance of any Triggering Event (as defined in Section 7), the
holders of Series A-1 Preferred Stock shall have the additional voting rights
set forth in Section 8(d).
(d) Means of Voting. On all matters on which the holders
of Series A-1 Preferred Stock are entitled to vote pursuant to Section 4(a) and
4(b), each holder of Series A-1 Preferred Stock shall be entitled to one vote
for each share held by such holder. The rights of the holders of Series A-1
Preferred Stock under this Section 4 may be exercised (i) with respect to the
election of the Series A-1 Preferred Directors pursuant to Section 4(a), at a
meeting of the holders of the Series A-1 Preferred Stock or by written consents
executed by the holders entitled to vote therefor and delivered to the
Secretary or Assistant Secretary of the Corporation; (ii) at any meeting of
stockholders of the Corporation for the election of directors; (iii) at a
meeting of the holders of shares of such Series A-1 Preferred Stock, called for
the purpose by the Corporation or by the holders of record of 25% or more of
the Series A-1 Preferred Stock, pursuant to requests delivered in writing to
the Secretary or Assistant Secretary of the Corporation; (iv) by written
consent signed by the holders of the requisite percentage of the then
outstanding shares, delivered to the Secretary or Assistant Secretary of the
Corporation; or (v) with respect to the voting rights referred to in Section
4(c), at any meeting of the stockholders of
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the Corporation or by written consent signed by the holders of the requisite
percentage of the then outstanding shares of Common Stock (and Series A-1
Preferred Stock), delivered to the Secretary or Assistant Secretary of the
Corporation. Except to the extent otherwise provided herein or to the extent
that holders of 75% of the Series A-1 Preferred Stock decide otherwise, any
meeting of the holders of Series A-1 Preferred Stock shall be conducted in
accordance with the provisions of the By-Laws of the Corporation applicable to
meetings of stockholders. In the event of a conflict or inconsistency between
the By-Laws of the Corporation and any term of this Certificate of Designation,
including, but not limited to this Section 4, the terms of this Certificate of
Designation shall prevail.
(e) Voting Rights of Series A-2 Preferred Stock. Holders
of shares of Series A-2 Preferred Stock shall not be entitled to any voting
rights, except as expressly set forth herein or as otherwise required by law.
5. OPTIONAL REDEMPTION.
(a) Redemption During Year One. At any time prior to
the first anniversary of the Issuance Date, provided that the Charter Amendment
has (1) been approved and adopted by the Corporation's stockholders, (2) been
filed with the Department of Consumer and Industry Services of the State of
Michigan and (3) become effective, and subject to Section 5(f), the
Corporation, at its sole option, may redeem all, but not less than all, of the
outstanding shares of Series A Preferred Stock and, concurrently therewith,
repurchase all of the outstanding Interim Dividend Warrants (as defined in the
Unit Purchase Agreement), one-half of the outstanding Attached Warrants which
are not Interim Dividend Warrants and a number of shares of Common Stock
equivalent to one-half of the number of shares of Common Stock for which
Attached Warrants have theretofore been exercised, for an aggregate redemption
price consisting of cash in an amount equal to one hundred seventeen and
one-half percent (117.5%) of the aggregate Stated Value of such shares of
Series A Preferred Stock less any cash dividends previously paid thereon.
(b) Redemption After Year Two. At any time after the
second anniversary of the Issuance Date, provided that the Corporation has not
theretofore exercised its rights pursuant to Section 5(a), and subject to
Section 5(f), the Corporation, at its sole option, may redeem all, but not less
than all, of the outstanding shares of Series A Preferred Stock and,
concurrently therewith, repurchase all of the outstanding Attached Warrants
which are part of Units and the Common Stock for which Attached Warrants have
theretofore been exercised (other than shares of Common Stock which have been
registered and sold under an effective registration statement pursuant to the
Securities Act, or sold pursuant to Rule 144 promulgated thereunder
("Non-Repurchasable Stock")), for an aggregate redemption price equal to the
greater of (i) an amount determined by multiplying (x) the sum of (1) the
number of shares of Common Stock for which the Attached Warrants are then
exercisable and (2) the number of shares for which the Attached Warrants have
theretofore been exercised (other than shares of Non-Repurchasable Stock) by
(y) the Current Market Price per share of Common Stock determined as of the
date of redemption and (ii) an amount sufficient to yield each Unit (other than
Units which have been transformed
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into Non-Repurchasable Stock) a 35% annual rate of return from the date of its
original issuance through the date of redemption, after giving effect to any
cash dividends actually paid to the holder or any prior holder of such Unit.
For purposes hereof, "Current Market Price" shall mean, in
respect of any share of Common Stock on any date herein specified, the average
of the daily market prices for the 20 consecutive Trading Days (as hereinafter
defined) immediately preceding such date. The daily market price for each such
Trading Day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the last reported sale
price as officially quoted on any such exchange, (iii) if the Common Stock is
not then listed or admitted to trading on any stock exchange but is traded on
the Nasdaq Stock Market, the last reported sale price as officially quoted on
the Nasdaq Stock Market, (iv) if the Common Stock is not then traded on the
Nasdaq Stock Market, the last reported sale price on the over-the-counter
market, as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of reporting
prices), or if such sale price is not available on such date, the average of
the closing bid and asked prices on such date as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices), or (v) if there is no such organization
or agency, as furnished by any member of the National Association of Securities
Dealers, Inc., or any successor corporation thereto (the "NASD") selected
mutually by the holders of a majority of the Units and the Corporation or, if
they cannot agree upon such selection, by a member selected by two such members
of the NASD, one of which shall be selected by such holders and one of which
shall be selected by the Corporation.
For purposes hereof, "Trading Day" shall mean (i) any day on
which stock is traded on the principal stock exchange on which the Common Stock
is listed or admitted to trading, (ii) if the Common Stock is not then listed
or admitted to trading on any stock exchange but is traded on the Nasdaq Stock
Market, any day on which stock is traded on the Nasdaq Stock Market, or (iii)
if the Common Stock is not then traded on the Nasdaq Stock Market, any day on
which stock is traded in the over-the counter market, as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices).
(c) Notice of Redemption. Notice of redemption pursuant
to Section 5(a) or (b) shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date to
such holder's address as the same appears on the books of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the number of
shares of Series A Preferred Stock to be redeemed and the number of Attached
Warrants and shares of Common Stock to be repurchased; (iii) the formula for
determination of the redemption price; (iv) the place or places where
certificates for such shares of Series A Preferred Stock and Attached Warrants,
and/or for such shares of Common Stock are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares of Series A Preferred
Stock to be redeemed will cease to accrue on the redemption date.
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(d) Cessation of Dividends on Shares of Series A
Preferred Stock Redeemed; Shares No Longer Outstanding. Notice having been
mailed as stated in subsection (c) above, from and after the close of business
on the redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price), dividends on the
shares of Series A Preferred Stock redeemed shall cease to accrue, and the
shares of Series A Preferred Stock redeemed and the Attached Warrants and
shares of Common Stock repurchased shall no longer be deemed to be outstanding,
and all rights of the holders thereof as stockholders of the Corporation
(except the right to receive from the Corporation the redemption price) shall
cease. Upon surrender in accordance with said notice of the certificates for
any shares of Series A Preferred Stock and Attached Warrants comprising Units,
and/or shares of Common Stock so redeemed or repurchased (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such Attached Warrants and/or shares
shall be redeemed or repurchased by the Corporation at the redemption price
aforesaid.
(e) Status of Redeemed Shares of Series A Preferred
Stock. Any shares of Series A Preferred Stock which have been redeemed shall
be retired and thereafter have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors or a
duly authorized committee thereof.
(f) Limitation on Corporation's Right to Redeem.
Notwithstanding anything to the contrary contained herein, the Corporation
shall not be entitled to redeem shares of Series A Preferred Stock or
repurchase Attached Warrants and/or shares of Common Stock until the earlier of
(i) the date which is six months and one day following the most recent issuance
to Pegasus Partners, L.P. and Pegasus Related Partners, L.P. of the Litigation
Warrants in accordance with Section 5.04 of the Unit Purchase Agreement,
provided that on or before such date, Pegasus Partners, L.P. and Pegasus
Related Partners, L.P. are unconditionally released in full from any unused
portion of the Litigation Guarantee or (ii) such time as Pegasus Partners, L.P.
and Pegasus Related Partners, L.P. are unconditionally released in full from
the Litigation Guarantee (as defined in the Unit Purchase Agreement), provided
that no Litigation Warrants have been issued prior to such release.
6. MANDATORY REDEMPTION.
(a) Obligation to Redeem. (i) At any time after the
date which is three years and six months after the Issuance Date, any holder of
shares of Series A Preferred Stock, at its election, may, by notice to the
Corporation (the "Put Notice"), demand redemption of all, but not less than
all, of such holder's shares of Series A Preferred Stock and repurchase of all,
but not less than all, of such holder's Attached Warrants. Subject to the
provisions of Section 6(b), the Corporation shall, on the date (not less than
30 days after the date of the Put Notice) designated in such Put Notice, redeem
or repurchase from the holder all (or such lesser portion permitted to be
repurchased in accordance with Section 6(a)(iii)) of such holder's shares of
Series A Preferred Stock and Attached Warrants for an amount determined by
multiplying (x) the number of shares
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of Common Stock for which such Attached Warrants are then exercisable by (y)
the Current Market Price per share of Common Stock determined as of the date of
the Put Notice.
(ii) Notwithstanding the provisions of
Section 6(a)(i), if, at any time during the period between the date on which a
holder of shares of Series A Preferred Stock shall have delivered a Put Notice
and the date of redemption by the Corporation pursuant thereto, a Realization
Event shall occur and the consideration received or receivable by stockholders
in connection with such Realization Event shall consist solely of cash, then
such holder shall (whether or not such holder shall have previously surrendered
its shares of Series A Preferred Stock for redemption by the Corporation
pursuant to this Section 6) be entitled to receive, on the date of such
redemption, the higher of (x) the amount payable to such holder as determined
pursuant to Section 6(a)(i) and (y) an amount equal to the amount of cash such
holder would have received upon the occurrence of such Realization Event had
such holder's Attached Warrants been exercised for Common Stock immediately
prior thereto.
(iii) The Corporation shall not be
obligated under Section 6(a)(i) to redeem shares of Series A Preferred Stock
and repurchase Attached Warrants if the Corporation is prohibited from doing so
under any agreement or instrument evidencing the Corporation's or any of its
subsidiaries' indebtedness for borrowed money, and such prohibition has not
been waived, or if and to the extent such a redemption and repurchase (x) would
cause an event of default to exist by reason of such redemption and repurchase,
which event of default has not been waived, with respect to any such agreement
or instrument or would violate any provision of any such agreement or
instrument, or (y) would be in violation of applicable law ("Restrictions"), in
any such case as determined by an opinion of counsel to the Corporation,
reasonably acceptable to the holder; provided, however, that the Corporation
shall use its reasonable best efforts to have any such Restriction either
waived or terminated (including, without limitation, by obtaining refinancing
for any such indebtedness on reasonable terms). In the event that, following
receipt of a Put Notice, the Corporation will not redeem shares of Series A
Preferred Stock and repurchase Attached Warrants requested to be so redeemed
and repurchased in accordance with Section 6(a)(i) because of the existence of
any Restriction, the Corporation shall, within twenty (20) days after receipt
of the Put Notice, so notify the holder in writing (the "Restriction Notice"),
setting forth the number of shares of Series A Preferred Stock and Attached
Warrants which will not be so redeemed and repurchased and the Restrictions
which apply, and deliver to the holder a copy of the opinion referred to in the
prior sentence. In addition, in such event, the Corporation shall, upon the
request of the holder, use its best efforts to register the shares of Common
Stock for which the Attached Warrants which will not be repurchased may be
exercised, in accordance with the terms of the Registration Rights Agreement
(as hereinafter defined). In addition, if, in such event, the Corporation will
be redeeming a number of shares of Series A-1 Preferred Stock which will result
in the holders of Series A-1 Preferred Stock losing their voting and other
rights pursuant to Section 4 hereof, the holder may, by written notice to the
Corporation within five (5) days after receipt of the Restriction Notice,
require that the Corporation redeem only such lesser number of shares of Series
A-1 Preferred Stock (and repurchase only those Attached Warrants which are part
of Units containing such shares of Series A-1 Preferred Stock) which will
result in such holders retaining such rights.
12
<PAGE> 14
(b) Payment of Redemption Price. The redemption price
for any redemption pursuant to this Section 6 shall be determined pursuant to
Section 6(a) and shall be payable in cash.
On the date of any redemption of shares of Series A Preferred
Stock and repurchase of Attached Warrants pursuant to this Section 6, the
holder thereof shall surrender for redemption or repurchase certificate(s) for
the number of shares of Series A Preferred Stock being redeemed and warrant(s)
for the number of Attached Warrants being repurchased, without any
representation or warranty (other than that the holder has good and marketable
title thereto, free and clear of liens, encumbrances and restrictions of any
kind), together with an instrument of transfer reasonably acceptable to the
Corporation, against payment therefor of the redemption price by, at the option
of the holder, (i) wire transfer to an account in a bank located in the United
States designated by the holder for such purpose or (ii) a certified or
official bank check payable to the order of the holder. If less than all of
the holder's shares of Series A Preferred Stock or Attached Warrants
represented by a single certificate or warrant are being redeemed or
repurchased, the Corporation shall cancel such certificate or warrant, as the
case may be, and issue in the name of, and deliver to, the holder a new
certificate or warrant, as the case may be, for the portion not being redeemed
or repurchased.
7. TRIGGERING EVENTS.
Any of the following actions or events shall constitute a
"Triggering Event" for purposes hereof:
(a) Failure to Redeem. The Corporation shall (i) fail to
redeem the Series A Preferred Stock in accordance with Section 6 or, if a
Restriction exists and a holder requests registration of shares of Common stock
issuable upon exercise of such holder's Attached Warrants, fail to cause such a
registration statement covering such shares to become effective in accordance
with the terms of the Registration Rights Agreement, dated as of the Issuance
Date, as amended, among the Corporation, Pegasus Partners, L.P., Pegasus
Related Partners, L.P. and General Electric Capital Corporation, a copy of
which is available for inspection at the Corporation (the "Registration Rights
Agreement"), or (ii) fail, on more than one occasion, to redeem any Series A
Preferred Stock called for redemption in accordance with Section 5.
(b) Failure to Pay Dividends. The Corporation shall fail
to pay any dividend on any Series A Preferred Stock on any Dividend Payment
Date in accordance with Section 2 for any reason, including but not limited to,
that such payment is prohibited by applicable law or the Board of Directors
elect not to pay such dividend, or shall otherwise violate any term of Section
2 and such failure shall not be cured within a period of 30 days after such
Dividend Payment Date or violation (which cure shall be effected in a manner
ensuring the holders the same yield as if such violation had not occurred).
13
<PAGE> 15
(c) Failure of Voting Rights. The Corporation shall
enter into any transaction or take any action required to be approved by
holders of Series A Preferred Stock without obtaining the requisite approval of
the holders of the Series A Preferred Stock.
(d) Failure of Charter Amendment Effectiveness. The
Charter Amendment shall not have (1) been approved and adopted by the
Corporation's stockholders, (2) been filed with the Department of Consumer and
Industry Services of the State of Michigan and (3) become effective, by May 31,
1998, and thereafter, for so long as such amendment shall not have been
approved and adopted by such stockholders, been filed with such department and
become effective.
(e) Failure to Issue Common Stock. The Corporation shall
fail for any reason to issue Common Stock required to be issued by the
Corporation upon the due exercise of Attached Warrants or shall fail for any
reason to comply with Section 7 thereof.
(f) Registration Rights Agreement. The Corporation shall
fail in any material respect to comply with the Registration Rights Agreement,
other than as described in Section 7(a), and such failure shall continue for a
period of 30 days after notice from any such holder.
(g) Unit Purchase Agreement. The Corporation shall fail
to comply with Sections 4.16 (Brokers), 5.03 (Shareholder Approvals), 5.04
(Issuance of Litigation Warrants), 5.05 (Insurance), 5.06 (Preemptive Rights),
9.01 (Indemnification) or 9.05 (Expenses) of the Unit Purchase Agreement and
such failure shall continue for a period of 30 days after notice from the
Purchasers (as defined in the Unit Purchase Agreement) or the representations
made under Sections 4.01 (Organization) (first sentence only), 4.02
(Capitalization), 4.03 (Authorization, etc.) or 4.04(a) (Consents and
Approvals) of the Unit Purchase Agreement shall prove to have been incorrect
or misleading in any material respect when made pursuant thereto or any other
material representation made under the Unit Purchase Agreement shall prove to
have been incorrect or misleading in any substantial material respect when
made.
8. REMEDIES.
(a) Upon the occurrence and during the continuance of any
Triggering Event, the Dividend Rate on all outstanding Series A Preferred Stock
shall be increased as provided in Section 2 without any action on the part of
any holder of the Series A Preferred Stock or the Corporation.
(b) In the event that a Triggering Event described in
Section 7(d) or 7(e) shall occur and be continuing, each holder of Series A
Preferred Stock shall be entitled to receive all cash and other dividends,
distributions and other payments which would be paid or payable to a holder of
a number of shares of Common Stock for which the Attached Warrants held by such
holder are exercisable at such time (without regard to the number of shares of
Common Stock which are authorized or reserved for issuance at such time).
14
<PAGE> 16
(c) In the event that a Triggering Event described in
Section 7(d) shall occur, and be continuing, all dividends on the Series A
Preferred Stock shall be paid in cash and not Units, to the extent but only to
the extent, that such cash payments are permitted under any applicable
indenture or credit agreement to which the Corporation is a party and by law.
(d) Upon the occurrence and during the continuance of any
Triggering Event (other than a Triggering Event described in Section 7(g)
arising as a result of the Corporation's failure to comply with Section 4.16,
5.05, 9.01 or 9.05 of the Unit Purchase Agreement), the holders of Series A
Preferred Stock shall have the right to vote on all matters requiring action of
the stockholders of the Corporation, voting together as a single class with the
holders of Common Stock. Each holder of Series A Preferred Stock shall be
entitled to a number of votes equivalent to three votes multiplied by the
number of shares of Common Stock which such holder would have received upon
exercise of such holder's Attached Warrants on the voting record date (assuming
for purposes of the calculation that such Attached Warrants were exercised on
such date and a sufficient number of shares of Common Stock were available for
issuance upon such exercise).
(e) Upon the occurrence of any Triggering Event, the
provisions contained in Section 9 of this Certificate of Designation and in
Section 8.03 of the Unit Purchase Agreement shall terminate and be of no
further force and effect.
(f) The Corporation stipulates that the remedies at law
of each holder of Series A Preferred Stock in the event of any Triggering Event
or threatened Triggering Event or otherwise or other failure in the performance
of or compliance with any of the terms hereof are not and will not be adequate
and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise without requiring any holder to post a bond or other
security except to the extent required by applicable law.
(g) Any holder of Series A Preferred Stock shall be
entitled to recover from the Corporation the reasonable attorneys' fees and
expenses incurred by such holder in connection with any Triggering Event or
enforcement by such holder of any obligation of the Corporation hereunder.
(h) No failure or delay on the part of any holder of
Series A Preferred Stock in exercising any right, power or remedy hereunder or
under applicable law or otherwise shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder or thereunder. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law or otherwise.
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<PAGE> 17
9. RIGHT OF FIRST REFUSAL
Certain transfers of the Series A Preferred Stock shall be
subject to a right of first refusal in accordance with the terms of Section
8.03 of the Unit Purchase Agreement.
10. TRANSFER OF SHARES OF SERIES A-1 PREFERRED STOCK.
Shares of Series A-1 Preferred Stock may only be transferred
together with the same number of Attached Warrants. Upon transfer by the
initial holder or any of its affiliates (as such term is defined in Section
776(1) of the Michigan Business Corporation Act) of any shares of Series A-1
Preferred Stock (other than a transfer to any affiliate of the initial holder),
such shares of Series A-1 Preferred Stock shall automatically be converted into
shares of Series A-2 Preferred Stock, on a one-for-one basis.
16
<PAGE> 1
EXHIBIT 3.1.2
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCE AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER RIGHTS OF SERIES B
PREFERRED STOCK
OF
CODE-ALARM, INC.
Code-Alarm Inc. (the "Corporation"), a corporation organized and existing
under the Michigan Business Corporation Act, hereby certifies that, pursuant to
the provisions of Section 302 of the Michigan Business Corporation Act, its
Board of Directors, at a meeting duly held on October 21, 1997, adopted the
following resolution:
WHEREAS, the Board of Directors of the Corporation
is authorized by the Restated Articles of
Incorporation to issue up to 500,000 shares of
preferred stock in one or more classes or series
and, in connection with the creation of any class
or series, to fix by the resolutions providing for
the issuance of shares the powers, designations,
preferences and relative, participating, optional
or other rights of the class or series and the
qualifications, limitations or restrictions
thereof; and
WHEREAS, it is the desire of the Board of
Directors of the Corporation, pursuant to such
authority, to authorize and fix the terms and
provisions of a series of preferred stock and the
number of shares constituting the series.
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a series
of preferred stock on the terms and with the provisions herein set forth on
Annex A attached to this resolution.
/s/ Rand Mueller
------------------------------------
Name: Rand Mueller
Title: President
ATTEST: /s/ Craig S. Camalo
Name: Craig S. Camalo
Title: Vice President & CFO
<PAGE> 2
Annex A
SERIES B PREFERRED STOCK
The powers, designations, preferences and relative, participating,
optional or other rights of the Series B Preferred Stock of Code-Alarm Inc.
(the "Corporation") are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series B
Preferred Stock" and shall have no par value per share. The number of
authorized shares constituting this series shall be one share.
2. DIVIDENDS.
(1) Right to Receive Dividends. The holders of Series B Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, to the extent permitted by the Michigan Business Corporation Act,
cumulative dividends in preference to any dividend on the Common Stock but not
in preference to any dividend on any other class or series of stock of the
Corporation at the rate of $1.00 per share per annum, payable in arrears, on
December 31 of each year, commencing with December 31, 1998. The dividend for
a period which is less than or more than a year shall be pro rated based upon
the number of days. Any dividend not paid shall accrue and be payable when and
if declared by the Board of directors or upon redemption or repurchase of the
Series B Preferred Stock or the liquidation of the Corporation.
3. LIQUIDATION.
In the event of any bankruptcy, liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of Series B
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any surplus funds of the Corporation to the holders of the
Common Stock by reason of their ownership thereof, but not in preference to any
distribution of any surplus funds of the Corporation to the holders of any
other class or series of stock of the Corporation, an amount equal to (i) Ten
Dollars ($10.00) per share plus (ii) all accrued but unpaid dividends on such
share (the "Liquidation Preference").
4. VOTING RIGHTS.
The holder of the Series B Preferred Stock shall have the following
voting rights:
(1) Election of Directors.
If (i) there is an Event of Default under the Credit Agreement
dated as of October 24, 1997, among the Corporation, as Borrower, and the other
Credit Parties identified
<PAGE> 3
therein, General Electric Capital Corporation, as Agent and Lender (as it may
be amended, supplemented or modified, the "Credit Agreement"), and (ii) Agent
accelerates payment of the Obligations (as defined in the Credit Agreement),
then the number of authorized directors shall be increased by an amount equal
to one plus the then number of directors (e.g., if before the Event of Default,
the Bylaws authorize 9 directors, the number shall be increased to 19), and the
holder of the Series B Preferred Stock shall be entitled to designate from time
to time (without the necessity of a meeting of shareholders) the persons to
fill the directorships thus created. If the Event of Default is cured or
waived and if acceleration is thereafter rescinded, the number of authorized
directors shall be decreased by the amount previously increased as provided in
this section and the term of any director so elected shall immediately
terminate. If the Board of Directors of the Corporation has been divided into
two or three classes with terms of each class expiring at a different annual
meeting, then the terms of the directors which the Series B Preferred Stock can
elect pursuant to this Section 4(a) shall likewise be divided into classes,
with the number of directors in each class being as nearly equal as possible
and with the terms of the first class expiring at the first annual meeting
following their election, the terms of the second class expiring at the second
annual meeting following their election and, if applicable, the terms of the
third class expiring at the third annual meeting following their election. At
each annual meeting after such classification, a number of directors equal to
the number of the class whose term expires at the time of the meeting shall be
elected to hold office until the second succeeding annual meeting if there are
two classes or until the third succeeding annual meeting if there are three
classes; however, the terms of each director elected by the Series B Preferred
Stock shall terminate as provided in this Section 4(a).
(2) Certain Corporate Actions.
So long as the Series B Preferred Stock is outstanding, the
Corporation shall not, without the affirmative vote or written consent of
the holder of the Series B Preferred Stock amend, repeal, modify or supplement
any provision of the Restated Articles of Incorporation, any certificate
setting forth the rights, preferences and privileges of any series of capital
stock pursuant to the authority of the Board of Directors to authorize such
series, the By-laws of the Corporation, as in effect on October 15, 1997, or
any successor bylaws or this Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other Rights of Series B
Preferred Stock (the "Certificate of Designation"), if such amendment, repeal,
modification or supplement in any way adversely affects the powers,
designations, preferences, or other rights of the Series B Preferred Stock.
(3) Other Matters.
Except as provided in subsections (a) and (b) of this Section 4
or as required by law, the holder of Series B Preferred Stock shall have no
right to vote on any matter presented to the stockholders of the Corporation.
5. REPURCHASE.
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<PAGE> 4
Upon payment in full of the Obligations and termination of the
Commitments (as such terms are defined in the Credit Agreement referred to
in Section 4), the Corporation shall be entitled to repurchase each share of
Series B Preferred Stock then outstanding for an amount equal to its
Liquidation Preference, upon giving written notice of not less than five days
to the holder thereof.
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<PAGE> 1
EXHIBIT 3.2.1
Amended as of March 22, 1991
CODE-ALARM, INC.
BYLAWS
ARTICLE I
Shareholders
Section 1. Date and Time of Meetings. The annual meeting of the
Shareholders of the Corporation shall be held on the third Tuesday in May in
each year (or if said day be a legal holiday, then on the next succeeding day
not a holiday) at 10:00 a.m., for the purpose of electing Directors and for
the transaction of such other business as may properly be brought before the
meeting. If the annual meeting is not held on the day designated therefor, the
Board of Directors shall cause the annual meeting to be held as soon thereafter
as convenient. Special meetings of the Shareholders may be called by the
Chairman of the Board, the Vice Chairman of the Board, the President, the
Secretary or an Assistant Secretary at the direction of the Board of Directors.
Section 2. Place of Meetings. Meetings of the Shareholders of the
Corporation shall be held at its registered office in the State of Michigan or
at such other place within or without the State of Michigan as from time to
time may be determined by the Board of Directors.
Section 3. Notice of Meetings. Written notice of the time, place and
purposes of each meeting of the Shareholders shall be given not less than ten
(10) nor more than sixty (60) days before the meeting either personally or by
mail to each Shareholder of record. No notice of adjourned meetings need be
given if the time and place to which the meeting is adjourned are announced at
the meeting and at the adjourned meeting only such business is transacted as
might have been transacted at the original meeting, unless the Board of
Directors fixes a new record date for the adjourned meeting. Meetings may be
held without notice if all Shareholders are present in person or by proxy or if
those not present submit a signed waiver, either before or after the holding
thereof.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the Corporation entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for that meeting, except as otherwise
provided
<PAGE> 2
by law or by the Articles of Incorporation of the Corporation. The
Shareholders present in person or by proxy at such meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum. Whether or not a quorum is present,
the holders of a majority of such shares so present or represented may adjourn
the meeting from time to time. When the holders of a class or series of shares
are entitled to vote separately on an item of business, this section applies
in determining the presence of a quorum of such class or series for
transaction of the item of business.
Section 5. Conduct of Meetings. Meetings of the Shareholders shall be
presided over by a Chairman of the meeting who shall be the Chairman of the
Board of Directors or, if he is not present, by the Vice Chairman or, if there
be no such officers or if neither is present, by the President or, if he is not
present, by a Vice President or, if none of the Vice Presidents is present or
there is no such officer, by a Chairman to be chosen at the meeting. The
Secretary or an Assistant Secretary of the Corporation or, in their absence, a
person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Business to be Transacted. At any annual or special meeting
of the Shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before the
meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
(ii) otherwise properly brought before the meeting by or at the direction of
the Board of Directors, or (iii) otherwise properly requested to be brought
before the meeting by a Shareholder. For business to be properly requested
to be brought before the meeting by a Shareholder, the Shareholder must have
given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a Shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation, not less than
90 days prior to the meeting; provided, however, that in the event that the
date of a special meeting is not publicly announced by the Corporation by mail,
press release or otherwise more than 90 days prior to the meeting, notice by
the Shareholder to be timely must be delivered to the Secretary of the
Corporation not later than the close of business on the seventh day following
the day on which such announcement of the date of the meeting was communicated
to Shareholders. A Shareholder's notice to the Secretary shall set forth as to
each matter the Shareholder proposes to bring before the meeting (1) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (2) the
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<PAGE> 3
name and address, as they appear on the Corporation's books, of the
Shareholder proposing such business, (3) the class and number of shares of the
Corporation which are beneficially owned by the Shareholder, and (4) any
material interest of the Shareholder in such business. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at a
meeting except in accordance with the procedures set forth in this Article I,
Section 6. The Chairman of the meeting shall determine and declare to the
meeting, if the facts warrant, that business was not properly brought before
the meeting and in accordance with the provisions of this Article I, Section 6,
and if the Chairman should so determine, the Chairman shall so declare to the
meeting that any such business not properly brought before the meeting shall
not be transacted. Advance notice of Shareholder nominations for the election
of Directors shall be given in the manner provided above for business to be
properly requested to be brought before the meeting by a Shareholder.
Section 7. Participation by Conference Telephone. The Chairman of the
meeting may allow a Shareholder to participate in a meeting by a conference
telephone or similar communications equipment by which all persons
participating in the meeting may hear each other if all participants are
advised of the communications equipment and the names of the participants in
the conference are divulged to all participants. Such participation shall
constitute presence in person at the meeting.
Section 8. Voting. Each holder of each outstanding share entitled to vote
at the meeting is entitled to one (1) vote on each matter submitted to a vote.
Directors shall be elected by a plurality of the votes cast at the election,
and all other questions shall be decided by a majority of the votes cast,
unless otherwise provided in these Bylaws or the Articles of Incorporation.
Section 9. Control Share Acquisitions. At any meeting of the shareholders
at which the voting rights to be accorded the shares acquired or to be acquired
in a control share acquisition is one of the items of business to be transacted
at the meeting, it shall be the last item of business transacted at the
meeting. Prior to being accorded voting rights, control shares acquired in a
control share acquisition may not be voted at any meeting of shareholders or
with respect to any item of business to be transacted at the meeting at which
the voting rights to be accorded to such shares is considered. Control shares
acquired in a control share acquisition, with respect to which no acquiring
person statement has been filed with the Corporation, may, at any time during
the period ending 60 days after the last acquisition of control shares or the
power to direct the exercise of voting power of control shares
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<PAGE> 4
by the acquiring person, be redeemed by the Corporation at the fair value of
the shares. After an acquiring person statement has been filed and after the
meeting at which the voting rights of the control shares acquired in a control
acquisition are submitted to the shareholders, the shares may be redeemed by
the Corporation at the fair value of the shares unless the shares are accorded
full voting rights by the shareholders as provided in section 798 of the
Michigan Business Corporation Act. The Board of Directors of the Corporation
may authorize any redemption provided for in this Article I, Section 9 and may
establish and amend the procedures for any redemption provided for in this
Article I, Section 9. For the purposes of this section, terms defined in the
Michigan Business Corporation Act shall have the meanings set forth therein.
Section 10. Record Date. The Board of Directors may fix in advance a date
as the record date for the determination of the Shareholders entitled to notice
of, and to vote at, a meeting of Shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining Shareholders entitled to receive payment of any dividend
or allotment of a right or for the purpose of any other action. Such date
shall be not more than sixty (60) nor less than ten (10) days before the date
of any meeting of Shareholders nor more than sixty (60) days before any other
action. If a record date is not fixed by the Board of Directors, the record
date for determination of the Shareholders entitled to notice of or to vote at
a meeting of the Shareholders shall be the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the day
next preceding the day on which the meeting is held, but the record date for
determining the Shareholders for any other purpose shall be the close of
business on the day on which the resolution of the Board of Directors relating
to such other purpose is adopted. When a determination of the Shareholders of
record entitled to notice of or to vote at a meeting of the Shareholders has
been made as provided in this Section, the determination applies to any
adjournment of the meeting, unless the Board of Directors fixes a new record
date under this Section for the adjourned meeting.
Section 11. Inspectors of Election. Whenever any Shareholder present in
person or by proxy at a meeting of the Shareholders shall request the
appointment of inspectors, the Chairman of the meeting shall appoint one or
more inspectors, who need not be Shareholders. The inspectors shall determine
the number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine
challenges and
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<PAGE> 5
questions arising in connection with the right to vote, count and tabulate
votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote. On request of the Chairman of the
meeting or a Shareholder entitled to vote thereat, the inspectors shall make
and execute a written report to the Chairman of the meeting of any of the facts
found by them and matters determined by them. The report is prima facie
evidence of the facts stated and of the vote as certified by the inspectors.
Section 12. Action by Written Consent. Any action required or permitted
to be taken at an annual or special meeting of Shareholders may be taken
without a meeting without prior notice and without a vote if a consent in
writing, setting forth the action so taken, is signed by all of the
Shareholders entitled to vote thereon.
ARTICLE II
Directors
Section 1. Number and Term of Office. The property, business and
affairs of the Corporation shall be managed by or under the direction of its
Board of Directors, to consist of seven (7) Directors. The Directors shall
hold office until their successors shall be elected or until their resignation
or removal.
Section 2. Classes of the Board. The Board of Directors shall be
divided into three classes, designated Class I, Class II and Class III, as
nearly equal in number as the then total number of Directors constituting the
whole Board permits, with the term of office of one class expiring each year.
Simultaneously with the adoption of these Bylaws, Directors of Class I have
been elected to hold office for a term expiring at the next succeeding annual
meeting of Shareholders, and Directors of Class II have been elected to hold
office for a term expiring at the second succeeding annual meeting of
Shareholders, and Directors of Class III have been elected to hold office for a
term expiring at the third succeeding annual meeting of Shareholders. At each
annual meeting of Shareholders, the successors to the class of Directors whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting of Shareholders.
Section 3. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such times or intervals and at such places within
or without the State of Michigan as may from time to time be determined by
resolution of
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<PAGE> 6
the Board of Directors, which resolution may authorize the Chairman of the
Board, the Vice Chairman of the Board, the President or the Secretary to fix
the specific date and place of each of such regular meetings, in which case
notice of the time and place of such regular meetings shall be given in the
manner hereinafter provided with respect to special meetings of the Board of
Directors. A regular meeting of the Board of Directors may be held without
notice immediately after the annual meeting of the Shareholders at the same
place as such meeting is held.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place upon the call of the Chairman of the Board,
the Vice Chairman of the Board, the President, the Secretary or an Assistant
Secretary. Oral, electronic or written notice of the time and place of all
special meetings of the Board of Directors shall be given to each Director
not less than two (2) days before the meeting, but no notice of adjourned
meetings need be given. Meetings may be held at any time without notice if all
the Directors are present or if those not present submit a signed waiver of
notice of the time and place of such meeting, either before or after the
holding thereof.
Section 5. Quorum. A majority of the Directors then in office shall
constitute a quorum for the transaction of business and the action of a
majority of the Directors present at a meeting at which a quorum is present
constitutes the action of the Board of Directors, except as action by a
majority of the Directors then in office may be required specifically by other
sections of these Bylaws or the Articles of Incorporation. If at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum shall
have been obtained.
Section 6. Participation by Conference Telephone. A Director may
participate in a meeting by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at the meeting.
Section 7. Action by Unanimous Written Consent. Any action required or
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting if, either before or after the action is taken, all of the
Directors consent thereto in writing. The written consents shall be filed with
the minutes of the proceedings of the Board of Directors.
Section 8. Resignation, Removal and Vacancies. A Director may resign by
written notice to the Corporation. The
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<PAGE> 7
resignation shall be effective upon its receipt by the Corporation or a
subsequent time as set forth in the notice of resignation. A Director or the
entire Board of Directors may be removed, with or without cause, by vote of
the holders of a majority of shares entitled to vote at an election of
Directors, at a meeting of Shareholders. Whenever any vacancy shall have
occurred in the Board of Directors by reason of death, resignation, removal,
increase in the number of Directors or otherwise, a majority of the Directors
then in office may fill such vacancy at any meeting, and the person so elected
shall be a Director until his successor is elected by the Shareholders.
Section 9. General Powers as to Negotiable Paper. The Board of Directors
shall, from time to time, prescribe the manner of making, signature or
endorsement of checks, drafts, notes, acceptances, bills of exchange,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents, who shall from
time to time be authorized to make, sign or endorse the same on behalf of the
Corporation.
Section 10. Powers as to Other Documents. The Board of Directors may
authorize any officer or officers, agent or agents, to enter into any contract
or execute or deliver any conveyance or other instrument in the name of the
Corporation, and such authority may be general or confined to specific
instances. When the execution of any contract, conveyance, or other instrument
has been authorized without specification of the officers authorized to
execute, the same may be executed on behalf of the Corporation by the Chairman
of the Board, the Vice Chairman of the Board, the President or any Vice
President, and the corporate seal may be thereto affixed and attested by the
Secretary, an Assistant Secretary or the Treasurer.
Section 11. Compensation. The Directors may receive such reasonable
compensation, if any, for their services as may from time to time be fixed by
resolution of a majority of the Board of Directors then in office.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors at its
first meeting after the annual meeting of Shareholders in each year shall elect
or appoint a President, a Secretary and a Treasurer of the Corporation. The
Board of Directors at that time or from time to time may elect or appoint a
Chairman of the Board, a Vice Chairman of the Board, one or
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more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The same
person may hold any two or more offices, but an officer shall not execute,
acknowledge or verify any instrument in more than one capacity if required by
law to be executed, acknowledged or verified by two or more officers. The
Board of Directors also may appoint such other officers and agents as it may
deem necessary for the transaction of the business of the Corporation.
Section 2. Term of Office. The term of office of all officers shall
commence upon their election or appointment and shall continue until their
respective successors are elected or appointed or until their resignation or
removal. Any officer may be removed from office at any meeting of the Board of
Directors, with or without cause, by the affirmative vote of a majority of the
Directors then in office. An officer may resign by written notice to the
Corporation. The resignation shall be effective upon its receipt by the
Corporation or at a subsequent time specified in the notice of resignation.
The Board of Directors shall have power to fill any vacancies in any offices
occurring for whatever reason.
Section 3. Compensation. The officers of the Corporation shall receive
such reasonable compensation for their services as may be fixed from time to
time by resolution of the Board of Directors, provided that the compensation of
any officer who is also a Director shall be fixed by resolution of a majority
of the Board of Directors then in office.
Section 4. The Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Shareholders and of the Board of Directors. He
shall have such other powers and duties as may from time to time be prescribed
by the Board of Directors.
Section 5. The Vice Chairman of the Board. The Vice Chairman of the
Board, in the absence of the Chairman of the Board, shall preside at all
meetings of the Shareholders and of the Board of Directors. He shall have such
other powers and duties as may from time to time be prescribed by the Board of
Directors.
Section 6. The President. The President shall be the chief executive
officer of the Corporation and shall have general and active management of the
business of the Corporation, and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The President, in the absence
of the Chairman of the Board or Vice Chairman of the Board, or, if there be no
such officer, shall preside at all meetings of the Shareholders and of the
Board of Directors. The
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<PAGE> 9
President shall execute all authorized conveyances, contracts, or other
obligations in the name of the Corporation except where required by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation. All shares of stock, other than treasury
shares, standing in the name of the Corporation may be voted by the President
in accordance with the directions of the Board of Directors or, lacking such
direction, in such manner as the President shall deem appropriate. The
President shall perform such other duties as the Board of Directors shall
prescribe.
Section 7. Vice Presidents. The Vice Presidents in the order designated
by the Board of Directors or, lacking such a designation, by the President
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties as the
Board of Directors or the President shall prescribe.
Section 8. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the Shareholders and record all
votes and the minutes of all proceedings in a book to be kept for that purpose.
The Secretary shall give, or cause to be given, notice of all meetings of the
Shareholders and any meetings of the Board of Directors for which notice may be
required, and shall perform such other duties as may be prescribed by the
Board of Directors or by the President, under whose supervision the Secretary
shall act. The Secretary shall execute, when directed by the President, all
authorized conveyances, contracts or other obligations in the name of the
Corporation except as otherwise directed by the Board of Directors.
Section 9. Assistant Secretaries. The Assistant Secretaries (in the order
designated by the Board of Directors or, lacking such designation, by the
President), in the absence of the Secretary shall perform the duties and
exercise the powers of the Secretary and shall perform such other duties as the
Board of Directors or the President shall prescribe.
Section 10. The Treasurer. The Treasurer shall have custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and Board of Directors, at the
regular meetings
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<PAGE> 10
of the Board of Directors, or whenever they may require it, an account of all
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of the office and for the restoration to the Corporation (in case of
death, resignation, or removal from office) of all books, papers, vouchers,
money and other property of whatever kind in the possession or control of the
Treasurer belonging to the Corporation.
Section 11. Assistant Treasurers. The Assistant Treasurers (in the order
designated by the Board of Directors or, lacking such designation, by the
President), in the absence of the Treasurer shall perform the duties and
exercise the powers of the Treasurer and shall perform such other duties as the
Board of Directors shall prescribe.
ARTICLE IV
Committees of the Board
Section 1. Audit Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors then in office, may
designate two or more of their number to constitute an Audit Committee. Upon
appointment, the Audit Committee is authorized and directed to:
(a) recommend to the Board a firm of independent
accountants to conduct an annual examination of the financial
statements of this Corporation and its subsidiaries;
(b) confer with such independent accountants and with
the appropriate officers of this Corporation as to the scope
of the examination to be conducted;
(c) review with such independent accountants their
reports on this Corporation's operating results and financial
position and such other matters as such independent
accountants bring to the attention of such Committee;
(d) review with management the fees charged by such
independent accountants, including all special services for
the previous year and approve the projected fees for the
current year's audit; and
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<PAGE> 11
(e) make such recommendations as such Committee deems
appropriate.
Section 2. Compensation Committee. The Board of Directors, by re
solution adopted by a majority of the whole Board of Directors then in office,
may designate two or more of their number to constitute a Compensation
Committee. Upon appointment, the Compensation Committee is authorized and
directed to:
(a) fix, from time to time, the salaries, benefits
and other remuneration, if any, of the officers of this
Corporation;
(b) review and recommend to the Board the
compensation to be paid to Directors;
(c) exercise all of the discretionary powers of the
Board of Directors under all employment agreements between
this Corporation and officers of the Corporation;
(d) grant stock options, stock appreciation rights
and exercise all of the discretionary powers under any stock
option plans adopted by the Corporation; and
(e) delegate to the President or any Vice President
the authority to fix salaries and other remuneration, if any,
of the Assistant Secretaries, Assistant Treasurers and other
officers of the Corporation.
Section 3. Other Committees. The Board of Directors, by resolution, may
designate one or more of their number to constitute any other committee, who
shall have only such powers as are expressly granted to them in such
resolution.
Section 4. Procedure. All committees, and each member thereof, shall
serve at the pleasure of the Board of Directors. The Board of Directors shall
have the power at any time to increase or decrease the number of members of any
such committee, to fill vacancies thereon, to change any member thereof, and to
change the functions or terminate the existence thereof. The Board of
Directors may designate one or more directors as alternate members of a
committee, who may replace an absent or disqualified member at a meeting of the
committee. In the absence or disqualification of a member of a committee, the
members thereof present at a meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the
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<PAGE> 12
meeting in place of such an absent or disqualified member. If the Board of
Directors shall not have designated a Chairman for any committee, the
committee shall elect from its membership a Chairman. All such committees
shall elect a Secretary who need not be a member of the committee who shall
keep minutes of all meetings of the committee, which shall be submitted to the
succeeding meeting of the Board of Directors for approval. Regular or special
meetings of any such committee may be held in like manner as provided in
these Bylaws for regular or special meetings of the Board of Directors, and a
majority of any such committee shall constitute a quorum at any such meeting.
Section 5. Committee Action Without Meeting. If and when the members of
any committee shall severally or collectively consent in writing to any action
authorized to be taken by such committee, either before or after the action is
taken, such action shall be as valid committee action as if it had been
authorized at a meeting of the committee and the written consents shall be
filed with the minutes of the proceedings of such committee.
ARTICLE V
Issue, Transfer and Records of Stock
Section 1. Form, Signature and Registration. The interest of each
Shareholder in the Corporation shall be evidenced by a certificate or
certificates, certifying the number and class of shares represented thereby,
in such form as the Board of Directors may, from time to time, prescribe in
accordance with the laws of the State of Michigan. The certificates of stock
of the Corporation shall be signed by or in the name of the Corporation by the
Chairman of the Board, the Vice Chairman of the Board, the President or a Vice
President and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, and may be sealed with the seal of the Corporation or a
facsimile thereof and countersigned and registered in such manner, if any, as
the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and
Registrars of stock of any class within or without of the State of Michigan as
to it may seem expedient; provided that, where such certificate is
countersigned by such Transfer Agent or registered by such Registrar other
than the Corporation itself or its employee, the signatures of the Chairman of
the Board, the Vice Chairman of the Board, the President, a Vice President,
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
may be facsimiles. In case any officer or officers, who shall have signed, or
whose facsimile signature or signatures shall have
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<PAGE> 13
been used on any certificate or certificates, shall cease to be such officer or
officers, whether because of death, resignation, or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued by the Corporation and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers of the Corporation.
Section 2. Transfer. Shares of stock of the Corporation may be
transferred on the books of the Corporation in the manner prescribed by the
laws of the State of Michigan by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the
same number of shares of the same class with an assignment and power of
attorney duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, and such proof of the authenticity of the
signature as the Corporation or its agents may reasonably require, and also
accompanied by sufficient funds (or appropriate documentary stamps) for payment
of any applicable transfer taxes that may be imposed by federal, state or local
governments.
Section 3. Stock Ledger and Inspection Thereof. The original or duplicate
stock ledger, or the stock transfer books, or a list containing the names and
addresses of all persons who are Shareholders of the Corporation,
alphabetically arranged within each class and series, and the number, class and
series of shares of stock held by them respectively, with indication of the
dates when they respectively became holders of record thereof, shall be kept at
all times at the registered office of the Corporation in the State of Michigan
or at the office of its transfer agent within or without the State of Michigan.
A complete list of Shareholders entitled to vote at a Shareholders meeting,
certified by the Secretary, an Assistant Secretary or other officer or agent
of the Corporation having charge of the stock transfer books for shares of the
Corporation, shall be produced and shall be subject to inspection at the time
and place where said meeting is to be held for the duration of such meeting. A
person who is a Shareholder of record of the Corporation, upon at least 10
days' written demand, may examine for any proper purpose in person or by agent
or attorney, during usual business hours, such record of Shareholders and make
extracts therefrom at the places where such records are kept.
Section 4. Stolen, Lost or Destroyed Certificates. The Corporation shall
issue a new certificate in place of the original certificate for shares or
fractional shares of capital
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<PAGE> 14
stock of the Corporation claimed by the owner of such certificate to have been
lost, destroyed or wrongfully taken if the owner so requests before the
Corporation has notice that the certificate has been acquired by a bona fide
purchaser, and if the owner files with the Corporation a sufficient indemnity
bond indemnifying the Corporation and its Transfer Agents and Registrars, if
any, in form satisfactory to said Board of Directors and such Transfer Agents
and Registrars, and if the owner satisfies any other reasonable requirements
imposed by the Board of Directors and its Transfer Agents and Registrars, if
any. If after the issue of the new certificate a bona fide purchaser of the
original certificate presents it for registration of transfer, the Corporation
is obligated to register the transfer unless registration would result in
overissue, in which event the Corporation's liability is governed by Section
8104 of Act No. 174 of the Michigan Public Acts of 1962, which is known as the
Uniform Commercial Code. In addition to any rights on the indemnity bond
furnished by the owner, the Corporation may recover the new certificate from
the person to whom it was issued or any person taking under such person except
a bona fide purchaser.
ARTICLE VI
Miscellaneous
Section 1. Indemnification. The Corporation shall, to the fullest extent
now or hereafter permitted by law, indemnify any Director or officer of the
Corporation (and, to the extent provided in a resolution of the Board of
Directors or by contract, may indemnify any employee or agent of the
Corporation) who was or is a party to or threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal,
including an action by or in the right of the Corporation, by reason of the
fact that such person is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses including attorneys' fees (which
expenses may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as provided by law), judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding. The indemnification
provided for herein shall continue as to a person who has ceased to be a
Director or officer of the Corporation and, to the extent provided in a
resolution of the Board of Directors or in any con-
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<PAGE> 15
tract between the Corporation and such person, may continue as to a person who
has ceased to be an employee or agent of the Corporation. Any indemnification
of a person who was entitled to indemnification after such person ceased to be
a Director, officer, employee or agent of the Corporation shall inure to the
benefit of the heirs, executors and administrators of such person. The
Corporation shall bear the burden of proving that indemnification is not proper
under the circumstances. A determination by the Corporation of the propriety
of indemnification shall not create a presumption or defense that
indemnification is not proper under the circumstances.
Section 2. Bylaws not Exclusive. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which any
person may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding office, except to the
extent that such indemnification may be contrary to law. The indemnification
provided by this Article VI shall continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 3. Fiscal Year. The fiscal year of the Corporation shall end on
the last day of December or on such other date as shall be fixed from time to
time by the Board of Directors.
Section 4. Notices. Any notice or communication required or permitted to
be given by mail, except as required by law, may be mailed by registered,
certified or other first class mail to the person to whom it is directed at the
address designated by the person for that purpose or, if none is designated, at
the last known address of the person. Any notice or communication given to a
Shareholder shall be directed to the Shareholder's address as it appears on the
stock books of the Corporation unless the Shareholder shall have filed with the
Secretary a written request that notices be mailed to some other address, in
which case it may be mailed to the address designated in such request. Any
notice or communication given to the Corporation or the Board of Directors
shall be directed to the resident agent of the Corporation at the registered
office of the Corporation. The notice or communication shall be deemed to have
been given when deposited, with postage thereon prepaid, in a post office or
official depository under the exclusive care and custody of the United States
Postal Service.
Section 5. Amendments. These Bylaws may be altered or repealed or new
Bylaws may be adopted in lieu thereof by
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<PAGE> 16
either the affirmative vote of a majority of (i) the votes cast by the holders
of shares entitled to vote thereon and present or represented at any annual or
special meeting of the Shareholders or (ii) a majority of the Directors then in
office at any regular or special meeting of the Board.
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Amendments to Corporation's Bylaws
as of October 21, 1997
Article II, Section 1 of the Corporation's Bylaws be revised to read in its
entirety as follows:
Number and Term of Office. The property, business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors, to consist of seven (7) Directors plus the aggregate number of
directors that the holders of each series of Preferred Stock voting
separately by series are entitled to elect pursuant to the Corporation's
Articles of Incorporation, as amended from time to time.
The following is hereby added to ARTICLE VI of the Corporation's Bylaws:
Section 6. Control Share Acquisitions. Pursuant to Section 794 of the
Michigan Business Corporation Act of 1972, as amended (the "Act"), the
Corporation elects not to be governed by Chapter 7B of the Act, being
Sections 790 to 799 of the Act, and hence Chapter 7B of the Act will not
apply to control share acquisitions (as defined in that Chapter) of
shares of the Corporation.
<PAGE> 1
EXHIBIT 10.40
EXECUTION COPY
CREDIT AGREEMENT
Dated as of October 24, 1997
among
CODE-ALARM, INC.,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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1. AMOUNT AND TERMS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Interest and Applicable Margins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.6 Eligible Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.7 Eligible Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.8 Cash Management Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.10 Receipt of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.11 Application and Allocation of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.12 Loan Account and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.14 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.16 Capital Adequacy; Increased Costs; Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.17 Single Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1 Conditions to the Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.2 Further Conditions to Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Further Conditions to Incurrence of Litigation L/C Obligations . . . . . . . . . . . . . . . . . . . . . 27
2.4 Further Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.2 Executive Offices; FEIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.3 Corporate Power, Authorization, Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . 30
3.4 Financial Statements and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.5 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.6 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.7 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness . . . . . . . . . . . . . . . 33
3.9 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.10 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.13 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
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3.14 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.16 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.19 Deposit and Disbursement Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.20 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.21 Customer and Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.22 Agreements and Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.23 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.24 Series A Preferred Stock Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.25 Series B Preferred Stock Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4. FINANCIAL STATEMENTS AND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.1 Reports and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Communication with Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.1 Maintenance of Existence and Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.2 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4 Insurance; Damage to or Destruction of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.6 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.8 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters . . . . . . . . . . . . . . . . . . . . . 43
5.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 OEM Contracts and Accreditations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.12 Tessco Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.1 Mergers, Subsidiaries, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.2 Investments; Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.3 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.4 Employee Loans and Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.5 Capital Structure and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.6 Guaranteed Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.8 Sale of Stock and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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6.10 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.11 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.12 Sale-Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.13 Cancellation of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.14 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.15 Change of Corporate Name or Location; Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 49
6.16 No Impairment of Intercompany Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.17 No Speculative Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.18 Changes Relating to Preferred Stock and Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . 50
7. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Survival of Obligations Upon Termination of Financing Arrangements . . . . . . . . . . . . . . . . . . . 50
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.3 Waivers by Credit Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.1 Assignment and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Appointment of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3 Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4 GE Capital and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.5 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.8 Setoff and Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert . . . . . . . . . . . . . . . . 60
10. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.1 Complete Agreement; Modification of Agreement and Pegasus Litigation Guaranty . . . . . . . . . . . . . 63
11.2 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.4 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
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11.7 Conflict of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.11 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.14 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.15 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.16 Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.17 No Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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<PAGE> 6
INDEX OF APPENDICES
<TABLE>
<S> <C> <C>
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Term A Note
Exhibit 1.1(c)(i) - Form of Term B Note
Exhibit 1.1(c)(ii) - Form of Notice of Term Loan B Advance
Exhibit 1.1(d) - Form of Notice of Term Loan C Advance
Exhibit 1.1(e) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.4(D) - Fair Salable Balance Sheet
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.21 - Customer and Trade Relations
Schedule 3.22 - Material Agreements
Schedule 5.1 - Trade Names
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4 - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
-----------
Annex C (Section 1.8) - Cash Management System
-----------
Annex D (Section 2.1(a)) - List of Closing Documents
--------------
</TABLE>
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<TABLE>
<S> <C> <C>
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
--------------
Annex F (Section 4.1(b)) - Collateral Reports
--------------
Annex G (Section 6.10) - Financial Covenants
------------
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
--------------
Annex I (Section 11.10) - Notice Addresses
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</TABLE>
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<PAGE> 8
CREDIT AGREEMENT, dated as of October 24, 1997 among
Code-Alarm, Inc., a Michigan corporation (a "Borrower"); THE OTHER CREDIT
PARTIES SIGNATORY HERETO; GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (in its individual capacity, "GE Capital"), for itself, as Lender,
and as Agent for Lenders, and the other Lenders signatory hereto from time to
time.
RECITALS
WHEREAS, Borrower desires that Lenders extend revolving letter
of credit and term credit facilities to Borrower of up to Twenty-Five Million
Five Hundred Thousand Dollars ($25,500,000.00) in the aggregate for the purpose
of (a) refinancing certain indebtedness of Borrower, (b) providing working
capital financing for Borrower, (c) providing funds to satisfy, or letters of
credit to secure the issuance of a supersedeas or appeal bond or similar
obligation with, a certain potentially adverse judgment or judgments which may
be entered against one or more Credit Parties in certain pending litigation,
and (d) providing funds for other general corporate purposes of Borrower; and
for these purposes, Lenders are willing to make certain loans and other
extensions of credit to Borrower of up to such amount upon the terms and
conditions set forth herein; and
WHEREAS, Borrower desires to secure all of its obligations
under the Loan Documents by granting to Agent, for the benefit of Agent and
Lenders, security interests in and liens upon all of its existing and
after-acquired personal and real property; and
WHEREAS, capitalized terms used in this Agreement shall have
the meanings ascribed to them in Annex A. All Annexes, Disclosure Schedules,
Exhibits and other attachments (collectively, "Appendices") hereto, or
expressly identified to this Agreement, are incorporated herein by reference,
and taken together, shall constitute but a single agreement. These Recitals
shall be construed as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility. (i) Subject to the terms
and conditions hereof, each Revolving Lender agrees to make available from time
to time until the Commitment Termination Date its Pro Rata Share of revolving
credit advances (other than revolving credit advances made under Section
1.1(e)) (each, a "Revolving Credit Advance"). The Pro Rata Share of the
Revolving Loan of each Revolving Lender shall not at any time exceed its
separate Revolving Loan Commitment. The obligations of each Revolving Lender
hereunder shall be
<PAGE> 9
several and not joint. The aggregate amount of Revolving Credit Advances
outstanding shall not exceed at any time the lesser of (A) the Maximum Amount
and (B) the Borrowing Base, in each case less the sum of the Letter of Credit
Obligations and the Swing Line Loan outstanding at such time ("Borrowing
Availability"). Until the Commitment Termination Date, Borrower may from time
to time borrow, repay and reborrow under this Section 1.1(a). Each Revolving
Credit Advance shall be made on notice by Borrower to the representative of
Agent identified on Schedule 1.1 at the address specified thereon. Those
notices must be given no later than (1) 11:00 a.m. (Chicago time) on the
Business Day of the proposed Revolving Credit Advance, in the case of an Index
Rate Loan, or (2) 11:00 a.m. (Chicago time) on the date which is three (3)
Business Days prior to the proposed Revolving Credit Advance, in the case of a
LIBOR Loan. Each such notice (a "Notice of Revolving Credit Advance") must be
given in writing (by telecopy or overnight courier) substantially in the form
of Exhibit 1.1(a)(i), and shall include the information required in such
Exhibit and such other information as may be required by Agent. If Borrower
desires to have the Revolving Credit Advances bear interest by reference to a
LIBOR Rate, Borrower must comply with Section 1.5(e).
(ii) Borrower shall execute and deliver to each
Revolving Lender a note to evidence the Revolving Loan Commitment of that
Revolving Lender. Each note shall be in the principal amount of the Revolving
Loan Commitment of the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving Note" and,
collectively, the "Revolving Notes"). Each Revolving Note shall represent the
obligation of Borrower to pay the amount of each Revolving Lender's Revolving
Loan Commitment or, if less, the applicable Revolving Lender's Pro Rata Share
of the aggregate unpaid principal amount of all Revolving Credit Advances to
Borrower together with interest thereon as prescribed in Section 1.5. The
entire unpaid balance of the aggregate Revolving Loan and all other non-
contingent Obligations shall be immediately due and payable in full in
immediately available funds on the Commitment Termination Date.
(iii) At the request of Borrower, in its discretion
Agent may (but shall have absolutely no obligation to), make Revolving Credit
Advances to Borrower on behalf of Revolving Lenders in amounts which cause the
outstanding balance of the aggregate Revolving Loan to exceed the Borrowing
Base (less the Swing Line Loan) (such excess Revolving Credit Advances are
herein referred to collectively as "Overadvances"), and no such event or
occurrence shall cause or constitute a waiver by Agent or Lenders of any
Default or Event of Default that may result therefrom or of Agent's, Swing Line
Lender's or Revolving Lenders' right to refuse to make any further
Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any
Letter of Credit Obligations, as the case may be, at any time that an
Overadvance exists or would result therefrom. In addition, Overadvances may be
made even if the applicable conditions to lending set forth in Section 2 have
not been met. All Overadvances shall constitute Index Rate Loans, shall bear
interest at the Default Rate and shall be payable on demand. Except as
otherwise provided in Section 1.11(b), the authority of Agent to make
Overadvances is limited to an aggregate amount not to exceed $1,000,000 at any
time, shall not cause the aggregate Revolving Loan to exceed the Maximum
Amount, and may be revoked prospectively by a
2
<PAGE> 10
written notice to Agent signed by Revolving Lenders holding fifty percent (50%)
or more of the Revolving Loan Commitments.
(b) Term Loan A. (i) Subject to the terms and
conditions hereof, each Term Lender agrees to make a term loan on the Closing
Date to Borrower in the original principal amount of its Term Loan A Commitment
(collectively, the "Term Loan A"). The obligations of each Term Lender
hereunder shall be several and not joint. Each such Term Loan shall be
evidenced by promissory notes substantially in the form of Exhibit 1.1(b) (each
a "Term A Note" and collectively the "Term A Notes"), and Borrower shall
execute and deliver a Term A Note to each applicable Term Lender. Each Term A
Note shall represent the obligation of Borrower to pay the amount of the
applicable Term Lender's Term Loan A, together with interest thereon as
prescribed in Section 1.5.
(ii) Borrower shall pay the principal amount of the Term
Loan A in twelve (12) equal, consecutive quarterly installments of $125,000
each, on the first day of January, April, July and October of each year,
commencing on January 1, 1998.
(iii) Notwithstanding the foregoing clause (ii), the
aggregate outstanding principal balance of the Term Loan A shall be due and
payable in full in immediately available funds on the Commitment Termination
Date, if not sooner paid in full.
(iv) Each payment of principal with respect to the Term
Loan A shall be paid to Agent for the ratable benefit of each Term Lender
making a Term Loan A, ratably in proportion to each such Term Lender's
respective Term Loan A Commitment.
(c) Term Loan B. (i) Subject to the terms and
conditions hereof, each Term Lender agrees to make a term loan on the Term Loan
B Funding Date to Borrower (the "Term Loan B") in the original principal amount
of its Term Loan B Commitment. The obligations of each Term Lender hereunder
shall be several and not joint. Each Term Loan B shall be evidenced by
promissory notes substantially in the form of Exhibit 1.1(c)(i) (each a "Term B
Note" and collectively the "Term B Notes"), and Borrower shall execute and
deliver a Term B Note to the applicable Term Lender on the Closing Date in an
amount equal to such Term Lender's Term B Commitment. Each Term B Note shall
represent the obligation of Borrower to pay the amount of the applicable Term
Lender's Term Loan B, together with interest thereon as prescribed in Section
1.5. The Term Loan B shall be made on notice by Borrower to the representative
of Agent identified on Schedule 1.1 at the address specified thereon. Such
notice (a "Notice of Term Loan B Advance") must be given no later than 11:00
a.m. (Chicago time) on the date which is three (3) Business Days prior to the
Term Loan B Funding Date whether such Term Loan B shall be an Index Rate Loan
or a LIBOR Loan and shall be given in writing (by telecopy or overnight
courier) substantially in the form of Exhibit 1.1(c)(i), and shall include the
information required in such Exhibit and such other information as may be
required by Agent.
3
<PAGE> 11
(ii) Borrower shall pay the aggregate principal amount of
the Term Loan B in equal, consecutive quarterly installments equal to
one-twelfth (1/12) of the aggregate original principal amount of such Loan on
the first day of January, April, July and October of each year, commencing on
the first of such dates occurring after the Term Loan B Funding Date (unless
the first of such dates is less than forty-five (45) days following the Term
Loan B Funding Date, in which case such installments shall commence on the
second of such dates occurring after the Term Loan B Funding Date).
(iii) Notwithstanding the foregoing clause (ii), the
aggregate outstanding principal balance of the Term Loan B, shall be due and
payable in full in immediately available funds on the Commitment Termination
Date, if not sooner paid in full.
(iv) Each payment of principal with respect to the Term
Loan B shall be paid to Agent for the ratable benefit of each Term Lender
making a Term Loan B ratably in proportion to each such Term Lender's
respective Term Loan B Commitment.
(d) Reimbursement of Litigation L/C Obligations; Term
Loan C. (i) The issuance of the Litigation L/C, the advancing of Term Loan C
and terms of repayment of the Litigation L/C Obligations, Term Loan C and the
other Litigation Obligations shall be governed by and construed in accordance
with the Litigation L/C Agreement, pursuant to which Agent and term Lender may
either cause the issuance of the Litigation L/C or directly advance "Term Loan
C" (as defined below) pursuant to the Term Loan C Commitments. Each of the
Credit Parties acknowledges and agrees that, notwithstanding anything contained
herein to the contrary, Borrower's Litigation L/C Obligations shall arise, and
shall be deemed to arise, immediately upon Borrower's execution of the
Litigation L/C Agreement.
(ii) If Agent and Term Lenders shall have incurred
Litigation L/C Obligations, then, upon payment by the L/C Issuer under the
Litigation L/C, and regardless of whether an Event of Default or Default shall
then exist and notwithstanding the failure of Borrower to satisfy any of the
conditions set forth in Section 2.4, each Term Lender shall fund its Pro Rata
Share of such payment to Agent pursuant to Annex B hereof and the Litigation
L/C Agreement and in accordance with their respective Term Loan C Commitments,
and, upon such payments, Borrower's Obligations to reimburse Agent for the
Litigation L/C Obligations shall thereafter be payable directly to such Term
Lenders pursuant to the terms of the Litigation L/C Agreement and Annex B
(which Obligations to the Term Lenders shall thereafter constitute "Term Loan
C" hereunder and thereunder), which Term Loan C shall be an Index Rate Loan.
Borrower's request for Agent's and Term Lenders' incurrence of Litigation L/C
Obligations shall be made on notice by Borrower to Agent two (2) Business Days
prior to incurrence pursuant to Annex B. Notwithstanding anything herein to
the contrary, such recharacterization of Borrower's Litigation L/C Obligations
hereunder shall occur solely for purposes of references herein, in the
Litigation L/C Agreement and in the other Loan Documents, to such Obligations
and shall not be construed to constitute a refinancing, repayment or novation
of any such Obligations. All liens and security interests in the Collateral
which are granted to Agent under the Litigation Collateral Documents
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to secure the Litigation L/C Obligations shall continue to secure Borrower's
Obligations with respect to Term Loan C as so recharacterized. The obligations
of the Term Lenders to pay to Agent their respective Pro Rata Shares of
payments under the Litigation L/C hereunder shall be several and not joint.
(iii) If Agent shall not have incurred Litigation L/C
Obligations or shall have terminated the Litigation L/C prior to its being
drawn, Borrower may request Term Lenders to directly advance Term Loan C
pursuant to this subparagraph. Subject to the terms and conditions hereof
(including, without limitation, the conditions set forth in Sections 2.1,
2.3(II) and 2.4), each Term Lender agrees to make a Term Loan C on the Term
Loan C Funding Date to Borrower in the original principal amount of its Term
Loan C Commitment. The obligations of each Term Lender hereunder shall be
several and not joint. If the Term Loan C is advanced under this subparagraph,
it shall be made on notice by Borrower to the representative of Agent
identified on Schedule 1.1 at the address specified thereon. Such notice (a
"Notice of Term Loan C Advance") must be given no later than 11:00 a.m.
(Chicago time) on the date which is three (3) Business Days prior to the Term
Loan C Funding Date whether such Term Loan C shall be an Index Rate Loan or a
LIBOR Loan and shall be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(d), and shall include the information
required in such Exhibit and such other information as may be required by
Agent.
(iv) Each Term Loan C shall be evidenced by a promissory
note substantially in the form of Exhibit A to the Litigation L/C Agreement
(each a "Term C Note" and collectively the "Term C Notes"), and Borrower shall
execute and deliver its Term C Note to each Term Lender on the Closing Date as
provided in the Litigation L/C Agreement in an amount equal to such Term
Lender's Term Loan C Commitment. Each Term C Note, following the applicable
Term Lender's payment to Agent of its Pro Rata Share of payment under the
Litigation L/C, shall represent the Obligation of Borrower to pay the amount of
the applicable Term Lender's Term Loan C, together with interest thereon as
prescribed in Section 1.5.
(v) As provided in the Litigation L/C Agreement, Borrower
shall pay the aggregate principal amount of the Term Loan C in equal,
consecutive quarterly installments equal to the lesser of $250,000 and
one-twelfth (1/12) of the aggregate original principal amount of such Loan, on
the first day of January, April, July and October of each year, commencing on
the first of such dates occurring after the date on which the L/C Issuer make
payment under the Litigation L/C (unless the first of such dates is less than
forty-five (45) days following the date of such payment by the L/C Issuer, in
which case such installments shall commence on the second of such dates
occurring after the date of such payment).
(vi) Notwithstanding the foregoing clause (ii) and as
provided in the Litigation L/C Agreement, the aggregate outstanding principal
balance of the Term Loan C, shall be due and payable in full in immediately
available funds on the Commitment Termination Date, if not sooner paid in full.
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(vii) As provided in the Litigation L/C Agreement, each
payment of principal with respect to the Term Loan C shall be paid to Agent for
the ratable benefit of each Term Lender making a Term Loan C ratably in
proportion to each such Term Lender's respective Term Loan C Commitment.
(e) Swing Line Facility. (i) Agent shall notify the
Swing Line Lender upon Agent's receipt of any Notice of Revolving Credit
Advance. Subject to the terms and conditions hereof, the Swing Line Lender
may, in its discretion, make available from time to time until the Commitment
Termination Date revolving credit advances (other than revolving credit
advances made under Section 1.1(a)) (each, a "Swing Line Advance") in
accordance with any such notice. The aggregate amount of Swing Line Advances
outstanding shall not exceed the lesser of (A) the Swing Line Commitment and
(B) the Borrowing Base less the outstanding balance of the Revolving Loan at
such time ("Swing Line Availability"). Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this Section
1.1(e). Each Swing Line Advance shall be made pursuant to a Notice of
Revolving Credit Advance delivered to Agent by Borrower in accordance with
Section 1.1(a). Those notices must be given no later than 11:00 a.m. (Chicago
time) on the Business Day of the proposed Swing Line Advance. Notwithstanding
any other provision of this Agreement or the other Loan Documents, the Swing
Line Loan shall constitute an Index Rate Loan. Borrower shall repay the
aggregate outstanding principal amount of the Swing Line Loan upon demand
therefor by Agent.
(ii) Borrower shall execute and deliver to the Swing Line
Lender a promissory note with respect to the Swing Line Commitment. Such note
shall be in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(e)
(each a "Swing Line Note" and, collectively, the "Swing Line Notes"). The
Swing Line Note shall represent the obligation of Borrower to pay the amount of
the Swing Line Commitment or, if less, the aggregate unpaid principal amount of
all Swing Line Advances made to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the Swing Line Loan
and all other non-contingent Obligations shall be immediately due and payable
in full in immediately available funds on the Commitment Termination Date if
not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line
Lender, at any time and from time to time in its sole and absolute discretion,
may on behalf of Borrower (and Borrower hereby irrevocably authorizes the Swing
Line Lender to so act on its behalf) request each Revolving Lender (including
the Swing Line Lender) to make a Revolving Credit Advance to Borrower (which
shall be an Index Rate Loan) in an amount equal to such Revolving Lender's Pro
Rata Share of the principal amount of the Swing Line Loan (the "Refunded Swing
Line Loan") outstanding on the date such notice is given. Unless any of the
events described in Sections 8.1(h) or 8.1(i) shall have occurred (in which
event the procedures of Section 1.1(e)(iv) shall apply) and regardless of
whether the conditions precedent set forth in this Agreement to the making of a
Revolving Credit Advance are then satisfied, each Revolving Lender shall
disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on
behalf of the Swing Line
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<PAGE> 14
Lender, prior to 2:00 p.m. (Chicago time), in immediately available funds on
the Business Day next succeeding the date such notice is given. The proceeds
of such Revolving Credit Advances shall be immediately paid to the Swing Line
Lender and applied to repay the Refunded Swing Line Loan of Borrower.
(iv) Participation in Swing Line Loans. If, prior to
refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section
1.1(e)(iii), one of the events described in Sections 8.1(h) or 8.1(i) shall
have occurred, then, subject to the provisions of Section 1.1(e)(v) below, each
Revolving Lender will, on the date such Revolving Credit Advance was to have
been made for the benefit of Borrower, purchase from the Swing Line Lender an
undivided participation interest in the Swing Line Loan to Borrower in an
amount equal to its Pro Rata Share of such Swing Line Loan. Upon request, each
Revolving Lender will promptly transfer to the Swing Line Lender, in
immediately available funds, the amount of its participation.
(v) Revolving Lenders' Obligations Unconditional. Each
Revolving Lender's obligation to make Revolving Credit Advances in accordance
with Section 1.1(e)(iii) and to purchase participating interests in accordance
with Section 1.1(e)(iv) shall be absolute and unconditional and shall not be
affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right which such Revolving Lender may have against
the Swing Line Lender, Borrower or any other Person for any reason whatsoever;
(B) the occurrence or continuance of any Default or Event of Default; (C) any
inability of Borrower to satisfy the conditions precedent to borrowing set
forth in this Agreement on the date upon which such participating interest is
to be purchased or (D) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. If any Revolving Lender does
not make available to Agent or the Swing Line Lender, as applicable, the amount
required pursuant to Section 1.1(e)(iii) or 1.1(e)(iv), as the case may be, the
Swing Line Lender shall be entitled to recover such amount on demand from such
Revolving Lender, together with interest thereon for each day from the date of
non-payment until such amount is paid in full at the Federal Funds Rate for the
first two Business Days and at the Index Rate thereafter.
(f) Reliance on Notices. Agent shall be entitled to rely
upon, and shall be fully protected in relying upon, any Notice of Revolving
Credit Advance, Notice of Conversion/Continuation, Notice of Term Loan B
Advance, requests for the incurrence of Letter of Obligations or Litigation L/C
Obligations under Annex B and the Litigation L/C Agreement, or similar notice
believed by Agent to be genuine. Agent may assume that each Person executing
and delivering such a notice was duly authorized, unless the responsible
individual acting thereon for Agent has actual knowledge to the contrary.
1.2 Letters of Credit. Subject to and in accordance with
the terms and conditions contained herein and in Annex B or the Litigation L/C
Agreement, as applicable, Borrower shall have the right to request, and Lenders
agree to incur, or purchase participations in, Letter of Credit Obligations and
Litigation L/C Obligations.
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1.3 Prepayments.
(a) Voluntary Prepayments. Borrower may at any time on
at least five (5) days' prior written notice by Borrower to Agent (i)
voluntarily prepay all or part of the Term Loans and/or (ii) voluntarily prepay
all or part of the Revolving Loan and permanently reduce (but not terminate)
the Revolving Loan Commitment; provided that (A) any such prepayments or
reductions shall be in a minimum amount of $250,000 and integral multiples of
$100,000 in excess of such amount and (B) the Revolving Loan Commitment shall
not be reduced to an amount less than the greater of (x) $4,000,000 and (y) the
L/C Sublimit. In addition, Borrower may at any time on at least ten (10) days'
prior written notice by Borrower to Agent terminate the Revolving Loan
Commitment; provided that upon such termination, all Loans and other
Obligations shall be immediately due and payable in full. Any such voluntary
prepayment and any such reduction or termination of the Revolving Loan
Commitment must be accompanied by the payment of the fee required by Section
1.9(c), if any, plus the payment of any LIBOR funding breakage costs in
accordance with Section 1.13(b). Upon any such reduction or termination of the
Revolving Loan Commitment, Borrower's right to request Revolving Credit
Advances, or request that Letter of Credit Obligations be incurred on its
behalf, or request Swing Line Advances, shall simultaneously be permanently
reduced or terminated, as the case may be; provided that a permanent reduction
of the Revolving Loan Commitment shall not require a corresponding pro rata
reduction in the L/C Sublimit (as defined in Annex B). Each notice of partial
prepayment shall designate the Loans or other Obligations to which such
prepayment is to be applied, provided that any partial prepayments of any Term
Loan made by or on behalf of Borrower shall be applied to prepay the scheduled
installments of such Term Loan in inverse order of their respective maturities.
(b) Mandatory Prepayments. (i) If at any time the
outstanding balance of the aggregate Revolving Loan exceeds the lesser of (A)
the Maximum Amount and (B) the Borrowing Base, less, in each case, the
aggregate outstanding Swing Line Loan at such time, Borrower shall immediately
repay the aggregate outstanding Revolving Credit Advances to the extent
required to eliminate such excess. If any such excess remains after repayment
in full of the aggregate outstanding Revolving Credit Advances, Borrower shall
provide cash collateral for the Letter of Credit Obligations in the manner set
forth in Annex B to the extent of such remaining excess. Notwithstanding the
foregoing, any Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid
on demand.
(ii) Immediately upon receipt by any Credit Party of
proceeds of any asset disposition (including condemnation proceeds, other than
asset dispositions with respect to which no prepayments are required under
Section 6.8, and excluding proceeds of casualty insurance and proceeds of other
claims for damage and destruction) or any sale of Stock of any Subsidiary of
any Credit Party, Borrower shall prepay the Obligations in an amount equal to
all such proceeds, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by Borrower in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts
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<PAGE> 16
payable to holders of senior Liens (to the extent such Liens constitute
Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for
income taxes in accordance with GAAP in connection therewith. Any such
prepayment shall be applied in accordance with Section 1.3(c).
(iii) If Borrower issues Stock or any debt securities
(other than Stock or debt securities issued pursuant to Section 2.2 and applied
to the payment of the portion of the Net Litigation Liability which exceeds
$3,000,000), then, not later than the Business Day following the date of
receipt of the proceeds thereof, Borrower shall prepay the Obligations (or cash
collateralize the Letter of Credit Obligations or Litigation L/C Obligations)
in an aggregate amount equal to all such proceeds, net of underwriting
discounts and commissions and other reasonable costs paid to non-Affiliates in
connection therewith. Any such prepayment (or cash collateralization) shall be
applied in accordance with Section 1.3(c).
(iv) Borrower shall prepay the outstanding principal
balance of the Term Loan B or Term Loan C (whichever is outstanding), or
provide cash collateral with respect to the Litigation L/C Obligations, on the
earlier of the date which is ten (10) days after (A) the date on which
Borrower's annual audited Financial Statements for the immediately preceding
Fiscal Year are delivered pursuant to Annex E or (B) the date on which such
annual audited Financial Statements were required to be delivered pursuant to
Annex E, in an amount equal to Excess Cash Flow for the immediately preceding
Fiscal Year. Any prepayments (or cash collateralization) paid pursuant to this
clause (iv) shall be applied in accordance with Section 1.3(c). Each such
prepayment (or cash collateralization) shall be accompanied by a certificate
signed by Borrower's chief financial officer certifying the manner in which
Excess Cash Flow and the resulting prepayment were calculated, which
certificate shall be in form and substance satisfactory to Agent.
(v) Immediately upon receipt by any Credit Party of
proceeds of any money judgment or other payment ordered by a court of law or
other Governmental Authority arising out of any litigation or other proceedings
involving patents or other intellectual property (including, without
limitation, with respect to the California Award), (i) Borrower shall prepay
the Loans or cash collateralize the Litigation L/C in an amount equal to fifty
percent (50%) of all such proceeds if, at the time of such prepayment or cash
collateralization, neither the Term Loan B or the Term Loan C shall have been
advanced by the Term Lenders and the Litigation L/C shall not have been issued,
or the Term Loan B shall have been previously repaid in full, or the Term Loan
C shall have been previously repaid in full or (ii) Borrower shall prepay the
Term Loan B or Term Loan C (whichever is outstanding) or provide cash
collateral with respect to the Litigation L/C Obligations, in an amount equal
to all of such proceeds if, at the time of such prepayment, any principal
portion of the Term Loan B or Term Loan C shall remain outstanding or the
Litigation L/C shall be outstanding. If any prepayment or cash
collateralization under clause (ii) above results in a prepayment in full of
the Term Loan B or Term Loan C, or full cash collateralization of the
Litigation L/C Obligations and the aggregate of such proceeds exceeds the
amount of such prepayment or cash collateralization, then the Borrower shall
further prepay the Loans or cash collateralize the Letter of Credit Obligations
in an amount equal to fifty
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percent (50%) of such excess proceeds as a prepayment or cash collateralization
under clause (i) above. All such prepayments shall be applied in accordance
with Section 1.3(c).
(c) Application of Certain Mandatory Prepayments.
Subject to the provisions of Section 1.3(d):
(i) All prepayments and cash collateral payments made by
Borrower pursuant to Sections 1.3(b)(ii), 1.3(b)(iii), or 1.3(b)(v)(i), or the
second sentence of Section 1.3(b)(v), shall be applied as follows: first, to
Fees and reimbursable expenses of Agent then due and payable pursuant to any of
the Loan Documents; second, to interest then due and payable on the Term Loan B
or Term Loan C, if any; third, to prepay the scheduled installments of the Term
Loan B or Term Loan C, if any, in inverse order of maturity, until such Loan
shall have been prepaid in full or to any Litigation L/C Obligations to provide
cash collateral therefor in the manner set forth in Annex B and the Litigation
L/C Agreement, until all such Litigation L/C Obligations have been fully cash
collateralized in the manner set forth in Annex B and the Litigation L/C
Agreement; fourth, to interest then due and payable on the Term Loan A; fifth,
to prepay the scheduled installments of the Term Loan A in inverse order of
maturity, until such Loan shall have been prepaid in full (or, in the case of
an application of the proceeds of the California Award pursuant to Section
1.3(b)(v), not to exceed an amount equal to $750,000 minus the aggregate amount
of principal of the Term Loan A therefore repaid by Borrower); sixth, to
interest then due and payable on the Swing Line Loan; seventh, to the principal
balance of the outstanding Swing Line Loan until the same shall have been
repaid in full; eighth, to interest then due and payable on Revolving Credit
Advances; ninth, to the principal balance of outstanding Revolving Credit
Advances until the same shall have been paid in full; and tenth, to any Letter
of Credit Obligations to provide cash collateral therefor in the manner set
forth in Annex B, until all such Letter of Credit Obligations have been fully
cash collateralized in the manner set forth in Annex B; it being understood and
agreed that neither the Revolving Loan Commitment nor the Swing Line Commitment
shall be permanently reduced by the amount of any such prepayments; and
(ii) Any prepayments and cash collateral payments made by
Borrower pursuant to Section 1.3(b)(iv) or 1.3(b)(v)(ii) above shall be
applied to prepay the scheduled installments of the Term Loan B or Term Loan C
(whichever is outstanding) in inverse order of maturity, until such Loan shall
have been prepaid in full, or to its Litigation L/C Obligations to provide cash
collateral therefor in the manner set forth in Annex B and the Litigation L/C
Agreement, until all such Litigation L/C Obligations have been fully cash
collateralized in the manner set forth in Annex B and the Litigation L/C
Agreement.
(iii) All cash collateral paid pursuant to this Section 1.3
shall be held by Agent in an interest bearing account subject to such
agreements and documents as may be reasonably acceptable to Agent.
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(d) Application of Prepayments from Insurance and Damage
Claim Proceeds. Prepayments from insurance proceeds in accordance with Section
5.4(c) and from proceeds of other claims for damage and destruction shall be
applied as follows: insurance proceeds and proceeds of other claims for damage
and destruction from casualties or losses to cash or Inventory shall be applied
first, to the Swing Line Loans and second to the Revolving Credit Advances;
insurance proceeds and proceeds of other claims for damage and destruction from
casualties or losses to Equipment, Fixtures and Real Estate shall be applied to
the Term Loans and Litigation L/C Obligations (first to Borrower's Term Loan B,
Term Loan C or Litigation L/C Obligations (as cash collateral), if any, and
then to its Term Loan A). Neither the Revolving Loan Commitment nor the Swing
Line Loan Commitment shall be permanently reduced by the amount of any such
prepayments. If the insurance proceeds and proceeds of other claims for damage
and destruction received exceed the outstanding principal balances of the
Loans, if the insurance proceeds and proceeds of other claims for damage and
destruction do not specifically relate to cash, Inventory, Equipment, Fixtures
or Real Estate, or if the precise amount of insurance proceeds and proceeds of
other claims for damage and destruction allocable to Inventory as compared to
Equipment, Fixtures and Real Estate is not otherwise determined, the allocation
and application of those proceeds shall be determined by Agent, subject to the
approval of Requisite Lenders.
(e) Nothing in this Section 1.3 shall be construed to
constitute Agent's or any Lender's consent to any transaction referred to in
Section 1.3(b)(ii) and 1.3(b)(iii) above which is not permitted by other
provisions of this Agreement or the other Loan Documents.
1.4 Use of Proceeds. Borrower shall utilize the
proceeds of the Revolving Loan and the Swing Line Advances solely for the
financing of Borrower's ordinary working capital and general corporate needs,
including capital expenditures (to the extent not prohibited by this
Agreement), but excluding the payment of any judgments relating to the DEI
Litigation, and the proceeds of the Term Loan A and the Revolving Loans and
Swing Line Advances made on the Closing Date, for the Refinancing or for the
financing of Borrower's ordinary working capital and general corporate needs
(including capital expenditures not prohibited by this Agreement), but
excluding the payment of any judgments relating to the DEI Litigation;
provided, however, that Borrower may utilize proceeds of Revolving Loans to pay
judgments relating to the DEI Litigation in an amount not to exceed the
aggregate amount of proceeds of the California Award which has been applied to
the Revolving Loan pursuant to Section 1.3(b)(v) if, after giving effect to any
such payment, the Net Borrowing Availability minus the Letter of Credit
Obligations exceeds $500,000. Borrower shall utilize the proceeds of the Term
Loan B solely for the payment of the Final Judgment and shall utilize the
Litigation L/C solely to obtain and secure a supersedeas bond issued to prevent
the creation, enforcement and execution of any judicial lien with respect to
the Lower Court Judgment in connection with an appeal of such judgment.
Disclosure Schedule (1.4) contains a description of Borrower's sources and uses
of funds as of the Closing Date, including Loans and Letter of Credit
Obligations to be made or incurred on that date, and a funds flow memorandum
detailing how funds from each source are to be transferred to particular uses.
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1.5 Interest and Applicable Margins. (a) Borrower shall
pay interest to Agent, for the ratable benefit of Lenders in accordance with
the various Loans being made by each Lender, in arrears on each applicable
Interest Payment Date, at the following rates: (i) with respect to the
Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index
Margin per annum or, at the election of Borrower, the applicable LIBOR Rate
plus the Applicable Revolver LIBOR Margin per annum, based on the aggregate
Revolving Credit Advances outstanding from time to time; (ii) with respect to
the Term Loans, the Index Rate plus the Applicable Term Loan Index Margin per
annum or, at the election of Borrower, the applicable LIBOR Rate plus the
Applicable Term Loan LIBOR Margin per annum; and (iii) with respect to the
Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per
annum.
(b) If any payment on any Loan becomes due and payable on
a day other than a Business Day, the maturity thereof will be extended to the
next succeeding Business Day (except as set forth in the definition of LIBOR
Period) and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum
basis and interest shall be made by Agent on the basis of a three hundred and
sixty (360) day year, in each case for the actual number of days occurring in
the period for which such interest and Fees are payable. The Index Rate shall
be determined each day based upon the Index Rate as in effect each day. Each
determination by Agent of an interest rate hereunder shall be conclusive,
absent manifest error.
(d) At the election of Agent (or upon the written request
of Requisite Lenders) confirmed by written notice from Agent to Borrower, and
so long as any Default or Event of Default shall have occurred and be
continuing, the interest rates applicable to the Loans and the Letter of Credit
Fees shall be increased by two percentage points (2%) per annum above the rates
of interest or the rate of such Fees otherwise applicable hereunder ("Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the date of such notice until such Default or
Event of Default is cured or waived, or the Agent (upon written authorization
therefor from the Requisite Lenders) notifies Borrower that the Default Rate no
longer applies, and shall be payable upon demand.
(e) So long as no Default or Event of Default shall have
occurred and be continuing, and subject to the additional conditions precedent
set forth in Section 2.4, Borrower shall have the option to (i) request that
any Revolving Credit Advances be made as a LIBOR Loan, (ii) convert at any time
all or any part of outstanding Loans (other than the Swing Line Loan) from
Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate
Loan, subject to payment of LIBOR breakage costs in accordance with Section
1.13(b) if such conversion is made prior to the expiration of the LIBOR Period
applicable thereto, or (iv) continue all or any portion of any Loan (other than
the Swing Line Loan) as a LIBOR Loan upon
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<PAGE> 20
the expiration of the applicable LIBOR Period and the succeeding LIBOR Period
of that continued Loan shall commence on the last day of the LIBOR Period of
the Loan to be continued. Any Loan to be made or continued as, or converted
into, a LIBOR Loan must be in a minimum amount of $1,000,000 and integral
multiples of $100,000 in excess of such amount. Any such election must be made
by 11:00 a.m. (Chicago time) on the third (3rd) Business Day prior to (1) the
date of any proposed Advance which is to bear interest at the LIBOR Rate, (2)
the end of each LIBOR Period with respect to any LIBOR Loans to be continued as
such, or (3) the date on which Borrower wishes to convert any Index Rate Loan
to a LIBOR Loan for a LIBOR Period designated by Borrower in such election. If
no election is received with respect to a LIBOR Loan by 11:00 a.m. (Chicago
time) on the third (3rd) Business Day prior to the end of the LIBOR Period with
respect thereto (or if a Default or an Event of Default shall have occurred and
be continuing or if the additional conditions precedent set forth in Section
2.4 shall not have been satisfied), that LIBOR Loan shall be converted to an
Index Rate Loan at the end of its LIBOR Period. Borrower must make such
election by notice to Agent in writing, by telecopy or overnight courier. In
the case of any conversion or continuation, such election must be made pursuant
to a written notice (a "Notice of Conversion/Continuation") in the form of
Exhibit 1.5(e).
(f) Notwithstanding anything to the contrary set forth in
this Section 1.5, if a court of competent jurisdiction determines in a final
order that the rate of interest payable hereunder exceeds the highest rate of
interest permissible under law (the "Maximum Lawful Rate"), then so long as the
Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if
at any time thereafter the rate of interest payable hereunder is less than the
Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the
Maximum Lawful Rate until such time as the total interest received by Agent, on
behalf of Lenders, is equal to the total interest which would have been
received had the interest rate payable hereunder been (but for the operation of
this paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest hereunder shall be paid at
the rate(s) of interest and in the manner provided in Sections 1.5(a) through
(e) above, unless and until the rate of interest again exceeds the Maximum
Lawful Rate, and at that time this paragraph shall again apply. In no event
shall the total interest received by any Lender pursuant to the terms hereof
exceed the amount which such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. If, notwithstanding the provisions of this Section
1.5(f), a court of competent jurisdiction shall finally determine that a Lender
has received interest hereunder in excess of the Maximum Lawful Rate, Agent
shall, to the extent permitted by applicable law, promptly apply such excess in
the order specified in Section 1.11 and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
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1.6 Eligible Accounts. Based on the most recent
Borrowing Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall in its reasonable credit judgment
determine which Accounts of Borrower and Tessco shall be "Eligible Accounts"
for purposes of this Agreement; provided, however, and notwithstanding anything
in this section or this Agreement to the contrary, no Accounts of Tessco shall
constitute Eligible Accounts from and after the earlier of June 30, 1998 and
the completion of the Tessco Liquidation. In determining whether a particular
Account of Borrower or Tessco constitutes an Eligible Account, Agent shall not
include any such Account to which any of the exclusionary criteria set forth
below applies. Agent reserves the right, at any time and from time to time
after the Closing Date, to adjust any such criteria, to establish new criteria
and to adjust advance rates with respect to Eligible Accounts, in its
reasonable credit judgment, subject to the approval of Supermajority Revolving
Lenders in the case of adjustments or new criteria or changes in advance rates
which have the effect of making more credit available. Unless Agent shall have
otherwise agreed in writing, Eligible Accounts shall not include any Account of
Borrower or Tessco:
(a) which does not arise from the sale of goods or the
performance of services by Borrower or Tessco in the ordinary course of its
business;
(b) upon which (i) Borrower's or Tessco's right to
receive payment is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) Borrower or Tessco is not able to bring suit or
otherwise enforce its remedies against the Account Debtor through judicial
process;
(c) to the extent any defense, counterclaim, setoff or
dispute is asserted as to such Account or if the Account represents a progress
billing consisting of an invoice for goods sold or used or services rendered
pursuant to a contract under which the Account Debtor's obligation to pay that
invoice is subject to Borrower's or Tessco's completion of further performance
under such contract;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice or other electronic
communication (with respect to which, in the case of an electronic
communication, tangible evidence of the existence and terms of such Account can
be reproduced by Borrower or Tessco), in any case acceptable to Agent in form
and substance, has not been sent to the applicable Account Debtor;
(f) that (i) is not owned by Borrower or Tessco or (ii)
is subject to any right, claim, security interest or other interest of any
other Person, other than Liens in favor of Agent, on behalf of itself and
Lenders;
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(g) that arises from a sale to any Credit Party or any
Affiliate of any Credit Party, or to any director, officer, other employee of
any Credit Party or any Affiliate of any Credit Party, or to any other entity
which has any common officer or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is
the United States government or a political subdivision thereof, or any state
or municipality or department, agency or instrumentality thereof unless Agent,
in its sole discretion, has agreed to the contrary in writing and Borrower or
Tessco, if necessary or desirable, has complied with the Federal Assignment of
Claims Act of 1940, and any amendments thereto, or any applicable state statute
or municipal ordinance of similar purpose and effect, with respect to such
obligation;
(i) that is the obligation of an Account Debtor located
in a foreign country other than Canada (excluding the provinces of Quebec,
Newfoundland, Nova Scotia and Prince Edward Island) unless payment thereof is
assured by a letter of credit or bankers' acceptance satisfactory to Agent as
to form, amount and issuer;
(j) to the extent Borrower or any Subsidiary thereof is
liable for goods sold or services rendered by the applicable Account Debtor to
Borrower or any Subsidiary thereof, but only to the extent of the potential
offset;
(k) that arises with respect to goods which are delivered
on a bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed
sale or other terms by reason of which the payment by the Account Debtor is or
may be conditional;
(l) that is in default; provided, that, without limiting
the generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) it is not paid within the earlier of: sixty (60) days
following its due date or ninety (90) days following its original
invoice date net of credit balances, unless assured by a letter of
credit satisfactory to Agent as to form, amount and issuer;
(ii) if any Account Debtor obligated upon such Account
suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any Account
Debtor obligated upon such Account under any bankruptcy law or any
other federal, state or foreign (including any provincial)
receivership, insolvency relief or other law or laws for the relief of
debtors;
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(m) which is the obligation of an Account Debtor if fifty
percent (50%) or more of the dollar amount of all Accounts in excess of $2,500
and owing by that Account Debtor to Borrower and Tessco are ineligible under
the other criteria set forth in this Section 1.6;
(n) to the extent the Dollar amount of such Account, when
aggregated with the Dollar amount of all other Accounts owing by that Account
Debtor (other than Ford Motor Company, General Motors Corporation, Chrysler
Corporation, Mitsubishi Motor Sales of America, Inc., Volkswagen of America,
Inc., and Subaru of America, Inc.) to Borrower and Tessco, exceeds ten percent
(10%) of the aggregate gross amount of all Accounts;
(o) as to which Agent's interest, on behalf of itself and
Lenders, therein is not a first priority perfected security interest;
(p) as to which any of the representations or warranties
pertaining to Accounts set forth in this Agreement or the Security Agreement is
untrue;
(q) to the extent such Account is evidenced by a
judgment, Instrument or Chattel Paper;
(r) which is payable in any currency other than Dollars;
(s) to the extent Borrower or Tessco has received
payments with respect to such Account, the goods sold with respect to such
Account have not been delivered or such Account remains indicated on Borrower's
or Tessco's most recent trial balance delivered to Agent pursuant to Annex F
hereto;
(t) to the extent such Account may be offset by warranty
expenses with respect to the goods sold and giving rise to such Account; or
(u) which is unacceptable to Agent in its reasonable
credit judgment.
1.7 Eligible Inventory. Based on the most recent
Borrowing Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall in its reasonable credit judgment
determine which Inventory of Borrower and Tessco shall be "Eligible Inventory"
for purposes of this Agreement; provided, however, that, notwithstanding
anything in this section or this Agreement to the contrary, no Inventory of
Tessco shall constitute Eligible Inventory from and after the earlier of June
30, 1998 and the completion of the Tessco Liquidation. In determining whether
any particular Inventory of Borrower or Tessco constitutes Eligible Inventory,
Agent shall not include any such Inventory to which any of the exclusionary
criteria set forth below applies. Agent reserves the right, at any time and
from time to time after the Closing Date, to adjust any such criteria, to
establish new criteria and to adjust advance rates with respect to Eligible
Inventory, in its reasonable credit judgment, subject to the approval of
Supermajority Revolving Lenders in the case of adjustments or new criteria or
changes in
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advance rates which have the effect of making more credit available. Unless
Agent shall have otherwise agreed in writing, Eligible Inventory shall not
include any Inventory of Borrower or Tessco:
(a) that is not owned by Borrower or Tessco free and
clear of all Liens and rights of any other Person (including the rights of a
purchaser that has made progress payments and the rights of a surety that has
issued a bond to assure Borrower's or Tessco's performance with respect to that
Inventory), except the Liens in favor of Agent, on behalf of itself and
Lenders;
(b) (i) that is located at a premises at which Borrower
maintains Inventory having an aggregate book value of less than $100,000 or
(ii) that is located on premises which are not owned and operated by Borrower
or Tessco, or stored with a bailee, warehouseman or similar Person, or located
on premises that are leased to Borrower or Tessco, or located on premises which
are owned by Borrower or Tessco and subject to a Lien securing Indebtedness of
Borrower or Tessco, unless in any such case under this clause (b)(ii), (x) a
satisfactory bailee letter, landlord waiver or mortgagee's waiver has been
delivered to Agent, or (y) Reserves satisfactory to Agent have been established
with respect thereto;
(c) that is placed on consignment or is in transit (other
than Inventory which is in transit for not more than ten (10) days from Tessco
to Borrower or Borrower to Tessco in the ordinary course of business or in
connection with the Tessco Liquidation);
(d) that is covered by a negotiable document of title,
unless such document has been delivered to Agent;
(e) that in Agent's reasonable determination, is excess,
obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;
(f) that consists of display items or packing, labels,
inserts or shipping materials, manufacturing supplies, work-in-process
Inventory or replacement parts;
(g) that consists of goods which have been returned by
the buyer;
(h) that is not of a type held for sale in the ordinary
course of Borrower's or Tessco's business;
(i) as to which Agent's Lien, on behalf of itself and
Lenders, therein is not a first priority perfected Lien;
(j) as to which any of the representations or warranties
pertaining to Inventory set forth in this Agreement or the Security Agreement
is untrue;
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(k) to the extent that it consists of any costs
associated with "freight-in" charges;
(l) to the extent that it consists of Hazardous Materials
or goods that can be transported or sold only with licenses that are not
readily available;
(m) to the extent that it is not covered by casualty
insurance acceptable to Agent;
(n) to the extent that it is physically counted annually
or quarterly and carried forward on the perpetual inventory as constant until
the next physical count; or
(o) to the extent reserves are established with respect
to it for variances resulting from physical inventory counts or standard cost
adjustments.
(p) that is otherwise unacceptable to Agent in its
reasonable credit judgment.
1.8 Cash Management Systems. On or prior to the
Closing Date, Borrower will establish and will maintain until the Termination
Date, the cash management systems described on Annex C (the "Cash Management
Systems").
1.9 Fees. (a) Borrower shall pay to GE Capital,
individually, the Fees specified in that certain fee letter of even date
herewith between Borrower and GE Capital (the "GE Capital Fee Letter"), at the
times specified for payment therein.
(b) As additional compensation for the Revolving Lenders,
Borrower agrees to pay to Agent, for the ratable benefit of such Lenders, in
arrears, on the first Business Day of each month prior to the Commitment
Termination Date and on the Commitment Termination Date, a fee for Borrower's
non-use of available funds in an amount equal to two-fifths of one percent
(0.40%) per annum (calculated on the basis of a 360 day year for actual days
elapsed) of the difference between (x) the Maximum Amount (as it may be reduced
from time to time) and (y) the average for the period of the daily closing
balances of the aggregate Revolving Loan and the Swing Line Loan outstanding
during the period for which such fee is due.
(c) If, prior to the second anniversary of the Closing
Date, the Revolving Loan Commitment is reduced or terminated, whether
voluntarily or involuntarily and whether before or after acceleration of the
Obligations, Borrower shall pay to Agent, for the benefit of Lenders as
liquidated damages and compensation for the costs of being prepared to make
funds available hereunder an amount equal to two percent (2.00%) of the amount
of the reduction of the Revolving Loan Commitment ; provided, however, that (i)
if Borrower requests Agent and Lenders to consent to permitting Borrower to
voluntarily redeem the Series A Preferred Stock pursuant to the terms and
conditions of the Series A Preferred Stock Documents and Agent and Lenders
refuse to consent thereto, and Borrower terminates the Commitments and repays
the
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Obligations in their entirety within ninety (90) days of such refusal, the
amount payable under this section shall be one percent (1.00%) of the amount of
the Revolving Loan Commitment immediately prior to such termination and
repayment and (ii) if Borrower shall have notified the Agent in writing that it
objects to the assignee of any assignment effected under Section 9.1 within ten
(10) days of such assignment and Borrower terminates the Commitments and repays
the Obligations in their entirety within ninety (90) days of such notification,
no amount shall be payable under this section.
1.10 Receipt of Payments. Borrower shall make each
payment under this Agreement not later than 2:00 p.m. (New York time) on the
day when due in immediately available funds in Dollars to the Collection
Account. For purposes of computing interest and Fees and determining Borrowing
Availability or Net Borrowing Availability as of any date, all payments shall
be deemed received on the day of receipt of immediately available funds
therefor in the Collection Account prior to 2:00 p.m. (New York time).
Payments received after 2:00 p.m. (New York time) on any Business Day shall be
deemed to have been received on the following Business Day.
1.11 Application and Allocation of Payments. (a) So long
as no Event of Default shall have occurred and be continuing, (i) payments
consisting of proceeds of Accounts received in the ordinary course of business
shall be applied to the Swing Line Loan and the Revolving Loan; (ii) payments
matching specific scheduled payments then due shall be applied to those
scheduled payments; (iii) voluntary prepayments shall be applied as determined
by Borrower, subject to the provisions of Section 1.3(a); and (iv) mandatory
prepayments shall be applied as set forth in Section 1.3. As to each other
payment, and as to all payments made when an Event of Default shall have
occurred and be continuing or following the Commitment Termination Date,
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive right to
apply, reverse and reapply any and all such payments against the Obligations of
Borrower as Agent may deem advisable notwithstanding any previous entry by
Agent in the Loan Account or any other books and records. In the absence of a
specific determination by Agent with respect thereto, payments shall be applied
to amounts then due and payable in the following order: (1) to Fees and Agent's
expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the other Loans,
ratably in proportion to the interest accrued as to each Loan; (5) to principal
payments on the other Loans and to provide cash collateral for Letter of Credit
Obligations and Litigation L/C Obligations in the manner described in Annex B
and the Litigation L/C Agreement, ratably to the aggregate, combined principal
balance of the other Loans and outstanding Letter of Credit Obligations and
Litigation L/C Obligations; and (6) to all other Obligations including expenses
of Lenders to the extent reimbursable under Section 11.3.
(b) Agent is authorized to, and at its sole election may,
charge to the Revolving Loan balance on behalf of Borrower and cause to be paid
all Fees, expenses, Charges,
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costs (including insurance premiums in accordance with Section 5.4(a)) and
interest and principal, other than principal of the Revolving Loan, owing by
Borrower under this Agreement or any of the other Loan Documents if and to the
extent Borrower fails to promptly pay any such amounts as and when due, even if
such charges would cause the balance of the aggregate Revolving Loan and the
Swing Line Loan to exceed Borrowing Availability. At Agent's option and to the
extent permitted by law, any charges so made shall constitute part of the
Revolving Loan hereunder.
1.12 Loan Account and Accounting. Agent shall maintain a
loan account (the "Loan Account") on its books to record: (a) all Advances and
the Term Loans, (b) all payments made by Borrower, and (c) all other debits and
credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by Borrower; provided that any failure to so record
or any error in so recording shall not limit or otherwise affect Borrower's
duty to pay the Obligations. Agent shall render to Borrower a monthly
accounting of transactions with respect to the Loans setting forth the balance
of the Loan Account as to Borrower. Unless Borrower notifies Agent in writing
of any objection to any such accounting (specifically describing the basis for
such objection), within thirty (30) days after the date thereof, each and every
such accounting shall (absent manifest error) be deemed final, binding and
conclusive upon Borrower in all respects as to all matters reflected therein.
Only those items expressly objected to in such notice shall be deemed to be
disputed by Borrower.
1.13 Indemnity. (a) Each Credit Party that is a signatory
hereto shall jointly and severally indemnify and hold harmless each of Agent,
Lenders and their respective Affiliates, and each such Person's respective
officers, directors, employees, attorneys, agents and representatives (each, an
"Indemnified Person"), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
attorneys' fees and disbursements and other costs of investigation or defense,
including those incurred upon any appeal) which may be instituted or asserted
against or incurred by any such Indemnified Person as the result of credit
having been extended, suspended or terminated under this Agreement and the
other Loan Documents and the administration of such credit, and in connection
with or arising out of the transactions contemplated hereunder and thereunder
and any actions or failures to act in connection therewith, including any and
all Environmental Liabilities and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
Loan Documents (collectively, "Indemnified Liabilities"); provided, that no
such Credit Party shall be liable for any indemnification to an Indemnified
Person to the extent that any such suit, action, proceeding, claim, damage,
loss, liability or expense results from that Indemnified Person's gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR,
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ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A
RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
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(b) To induce Lenders to provide the LIBOR Rate option on
the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in
part prior to the last day of any applicable LIBOR Period (whether that
repayment is made pursuant to any provision of this Agreement or any other Loan
Document or is the result of acceleration, by operation of law or otherwise);
(ii) Borrower shall default in payment when due of the principal amount of or
interest on any LIBOR Loan; (iii) Borrower shall default in making any
borrowing of, conversion into or continuation of LIBOR Loans after Borrower has
given notice requesting the same in accordance herewith; or (iv) Borrower shall
fail to make any prepayment of a LIBOR Loan after Borrower has given a notice
thereof in accordance herewith, Borrower shall indemnify and hold harmless each
Lender from and against all losses, costs and expenses resulting from or
arising from any of the foregoing. Such indemnification shall include any loss
(including loss of margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from which such funds
were obtained. For the purpose of calculating amounts payable to a Lender
under this subsection, each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest at the
LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a
maturity comparable to the relevant Interest Period; provided, however, that
each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this subsection. This covenant shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder. As promptly as practicable under the circumstances, each Lender
shall provide Borrower with its written calculation of all amounts payable
pursuant to this Section 1.13(b), and such calculation shall be binding on the
parties hereto unless Borrower shall object in writing within ten (10) Business
Days of receipt thereof, specifying the basis for such objection in detail.
1.14 Access. Each Credit Party which is a party hereto
shall, during normal business hours, from time to time: (a) provide Agent and
any of its officers, employees and agents access to its properties, facilities,
advisors and employees (including officers) of each Credit Party and to the
Collateral, (b) permit Agent, and any of its officers, employees and agents, to
inspect, audit and make extracts from any Credit Party's books and records, (c)
permit Agent, and its officers, employees and agents, to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory and
other Collateral of any Credit Party, (d) make available to Agent and its
counsel, as quickly as is possible under the circumstances, originals or copies
of all books and records which Agent may request, and (e) deliver any document
or instrument necessary for Agent, as it may from time to time request, to
obtain records from any service bureau or other Person which maintains records
for such Credit Party, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned by such Credit
Party. If a Default or Event of Default shall have occurred and be continuing,
each such Credit Party shall provide such access and make such deliveries to
Agent and to each Lender at all times and without advance notice. If no
Default or Event of Default shall have occurred and be continuing, each such
Credit Party shall provide such access and make such deliveries to Agent upon
three (3) Business Days' prior notice and not more frequently than once during
any twelve month period. Borrower shall pay Agent, within thirty
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(30) days of Agent's demand therefor, an amount equal to $600 per person, per
day, plus all of Agent's out-of-pocket expenses, for each on-site inspection by
Agent pursuant to this section, provided that such payments to Agent shall not
exceed $15,000 for any on-site inspection occurring prior to the occurrence of
a Default or Event of Default. Furthermore, so long as any Event of Default
shall have occurred and be continuing, Borrower shall provide Agent and each
Lender with access to their suppliers and customers. Representatives of other
Lenders may accompany Agent's representatives on regularly scheduled audits at
no charge to Borrower.
1.15 Taxes. (a) Any and all payments by Borrower
hereunder or under the Notes shall be made, in accordance with this Section
1.15, free and clear of and without deduction for any and all present or future
Taxes. If Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under the Notes, (i) the sum payable
shall be increased as much as shall be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 1.15) Agent or Lenders, as applicable, receive an amount
equal to the sum they would have received had no such deductions been made,
(ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Agent the original or a certified copy of a
receipt evidencing payment thereof.
(b) Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and, within ten (10) days of demand therefor,
pay Agent and each Lender for the full amount of Taxes (including any Taxes
imposed by any jurisdiction on amounts payable under this Section 1.15) paid by
Agent or such Lender, as appropriate, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally asserted, unless the payment of such
Taxes by Agent or such Lender was made with gross negligence or willful
misconduct by Agent or such Lender. Agent or such Lender shall use its best
efforts to give Borrower as much advance notice of each such payment of Taxes
in excess of $2,500 under this subsection as is reasonably possible under the
circumstances.
(c) Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") as to which
payments to be made under this Agreement or under the Notes are exempt from
United States withholding tax under an applicable statute or tax treaty shall
provide to Borrower and Agent a properly completed and executed IRS Form 4224
or Form 1001 or other applicable form, certificate or document prescribed by
the IRS or the United States certifying as to such Foreign Lender's entitlement
to such exemption (a "Certificate of Exemption"). Any foreign Person that
seeks to become a Lender under this Agreement shall provide a Certificate of
Exemption to Representative and Agent prior to becoming a Lender hereunder. No
foreign Person may become a Lender hereunder if such Person is unable to
deliver a Certificate of Exemption.
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1.16 Capital Adequacy; Increased Costs; Illegality. (a)
If any Lender shall have determined that the adoption after the date hereof of
any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law) from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Lender and thereby reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder, then Borrower shall from time to time
upon demand by such Lender (with a copy of such demand to Agent) pay to Agent,
for the account of such Lender, additional amounts sufficient to compensate
such Lender for such reduction. A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by such
Lender to Borrower and to Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any
change in any law or regulation (or any change in the interpretation thereof)
or (ii) the compliance with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining any Loan or incurring any Letter of Credit Obligations
or Litigation L/C Obligations, then Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to Agent), pay to Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to Borrower and to Agent by such Lender, shall be
conclusive and binding on Borrower for all purposes, absent manifest error.
Each Lender agrees that, as promptly as practicable after it becomes aware of
any circumstances referred to above which would result in any such increased
cost, the affected Lender shall, to the extent not inconsistent with such
Lender's internal policies of general application, use reasonable commercial
efforts to minimize costs and expenses incurred by it and payable to it by
Borrower pursuant to this Section 1.16(b).
(c) Notwithstanding anything to the contrary contained
herein, if the introduction of or any change in any law or regulation (or any
change in the interpretation thereof) shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for any
Lender to agree to make or to make or to continue to fund or maintain any LIBOR
Loan, then, unless that Lender is able to make or to continue to fund or to
maintain such LIBOR Loan at another branch or office of that Lender without, in
that Lender's opinion, adversely affecting it or its Loans or the income
obtained therefrom, on notice thereof and demand therefor by such Lender to
Borrower through Agent, (i) the obligation of such Lender to agree to make or
to make or to continue to fund or maintain LIBOR Loans shall terminate and (ii)
Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by
Borrower to such Lender, together with interest accrued thereon, unless
Borrower, within five (5) Business
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Days after the delivery of such notice and demand, converts all such Loans into
a Loan bearing interest based on the Index Rate.
1.17 Single Loan. Except with respect to the
Litigation Obligations, all Loans to Borrower and all of the other Obligations
of Borrower arising under this Agreement and the other Loan Documents (other
than the Litigation Collateral Documents) shall constitute one general
obligation of Borrower secured, until the Termination Date, by all of the
Collateral pursuant to the Collateral Documents other than the Litigation
Collateral Documents. The Litigation Obligations shall constitute a single,
but separate, general obligation of Borrower secured, until the Termination
Date, by all of the Collateral pursuant to the Litigation Collateral Documents.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans.
No Lender shall be obligated to make or incur its initial
Loans or Letter of Credit Obligations or Litigation L/C Obligations hereunder
on or after the Closing Date, unless and until the following conditions have
been satisfied or provided for in a manner satisfactory to Agent, or waived in
writing by Agent and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or
counterparts hereof shall have been duly executed by, and delivered to,
Borrower, Agent and Lenders; and Agent shall have received such documents,
instruments, agreements and legal opinions as Agent shall request in connection
with the transactions contemplated by this Agreement and the other Loan
Documents, including all those listed in the Closing Checklist attached hereto
as Annex D, each in form and substance satisfactory to Agent.
(b) Repayment of Prior Lender Obligations; Satisfaction
of Outstanding L/Cs. (i) Agent shall have received a fully executed original
of a pay-off letter satisfactory to Agent confirming that all of the Prior
Lender Obligations will be repaid in full from the proceeds of the Term Loan A
and the initial Revolving Credit Advance and all Liens upon any of the property
of Borrower or any of its Subsidiaries in favor of Prior Lender shall be
terminated by Prior Lender immediately upon such payment; and (ii) all letters
of credit issued or guaranteed by Prior Lender shall have been cash
collateralized, supported by a guaranty of Agent or supported by a Letter of
Credit issued pursuant to Annex B, or terminated, as mutually agreed upon by
Agent, Borrower and Prior Lender.
(c) Approvals. Agent shall have received (i)
satisfactory evidence that the Credit Parties have obtained all required
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the Related Transactions or
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(ii) an officer's certificate in form and substance satisfactory to Agent
affirming that no such consents or approvals are required.
(d) Opening Availability. The Eligible Accounts and
Eligible Inventory of Borrower and Tessco supporting the initial Revolving
Credit Advance and the initial Letter of Credit Obligations incurred and the
amount of the Reserves to be established on the Closing Date shall be
sufficient in value, as determined by Agent, to provide Borrower, with Net
Borrowing Availability of at least $1,000,000, after giving effect to the
initial Revolving Credit Advance made to Borrower, the incurrence of any
initial Letter of Credit Obligations, the payment of all fees and expenses
incurred or owing by Borrower to Agent and Lenders and to the purchasers of the
Series A Preferred Stock as of the Closing Date, and the consummation of the
Related Transactions (on a pro forma basis, with trade payables being paid
currently, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales).
(e) Payment of Fees. Borrower shall have paid the Fees
required to be paid on the Closing Date in the respective amounts specified in
Section 1.9 (including the Fees specified in the GE Capital Fee Letter), and
shall have reimbursed Agent for all fees, costs and expenses of closing
presented as of the Closing Date.
(f) Capital Structure: Other Indebtedness. The capital
structure of each Credit Party and the terms and conditions of all Indebtedness
of each Credit Party shall be acceptable to Agent in its sole discretion.
Without limiting the foregoing, the aggregate consolidated Indebtedness,
together with all other consolidated liabilities of Borrower (other than trade
payables), shall not exceed $10,000,000 as of the Closing Date after giving
effect to the consummation of all of the Related Transactions.
(g) Consummation of Related Transactions. Agent shall
have received fully executed copies of the Series A Preferred Stock Documents,
the Series B Preferred Stock Documents, and each of the other Related
Transactions Documents, each of which shall be in form and substance
satisfactory to Agent and its counsel. The Related Transactions shall have been
consummated in accordance with the terms of the Related Transactions Documents
and Borrower shall have received $6,999,850 of cash proceeds (before deduction
of expenses) from the issuance of the Series A Preferred Stock, which proceeds
shall be accounted for as a contribution to Borrower's equity capital.
(h) Pegasus Guaranties. Each of the Litigation Guaranty
and the Supplemental Guaranty shall have been duly executed and delivered to
Agent and Agent shall have received all documents, instruments, certificates
and opinions as may be required by the terms thereof or as Agent shall
otherwise require with respect thereto.
2.2 Further Conditions to Term Loan B. No Lender shall
be obligated to fund its Term Loan B, unless and until the following conditions
shall have been satisfied or provided for in a manner satisfactory to Agent, or
waived in writing by Agent and Lenders:
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(a) Entry of Final Judgment. The Final Judgment shall
have been entered or established by settlement agreement and Agent shall have
received satisfactory evidence of (i) such entry or settlement, (ii) the amount
of Borrower's and each other Credit Party's liability with respect thereto,
(iii) the amount and timing of any proceeds of insurance, indemnification or
contribution expected to be received by Borrower and each of the other Credit
Parties with respect thereto and (iv) the aggregate amount of accrued and
unpaid expenses (including, without limitation, legal fees) incurred by the
Credit Parties with respect to the DEI Litigation as of the Term Loan B Funding
Date.
(b) Additional Equity or Subordinated Debt. If the
aggregate amount of the Final Judgment, minus the amount of any proceeds of
insurance, indemnification or contribution actually received by the Credit
Parties with respect thereto on or prior to the Term Loan B Funding Date plus
the amount determined pursuant to clause (iv) of Section 2.2(a) (provided,
however, that such amount shall not be added to Net Litigation Liability to the
extent that, as the date of determination of Net Litigation Liability
hereunder, the Net Borrowing Base Availability minus the Letter of Credit
Obligations and minus such amount, exceeds $500,000) (the "Net Litigation
Liability"), exceeds $3,000,000, Borrower shall have received, or will
simultaneously receive, additional net capital contributions or net proceeds of
Subordinated Debt, or a combination thereof, in an aggregate amount at least
equal to such excess, and shall have applied, or will simultaneously apply,
such contributions and proceeds to the payment in part of the Net Litigation
Liability. Agent shall have received, or will simultaneously receive,
satisfactory evidence of the application of such contributions and proceeds to
the Net Litigation Liability. The structure of, and documentation governing,
such additional net capital contributions and Subordinated Debt shall be in
form and substance acceptable in all respects to Agent and the Requisite
Lenders, and the identity of the Credit Parties or other obligors and issuers
with respect to the securities issued in exchange for such capital
contributions and for such Subordinated Debt shall be selected only with the
written approval of Agent and the Requisite Lenders. Without limiting the
foregoing, (i) any such Subordinated Debt shall not exceed $1,000,000 in
aggregate principal, shall be unsecured, no principal or interest with respect
thereto shall be required to be paid in cash to the holders of such
Subordinated Debt on or prior to its maturity date, and its maturity date shall
be no earlier than the July 24, 2003 and (ii) any such equity securities shall
not require dividends to be paid in cash or mandatory redemptions to be made
prior to July 24, 2003.
(c) Timing of Request for Advance. Each of the other
conditions described in this Section 2.2 shall have been satisfied, and
Borrower shall have delivered the Notice of Term Loan B Advance, on or prior to
the earlier of (i) the ninth (9th) day following the entry settlement of the
Final Judgment and (ii) December 31, 1998.
(d) Minimum Availability. The Net Borrowing Availability
minus the Letter of Credit Obligations shall be not less than $500,000.
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(e) Term Loan C Not Outstanding. No Litigation L/C
Obligations nor any Obligations with respect to Term Loan C shall be
outstanding. If the Litigation L/C shall have been theretofore issued, it
shall have been theretofore terminated or expired.
2.3 Further Conditions to Incurrence of Litigation L/C
Obligations. The Agent and Term Lenders shall not be obligated to incur
Litigation L/C Obligations or cause the Litigation L/C to be issued or renewed,
extended or modified, or directly advance the Term Loan C pursuant to Section
1.1(c) of the Litigation L/C Agreement, unless and until the following
conditions shall have been satisfied or provided for in a manner satisfactory
to Agent, or waived in writing by Agent and Lenders:
(I) In the case of a request to incur Litigation L/C Obligations
in connection with the issuance of the Litigation L/C pursuant to the
Litigation L/C Agreement:
(a) Entry of Lower Court Judgment. The Lower Court
Judgment shall have been entered and Agent shall have received satisfactory
evidence (i) of such entry, (ii) of the amount of Borrower's and each other
Credit Party's liability with respect thereto, (iii) of the aggregate amount of
accrued and unpaid expenses (including, without limitation, legal fees)
incurred by the Credit Parties with respect to the DEI Litigation as of the
proposed Litigation L/C Issuance Date, (iv) that the sum of the amounts
described in clauses (ii) and (iii) of this subparagraph is less than or equal
to $12,000,000 (provided, however, the amount determined pursuant to clause
(iii) shall not be included in such addition to the extent that, as the date of
determination hereof, the Net Borrowing Base Availability minus the Letter of
Credit Obligations and minus such amount, exceeds $500,000), (v) that,
notwithstanding anything contained in Section 2.3(I)(a)(iv) to the contrary,
the Litigation L/C, shall be in a face amount which is less than or equal to
$12,000,000, (vi) that the Litigation L/C shall be sufficient in amount and in
such terms and conditions as to permit Borrower to obtain and secure a
supersedeas or appeal bond or similar obligation pursuant to Federal Rule of
Civil Procedure 62(d) or otherwise which will have the effect of enjoining or
preventing the creation, attachment, perfection, enforcement, levy, execution
and foreclosure of any judicial or judgment lien which could otherwise arise
with respect to the Lower Court Judgment under applicable law and procedure
pending Borrower's appeal of such Lower Court Judgment; provided, however, that
any such supersedeas or appeal bond or similar obligation shall not dissolve,
or have the effect of dissolving, any judicial or judgment lien in connection
with the Lower Court Judgment under applicable law and procedure (the "Bond"),
(vii) that the form of the Bond shall be reasonably satisfactory to Agent,
(viii) that, prior to the expiration of ten (10) days after the entry of the
Lower Court Judgment, the Bond shall have been approved by the Lower Court and
shall be in full force and effect, (ix) that, upon the issuance and posting of
the Litigation L/C and upon the approval of the Bond by the Lower Court and the
issuance of the Bond, no such judicial lien or judgment shall have in fact been
created, attached or perfected under applicable law and procedure, and (x)
that, upon the issuance and posting of the Litigation L/C and Bond, Borrower
will have taken all actions as are necessary to timely and properly appeal the
Lower Court Judgment.
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(b) Pegasus Litigation Guaranty. The Pegasus Litigation
Guaranty shall be effective in accordance with its terms, and shall be valid
and enforceable severally against the Pegasus Funds in an amount not less than
the proposed aggregate face amount of the Litigation L/C and neither Pegasus
Fund shall be in default or breach of any term or condition of the Pegasus
Litigation Guaranty.
(c) Timing of Request for Advance. Each of the other
conditions described in this Section 2.3(I) shall have been satisfied, and
Borrower shall have requested that the Litigation L/C and Bond be issued, and
the Litigation L/C and Bond will be issued, on or prior to the earlier of (i)
the ninth (9th) day following the entry of the Lower Court Judgment and (ii)
December 31, 1998.
(d) Minimum Availability. The Net Borrowing Availability
minus the Letter of Credit Obligations shall be not less than $500,000.
(e) Term Loan B Note Outstanding. No Obligations with
respect to Term Loan B shall be outstanding.
(II) In the case of a request to advance the Term Loan C pursuant
to Section 1.1(c) of the Litigation L/C Agreement:
(a) Entry of Final Judgment. The Final Judgment shall
have been entered or established by settlement agreement and Agent shall have
received satisfactory evidence of (i) such entry or settlement, (ii) the amount
of the Net Litigation Liability and (iii) the Net Litigation Liability shall be
less than or equal to $12,000,000.
(b) Pegasus Litigation Guaranty. The Pegasus Litigation
Guaranty shall be effective in accordance with its terms, and shall be valid
and enforceable severally against the Pegasus Funds in an amount not less than
the requested principal amount of the Term Loan C and neither Pegasus Fund
shall be in default or breach of any term or condition of the Pegasus
Litigation Guaranty.
(c) Timing of Request for Advance. Each of the other
conditions described in this Section 2.3(II) shall have been satisfied, and
Borrower shall have delivered the Notice of Term Loan C Advance, on or prior to
the earlier of (i) the ninth (9th) day following the entry or settlement of the
Final Judgment and (ii) December 31, 1998.
(d) Minimum Availability. The Net Borrowing Availability
minus the Letter of Credit Obligations shall be not less than $500,000.
(e) Term Loan B and Litigation L/C Not Outstanding. No
Litigation L/C Obligations nor any Obligations with respect to Term Loan B
shall be outstanding. If the
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Litigation L/C shall have been theretofore issued, it shall have been
theretofore terminated or expired.
2.4 Further Conditions to Each Loan. Except as otherwise
expressly provided herein, no Lender shall be obligated to fund any Loan (other
than its Pro Rata Share of payments under the Litigation L/C as the Term Loan C
under Section 1.1(b) of the Litigation L/C Agreement), convert or continue any
Loan as a LIBOR Loan or incur any Letter of Credit Obligation or Litigation L/C
Obligations (whether initially or by renewal, extension or other modification),
if, as of the date thereof:
(a) Any representation or warranty by any Credit Party
contained herein or in any of the other Loan Documents shall be untrue or
incorrect as of such date, except to the extent that such representation or
warranty expressly relates to an earlier date, or if the proceeds of the
requested Loan or use of the requested Letter of Credit is inconsistent with
the provisions of Section 1.4; or
(b) Any event or circumstance having a Material Adverse
Effect shall have occurred since the date hereof; or
(c) (i) Any Event of Default shall have occurred and be
continuing or would result after giving effect to such Loan (or the incurrence
of such Letter of Credit Obligations or Litigation L/C Obligations), or (ii) a
Default shall have occurred and be continuing or would result after giving
effect to such Loan, and Agent or Requisite Revolving Lenders shall have
determined, in its or their sole and absolute discretion, not to make such Loan
or incur such Letter of Credit Obligations or Litigation L/C Obligations so
long as that Default is continuing; or
(d) After giving effect to such Advance (or the
incurrence of such Letter of Credit Obligations), the outstanding principal
amount of the aggregate Revolving Loan would exceed the lesser of the Borrowing
Base and the Maximum Amount, less, in each case, the then outstanding principal
amount of the Swing Line Loan; or
(e) After giving effect to such Swing Line Advance, the
outstanding principal amount of the Swing Line Loan would exceed Swing Line
Availability.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or Litigation L/C Obligations or
the conversion or continuation of any Loan into, or as, a LIBOR Loan, as the
case may be, shall be deemed to constitute, as of the date of such request,
acceptance, conversion or continuation, (i) a representation and warranty by
Borrower that the conditions in this Section 2.4 have been satisfied (and that
the conditions set forth in Section 2.2 have been satisfied in the case of a
request for the Term Loan B, that the conditions set forth in Section 2.3(I)
have been satisfied in the case of a request for the incurrence of the
Litigation L/C Obligations, and that the conditions set forth in Section
2.3(II)
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have been satisfied in the case of a request for a direct advance of Term Loan
C) and (ii) a reaffirmation by Borrower of the granting and continuance of
Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral
Documents or Litigation Collateral Documents, as the case may be.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of
Credit Obligations and Litigation L/C Obligations, the Credit Parties executing
this Agreement, jointly and severally, make the following representations and
warranties to Agent and each Lender with respect to all Credit Parties, each
and all of which shall survive the execution and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each
Credit Party (excluding, except in the case of clause (f) below, each of
Borrower's Subsidiaries which are organized under the laws of jurisdictions
outside of the United States) (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification; (c) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it
operates under lease and to conduct its business as now, heretofore and
proposed to be conducted; (d) has all licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter and
by-laws; and (f) subject to specific representations set forth herein regarding
ERISA, Environmental Laws, tax and other laws, is in compliance with all
applicable provisions of law, except where the failure to comply, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
3.2 Executive Offices; FEIN. As of the Closing Date, the
current location of each Credit Party's chief executive office and principal
place of business is set forth in Disclosure Schedule (3.2), and, except as set
forth in such schedule, none of such locations have changed within the twelve
(12) months preceding the Closing Date. In addition, Disclosure Schedule (3.2)
lists the federal employer identification number of each Credit Party.
3.3 Corporate Power, Authorization, Enforceable
Obligations. The execution, delivery and performance by each Credit Party of
the Loan Documents to which it is a party and the creation of all Liens
provided for therein, the execution, delivery and performance by each Credit
Party of the other Related Transaction Documents to which it is a party, and
their consummation of each Related Transaction pursuant thereto: (a) are within
such Person's corporate power; (b) have been duly authorized by all necessary
or proper corporate and shareholder action; (c) do not contravene any provision
of such Person's charter or bylaws; (d) do
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not violate any law or regulation, or any order or decree of any court or
Governmental Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound; (f) do not result in the
creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Agent, on behalf of itself and Lenders, pursuant
to the Loan Documents; and (g) do not require the consent or approval of any
Governmental Authority or any other Person, except those referred to in Section
2.1(c), all of which will have been duly obtained, made or complied with prior
to the Closing Date. On or prior to the Closing Date, each of the Loan
Documents shall have been duly executed and delivered by each Credit Party
thereto and each such Loan Document shall then constitute a legal, valid and
binding obligation of such Credit Party enforceable against it in accordance
with its terms.
3.4 Financial Statements and Projections. Except for the
Projections and the Fair Salable Balance Sheet, all Financial Statements
concerning Borrower and its Subsidiaries which are referenced below have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for the absence of footnotes and normal year-end audit
adjustments) and present fairly in all material respects the financial position
of the Persons covered thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as
Disclosure Schedule (3.4(A)) have been delivered on the date hereof:
(i) The audited consolidated balance sheets at December
31, 1996 and 1995 and the related statements of income and cash flows
of Borrower and its Subsidiaries for the Fiscal Years then ended,
certified by Deloitte & Touche LLP.
(ii) The unaudited balance sheet(s) at March 31, 1997,
April 30, 1997, May 31, 1997, June 30, 1997, July 31, 1997 and August
31, 1997 and the related statement(s) of income and cash flows of
Borrower and its Subsidiaries for the Fiscal Quarter then ended in the
case of the March 31, 1997 statements, and the months then ended in
the case of the April 30, 1997, May 31, 1997, June 30, 1997, July 31,
1997 and August 31, 1997 statements.
(b) Pro Forma. The Pro Forma delivered on the date
hereof and attached hereto as Disclosure Schedule (3.4(B)) was prepared by
Borrower giving pro forma effect to the Related Transactions, was based on the
unaudited consolidated and consolidating balance sheets of Borrower and its
Subsidiaries dated August 31, 1997 and was prepared in accordance with GAAP,
with only such adjustments thereto as would be required in accordance with
GAAP.
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(c) Projections. The Projections delivered on the date
hereof and attached hereto as Disclosure Schedule (3.4(C)) have been prepared
by Borrower in light of the past operations of its and its Subsidiaries'
businesses, but including future payments of known contingent liabilities
reflected on the Fair Salable Balance Sheet, and reflect projections for the
twelve (12) months ending December 31, 1997 and December 31, 1998 on a month by
month basis and for the fiscal years ending December 31, 1998, 1999 and 2000 on
an annual basis. The Projections are based upon estimates and assumptions
stated therein, all of which Borrower believes to be reasonable and fair in
light of current conditions and current facts known to Borrower and, as of the
Closing Date, reflect Borrower's good faith and reasonable estimates of the
future financial performance of Borrower and its Subsidiaries and of the other
information projected therein for the period set forth therein.
(d) Fair Salable Balance Sheet. The Fair Salable Balance
Sheet delivered on the date hereof and attached hereto as Disclosure Schedule
(3.4(D)) was prepared by Borrower on the same basis as the Pro Forma, except
that Borrower's assets are set forth therein at their fair salable values on a
going concern basis and the liabilities set forth therein include all
contingent liabilities of Borrower and its Subsidiaries stated at the
reasonably estimated present values thereof.
3.5 Material Adverse Effect. Between December 31, 1996
and the Closing Date, (a) no Credit Party has incurred any obligations,
contingent or non-contingent liabilities, liabilities for Charges, long-term
leases or unusual forward or long-term commitments which are not reflected in
the Pro Forma and which, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, (b) no contract, lease or other
agreement or instrument has been entered into by any Credit Party or has become
binding upon any Credit Party's assets and no law or regulation applicable to
any Credit Party has been adopted which has had or could reasonably be expected
to have a Material Adverse Effect, and (c) no Credit Party is in default and to
the best of Borrower's knowledge no third party is in default under any
material contract, lease or other agreement or instrument, which alone or in
the aggregate could reasonably be expected to have a Material Adverse Effect.
Between December 31, 1996 and the Closing Date no event has occurred, which
alone or together with other events, could reasonably be expected to have a
Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing
Date, the real estate ("Real Estate") listed on Disclosure Schedule (3.6)
constitutes all of the real property owned, leased, subleased, or occupied by
any Credit Party. Each Credit Party owns good and marketable fee simple title
to all of its owned real estate, and valid and marketable leasehold interests
in all of its leased Real Estate, all as described on Disclosure Schedule
(3.6), and copies of all such leases or a summary of terms thereof satisfactory
to Agent have been delivered to Agent. Disclosure Schedule (3.6) further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Closing Date. Each Credit Party also has good
and marketable title to, or valid leasehold interests in, all of its personal
properties and assets. As of the Closing Date, none of the properties and
assets of any Credit Party is subject to any Liens
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other than Permitted Encumbrances, and there are no facts, circumstances or
conditions known to any Credit Party that may result in any Liens (including
Liens arising under Environmental Laws) other than Permitted Encumbrances.
Each Credit Party has received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party's right, title
and interest in and to all such Real Estate and other properties and assets.
Disclosure Schedule (3.6) also describes any purchase options, rights of first
refusal or other similar contractual rights pertaining to any Real Estate. As
of the Closing Date, no portion of any Credit Party's Real Estate has suffered
any material damage by fire or other casualty loss which has not heretofore
been repaired and restored in all material respects to its original condition
or otherwise remedied. As of the Closing Date, all material permits required
to have been issued or appropriate to enable the Real Estate to be lawfully
occupied and used for all of the purposes for which they are currently occupied
and used have been lawfully issued and are in full force and effect.
3.7 Labor Matters. As of the Closing Date (a) no strikes
or other material labor disputes against any Credit Party are pending or, to
any Credit Party's knowledge, threatened; (b) hours worked by and payment made
to employees of each Credit Party comply with the Fair Labor Standards Act and
each other federal, state, local or foreign law applicable to such matter; (c)
all payments due from any Credit Party for employee health and welfare
insurance have been paid or accrued as a liability on the books of such Credit
Party; (d) except as set forth in Disclosure Schedule (3.7), no Credit Party is
a party to or bound by any collective bargaining agreement, management
agreement, consulting agreement or any employment agreement (and true and
complete copies of any agreements described on Disclosure Schedule (3.7) have
been delivered to Agent); (e) there is no organizing activity involving any
Credit Party pending or, to any Credit Party's knowledge, threatened by any
labor union or group of employees; (f) there are no representation proceedings
pending or, to any Credit Party's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of any Credit
Party has made a pending demand for recognition; and (g) except as set forth in
Disclosure Schedule (3.7), there are no complaints or charges against any
Credit Party pending or, to the knowledge of any Credit Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness. Except as set forth in Disclosure Schedule (3.8), no
Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. All
of the issued and outstanding Stock of each Credit Party (other than Borrower)
is owned by each of the Persons and in the amounts set forth on Disclosure
Schedule (3.8). As of the Closing Date, after giving effect to the Related
Transactions, the names of each Person which owns of record five percent
(5.00%) or more (on a fully-diluted basis) of the outstanding shares of any
class of Stock issued by Code Alarm, and the aggregate amounts of such Stock
owned by such Persons, is set forth on Disclosure Schedule (3.8). Except
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as set forth in Disclosure Schedule (3.8), as of the Closing Date, after giving
effect to the Related Transactions, there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Credit Party may be required to issue, sell, repurchase or redeem any of
its Stock or other equity securities or any Stock or other equity securities of
its Subsidiaries. All outstanding Indebtedness and all known and probable
contingent liabilities of each Credit Party as of the Closing Date (after
giving effect to the Related Transactions) are described in Section 6.3
(including Disclosure Schedule (6.3)).
3.9 Government Regulation. No Credit Party is an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940 as amended. No Credit Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, or any other federal or state statute that restricts or limits its
ability to incur Indebtedness or to perform its obligations hereunder. The
making of the Loans by Lenders to Borrower, the incurrence of the Letter of
Credit Obligations or Litigation L/C Obligations on behalf of Borrower, the
application of the proceeds thereof and repayment thereof and the consummation
of the Related Transactions will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission.
3.10 Margin Regulations. No Credit Party is engaged, nor
will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin security" as such terms are defined in Regulation U or G of the Federal
Reserve Board as now and from time to time hereafter in effect (such securities
being referred to herein as "Margin Stock"). No Credit Party owns any Margin
Stock, and none of the proceeds of the Loans or other extensions of credit
under this Agreement will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the Loans or
other extensions of credit under this Agreement to be considered a "purpose
credit" within the meaning of Regulation G, T, U or X of the Federal Reserve
Board. No Credit Party will take or permit to be taken any action which might
cause any Loan Document to violate any regulation of the Federal Reserve Board.
3.11 Taxes. All tax returns, reports and statements,
including information returns, required by any Governmental Authority to be
filed by any Credit Party have been filed with the appropriate Governmental
Authority and all Charges have been paid prior to the date on which any fine,
penalty, interest or late charge may be added thereto for nonpayment thereof
(or any such fine, penalty, interest, late charge or loss has been paid),
excluding Charges or other amounts being contested in accordance with Section
5.2(b). Proper and accurate amounts have been withheld by each Credit Party
from its respective employees for all periods in full and complete compliance
with all applicable federal, state, local and foreign law and such withholdings
have been timely paid to the respective Governmental Authorities. Disclosure
Schedule (3.11) sets forth as of the Closing Date those taxable years for which
any Credit Party's
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tax returns are currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as
described on Disclosure Schedule (3.11), no Credit Party has executed or filed
with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Credit Parties and their
respective predecessors are liable for any Charges: (a) under any agreement
(including any tax sharing agreements) or (b) to each Credit Party's knowledge,
as a transferee. As of the Closing Date, no Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by reason of a
change in accounting method or otherwise, which would have a Material Adverse
Effect.
3.12 ERISA. (a) Disclosure Schedule (3.12) lists and
separately identifies all Title IV Plans, Multiemployer Plans, ESOPs and
Retiree Welfare Plans. Copies of all such listed Plans, together with a copy
of the latest form 5500 for each such Plan, have been delivered to Agent. Each
Qualified Plan has been determined by the IRS to qualify under Section 401 of
the IRC, and the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501 of the IRC, and nothing has
occurred which would cause the loss of such qualification or tax-exempt status.
Except as set forth in Disclosure Schedule (3.12), each Plan is in compliance
with the applicable provisions of ERISA and the IRC, including the filing of
reports required under the IRC or ERISA. No Credit Party or ERISA Affiliate has
failed to make any contribution or pay any amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan.
No Credit Party or ERISA Affiliate has engaged in a prohibited transaction, as
defined in Section 4975 of the IRC, in connection with any Plan, which would
subject any Credit Party to a material tax on prohibited transactions imposed
by Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12):
(i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or
event described in Section 4062(e) of ERISA with respect to any Title IV Plan
has occurred or is reasonably expected to occur; (iii) there are no pending, or
to the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan with
Unfunded Pension Liabilities has been transferred outside of the "controlled
group" (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party
or ERISA Affiliate; and (vi) no liability under any Title IV Plan has been
satisfied with the purchase of a contract from an insurance company that is not
rated AAA by the Standard & Poor's Corporation or the equivalent by another
nationally recognized rating agency.
3.13 No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority
or before any arbitrator or panel of arbitrators
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(collectively, "Litigation"), (a) which challenges any Credit Party's right or
power to enter into or perform any of its obligations under the Loan Documents
to which it is a party, or the validity or enforceability of any Loan Document
or any action taken thereunder, or (b) which could reasonably be expected to
have a Material Adverse Effect. Except as set forth on Disclosure
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Schedule (3.13), as of the Closing Date there is no Litigation pending or
threatened which seeks damages in excess of $100,000 or injunctive relief or
alleges criminal misconduct of any Credit Party.
3.14 Brokers. No broker or finder acting on behalf of any
Credit Party brought about the obtaining, making or closing of the Loans or the
Related Transactions, and no Credit Party has any obligation to any Person in
respect of any finder's or brokerage fees in connection therewith.
3.15 Intellectual Property. Except as set forth on
Disclosure Schedule (3.15), (a) as of the Closing Date, each Credit Party owns
or has rights to use all Intellectual Property necessary to continue to conduct
its business as now or heretofore conducted by it or proposed to be conducted
by it, and each Patent, Trademark, Copyright and License is listed, together
with application or registration numbers, as applicable, in Disclosure Schedule
(3.15) hereto and (b) each Credit Party conducts its business and affairs
without infringement of or interference with any Intellectual Property of any
other Person. Notwithstanding the foregoing, none of the matters set forth in
Disclosure Schedule (3.15) could reasonably be expected to have a Material
Adverse Effect.
3.16 Full Disclosure. No information contained in this
Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other reports from time to time delivered
hereunder or any written statement furnished by or on behalf of any Credit
Party to Agent or any Lender pursuant to the terms of this Agreement contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were
made. The Liens granted to Agent, on behalf of itself and Lenders, pursuant to
the Collateral Documents will at all times be fully perfected first priority
Liens in and to the Collateral described therein, subject, as to priority, only
to Permitted Encumbrances with respect to the Collateral.
3.17 Environmental Matters. (a) Except as set forth in
Disclosure Schedule (3.17), as of the Closing Date: (i) the Real Estate is free
of contamination from any Hazardous Material except for such contamination that
would not adversely impact the value or marketability of such Real Estate and
which would not result in Environmental Liabilities of the Credit Parties which
could reasonably be expected to exceed $50,000; (ii) no Credit Party has caused
or suffered to occur any Release of Hazardous Materials on, at, in, under,
above, to, from or about any of its Real Estate the cleanup of which could
reasonably be expected to exceed $50,000; (iii) the Credit Parties are and have
been in compliance with all Environmental Laws, except for such noncompliance
which would not result in Environmental Liabilities of the Credit Parties which
could reasonably be expected to exceed $50,000; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in
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Environmental Liabilities of the Credit Parties which could reasonably be
expected to exceed $50,000, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Credit Party is involved in operations
or knows of any facts, circumstances or conditions, including any Releases of
Hazardous Materials, that are likely to result in any Environmental Liabilities
of such Credit Party which could reasonably be expected to exceed $50,000, and
no Credit Party has authorized any current or former tenant of the Real Estate
to engage in any such operations; (vi) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
which seeks damages, penalties, fines, costs or expenses in excess of $50,000
or injunctive relief, or which alleges criminal misconduct by any Credit Party;
(vii) no notice has been received by any Credit Party identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Credit Parties (other
than from customary business operations), there are no facts, circumstances or
conditions that may result in any Credit Party being identified as a
"potentially responsible party" under CERCLA or analogous state statutes; and
(viii) the Credit Parties have provided to Agent copies of all existing written
environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities of the Credit
Parties, in each case relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that
Agent (i) is not now, and has not ever been, in control of any of the Real
Estate or any Credit Party's affairs, and (ii) does not have the capacity
through the provisions of the Loan Documents or otherwise to influence any
Credit Party's conduct with respect to the ownership, operation or management
of any of its Real Estate or compliance with Environmental Laws or
Environmental Permits.
3.18 Insurance. Disclosure Schedule (3.18) lists all
insurance policies of any nature maintained, as of the Closing Date, for
current occurrences by each Credit Party, as well as a summary of the terms of
each such policy.
3.19 Deposit and Disbursement Accounts. Disclosure
Schedule (3.19) lists all banks and other financial institutions at which any
Credit Party maintains deposits and/or other accounts as of the Closing Date,
including any Disbursement Accounts, and such Schedule correctly identifies the
name, address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number.
3.20 Government Contracts. Except as set forth in
Disclosure Schedule (3.20), as of the Closing Date, no Credit Party is a party
to any contract or agreement with any Governmental Authority and no Credit
Party's Accounts are subject to the Federal Assignment of Claims Act, as
amended (31 U.S.C. Section 3727) or any similar state or local law.
3.21 Customer and Trade Relations. Except as disclosed on
Disclosure Schedule (3.21), as of the Closing Date, there exists no actual or,
to the knowledge of any Credit Party, threatened termination or cancellation
of, or any material adverse modification or change
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in: (a) the business relationship of any Credit Party with any customer or
group of customers whose purchases during the preceding twelve (12) months
caused them to be ranked among the ten largest customers of such Credit Party;
or (b) the business relationship of any Credit Party with any supplier material
to its operations.
3.22 Agreements and Other Documents. As of the Closing
Date, each Credit Party has provided to Agent or its counsel, on behalf of
Lenders, accurate and complete copies (or summaries) of all of the following
agreements or documents to which any it is subject and each of which is listed
on Disclosure Schedule (3.22): (a) supply agreements and purchase agreements
not terminable by such Credit Party within sixty (60) days following written
notice issued by such Credit Party and involving transactions in excess of
$1,000,000 per annum; (b) OEM contracts and similar agreements with customers
pursuant to which revenues have been generated (or are reasonably expected to
be generated) in excess of $1,000,000 per annum, together with schedules
describing, and other evidence of, all accreditations awarded to Borrower or
any other Credit Parties by any of such customers, or any insurance industry
group or similar organization, with respect to any products or services sold or
provided by Borrower or such other Credit Parties pursuant to such OEM
contracts and similar agreements; (c) any lease of Equipment having a remaining
term of one year or longer and requiring aggregate rental and other payments in
excess of $500,000 per annum; (d) licenses and permits held by the Credit
Parties, the absence of which could be reasonably likely to have a Material
Adverse Effect; (e) instruments or documents evidencing Indebtedness (other
than leases of Equipment) of such Credit Party and any security interest
granted by such Credit Party with respect thereto; and (f) instruments and
agreements evidencing the issuance of any equity securities, warrants, rights
or options to purchase equity securities of such Credit Party.
3.23 Solvency. After giving effect to (a) the Loans and
Letter of Credit Obligations to be made or extended on the Closing Date or such
other date as Loans, Letter of Credit Obligations and Litigation L/C
Obligations requested hereunder are made or extended and the execution and
delivery of the Loan Documents, (b) the disbursement and application of the
proceeds of such Loans pursuant to the instructions of Borrower, (c) the
issuance of the Series A Preferred Stock, the Series B Preferred Stock, the
Refinancing and the consummation of the other Related Transactions and (d) the
payment and accrual of all transaction costs in connection with the foregoing,
the Credit Parties, taken as a whole, are Solvent.
3.24 Series A Preferred Stock Issuance. As of the Closing
Date, Borrower have delivered to Agent a complete and correct copy of the
Series A Preferred Stock Documents (including all schedules, exhibits,
amendments, supplements, modifications, assignments and all other documents
delivered pursuant thereto or in connection therewith). As of the Closing Date
the Series A Preferred Stock and the "Attached Warrants" and "Shortfall
Warrants" (as such terms are defined in the Series A Preferred Stock Documents)
have been issued pursuant to the Series A Preferred Stock Documents and not
less than $6,999,850 in cash proceeds (before deduction of expenses) from such
issuance have been received by Borrower. Borrower acknowledge that Agent and
each Lender are entering into this Agreement and are extending the
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Commitments in reliance upon the issuance of the Series A Preferred Stock and
such Series A Warrants pursuant to the Series A Preferred Stock Documents, the
receipt by Borrower of all of the proceeds of such issuance, and this Section
3.24.
3.25 Series B Preferred Stock Issuance. As of the Closing
Date, Borrower has delivered to Agent a complete and correct copy of the Series
B Preferred Stock Documents (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith). As of the Closing Date the
Series B Preferred Stock has been issued pursuant to the Series B Preferred
Stock Documents to the Series B Pledgor, all of the outstanding shares of such
Series B Preferred Stock have been pledged by the Series B Pledgor to Agent,
for itself and Lenders, as security for the Obligations, pursuant to a Pledge
Agreement, and the certificate of designation with respect to the Series B
Preferred Stock shall have been duly approved by Borrower and filed with the
Department of Consumer and Industry Services of the State of Michigan.
Borrower acknowledges that Agent and each Lender are entering into this
Agreement and are extending the Commitments in reliance upon the issuance of
the Series B Preferred Stock pursuant to the Series B Preferred Stock
Documents, the pledge of such Series B Preferred Stock to Agent, and this
Section 3.25.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. (a) Each Credit Party executing
this Agreement hereby agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Agent and/or Lenders, as required, the
Financial Statements, notices, Projections and other information at the times,
to the Persons and in the manner set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby
agrees that from and after the Closing Date and until the Termination Date, it
shall deliver to Agent and/or Lenders, as required, the various Collateral
Reports (including Borrowing Base Certificates in the form of Exhibit 4.1(b))
at the times, to the Persons and in the manner set forth in Annex F.
4.2 Communication with Accountants. Following the
occurrence and continuation of a Default or Event of Default, each Credit Party
executing this Agreement authorizes Agent and each Lender, to communicate
directly with its independent certified public accountants, including, without
limitation, Deloitte & Touche LLP, and authorizes and shall instruct those
accountants and advisors to disclose and make available to Agent and each
Lender any and all Financial Statements and other supporting financial
documents, schedules and information relating to any Credit Party (including
copies of any issued management letters) with respect to the business,
financial condition and other affairs of any Credit Party.
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5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Credit Agreement jointly and
severally agrees as to all Credit Parties that from and after the date hereof
and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business.
Each Credit Party shall, except as otherwise permitted by Section 6.1: (a) do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and its rights and franchises; (b) continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder; (c) at all times maintain, preserve and protect all of its assets
and properties used or useful in the conduct of its business, and keep the same
in good repair, working order and condition in all material respects (taking
into consideration ordinary wear and tear) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices; and (d) transact business only in
such corporate and trade names as are set forth in Disclosure Schedule (5.1).
5.2 Payment of Obligations. (a) Subject to Section
5.2(b), each Credit Party shall pay and discharge or cause to be paid and
discharged promptly all Charges payable by it, including Charges imposed upon
it, its income and profits, or any of its property (real, personal or mixed)
and all Charges with respect to tax, social security and unemployment
withholding with respect to its employees.
(b) Each Credit Party may in good faith contest, by
appropriate proceedings, the validity or amount of any Charges or claims
described in Section 5.2(a); provided, that (i) adequate reserves with respect
to such contest are maintained on the books of such Credit Party, in accordance
with GAAP, (ii) such contest is maintained and prosecuted continuously and with
diligence and operates to suspend collection or enforcement of such Charges or
claims or any Lien in respect thereof, (iii) none of the Collateral becomes
subject to forfeiture or loss as a result of such contest, (iv) no Lien shall
be imposed to secure payment of such Charges or claims other than Permitted
Encumbrances, (v) such Credit Party shall promptly pay or discharge such
contested Charges or claims and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set forth in this
Section 5.2(b) are no longer met, and (vi) Agent has not advised Borrower in
writing that Agent reasonably believes that nonpayment or nondischarge thereof
could have or result in a Material Adverse Effect.
5.3 Books and Records. Each Credit Party shall keep
adequate books and records with respect to its business activities in which
proper entries, reflecting all financial transactions, are made in accordance
with GAAP and on a basis consistent with the Financial Statements attached as
Disclosure Schedule (3.4(A)).
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5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense, maintain the
policies of insurance described on Disclosure Schedule (3.18) or substantially
similar replacement policies, in any case in form and with insurers acceptable
to Agent. If any Credit Party at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay
all premiums relating thereto, Agent may at any time or times thereafter obtain
and maintain such policies of insurance and pay such premiums and take any
other action with respect thereto which Agent deems advisable. Agent shall
have no obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default or
Event of Default arising from any Credit Party's failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
attorneys' fees, court costs and other charges related thereto, shall be
payable by Borrower to Agent within thirty (30) days of demand therefor and
shall be additional Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any change
in any Credit Party's risk profile (including any change in the product mix
maintained by any Credit Party or any laws affecting the potential liability of
such Credit Party) to require additional forms and limits of insurance to, in
Agent's reasonable opinion, adequately protect both Agent's and Lender's
interests in all or any portion of the Collateral and to ensure that each
Credit Party is protected by insurance in amounts and with coverage customary
for its industry; provided, however, that, in the event of any such change, the
Credit Parties shall obtain such additional forms and limits not later than
thirty (30) days following Agent's written request therefor. If requested by
Agent, each Credit Party shall deliver to Agent from time to time a report of a
reputable insurance broker, satisfactory to Agent, with respect to its
insurance policies.
(c) Borrower shall deliver to Agent, in form and
substance satisfactory to Agent, endorsements to (i) all "All Risk" and
business interruption insurance naming Agent, on behalf of itself and Lenders,
as loss payee, and (ii) all general liability and other liability policies
naming Agent, on behalf of itself and Lenders, as additional insured. Borrower
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent), so long as any Default or Event of Default
shall have occurred and be continuing or the anticipated insurance proceeds
exceed $150,000, as Borrower's true and lawful agent and attorney-in-fact for
the purpose of making, settling and adjusting claims under such "All Risk"
policies of insurance, endorsing the name of Borrower on any check or other
item of payment for the proceeds of such "All Risk" policies of insurance and
for making all determinations and decisions with respect to such "All Risk"
policies of insurance. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of- attorney. Borrower
shall promptly notify Agent of any loss, damage, or destruction to the
Collateral in the amount of $150,000 or more, whether or not covered by
insurance. After deducting from such proceeds the expenses, if any, incurred
by Agent in the collection or handling thereof, Agent may, at its option, apply
such proceeds to the reduction of the Obligations in accordance with Section
1.3(d), or permit or require the applicable Borrower to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner
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with materials and workmanship of substantially the same quality as existed
before the loss, damage or destruction. Notwithstanding the foregoing, if the
casualty giving rise to such insurance proceeds would not reasonably be
expected to have a Material Adverse Effect and such insurance proceeds do not
exceed $150,000 in the aggregate, Agent shall permit Borrower to replace,
restore, repair or rebuild the property; provided that if Borrower shall not
have completed or entered into binding agreements to complete such replacement,
restoration, repair or rebuilding within 180 days of such casualty, Agent may
apply such insurance proceeds to the Obligations in accordance with Section
1.3(d). All insurance proceeds which are to be made available to Borrower to
replace, repair, restore or rebuild the Collateral shall be applied by Agent to
reduce the outstanding principal balance of the Revolving Loan (which
application shall not result in a permanent reduction of the Revolving Loan
Commitment) and upon such application, Agent shall establish a Reserve against
the Borrowing Base in an amount equal to the amount of such proceeds so applied
(except in the case of proceeds of Inventory). Thereafter, such funds shall be
made available to that Borrower to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower shall request a Revolving
Credit Advance be made to Borrower in the amount requested to be released; (ii)
so long as the conditions set forth in Section 2.4 have been met, Revolving
Lenders shall make such Revolving Credit Advance; and (iii) the Reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Revolving Credit Advance. To the extent not used to replace,
repair, restore or rebuild the Collateral, such insurance proceeds shall be
applied in accordance with Section 1.3(d).
5.5 Compliance with Laws. Each Credit Party shall comply
with all federal, state, local and foreign laws and regulations applicable to
it, including those relating to the Communications Act of 1934, as amended,
licensing, ERISA and labor matters and Environmental Laws and Environmental
Permits, except to the extent that the failure to comply, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
5.6 Supplemental Disclosure. From time to time as may be
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered materially inaccurate thereby (and, in
the case of any supplements to any Disclosure Schedule, such Disclosure
Schedule shall be appropriately marked to show the changes made therein);
provided that (a) no such supplement to any such Disclosure Schedule or
representation shall be or be deemed a waiver of any Default or Event of
Default resulting from the matters disclosed therein, except as consented to by
Agent and Requisite Lenders in writing; and (b) no supplement shall be required
as to representations and warranties that relate solely to the Closing Date.
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5.7 Intellectual Property. Each Credit Party will conduct
its business and affairs without infringement of or interference with any
Intellectual Property of any other Person.
5.8 Environmental Matters. Each Credit Party shall and
shall cause each Person within its control to: (a) conduct its operations and
keep and maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance which could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions which are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining
to the presence, generation, treatment, storage, use, disposal, transportation
or Release of any Hazardous Material on, at, in, under, above, to, from or
about any of its Real Estate; (c) notify Agent promptly after such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits
or any Release on, at, in, under, above, to, from or about any Real Estate
which is reasonably likely to result in Environmental Liabilities of the Credit
Parties in excess of $75,000; and (d) promptly forward to Agent a copy of any
order, notice, request for information or any communication or report received
by such Credit Party in connection with any such violation or Release or any
other matter relating to any Environmental Laws or Environmental Permits that
could reasonably be expected to result in Environmental Liabilities of the
Credit Parties in excess of $75,000, in each case whether or not the
Environmental Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation, Release or other
matter. If Agent at any time has a reasonable basis to believe that there may
be a violation of any Environmental Laws or Environmental Permits by any Credit
Party or any Environmental Liability of the Credit Parties arising thereunder,
or a Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate, which, in each case, could reasonably be expected to
have a Material Adverse Effect, then each Credit Party shall, upon Agent's
written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower's expense, as Agent may from time to time
request, which shall be conducted by reputable environmental consulting firms
acceptable to Agent and shall be in form and substance acceptable to Agent, and
(ii) permit Agent or its representatives to have access to all Real Estate for
the purpose of conducting such environmental audits and testing as Agent deems
appropriate, including subsurface sampling of soil and groundwater. Borrower
shall reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 Landlords' Agreements, Mortgagee Agreements and
Bailee Letters. Each Credit Party shall use its best efforts to obtain a
landlord's agreement, mortgagee agreement or bailee letter, as applicable, from
the lessor of each leased property or mortgagee of owned property or with
respect to any warehouse, processor or converter facility or other location
where Collateral is located, which agreement or letter shall contain a waiver
or subordination of all Liens or claims that the landlord, mortgagee or bailee
may assert against the Inventory or Collateral at that location, and shall
otherwise be satisfactory in form and substance to Agent. With respect to such
locations or warehouse space leased or owned as of the Closing Date, if
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Agent has not received a landlord or mortgagee agreement or bailee letter as of
the Closing Date and until such time as such agreement or waiver shall be later
delivered, Borrower's or Tessco's Eligible Inventory at that location shall, in
Agent's discretion, be excluded from the Borrowing Base or be subject to such
Reserves as may be established by Agent in its reasonable credit judgment.
After the Closing Date, no real property or warehouse space shall be leased or
acquired by any Credit Party and no Inventory shall be shipped to a processor
or converter under arrangements established after the Closing Date, unless and
until a satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location;
provided that Borrower may hold Inventory at newly established locations
without such agreements or letters with Agent's prior approval and subject to
such Reserves as are established at Agent's discretion. Each Credit Party
shall timely and fully pay and perform its obligations under all leases and
other agreements with respect to each leased location or public warehouse where
any Collateral is or may be located.
5.10 Further Assurances. Each Credit Party executing this
Agreement agrees that it shall and shall cause each other Credit Party to, at
such Credit Party's expense and upon request of Agent, duly execute and
deliver, or cause to be duly executed and delivered, to Agent such further
instruments and do and cause to be done such further acts as may be necessary
or proper in the reasonable opinion of Agent to carry out more effectually the
provisions and purposes of this Agreement or any other Loan Document.
5.11 OEM Contracts and Accreditations. Each Credit Party
executing and delivering this Agreement shall substantially comply with each
OEM Contract to which it is a party. Each Credit Party shall exert its best
efforts to cause the renewal of each such OEM Contract and each OEM
Accreditation upon its expiration, on such terms and are not less favorable to
the Credit Parties as those governing the OEM Contract or OEM Accreditation
subject to such expiration.
5.12 Tessco Liquidation. Borrower shall promptly notify
Agent of all material developments relating to the Tessco Liquidation, and
promptly provide Agent with complete copies of any and all documents,
instruments, agreements governing such transaction. Borrower shall promptly
provide to Agent all Collateral Documents, Litigation Collateral Documents, UCC
financing statements and UCC financing statement amendments, and other
documents, agreements, and instruments, as may be reasonably requested by Agent
to evidence the continuation of Agent's liens and security interests in the
property subject to such transaction with the same priority as such liens and
security interests had immediately prior to such transaction, together with
such additional operational, financial and legal information as Agent may
reasonably request in connection with such transaction. Borrower agrees to
complete the Tessco Liquidation on or before June 30, 1998.
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6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that, without the prior written
consent of Agent and the Requisite Lenders, from and after the date hereof
until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Credit Party shall
directly or indirectly, by operation of law or otherwise, (a) form or acquire
any Subsidiary, or (b) merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise combine with
or acquire, any Person, other than (i) the Tessco Liquidation (provided, that
no Default or Event of Default exists and is continuing at the time of such
Tessco Liquidation, or would result therefrom and such transaction shall be
effected in compliance with all applicable laws) and (ii) the merger of
wholly-owned Subsidiaries into Borrower or other wholly-owned Subsidiaries.
6.2 Investments; Loans and Advances. Except as set forth
on Disclosure Schedule (6.2) otherwise expressly permitted by this Section 6,
no Credit Party shall make or permit to exist any investment in, or make,
accrue or permit to exist loans or advances of money to, any Person, through
the direct or indirect lending of money, holding of securities or otherwise,
except (a) that Borrower may hold investments comprised of notes payable, or
stock or other securities issued by Account Debtors to Borrower pursuant to
negotiated agreements with respect to settlement of such Account Debtor's
Accounts in the ordinary course of business, so long as the aggregate amount of
such Accounts so settled by Borrower does not exceed $100,000; (b) that each
Credit Party may maintain its existing investments in its Subsidiaries as of
the Closing Date; (c) investments in the form of loans, permitted under Section
6.4(b) and intercompany advances and investments permitted under Section 6.3,
and (d) for other investments not exceeding $50,000 in the aggregate at any
time outstanding.
6.3 Indebtedness. (a) No Credit Party shall create,
incur, assume or permit to exist any Indebtedness, except (without duplication)
(i) Indebtedness secured by purchase money security interests permitted in
clause (c) of Section 6.7, (ii) the Loans and the other Obligations, (iii)
deferred taxes, (iv) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law, (v) existing Indebtedness described in Disclosure
Schedule (6.3) to Persons which are not Affiliates and refinancings thereof or
amendments or modifications thereto which do not have the effect of increasing
the principal amount thereof or changing the amortization thereof (other than
to extend the same) and which are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as determined by Agent,
than the terms of the Indebtedness being refinanced, amended or modified, (vi)
Subordinated Debt satisfying the conditions described in Section 2.2(b) and
provided that the proceeds thereof are used solely to satisfy that portion of
the Net Litigation Liability which exceeds $3,000,000, (vii) Borrower may
assume the Indebtedness of Tessco upon the consummation of the Tessco
Liquidation in compliance with Section 6.1, and (viii) Indebtedness of Tessco
owing to Borrower existing on the Closing Date as described in Disclosure
Schedule (6.3), and additional Indebtedness in connection with the
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ongoing business between Tessco and Borrower and in connection with the Tessco
Liquidation consisting of intercompany loans and advances made after the
Closing Date by Borrower to Tessco or Tessco to Borrower, provided that (A)
Borrower and Tessco shall have executed and delivered to each other, on the
Closing Date, a demand note (the "Intercompany Note") to evidence all such
intercompany Indebtedness owing at any time to one another (including all
existing intercompany Indebtedness owing on the Closing Date), which
Intercompany Note shall be in form and substance satisfactory to Agent and
shall be pledged and delivered to Agent pursuant to the Collateral Agreements
executed by Borrower and Tessco and as additional collateral security for the
Obligations (including the Litigation Obligations); (B) Borrower and Tessco
shall record all intercompany transactions on its books and records in a manner
satisfactory to Agent; (C) the obligations of Borrower and Tessco under such
Intercompany Note shall be subordinated to the Obligations of Borrower
hereunder and the obligations of Tessco under its Loan Documents in a manner
satisfactory to Agent; (D) at the time any such intercompany loan or advance is
made by Borrower to Tessco or Tessco to Borrower, and after giving effect
thereto, Borrower shall be Solvent; (E) no Default or Event of Default would
occur and be continuing after giving effect to any such proposed intercompany
loan; and (F) in the case of any intercompany Indebtedness arising as a result
of Borrower making a loan or advance, Borrower shall have Net Borrowing
Availability of not less than $500,000 after giving effect to such intercompany
loan.
(b) No Credit Party shall, directly or indirectly,
voluntarily purchase, redeem, defease or prepay any principal of, premium, if
any, interest or other amount payable in respect of any Indebtedness, other
than (i) the Obligations, (ii) Indebtedness secured by a Permitted Encumbrance
if the asset securing such Indebtedness has been sold or otherwise disposed of
in accordance with Sections 6.8(b) or (c), (iii) intercompany Indebtedness
permitted under Section 6.3 and (iv) other Indebtedness (excluding Subordinated
Debt) not in excess of $500,000.
6.4 Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this
Section 6.4 with respect to Affiliates, no Credit Party shall enter into or be
a party to any transaction with any other Credit Party or any Affiliate thereof
except in the ordinary course of and pursuant to the reasonable requirements of
such Credit Party's business and upon fair and reasonable terms that are no
less favorable to such Credit Party than would be obtained in a comparable
arm's length transaction with a Person not an Affiliate of such Credit Party;
provided, however, that nothing in this Section shall prohibit the consummation
of the Tessco Liquidation in compliance with Section 6.1 or the sale of goods
for value of Borrower to Tessco and Tessco to Borrower. In addition, if any
such transaction or series of related transactions other than as part of the
Tessco Liquidation involves payments in excess of $100,000, the terms of these
transactions must be disclosed in advance to Agent and Lenders. All such
transactions existing as of the date hereof are described on Disclosure
Schedule (6.4).
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(b) No Credit Party shall enter into any lending or
borrowing transaction with any employees of any Credit Party after the Closing
Date, except (i) loans to their respective employees on an arm's-length basis
in the ordinary course of business consistent with past practices for travel
expenses, relocation costs and similar purposes and (ii) stock option financing
up to a maximum of $25,000 to any employee and up to a maximum of $100,000 in
the aggregate at any one time outstanding.
6.5 Capital Structure and Business. No Credit Party
shall:
(a) make any changes in any of its business objectives,
purposes or operations which could in any way adversely affect the repayment of
the Loans or any of the other Obligations or could have or result in a Material
Adverse Effect;
(b) make any change in its capital structure as described
on Disclosure Schedule (3.8), including the issuance of any shares of Stock,
warrants or other securities convertible into Stock or any revision of the
terms of its outstanding Stock, except that (i) Borrower may make a Qualified
Public Offering of its Common Stock so long as (A) the proceeds thereof are
applied in prepayment of the Obligations as required by Section 1.3(b)(ii), and
(B) no Change of Control occurs after giving effect thereto, (ii) Borrower may
issue additional shares of its capital stock, pursuant to an exercise of the
GECC Warrants, (iii) Borrower may issue capital stock and Subordinated Debt to
the extent necessary to satisfy the portion of Net Litigation Liability, if
any, which exceeds $3,000,000 as provided in Section 2.2(b), (iv) Borrower may
increase the number of authorized shares of its Common Stock, (v) Borrower may
issue the Management Options and, upon their exercise, issue shares of its
capital stock in accordance with their terms, (vi) Borrower and Tessco may
effect the Tessco Liquidation and mergers of Subsidiaries in compliance with
Section 6.1, (vii) Borrower may issue additional shares of its capital stock
upon the exercise of Series A Warrants, and payment-in-kind dividends, in
accordance with the terms and conditions of the Series A Preferred Stock
Documents, and (viii) Borrower may issue the "Litigation Warrants" in
accordance with the terms and conditions of the Series A Preferred Stock
Documents;
(c) amend its charter (including any certificate of
designation with respect to preferred stock) or bylaws in a manner which would
adversely affect Agent or Lenders or such Credit Party's duty or ability to
repay the Obligations other than, in the case of Borrower, to increase the
number of authorized shares of its Common Stock; or
(d) engage in any business other than the businesses
currently engaged in by it or businesses reasonably related thereto.
6.6 Guaranteed Indebtedness. No Credit Party shall
create, incur, assume or permit to exist any Guaranteed Indebtedness except (a)
by endorsement of instruments or items of payment for deposit to the general
account of any Credit Party, (b) Guaranteed Indebtedness
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with respect to the Obligations and (c) for Guaranteed Indebtedness incurred
for the benefit of any other Credit Party if the primary obligation is
expressly permitted by this Agreement.
6.7 Liens. No Credit Party shall create, incur, assume
or permit to exist any Lien on or with respect to its Accounts or any of its
other properties or assets (whether now owned or hereafter acquired) except for
(a) Permitted Encumbrances; (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule (6.7); (c) Liens created after the date
hereof by conditional sale or other title retention agreements (including
Capital Leases) or in connection with purchase money Indebtedness with respect
to Equipment and Fixtures acquired by any Credit Party in the ordinary course
of business, involving the incurrence of an aggregate amount of purchase money
Indebtedness and Capital Lease Obligations of not more than $100,000
outstanding at any one time for all such Liens (provided that such Liens attach
only to the assets subject to such purchase money debt and such Indebtedness is
incurred within twenty (20) days following such purchase and does not exceed
100% of the purchase price of the subject assets); and (d) other Liens securing
Indebtedness not exceeding $100,000 in the aggregate at any time outstanding,
so long as such Liens do not attach to any Accounts or Inventory. In addition,
no Credit Party shall become a party to any agreement, note, indenture or
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Agent, on behalf of
itself and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.
6.8 Sale of Stock and Assets. No Credit Party shall
sell, transfer, convey, assign or otherwise dispose of any of its properties or
other assets, including its capital Stock or the capital Stock of any of its
Subsidiaries (whether in a public or a private offering, except as permitted
under Section 6.5(b)) or otherwise or any of their Accounts, other than (a) the
sale of Inventory in the ordinary course of business, (b) the sale, transfer,
conveyance or other disposition of Equipment, Fixtures or Real Estate that are
obsolete or no longer used or useful in such Credit Party's business and having
a value not exceeding $50,000 in any single transaction or $100,000 in the
aggregate in any Fiscal Year, and (c) the sale, transfer, conveyance or other
disposition of other Equipment and Fixtures having a value not exceeding
$50,000 in any single transaction or $100,000 in the aggregate in any Fiscal
Year; provided, however, if any sale, transfer, conveyance or other disposition
under clause (b) or (c) above involves property having a value in excess of
$25,000 for any single transaction, or if all such sales, transfers,
conveyances and other dispositions under clause (b) or (c) involve property
having an aggregate value in excess of $50,000 for any Fiscal Year, then
Borrower shall make prepayments of the Obligations in accordance with Section
1.3(b)(ii) in amounts equal to all of the proceeds of such sales, transfers,
conveyances or other dispositions. With respect to any disposition of assets
or other properties permitted pursuant to clause (b) and clause (c) above,
Agent agrees on reasonable prior written notice to release its Lien on such
assets or other properties in order to permit the applicable Credit Party to
effect such disposition and shall execute and deliver to Borrower, at
Borrower's expense, appropriate UCC-3 termination statements and other releases
as reasonably requested by Borrower.
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6.9 ERISA. No Credit Party shall, or shall cause or
permit any ERISA Affiliate to, cause or permit to occur an event which could
result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA.
6.10 Financial Covenants. Borrower shall not breach or
fail to comply with any of the Financial Covenants (the "Financial Covenants")
set forth in Annex G.
6.11 Hazardous Materials. No Credit Party shall cause or
permit a Release of any Hazardous Material on, at, in, under, above, to, from
or about any of the Real Estate where such Release would (a) violate in any
respect, or form the basis for any Environmental Liabilities of the Credit
Parties under, any Environmental Laws or Environmental Permits or (b) otherwise
adversely impact the value or marketability of any of the Real Estate or any of
the Collateral, other than such violations or impacts which could not
reasonably be expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13 Cancellation of Indebtedness. No Credit Party shall
cancel any claim or debt owing to it, except for reasonable consideration
negotiated on an arm's-length basis and (except with respect to the California
Award) in the ordinary course of its business consistent with past practices.
6.14 Restricted Payments. No Credit Party shall make any
Restricted Payment, except (a) intercompany loans and advances between Borrower
and Tessco permitted by Section 6.3 above, (b) dividends and distributions by
Subsidiaries of Borrower paid to Borrower, (c) employee loans permitted under
Section 6.4(b) above, (d) payments of scheduled and accrued dividends (and not
any liquidating dividends or any redemption or repurchase payments) to holders
of Series A Preferred Stock pursuant to the terms and conditions of the Series
A Preferred Stock Documents, (e) cash payments for fractional shares upon the
exercise of GECC Warrants or Series A Warrants and (f) scheduled payments of
interest on Subordinated Debt permitted under Section 6.3, provided that (i) no
Default or Event of Default shall have occurred and be continuing or would
result after giving effect to each payment pursuant to clauses (d) and (f)
above, and (ii) Borrower shall have Net Borrowing Availability of at least
$1,000,000 after giving effect to each payment pursuant to clauses (d) and (f)
above.
6.15 Change of Corporate Name or Location; Change of
Fiscal Year. No Credit Party shall (a) change its corporate name, or (b)
change its chief executive office, principal place of business, corporate
offices or warehouses or locations at which Collateral is held or stored, or
the location of its records concerning the Collateral, in any case without at
least thirty (30) days prior written notice to Agent and after Agent's written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of Agent,
on behalf of Lenders, in any Collateral, has been
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completed or taken, and provided that any such new location shall be in the
continental United States. Without limiting the foregoing, no Credit Party
shall change its name, identity or corporate structure in any manner which
might make any financing or continuation statement filed in connection herewith
seriously misleading within the meaning of Section 9-402(7) of the Code or any
other then applicable provision of the Code except upon prior written notice to
Agent and Lenders and after Agent's written acknowledgment that any reasonable
action requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Lenders, in any
Collateral, has been completed or taken. No Credit Party shall change its
Fiscal Year.
6.16 No Impairment of Intercompany Transfers. No Credit
Party shall directly or indirectly enter into or become bound by any agreement,
instrument, indenture or other obligation (other than this Agreement and the
other Loan Documents) which could directly or indirectly restrict, prohibit or
require the consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by a Subsidiary
of Borrower to Borrower or between such Subsidiaries.
6.17 No Speculative Transactions. No Credit Party shall
engage in any transaction involving commodity options, futures contracts or
similar transactions, except solely to hedge against fluctuations in the prices
of commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18 Changes Relating to Preferred Stock and Subordinated
Debt. No Credit Party shall change or amend the terms of any of the Series A
Preferred Stock Documents, the Series B Preferred Stock Documents or any
Subordinated Debt (or any indenture or agreement in connection therewith).
7. TERM
7.1 Termination. The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and the Loans
and all other Obligations shall be automatically due and payable in full on
such date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or procedure) of
any financing arrangement under this Agreement shall in any way affect or
impair the obligations, duties and liabilities of the Credit Parties or the
rights of Agent and Lenders relating to any unpaid portion of the Loans or any
other Obligations, due or not due, liquidated, contingent or unliquidated or
any transaction or event occurring prior to such termination, or any
transaction or event, the performance of which is required after the Commitment
Termination Date. Except as otherwise expressly provided herein or in any
other Loan Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all
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as contained in the Loan Documents, shall not terminate or expire, but rather
shall survive any such termination or cancellation and shall continue in full
force and effect until the Termination Date; provided however, that in all
events the provisions of Section 11, the payment obligations under Sections
1.13, 1.15 and 1.16, and the indemnities contained in the Loan Documents shall
survive the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more
of the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal
of, or interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agent or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following the date such payment is due hereunder or
thereunder.
(b) Any Credit Party shall fail or neglect to perform,
keep or observe any of the provisions of Sections 1.4, 1.8, 5.4 or 6, or any of
the provisions set forth in Annexes C, F or G, respectively.
(c) Borrower shall fail or neglect to perform, keep or
observe any of the provisions of Section 4 or any provisions set forth in Annex
E, and the same shall remain unremedied for three (3) Business Days or more.
(d) Any Credit Party shall fail or neglect to perform,
keep or observe any other provision of this Agreement or of any of the other
Loan Documents (other than any provision embodied in or covered by any other
clause of this Section 8.1) and the same shall remain unremedied for
twenty-five (25) days or more.
(e) A default or breach shall occur under any other
agreement, document or instrument to which any Credit Party is a party which is
not cured within any applicable grace period, and such default or breach (i)
involves the failure to make any payment when due in respect of any
Indebtedness (other than the Obligations) of any Credit Party having an
aggregate outstanding principal balance in excess of $250,000 in the aggregate,
or (ii) causes, or permits any holder of such Indebtedness or a trustee to
cause, such Indebtedness, or any portion thereof in excess of $250,000 in the
aggregate, to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, regardless of whether such default is waived, or
such right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base
Certificate is untrue or incorrect in any material respect, or any
representation or warranty herein or in any Loan Document or in any written
statement, report, financial statement or certificate (other than a
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Borrowing Base Certificate) made or delivered to Agent or any Lender by any
Credit Party is untrue or incorrect in any material respect as of the date when
made or deemed made.
(g) Assets of any Credit Party with a fair market value
of $25,000 or more shall be seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced
against the Series B Pledgor, either Pegasus Fund or any Credit Party seeking a
decree or order in respect of such Person (i) under Title 11 of the United
States Code, as now constituted or hereafter amended or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for any such Person or of any substantial part of any such Person's
assets, or (iii) ordering the winding-up or liquidation of the affairs of any
such Person, and such case or proceeding shall remain undismissed or unstayed
for sixty (60) days or more or such court shall enter a decree or order
granting the relief sought in such case or proceeding.1
(i) The Series B Pledgor, either Pegasus Fund or any
Credit Party (i) shall file a petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
shall fail to contest in a timely and appropriate manner or shall consent to
the institution of proceedings thereunder or to the filing of any such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any such
Person or of any substantial part of any such Person's assets, (iii) shall make
an assignment for the benefit of creditors, (iv) shall take any corporate
action in furtherance of any of the foregoing; or (v) shall admit in writing
its inability to, or shall be generally unable to, pay its debts as such debts
become due.
(j) A final judgment or judgments for the payment of
money in excess of $250,000 in the aggregate at any time outstanding shall be
rendered against any Credit Party (excluding the Lower Court Judgment or the
Final Judgment, but including any other judgment with respect to the DEI
Litigation) and the same shall not, within thirty (30) days after the entry
thereof, have been discharged or execution thereof stayed or bonded pending
appeal, or shall not have been discharged prior to the expiration of any such
stay.
(k) The Lower Court Judgment, Final Judgment and/or any
other judgment with respect to the DEI Litigation shall have been entered or
determined and the sum of the amount of Borrower's and each Credit Parties'
liability with respect thereto and the aggregate amount of accrued and unpaid
expenses (including, without limitation, legal fees) incurred by the
__________________________________
1Confirm that no default exists at closing with respect to foreign subsidiaries.
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Credit Parties with respect to the DEI Litigation as of the date of such entry
or determination, exceeds $12,000,000 (provided, however, that such sum shall
not include such expenses to the extent that, as of any date of determination
hereof, the Net Borrowing Base Availability minus the Letter of Credit
Obligations and minus such expenses exceeds $500,000); or the Lower Court
Judgment shall have been entered and the conditions described in Section 2.3(I)
shall have not been satisfied by the time specified in Section 2.3(I)(c) or, as
of such time, either the Bond shall not have been approved by the Lower Court
or issued as contemplated by Section 2.3 or the conditions precedent to the
issuance of the Litigation L/C shall not have been otherwise satisfied; or the
Final Judgment shall have been entered or otherwise determined and the
conditions described in Section 2.2 shall have not been satisfied by the time
specified in Section 2.2(c) or, as of such time, the conditions precedent to
the making of Term Loan B shall not have been otherwise satisfied and the
conditions described in Section 2.3(II) shall have not been satisfied by the
time specified in Section 2.3(II)(c) or, as of such time, the conditions
precedent to the making of Term Loan C directly shall not have been otherwise
satisfied; or any Lien (including, without limitation, any judicial or judgment
lien) securing, arising as a result of or otherwise relating to the Lower Court
Judgment, the Final Judgment or any other judgment or claim against any of the
Credit Parties with respect to the DEI Litigation shall have been created,
attached or perfected under applicable law and procedure.
(l) Any material provision of any Loan Document shall for
any reason cease to be valid, binding and enforceable in accordance with its
terms (or the Series B Pledgor, either Pegasus Fund or any Credit Party shall
challenge the enforceability of, or revoke or attempt to revoke, any Loan
Document or shall assert in writing, or engage in any action or inaction based
on any such assertion, that any provision of any of the Loan Documents has
ceased to be or otherwise is not valid, binding and enforceable in accordance
with its terms), or any security interest created under any Loan Document shall
cease to be a valid and perfected first priority security interest or Lien
(except as otherwise permitted herein or therein) in any of the Collateral or
Litigation Collateral purported to be covered thereby.
(m) Any Change of Control shall occur.
(n) Any event shall occur, whether or not insured or
insurable, as a result of which revenue-producing activities cease or are
substantially curtailed at any facility of Borrower or any of its Subsidiaries
generating more than 10% of Borrower's consolidated revenues for the Fiscal
Year preceding such event and such cessation or curtailment continues for more
than thirty (30) days; provided, however, that no Event of Default shall exist
under this clause (m) solely as a result of the physical relocation of Tessco's
Georgetown, Texas location to one or more of Borrower's facility locations in
connection with the Tessco Liquidation.
8.2 Remedies. (a) If any Event of Default shall have
occurred and be continuing, Agent may (and at the written request of the
Requisite Revolving Lenders shall), without notice, suspend this facility with
respect to further Advances and/or the incurrence of further Letter of Credit
Obligations or Litigation L/C Obligations whereupon any further
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Advances and Letter of Credit Obligations or Litigation L/C Obligations shall
be made or extended in Agent's sole discretion (or in the sole discretion of
the Requisite Revolving Lenders, if such suspension occurred at their
direction) so long as such Event of Default is continuing. If any Event of
Default shall have occurred and be continuing, Agent may (and at the written
request of Requisite Lenders shall), without notice except as otherwise
expressly provided herein, increase the rate of interest applicable to the
Loans and the Letter of Credit Fees to the Default Rate.
(b) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the Requisite Lenders
shall), without notice, (i) terminate this facility with respect to further
Advances or the incurrence of further Letter of Credit Obligations or
Litigation L/C Obligations; (ii) declare all or any portion of the Obligations,
including all or any portion of any Loan, to be thereupon due and payable, and
require that the Letter of Credit Obligations and Litigation L/C Obligations be
cash collateralized as provided in Annex B or the Litigation L/C Agreement, all
without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrower and each other Credit Party; and (iii)
exercise any rights and remedies provided to Agent under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
provided, however, that upon the occurrence of an Event of Default specified in
Sections 8.1, (h) or (i), all of the Obligations, including the aggregate
Revolving Loan, shall become immediately due and payable without declaration,
notice or demand by any Person, and the Commitments shall be thereupon
terminated.
8.3 Waivers by Credit Parties. Except as otherwise
provided for in this Agreement or by applicable law, each Credit Party waives:
(a) presentment, demand and protest and notice of presentment, dishonor, notice
of intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Agent on which any Credit Party may in
any way be liable, and hereby ratifies and confirms whatever Agent may do in
this regard, (b) all rights to notice and a hearing prior to Agent's taking
possession or control of, or to Agent's replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior
to allowing Agent to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations. (a) The Credit
Parties signatory hereto consent to any Lender's assignment of, and/or sale of
participations in, at any time or times, the Loan Documents, Loans, Letter of
Credit Obligations, Litigation L/C Obligations and any Commitment or of any
portion thereof or interest therein, including any Lender's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a
writing or not. Any assignment by a Lender shall (i) require the consent of
Agent (which shall not be unreasonably
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withheld or delayed) and the execution of an assignment agreement (an
"Assignment Agreement") substantially in the form attached hereto as Exhibit
9.1(a) and otherwise in form and substance satisfactory to, and acknowledged
by, Agent; (ii) be conditioned on such assignee Lender representing to the
assigning Lender and Agent that it is purchasing the applicable Loans to be
assigned to it for its own account, for investment purposes and not with a view
to the distribution thereof; (iii) if a partial assignment, be in an amount at
least equal to $5,000,000 and, after giving effect to any such partial
assignment, the assigning Lender shall have retained Commitments in an amount
at least equal to $5,000,000; and (iv) include a payment to Agent by such
assigning Lender of an assignment fee of $3,500. In the case of an assignment
by a Lender under this Section 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be
considered to be a "Lender". In all instances, each Lender's liability to make
Loans hereunder shall be several and not joint and shall be limited to such
Lender's Pro Rata Share of the applicable Commitment. In the event Agent or
any Lender assigns or otherwise transfers all or any part of a Note, Agent or
any such Lender shall so notify Borrower and Borrower shall, upon the request
of Agent or such Lender, execute new Notes in exchange for the Notes being
assigned. Notwithstanding the foregoing provisions of this Section 9.1(a), any
Lender may at any time pledge or assign all or any portion of such Lender's
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank; provided, however, that no such pledge or assignment shall release such
Lender from such Lender's obligations hereunder or under any other Loan
Document.
(b) Any participation by a Lender of all or any part of
its Commitments shall be in an amount at least equal to $5,000,000, and with
the understanding that all amounts payable by Borrower hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be entitled to require such Lender
to take or omit to take any action hereunder except actions directly affecting
(i) any reduction in the principal amount of, or interest rate or Fees payable
with respect to, any Loan in which such holder participates, (ii) any extension
of the scheduled amortization of the principal amount of any Loan in which such
holder participates or the final maturity date thereof, and (iii) any release
of all or substantially all of the Collateral (other than in accordance with
the terms of this Agreement, the Collateral Documents or the other Loan
Documents). Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, Borrower
acknowledges and agrees that a participation shall give rise to a direct
obligation of Borrower to the participant and the participant shall be
considered to be a "Lender". Except as set forth in the preceding sentence
neither Borrower nor any Credit Party shall have any obligation or duty to any
participant. Neither Agent nor any Lender (other than the Lender selling a
participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.
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(c) Except as expressly provided in this Section 9.1, no
Lender shall, as between Borrower and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall
assist any Lender permitted to sell assignments or participations under this
Section 9.1 as reasonably required to enable the assigning or selling Lender to
effect any such assignment or participation, including the execution and
delivery of any and all agreements, notes and other documents and instruments
as shall be requested and, if requested by Agent, the preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants. Each Credit Party executing this
Agreement shall certify the correctness, completeness and accuracy of all
descriptions of the Credit Parties and their affairs contained in any selling
materials provided by them and all other information provided by them and
included in such materials, except that any Projections delivered by Borrower
shall only be certified by Borrower as having been prepared by Borrower in
compliance with the representations contained in Section 3.4(c).
(e) A Lender may furnish any information concerning
Borrower in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants). Each Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred
and be continuing, no Lender shall assign or sell participations in any portion
of its Loans or Commitments to a potential Lender or participant, if, as of the
date of the proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements under Section
1.16(a), increased costs under Section 1.16(b), an inability to fund LIBOR
Loans under Section 1.16(c), or withholding taxes in accordance with Section
1.16(d).
9.2 Appointment of Agent. GE Capital is hereby appointed
to act on behalf of all Lenders as Agent under this Agreement and the other
Loan Documents. The provisions of this Section 9.2 are solely for the benefit
of Agent and Lenders and no Credit Party nor any other Person shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement and the other Loan
Documents, and, notwithstanding the use of the term "Agent", Agent shall act
solely as an independent contractor and contractual representative of Lenders
and does not assume and shall not be deemed to have assumed any obligation
toward or relationship of agency, trust or other fiduciary with or for any
Lender, Credit Party or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed to have, by
reason of this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender. Neither Agent nor any of its Affiliates
nor any of their respective officers, directors, employees, agents, attorneys
or representatives shall be liable to
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any Lender for any action taken or omitted to be taken by it hereunder or under
any other Loan Document, or in connection herewith or therewith, except for
damages solely caused by its or their own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
If Agent shall request instructions from Requisite Lenders,
Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Loan Document, then Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from Requisite Lenders, Requisite Revolving
Lenders, Supermajority Revolving Lenders or all affected Lenders, as the case
may be, and Agent shall not incur liability to any Person by reason of so
refraining. Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other Loan Document (a) if such action would, in
the opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting hereunder or under any other Loan Document in accordance with the
instructions of Requisite Lenders, Requisite Revolving Lenders, Supermajority
Revolving Lenders or all affected Lenders, as applicable.
9.3 Agent's Reliance, Etc. Neither Agent nor any of its
Affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the other Loan Documents, except for
damages caused by its or their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction. Without limitation of
the generality of the foregoing, Agent: (a) may treat the payee of any Note
as the holder thereof until Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to Agent; (b)
may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto or the perfection, priority, enforceability or
unavoidability of any of the Liens securing the Obligations; and (f) shall
incur no liability under or in respect of this Agreement or the other Loan
Documents by acting upon any notice, consent, certificate or other instrument
or writing
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(which may be by telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
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9.4 GE Capital and Affiliates. With respect to its
Commitments hereunder, GE Capital shall have the same rights and powers under
this Agreement and the other Loan Documents as any other Lender and may
exercise the same as though it were not Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include GE Capital in
its individual capacity. GE Capital and its Affiliates may lend money to,
invest in, and generally engage in any kind of business with, any Credit Party,
any of their Affiliates and any Person who may do business with or own
securities of any Credit Party or any such Affiliate, all as if GE Capital were
not Agent and without any duty to account therefor to Lenders. GE Capital and
its Affiliates may accept fees and other consideration from any Credit Party
for services in connection with this Agreement or otherwise without having to
account for the same to Lenders. GE Capital has also received warrants from
Borrower and is an investor in each of the Pegasus Funds. Each Lender
acknowledges the potential conflict of interest between GE Capital as a Lender
holding disproportionate interests in the Loans, GE Capital as a stockholder or
warrant holder of Borrower, GE Capital as an investor in each of the Pegasus
Funds and GE Capital as Agent.
9.5 Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon Agent or any other Lender
and based on the Financial Statements referred to in Section 3.4(a) and such
other documents and information as it has deemed appropriate, made its own
credit and financial analysis of the Credit Parties and its own decision to
enter into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement. Each Lender acknowledges the potential conflict of interest of
each other Lender as a result of Lenders holding disproportionate interests in
the Loans, and expressly consents to, and waives any claim based upon, such
conflict of interest.
9.6 Indemnification. Lenders agree to indemnify Agent
(to the extent not reimbursed by the Credit Parties and without limiting the
obligations of the Credit Parties hereunder), ratably according to their
respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against Agent in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
by Agent in connection therewith; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's gross negligence or wilful misconduct as finally
determined by a court of competent jurisdiction. Without limiting the
foregoing, each Lender agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and
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each other Loan Document, to the extent that Agent is not reimbursed for such
expenses by the Credit Parties.
9.7 Successor Agent. Agent may resign at any time by
giving not less than thirty (30) days' prior written notice thereof to Lenders
and Borrower. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within 30 days after the resigning Agent's giving notice of resignation, then
the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary
of a commercial bank or financial institution if such commercial bank or
financial institution is organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus of at
least $300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, by the 30th day after the date such notice of resignation was given
by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent's resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents. Agent may be removed at the
written direction of the holders (other than Agent) of two-thirds or more of
the Commitments (excluding Agent's Commitment); provided that in so doing, such
Lenders shall be deemed to have waived and released any and all claims they may
have against Agent.
9.8 Setoff and Sharing of Payments. In addition to any
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Lender and each holder of any Note is hereby
authorized at any time or from time to time, without notice to any Credit Party
or to any other Person, any such notice being hereby expressly waived, to set
off and to appropriate and to apply any and all balances held by it at any of
its offices for the account of any Credit Party (regardless of whether such
balances are then due to such Credit Party) and any other properties or assets
any time held or owing by that Lender or that holder to or for the credit or
for the account of the Credit Parties against and on account of any of the
Obligations which are not paid when due. Any Lender or holder of any Note
exercising a right to set off or
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otherwise receiving any payment on account of the Obligations in excess of its
Pro Rata Share thereof shall purchase for cash (and the other Lenders or
holders shall sell) such participations in each such other Lender's or holder's
Pro Rata Share of the Obligations as would be necessary to cause such Lender to
share the amount so set off or otherwise received with each other Lender or
holder in accordance with their respective Pro Rata Shares. Each Lender's
obligation under this Section 9.8 shall be in addition to and not limitation of
its obligations to purchase a participation in an amount equal to its Pro Rata
Share of the Swing Line Loans under Section 1.1. Each Credit Party agrees, to
the fullest extent permitted by law, that (a) any Lender or holder may exercise
its right to set off with respect to amounts in excess of its Pro Rata Share of
the Obligations and may sell participations in such amount so set off to other
Lenders and holders and (b) any Lender or holders so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
set-off amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest.
9.9 Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert.
(a) Advances; Payments. (i) Revolving Lenders shall
refund or participate in the Swing Line Loan in accordance with clauses (iii)
and (iv) of Section 1.1(e). Agent shall notify Revolving Lenders, promptly
after receipt of a Notice of Revolving Credit Advance and in any event prior to
1:00 p.m. (New York time) on the date such Notice of Revolving Advance is
received, by telecopy, telephone or other similar form of transmission. Each
Revolving Lender shall make the amount of such Lender's Pro Rata Share of each
Revolving Credit Advance available to Agent in same day funds by wire transfer
to Agent's account as set forth in Annex H not later than 3:00 p.m. (New York
time) on the requested funding date, in the case of an Index Rate Loan and not
later than 11:00 a.m. (New York time) on the requested funding date in the case
of a LIBOR Loan. After receipt of such wire transfers (or, in the Agent's sole
discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to the
Borrower. All payments by each Revolving Lender shall be made without setoff,
counterclaim or deduction of any kind.
(ii) Agent shall notify Term Lenders promptly after receipt
of a Notice of Term Loan B Advance or promptly upon its receipt of notice of a
payment by the L/C Issuer under the Litigation L/C, and in any event prior to
1:00 p.m. (New York time) on the date a Notice of Term Loan B Advance is
received or, in the case of a notice of payment under the Litigation L/C prior
to 1:00 p.m. on the Business Day next following the date of Agent's receipt of
such notice. Any such notification to Term Lenders shall be by telecopy,
telephone or other similar form of transmission. Each Term Lender shall make
the amount of such Lender's Pro Rata Share of the Term Loan B or payment under
the Litigation L/C available to Agent in same day funds by wire
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transfer to Agent's account as set forth in Annex H not later than 3:00 p.m.
(New York time) on the Term Loan B Funding Date in the case of Term Loan B if
requested as an Index Rate Loan, not later than 11:00 a.m. (New York time) on
the Term Loan B Funding Date in the case of Term Loan B if requested as a LIBOR
Loan or, not later than 3:00 p.m. (New York time) on the Business Day next
following the date of Agent's receipt of notice of such payment in the case of
a payment with respect to the Litigation L/C. In the case of Term Loan B,
after receipt of such wire transfers (or, in Agent's sole discretion, before
receipt of such wire transfers), subject to the terms hereof, Agent shall make
the Term Loan B available to Borrower. All payments by each Term Lender shall
be made without setoff, counterclaim or deduction of any kind.
(iii) On the second (2nd) Business Day of each calendar
week or more frequently as aggregate cumulative payments in excess of
$2,000,000 are received with respect to the Loans (other than the Swing Line
Loan) (each, a "Settlement Date"), Agent will advise each Lender by telephone,
or telecopy of the amount of such Lender's Pro Rata Share of principal,
interest and Fees paid for the benefit of Lenders with respect to each
applicable Loan. Provided that such Lender has made all payments required to
be made by it and has purchased all participations required to be purchased by
it under this Agreement and the other Loan Documents as of such Settlement
Date, Agent will pay to each Lender such Lender's Pro Rata Share of principal,
interest and Fees paid by Borrower since the previous Settlement Date for the
benefit of that Lender on the Loans held by it. Such payments shall be made by
wire transfer to such Lender's account (as specified by such Lender in Annex H
or the applicable Assignment Agreement) not later than 1:00 p.m. (Chicago time)
on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may
assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date and that each
Term Lender will make its Pro Rata Share of Term Loan B on the Term Loan B
Funding Date. If such Pro Rata Share is not, in fact, paid to Agent by such
Lender when due, Agent will be entitled to recover such amount on demand from
such Lender without set-off, counterclaim or deduction of any kind. If any
Lender fails to pay the amount of such Pro Rata Share of any Revolving Credit
Advance, or if any Term Lender fails to pay the amount of its Pro Rata Share of
any payment under the Litigation L/C when due, forthwith upon Agent's demand,
Agent shall promptly notify Borrower and Borrower shall immediately repay such
amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this Agreement
or the other Loan Documents shall be deemed to require Agent to advance funds
on behalf of any Lender or to relieve any Lender from its obligation to fulfill
its Commitments hereunder or to prejudice any rights that Borrower may have
against any Lender as a result of any default by such Lender hereunder. To the
extent that Agent advances funds to Borrower on behalf of any Lender and is not
reimbursed therefor on the same Business Day as such Advance is made, Agent
shall be entitled to retain for its account all interest accrued on such
Advance until reimbursed by the applicable Lender.
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(c) Return of Payments. (i) If Agent pays an amount
to a Lender under this Agreement in the belief or expectation that a related
payment has been or will be received by Agent from Borrower and such related
payment is not received by Agent, then Agent will be entitled to recover such
amount from such Lender on demand without set-off, counterclaim or deduction of
any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to Borrower or paid to
any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender. In addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together with interest
at such rate, if any, as Agent is required to pay to Borrower or such other
Person, without set-off, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Lender (such
Lender, a "Non-Funding Lender") to make any Revolving Credit Advance, to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor, to make its Term Loan B, or to pay its Pro Rata
Share of any payment under the Litigation L/C, shall not relieve any other
Lender (each such other Lender, an "Other Lender") of its obligations to make
such Advance, purchase such participation on such date, make such Term Loan B
or to make such payment with respect to the Litigation L/C payment, but neither
any Other Lender nor Agent shall be responsible for the failure of any Non-
Funding Lender to make an Advance to be made, or to purchase a participation to
be purchased, by such Non-Funding Lender, and no Non-Funding Lender shall have
any obligation to Agent or any Other Lender for the failure by such Non-Funding
Lender. Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a "Lender", a "Revolving Lender" or
a "Term Lender" (or be included in the calculation of "Requisite Lenders",
"Requisite Revolving Lenders" or "Supermajority Revolving Lenders" hereunder)
for any voting or consent rights under or with respect to any Loan Document.
(e) Dissemination of Information. Agent will use
reasonable efforts to provide Lenders with any notice of Default or Event of
Default received by Agent from, or delivered by Agent to, any Credit Party,
with notice of any Event of Default of which Agent has actually become aware
and with notice of any action taken by Agent following any Event of Default;
provided, however, that Agent shall not be liable to any Lender for any failure
to do so, except to the extent that such failure is attributable solely to
Agent's gross negligence or willful misconduct as finally determined by a court
of competent jurisdiction. Lenders acknowledge that Borrower is required to
provide Financial Statements and Collateral Reports to Lenders in accordance
with Annexes E and F hereto and agree that Agent shall have no duty to provide
the same to Lenders.
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(f) Actions in Concert. Anything in this Agreement to
the contrary notwithstanding, each Lender hereby agrees with each other Lender
that no Lender shall take any action to protect or enforce its rights arising
out of this Agreement or the Notes (including exercising any rights of set-off)
without first obtaining the prior written consent of Agent or Requisite
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of Agent.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other
Loan Documents shall be binding on and shall inure to the benefit of each
Credit Party, Agent, Lenders and their respective successors and assigns
(including, in the case of any Credit Party, a debtor-in-possession on behalf
of such Credit Party), except as otherwise provided herein or therein. No
Credit Party may assign, transfer, hypothecate or otherwise convey its rights,
benefits, obligations or duties hereunder or under any of the other Loan
Documents without the prior express written consent of Agent and Requisite
Lenders. Any such purported assignment, transfer, hypothecation or other
conveyance by any Credit Party without the prior express written consent of
Agent and Requisite Lenders shall be void. The terms and provisions of this
Agreement are for the purpose of defining the relative rights and obligations
of each Credit Party, Agent and Lenders with respect to the transactions
contemplated hereby and no Person shall be a third party beneficiary of any of
the terms and provisions of this Agreement or any of the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement and
Pegasus Litigation Guaranty. (a) The Loan Documents constitute the complete
agreement between the parties with respect to the subject matter thereof and
may not be modified, altered or amended except as set forth in Section 11.2
below. Any letter of interest, commitment letter, and/or fee letter (other
than the GE Capital Fee Letter) and/or confidentiality agreement between any
Credit Party and Agent or any Lender or any of their respective affiliates,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this Agreement.
(b) Without Borrower's prior written consent, Agent shall
not enter into any written amendment to the Litigation Guaranty which expands
or modifies the deliveries required pursuant to Section 3 hereof.
11.2 Amendments and Waivers. (a) Except for actions
expressly permitted to be taken by Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any of the Notes,
or any consent to any departure by any Credit Party therefrom, shall in any
event be effective unless the same shall be in writing and signed by Agent and
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Borrower, and by Requisite Lenders, Requisite Revolving Lenders, Supermajority
Revolving Lenders or all affected Lenders, as applicable. Except as set forth
in clauses (b) and (c) below, all such amendments, modifications, terminations
or waivers requiring the consent of any Lenders shall require the written
consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of
or consent with respect to any provision of this Agreement which increases the
percentage advance rates set forth in the definition of the Borrowing Base, or
which makes less restrictive the nondiscretionary criteria for exclusion from
Eligible Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7,
shall be effective unless the same shall be in writing and signed by Agent,
Supermajority Revolving Lenders and Borrower. No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement which waives compliance with the conditions precedent set forth in
Section 2.2 to the making of any Loan or the incurrence of any Letter of Credit
Obligations shall be effective unless the same shall be in writing and signed
by Agent, Requisite Revolving Lenders and Borrower. Notwithstanding anything
contained in this Agreement to the contrary, no waiver or consent with respect
to any Default (if in connection therewith Agent or Requisite Revolving
Lenders, as the case may be, have exercised its or their right to suspend the
making or incurrence of further Advances or Letter of Credit Obligations
pursuant to Section 8.2(a)) or any Event of Default shall be effective for
purposes of the conditions precedent to the making of Loans or the incurrence
of Letter of Credit Obligations set forth in Section 2.2 unless the same shall
be in writing and signed by Agent, Requisite Revolving Lenders and Borrower.
(c) No amendment, modification, termination or waiver
shall, unless in writing and signed by Agent and each Lender directly affected
thereby, do any of the following: (i) increase the principal amount of any
Lender's Commitment (which action shall be deemed to directly affect all
Lenders); (ii) reduce the principal of, rate of interest on or Fees payable
with respect to any Loan or Letter of Credit Obligations of any affected
Lender; (iii) extend any scheduled payment date or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive,
defer, extend or postpone any payment of interest or Fees as to any affected
Lender; (v) release any Guaranty or, except as otherwise permitted herein or in
the other Loan Documents, permit any Credit Party to sell or otherwise dispose
of any Collateral with a value exceeding $5,000,000 in the aggregate (which
action shall be deemed to directly affect all Lenders); (vi) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans which shall be required for Lenders or any of them to take any action
hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the
terms "Requisite Lenders", "Requisite Revolving Lenders" or "Supermajority
Revolving Lenders" insofar as such definitions affect the substance of this
Section 11.2. Furthermore, no amendment, modification, termination or waiver
affecting the rights or duties of Agent under this Agreement or any other Loan
Document shall be effective unless in writing and signed by Agent, in addition
to Lenders required hereinabove to take such action. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No amendment,
modification, termination or waiver shall be required for
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<PAGE> 75
Agent to take additional Collateral pursuant to any Loan Document. No
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on any Credit Party in any case shall entitle such
Credit Party or any other Credit Party to any other or further notice or demand
in similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.2 shall be
binding upon each holder of the Notes at the time outstanding and each future
holder of the Notes.
(d) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected
Lenders, the consent of Requisite Lenders is obtained, but the
consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as
described this clause (i) and in clauses (ii), (iii) and (iv)
below being referred to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Supermajority
Revolving Lenders, the consent of Requisite Revolving Lenders
is obtained, but the consent of Supermajority Revolving
Lenders is not obtained, or
(iii) requiring the consent of Requisite Revolving
Lenders, the consent of Revolving Lenders holding 51% or more
of the aggregate Revolving Loan Commitments is obtained, but
the consent of Requisite Revolving Lenders is not obtained, or
(iv) requiring the consent of Requisite Lenders,
the consent of Lenders holding 51% or more of the aggregate
Commitments is obtained, but the consent of Requisite Lenders
is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request,
Agent or a Person acceptable to Agent shall have the right with Agent's consent
and in Agent's sole discretion (but shall have no obligation) to purchase from
such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they
shall, upon Agent's request, sell and assign to Agent or such Person, all of
the Commitments of such Non-Consenting Lender for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lender and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Upon indefeasible payment in full in cash and
performance of all of the Obligations (other than indemnification Obligations
under Section 1.13), termination of the Commitments and a release of all claims
against Agent and Lenders, and so long as no suits, actions proceedings, or
claims are pending or threatened against any Indemnified Person
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<PAGE> 76
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Agent shall deliver to Borrower termination statements, mortgage releases and
other documents necessary or appropriate to evidence the termination of the
Liens securing payment of the Obligations.
11.3 Fees and Expenses. Borrower shall reimburse Agent
for all reasonable out-of-pocket expenses incurred in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses
of all of its special loan counsel, advisors, consultants and auditors retained
in connection with the Loan Documents and the Related Transactions and advice
in connection therewith). Borrower shall reimburse Agent (and, with respect to
clauses (c) and (d) below, all Lenders) for all reasonable fees, costs and
expenses, including the fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and appraisers) for advice,
assistance, or other representation in connection with:
(a) the forwarding to Borrower or any other
Person on behalf of Borrower by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or
consent with respect to, any of the Loan Documents or Related Transactions
Documents or advice in connection with the administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Agent, any Lender, Borrower or any
other Person) in any way relating to the Collateral, any of the Loan Documents
or any other agreement to be executed or delivered in connection therewith or
herewith, whether as party, witness, or otherwise, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against Borrower or any
other Person that may be obligated to Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Loans during
the pendency of one or more Events of Default; provided that in the case of
reimbursement of counsel for Lenders other than Agent, such reimbursement shall
be limited to one counsel for all such Lenders and, provided, further, that
Borrower shall not be obligated hereunder to reimburse the Agent or the Lenders
to the extent the amount otherwise to be reimbursed hereunder resulted from the
Agent's or such Lenders' gross negligence or willful misconduct.
(d) any attempt to enforce any remedies of Agent
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents;
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more
Events of Default; provided that in the case of reimbursement of counsel for
Lenders other than Agent, such reimbursement shall be limited to one counsel
for all such Lenders;
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(e) any work-out or restructuring of the Loans
during the pendency of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of
the other Obligations, (ii) evaluate, observe or assess any of the Credit
Parties or their respective affairs, and (iii) verify, protect, evaluate,
assess, appraise, collect, sell, liquidate or otherwise dispose of any of the
Collateral;
including all reasonable attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings; and all reasonable expenses, costs, charges and
other fees incurred by such counsel and others in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section 11.3 shall be payable by Borrower to Agent, within thirty (30) days of
demand therefor. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: fees, costs and expenses of
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying
and duplication expenses; court reporter fees, costs and expenses; long
distance telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.
11.4 No Waiver. Agent's or any Lender's failure, at any
time or times, to require strict performance by the Credit Parties of any
provision of this Agreement and any of the other Loan Documents shall not
waive, affect or diminish any right of Agent or such Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver
of an Event of Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and whether the same or
of a different type. Subject to the provisions of Section 11.2, none of the
undertakings, agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Credit Party shall be deemed to have been
suspended or waived by Agent or any Lender, unless such waiver or suspension is
by an instrument in writing signed by an officer of or other authorized
employee of Agent and the applicable required Lenders, and directed to Borrower
specifying such suspension or waiver.
11.5 Remedies. Agent's and Lenders' rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies which Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise. Recourse
to the Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of
this Agreement and the other Loan Documents shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
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<PAGE> 78
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
11.7 Conflict of Terms. Except as otherwise provided in
this Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.
11.8 Confidentiality. Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintaining the confidentiality of its own confidential information)
to maintain as confidential all confidential information provided to them by
the Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agent and any Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender in
evaluating, approving, structuring or administering the Loans and the
Commitments; (b) to any bona fide assignee or participant or potential assignee
or participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, in the opinion of Agent's or such Lender's counsel, required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; or (f) which ceases to be confidential through no fault of
Agent or such Lender; provided, however, that such Lender shall use its best
efforts to give Borrower as much advance notice of the proposed disclosure as
is reasonably possible under the circumstances.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE
OBLIGATIONS 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. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN COOK COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND
THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
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<PAGE> 79
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK 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. EACH CREDIT PARTY EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH
CREDIT PARTY 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. EACH CREDIT PARTY
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 CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10 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 parties, or whenever any of the parties
desires to give or serve upon any other parties any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 11.10), (c) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated on Annex I or to
such other address (or facsimile number) as may be substituted by notice given
as herein provided. The giving of any notice required hereunder may be waived
in writing by the party entitled to receive such notice. Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower or Agent)
designated on Annex I to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
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11.11 Section Titles. The Section titles and Table of
Contents contained in this 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.
11.12 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and
separately constitute one agreement.
11.13 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 THEIR DISPUTES 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 ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue
any press releases or other public disclosure using the name of GE Capital or
its affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will
consult with GE Capital before issuing such press release or other public
disclosure. Each Credit Party consents to the publication by Agent or any
Lender of a tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement.
11.15 Reinstatement. Notwithstanding anything contained
herein to the contrary, this Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against
Borrower for liquidation or reorganization, should Borrower 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 Borrower's
assets, and shall continue to be effective or to 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,"
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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.
11.16 Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Agreement and, specifically,
the provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
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 Agreement.
* * * *
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
-------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
Revolving Loan
Commitment (including
a Swing Line Commitment By: /s/ Timothy S. Van Kirk
of $1,200,000): --------------------------------
$12,000,000 Name: Timothy S. Van Kirk
--------------------------
Title: Duly Authorized Signatory
-------------------------
Term Loan A Commitment:
$1,500,000
Term Loan B Commitment:
$3,000,000
Term Loan C Commitment:
$12,000,000
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The following Persons are signatories to this Agreement in
their capacity as Credit Parties and not as borrowers.
TESSCO GROUP, INC.
By: /s/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
-------------------------
CHAPMAN SECURITY SYSTEMS, INC.
By: /s/ Rand Mueller
-------------------------------
Name: Rand Mueller
--------------------------
Title: President
-------------------------
INTERCEPT SYSTEMS, INC.
By: /s/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
-------------------------
ANES, INC.
By: /s/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
-------------------------
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EXHIBIT 1.1(a)(i)
TO
CREDIT AGREEMENT
FORM OF NOTICE OF REVOLVING CREDIT ADVANCE
Reference is made to that certain Credit Agreement dated as of
October 24, 1997 by and among Code-Alarm, Inc. (the "Borrower"), the other
Persons signatory thereto as Credit Parties, General Electric Capital
Corporation ("Agent") and the Persons signatory thereto from time to time as
Lenders (including all annexes, exhibits and schedules thereto, and as from
time to time amended, restated, supplemented or otherwise modified, the "Credit
Agreement"). Capitalized terms used herein without definition are so used as
defined in the Credit Agreement.
The undersigned hereby certifies that all of the conditions set forth in
Section 2.4 ("Further Conditions to Each Loan") of the Credit Agreement have
been satisfied as of the date hereof, and will remain satisfied on the date of
the requested Revolving Credit Advance, before and after giving effect thereto
and the application of the proceeds therefrom.
Borrower represents and warrants that the conditions in Section 2.4 have
been satisfied and hereby reaffirms the granting and continuance of Agent's
Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.
<PAGE> 85
<TABLE>
Previously Faxed: Yes No (Circle One)
__________________________________________________________________________________________________________________________
Company Name: Date: / / Certificate Number:
__________________________________________________________________________________________________________________________
<S><C>
1. ACCOUNTS RECEIVABLE (Line 5 of previous Notice of Revolving Credit Advance
$__________________
dated_____/_____/_____)
2. Additions to Accounts Receivable since last Notice of Revolving Credit Advance
(A) New sales dated _____/_____/_____ to _____/_____/_____ $_________________
(B) Other additions (Explain: ) $_________________
(C) TOTAL ADDITIONS
$_________________
3. Reductions to Accounts Receivable since last BBC
(A) Cash collections dated _____/_____/_____ to _____/_____/_____ $_________________
(B) Discounts issued since last Notice of Revolving Credit Advance $_________________
(C) Credit memos issued since last Notice of Revolving Credit Advance $_________________
(D) Other reductions/additions since last Notice of Revolving Credit Advance $_________________
(E) TOTAL REDUCTIONS $_________________
4. Other adjustments to Accounts Receivable (Explain:_______________________________________) $_________________
5. NEW ACCOUNTS RECEIVABLE BALANCE (Total of Lines 1, 2C, 3E, and 4) $_________________
6. Total ineligible Accounts Receivable (Line 2 of Borrowing Base Certificate dated ______/_____/_____)
$_________________
7. Eligible Accounts Receivable (Line 5 minus Line 6) $_________________
8. Eligible Accounts Receivable Availability (85% of Line 7) $_________________
9. Eligible Inventory Availability (Line 10 of Borrowing Base Certificate dated _____/_____/_____) $_________________
10. Supplemental Amount $4,000,000
11. Reserves against availability (including Rent Reserve and reserve for NBD indemnities) $_________________
12. Tessco Liquidation Reserve (including the total liabilities and contingent liabilities (to the
extent known and probable) of Tessco, as provided by Borrower on the attached Schedule A hereto,
other than Tessco's intercompany liabilities owing to Borrower and Tessco's obligations to
Agent and Lenders under the Loan Documents), plus an amount equal to two months' rental
obligations with respect to all existing operating leases of Tessco. $_________________
13. Total Borrowing Availability (The lesser of (i) the total of Lines 8, 9 and 10 minus the sum of
Lines 11 and 12, or (ii) the Maximum amount of $12,000,000)
$_________________
14. BEGINNING REVOLVING CREDIT LOAN BALANCE (Line 17 of previous Notice of Revolving
Credit Advance dated _____/_____/_____) $_________________
15. Plus Revolving Credit Advance requested, including any Swing Line Advances $_________________
16. Less TOTAL cash collections against Revolving Credit Loan
since last Notice of Revolving Credit Advance
(A) Date ____________ Amt. $___________ (C) Date ___________ Amt. $__________
(B) Date ____________ Amt. $___________ (C) Date ___________ Amt. $__________
(E) TOTAL CASH REMITTED $_________________
17. New Revolving Credit Loan Balance (Line 14 plus Line 15 minus Line 16E) $_________________
18. Letter of Credit Obligations $_________________
19. NET BORROWING AVAILABILITY (Line 13 minus the total of Line 17 plus Line 18) $_________________
</TABLE>
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<PAGE> 86
IN WITNESS WHEREOF, Borrower has caused this Notice of Revolving Credit
Advance to be executed and delivered by its duly authorized officer as of the
date first set forth above.
CODE-ALARM, INC.
By: _________________________
Title: ______________________
-3-
<PAGE> 87
SCHEDULE A
TESSCO LIQUIDATION RESERVE
Item 12 on the Notice of Revolving Credit Advance
[To be provided by Borrower]
-4-
<PAGE> 88
A:\478139.WPD November 5,1997 (2:25pm)
-5-
<PAGE> 89
EXHIBIT 1.1(a)(ii)
TO
CREDIT AGREEMENT
FORM OF REVOLVING NOTE
Chicago, Illinois
$12,000,000 October 24, 1997
FOR VALUE RECEIVED, the undersigned, CODE-ALARM, INC., a Michigan
corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of GENERAL
ELECTRIC CAPITAL CORPORATION ("Lender"), at the offices of GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as Agent for Lenders ("Agent"), at
its address at 10 South LaSalle Street, Suite 2800, Chicago, Illinois 60603, or
at such other place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately available
funds, the amount of TWELVE MILLION DOLLARS AND NO CENTS ($12,000,000) or, if
less, the aggregate unpaid amount of all Revolving Credit Advances made to the
undersigned under the "Credit Agreement" (as hereinafter defined). All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Credit Agreement or in Annex A thereto.
This Revolving Note is one of the Revolving Notes issued pursuant to that
certain Credit Agreement dated as of October 24, 1997 by and among Borrower,
the other Persons named therein as Credit Parties, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including all annexes,
exhibits and schedules thereto, and as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), evidences the
Revolving Credit Advances made to Borrower, and is entitled to the benefit and
security of the Credit Agreement, the Security Agreement and all of the Loan
Documents other than Litigation Collateral Documents referred to therein.
Reference is hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which such Revolving Credit Advances are made and
are to be repaid. The date and amount of each Revolving Credit Advance made by
Lenders to Borrower, the rates of interest applicable thereto and each payment
made on account of the principal thereof, shall be recorded by Agent on its
books; provided that the failure of Agent to make any such recordation shall
not affect the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement or this Revolving Note in respect of the
Revolving Credit Advances made by Lender to Borrower.
The principal amount of the indebtedness evidenced hereby shall be payable
in the amounts and on the dates specified in the Credit Agreement, the terms of
which are hereby incorporated herein by reference. Interest thereon shall be
paid until such principal amount is paid in full at such interest rates and at
such times, and pursuant to such calculations, as are specified in the Credit
Agreement.
<PAGE> 90
If any payment on this Revolving Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (except as otherwise provided in the Credit Agreement)
and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default, this Revolving Note
may, as provided in the Credit Agreement, and without demand, notice or legal
process of any kind, be declared, and immediately shall become, due and
payable.
Time is of the essence of this Revolving Note. Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower.
Except as provided in the Credit Agreement, this Revolving Note may not be
assigned by Lender to any Person.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE.
CODE-ALARM, INC.
By:__________________________
Name:___________________
Title:____________________
<PAGE> 91
EXHIBIT 1.1(b)
TO
CREDIT AGREEMENT
FORM OF TERM A NOTE
Chicago, Illinois
$1,500,000 October 24, 1997
FOR VALUE RECEIVED, the undersigned, CODE-ALARM, INC., a Michigan
corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of GENERAL
ELECTRIC CAPITAL CORPORATION ("Lender") at the offices of GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as Agent for Lenders ("Agent"), at
its address at 10 South LaSalle Street, Suite 2800, Chicago, Illinois 60603, or
at such other place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately available
funds, the amount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS AND NO CENTS
($1,500,000). All capitalized terms used but not otherwise defined herein have
the meanings given to them in the "Credit Agreement" (as hereinafter defined)
or in Annex A thereto.
This Term A Note is one of the Term A Notes issued pursuant to that
certain Credit Agreement dated as of October 24, 1997 by and among Borrower,
the other Persons named therein as Credit Parties, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including all annexes,
exhibits and schedules thereto and as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), evidences the
Lender's Term Loan A, and is entitled to the benefit and security of the Credit
Agreement, the Security Agreement and all of the Loan Documents other than
Litigation Collateral Documents referred to therein. Reference is hereby made
to the Credit Agreement for a statement of all of the terms and conditions
under which such Term Loan A is made and is to be repaid. The principal
balance of such Term Loan A, the rates of interest applicable thereto and the
date and amount of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of Agent to make
any such recordation shall not affect the obligations of Borrower to make a
payment when due of any amount owing under the Credit Agreement or this Term A
Note.
Borrower shall pay the principal amount of the Term Loan A evidenced
hereby in twelve (12) equal, consecutive quarterly installments of $125,000
each, on the first day of January, April, July and October of each year,
commencing on January 1, 1998. Interest thereon shall be paid until such
principal amount is paid in full at such interest rates and at such times, and
pursuant to such calculations, as are specified in the Credit Agreement. The
terms of the Credit Agreement are hereby incorporated herein by reference.
If any payment on this Term A Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day
<PAGE> 92
(except as otherwise provided in the Credit Agreement) and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.
Upon and after the occurrence of any Event of Default, this
Term A Note may, as provided in the Credit Agreement, and without demand,
notice or legal process of any kind, be declared, and immediately shall become,
due and payable.
Time is of the essence of this Term A Note. Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower.
Except as provided in the Credit Agreement, this Term A Note may not be
assigned by Lender to any Person.
THIS TERM A NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE.
CODE-ALARM, INC.
By:_____________________________
Name:______________________
Title:_____________________
<PAGE> 93
EXHIBIT 1.1(c)(i)
TO
CREDIT AGREEMENT
FORM OF TERM B NOTE
Chicago, Illinois
$3,000,000 October 24, 1997
FOR VALUE RECEIVED, the undersigned, CODE-ALARM, INC., a Michigan
corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of GENERAL
ELECTRIC CAPITAL CORPORATION ("Lender") at the offices of GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as Agent for Lenders ("Agent"), at
its address at 10 South LaSalle Street, Suite 2800, Chicago, Illinois 60603,
or at such other place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately available
funds, the amount of THREE MILLION DOLLARS AND NO CENTS ($3,000,000) or such
lesser amount as may have been advanced as Term Loan B to the undersigned under
the "Credit Agreement" (as hereinafter defined). All capitalized terms used
but not otherwise defined herein have the meanings given to them in the Credit
Agreement or in Annex A thereto.
This Term B Note is one of the Term B Notes issued pursuant to that
certain Credit Agreement dated as of October 24, 1997 by and among Borrower,
the other Persons named therein as Credit Parties, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including all annexes,
exhibits and schedules thereto and as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), evidences Lender's
Term Loan B, and is entitled to the benefit and security of the Credit
Agreement, the Security Agreement and all of the Loan Documents other than
Litigation Collateral Documents referred to therein. Reference is hereby made
to the Credit Agreement for a statement of all of the terms and conditions
under which such Term Loan B is made and is to be repaid. The principal
balance of such Term Loan B, the rates of interest applicable thereto and the
date and amount of each payment made on account of the principal thereof, shall
be recorded by Agent on its books; provided that the failure of Agent to make
any such recordation shall not affect the obligations of Borrower to make a
payment when due of any amount owing under the Credit Agreement or this Term B
Note.
Borrower shall pay the aggregate amount of the Term Loan B evidenced
hereby in equal, consecutive quarterly installments equal to one- twelfth
(1/12) of the aggregate original principal amount of such Loan on the first day
of January, April, July and October of each year, commencing, subject to the
terms of the Credit Agreement, on the first of such dates occurring after the
Term Loan B Funding Date. Interest thereon shall be paid until such principal
amount is paid in full at such interest rates and at such times, and pursuant
to such calculations, as are
<PAGE> 94
specified in the Credit Agreement. The terms of the Credit Agreement are
hereby incorporated herein by reference.
If any payment on this Term B Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day (except as otherwise provided in the Credit
Agreement) and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default, this Term Note
may, as provided in the Credit Agreement, and without demand, notice or
legal process of any kind, be declared, and immediately shall become, due and
payable.
Time is of the essence of this Term B Note. Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower.
Except as provided in the Credit Agreement, this Term B Note may not be
assigned by Lender to any Person.
THIS TERM B NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE.
CODE-ALARM, INC.
By:___________________________
Name:____________________
Title:___________________
<PAGE> 95
EXHIBIT 1.1(c)(ii)
TO
CREDIT AGREEMENT
FORM OF NOTICE OF TERM LOAN B ADVANCE
Reference is made to that certain Credit Agreement dated as of October
24, 1997 by and among Code-Alarm, Inc. ("Borrower"), the other Persons
signatory thereto as Credit Parties, General Electric Capital Corporation as
agent ("Agent") and the Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as from time to
time amended, restated, supplemented or otherwise modified, the "Credit
Agreement"). Capitalized terms used herein without definition are so used as
defined in the Credit Agreement.
Borrower hereby gives irrevocable notice, pursuant to Section
1.1(c)(i) of the Credit Agreement, of its request on behalf of the Borrower for
a Term Loan B Advance to be made on [ DATE ] in the aggregate amount of
$[___________] to be made on [____________, ____] as [an Index Rate Loan] [as a
LIBOR Loan having LIBOR Period of [_____] month(s)].
Borrower hereby represents and warrants that all of the conditions
contained in Sections 2.2 and 2.4 of the Credit Agreement have been
satisfied on and as of the date hereof, and will continue to be satisfied on
and as of the date of the Term Loan B Advance(s) requested hereby, before and
after giving effect thereto and to the application of the proceeds therefrom.
Borrower hereby represents and warrants that the conditions set forth
in Section 2.2 pertaining to a request for the Term Loan B Advance and the
further conditions in Section 2.4 have been satisfied and hereby reaffirms its
granting and continuance of Agent's Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.
IN WITNESS WHEREOF, Borrower has caused this Notice of Term Loan B
Advance to be executed and delivered by its duly authorized officer as of the
date first set forth above.
<PAGE> 96
CODE-ALARM, INC.
By: _________________________________
Title: ______________________________
-2-
<PAGE> 97
EXHIBIT 1.1(d)
TO
CREDIT AGREEMENT
FORM OF NOTICE OF TERM LOAN C ADVANCE
Reference is made to that certain Credit Agreement dated as of October
24, 1997 by and among Code-Alarm, Inc. ("Borrower"), the other Persons
signatory thereto as Credit Parties, General Electric Capital Corporation as
agent ("Agent") and the Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as from time to
time amended, restated, supplemented or otherwise modified, the "Credit
Agreement"). Capitalized terms used herein without definition are so used as
defined in the Credit Agreement.
Borrower hereby gives irrevocable notice, pursuant to Section
1.1(d)(iii) of the Credit Agreement, of its request on behalf of the Borrower
for a Term Loan C Advance to be made on [ DATE ] in the aggregate
amount of $[___________] to be made on [____________, ____] as [an Index Rate
Loan] [as a LIBOR Loan having LIBOR Period of [_____] month(s)].
Borrower hereby represents and warrants that all of the conditions
contained in Sections 2.3(II) and 2.4 of the Credit Agreement have been
satisfied on and as of the date hereof, and will continue to be satisfied on
and as of the date that the Term Loan C Advance(s) is requested hereby, before
and after giving effect thereto and to the application of the proceeds
therefrom.
Borrower hereby represents and warrants that the conditions set forth
in Section 2.3 (II) pertaining to a request for the Term Loan C Advance, and
the further conditions in Section 2.4 have been satisfied and hereby reaffirms
its granting and continuance of Agent's Liens, on behalf of itself and Lenders,
pursuant to the Litigation Collateral Documents.
<PAGE> 98
IN WITNESS WHEREOF, Borrower has caused this Notice of Term Loan C
Advance to be executed and delivered by its duly authorized officer as of
the date first set forth above.
CODE-ALARM, INC.
By: _______________________
Title: ____________________
-2-
<PAGE> 99
EXHIBIT 1.1(e)
TO
CREDIT AGREEMENT
FORM OF SWING LINE NOTE
Chicago, Illinois
$1,200,000 October 24, 1997
FOR VALUE RECEIVED, the undersigned, CODE-ALARM, INC., a Michigan
corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("Swing Line Lender") at
the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as
Agent (in such capacity, the "Agent") at the Agent's address at 10 South
LaSalle Street, Suite 2800, Chicago, Illinois 60603, or at such other place as
Agent may designate from time to time in writing, in lawful money of the United
States of America and in immediately available funds, the amount of ONE MILLION
TWO HUNDRED THOUSAND DOLLARS AND NO CENTS ($1,200,000) or, if less, the
aggregate unpaid amount of all Swing Line Advances made to the undersigned
under the "Credit Agreement" (as hereinafter defined). All capitalized terms
used but not otherwise defined herein have the meanings given to them in the
Credit Agreement or in Annex A thereto.
This Swing Line Note is issued pursuant to that certain Credit Agreement
dated as of October 24, 1997 by and among Borrower, the other Persons named
therein as Credit Parties, Agent, Swing Line Lender and the other Persons
signatory thereto from time to time as Lenders (including all annexes, exhibits
and schedules thereto and as from time to time amended, restated, supplemented
or otherwise modified, the "Credit Agreement"), evidences the Swing Line
Lenders' Swing Line Advances made to Borrower, and is entitled to the benefit
and security of the Credit Agreement, the Security Agreement and all of the
Loan Documents other than Litigation Collateral Documents referred to therein.
Reference is hereby made to the Credit Agreement for a statement of all of the
terms and conditions under which such Swing Line Advances are made and are to
be repaid. The date and amount of each Swing Line Advance made by Swing Line
Lender to Borrower, the rate of interest applicable thereto and each payment
made on account of the principal thereof, shall be recorded by Agent on its
books; provided that the failure of Agent to make any such recordation shall
not affect the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement or this Swing Line Note in respect of the
Swing Line Advances made by Swing Line Lender to Borrower.
The principal amount of the indebtedness evidenced hereby shall be payable
in the amounts and on the dates specified in the Credit Agreement, the terms of
which are hereby incorporated herein by reference. Interest thereon shall be
paid until such principal amount is
<PAGE> 100
paid in full at such interest rates and at such times, and pursuant to such
calculations, as are specified in the Credit Agreement.
If any payment on this Swing Line Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default, this Swing Line
Note may, as provided in the Credit Agreement, and without demand, notice or
legal process of any kind, be declared, and immediately shall become, due and
payable.
Time is of the essence of this Swing Line Note. Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower.
Except as provided in the Credit Agreement, this Swing Line Note may not
be assigned by Lender to any Person.
THIS SWING LINE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE.
CODE-ALARM, INC.
By:___________________________
Name:____________________
Title:___________________
<PAGE> 101
EXHIBIT 1.5(E)
TO
CREDIT AGREEMENT
FORM OF NOTICE OF CONVERSION/CONTINUATION
Reference is made to that certain Credit Agreement dated as of
October 24, 1997 by and among Code-Alarm, Inc., a Michigan corporation (in such
capacity, the "Borrower"), the other Persons signatory thereto as Credit
Parties, General Electric Capital Corporation ("Agent") and the Persons
signatory thereto from time to time as Lenders (including all annexes, exhibits
or schedules thereto, and as from time to time amended, restated, supplemented
or otherwise modified, the "Credit Agreement"). Capitalized terms used herein
without definition are so used as defined in the Credit Agreement.
Borrower hereby gives irrevocable notice, pursuant to Section
1.5(e) of the Credit Agreement, of its request to:
(a) on DATE convert $________ of the aggregate
outstanding principal amount of the _______ Loan, bearing interest at
the ________ Rate, into a(n) ________ Loan [and, in the case of a
LIBOR Loan, having a LIBOR Period of _____ month(s)];
[(b) on DATE continue $________of the aggregate
outstanding principal amount of the _______ Loan, bearing interest at
the LIBOR Rate, as a LIBOR Loan having a LIBOR Period of _____
month(s)].
Borrower hereby represents and warrants that all of the
conditions contained in Section 2.4 of the Credit Agreement have been satisfied
on and as of the date hereof, and will continue to be satisfied on and as of
the date of the conversion/continuation requested hereby, before and after
giving effect thereto.
Borrower hereby represents and warrants that the conditions
set forth in Section 2.4 have been satisfied and hereby reaffirms its granting
and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to
the Collateral Documents.
<PAGE> 102
IN WITNESS WHEREOF, Borrower has caused this Notice of
Conversion/Continuation be executed and delivered on its by its duly authorized
officer as of the date first set forth above.
CODE-ALARM, INC.
By:
--------------------------------
Title:
-----------------------------
-2-
<PAGE> 103
EXHIBIT 4.1(b)
TO
CREDIT AGREEMENT
FORM OF BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement dated as of October 24,
1997 by and among Code-Alarm, Inc. ("Borrower"), the other Persons signatory
thereto as Credit Parties, General Electric Capital Corporation ("Agent") and
the Persons signatory thereto from time to time as Lenders (including all
annexes, exhibits and schedules thereto, and as from time to time amended,
restated, supplemented or otherwise modified, the "Credit Agreement").
Capitalized terms used herein without definition are so used as defined in the
Credit Agreement.
The undersigned certifies that (a) all of the foregoing information
regarding Eligible Accounts is true and correct on the date hereof and relates
solely to Eligible Accounts within the meaning given such term in the Credit
Agreement, and (b) all of the foregoing information regarding Eligible
Inventory is true and correct on the date hereof and relates solely to Eligible
Inventory within the meaning given such term in the Credit Agreement.
<PAGE> 104
<TABLE>
<S><C>
Company Name: Code-Alarm, Inc. Date:_________________ B.B.C.#________
1. Period end accounts receivable as of :______________________ $______________
2. Ineligible Accounts as of :________________________
Accounts from sales/services not in ordinary course
(as defined in Section 1.6(a)) $______________
Contingent or judicially unenforceable accounts
(as defined in Section 1.6(b)) $______________
Defense, counterclaim, setoff or dispute applies
(as defined in Section 1.6(c)) $______________
Invalid Account (as defined in Section 1.6(d)) $______________
Invoice not sent to Account Debtor
(as defined in Section 1.6(e)) $______________
Accounts not owned (as defined in Section 1.6(f)) $______________
Intercompany accounts
(as defined in Section 1.6(g)) $______________
United States government Account
(as defined in Section 1.6(h)) $______________
Prepaid Credit Balance over ninety (90) days
(as defined in Section 1.6(i)) $______________
Foreign accounts (as defined in Section 1.6(i)) $______________
Contra accounts (as defined in Section 1.6(j)) $______________
Consignment (as defined in Section 1.6(k)) $______________
Accounts in default (as defined in Section 1.6(l)) $______________
50% Cross aging exclusion
(as defined in Section 1.6(m)) $______________
Accounts exceeding 10% of all Eligible Accounts
(excluding entities named in Section 1.6(n)) $______________
Restricted Accounts (as defined in Section 1.6(o)) $______________
Representations and Warranties untrue
(as defined in Section 1.6(p)) $______________
Evidenced by judgment, Instrument, or Chattel Paper
(as defined in Section 1.6(q)) $______________
Payable in currency other than Dollars
(as defined in Section 1.6(r)) $______________
Payment conditional on delivery
(as defined in Section 1.6(s)) $______________
Warranty (as defined in Section 1.6(t)) $______________
Other (as specified in Section 1.6 or otherwise):
________________________________ $______________
</TABLE>
<PAGE> 105
<TABLE>
<S><C>
TOTAL INELIGIBLES $______________
3. Eligible Accounts (Line 1 minus Line 2) $______________
4. Eligible Accounts advance rate 85%
5. Eligible Accounts availability (Line 3 multiplied by Line 4) $______________
_______________________________________________________________________________________
6. Inventory as of :____________________ $______________
7. Ineligible Inventory as of : ___________________
Not owned by Borrower/Tessco
(as defined in Section 1.7(a)) $______________
On premises not owned/operated by Borrower/Tessco
(as defined in Section 1.7(b)) $______________
Locations less than $100,000
(as defined in Section 1.7(b)) $______________
Inventory on Consignment or In Transit
(as defined in Section 1.7(c)) $______________
Negotiable titles (as defined in Section 1.7(d)) $______________
Excess Inventory Reserve
(as defined in Section 1.7(e)) $______________
Work-in-process (as defined in Section 1.7(f)) $______________
Low Value items (as defined in Section 1.7(f)) $______________
Returned goods (as defined in Section 1.7(g)) $______________
Not held for sale in ordinary course of business
(as defined in Section 1.7(h)) $______________
Restricted (as defined in Section 1.7(i)) $______________
Representations and Warranties untrue
(as defined in Section 1.7(j)) $______________
"Freight-in" costs or charges
(as defined in Section 1.7(k)) $______________
Hazardous Materials or licensed sales
(as defined in Section 1.7(l)) $______________
Unacceptably insured
(as defined in Section 1.7(m)) $______________
Components not tracked
(as defined in Section 1.7(n)) $______________
Valuation Reserve (as defined in Section 1.7(o)) $______________
Other (as specified in Section 1.7 or otherwise):
________________________________ $______________
</TABLE>
<PAGE> 106
<TABLE>
<S> <C> <C>
TOTAL INELIGIBLES $______________
8. Eligible Inventory (Line 6 minus Line 7) $______________
9. Eligible Inventory advance rate 25%
10. Eligible Inventory availability (Line 8 multiplied by Line 9) $______________
_______________________________________________________________________________________________________
11. Supplemental Amount $4,000,000
_______________________________________________________________________________________________________
12. Reserves against availability (including Rent Reserve
and reserve for NBD indemnities) $______________
13. Tessco Liquidation Reserve (including the total liabilities and contingent
liabilities (to the extent known and probable) of Tessco, as provided
by Borrower on the attached Schedule A hereto, other than Tessco's
intercompany liabilities owing to Borrower and Tessco's obligations to
Agent and Lenders under the Loan Documents), plus an amount equal to
two months' rental obligations with respect to all existing operating
leases of Tessco. $______________
_______________________________________________________________________________________________________
14. Borrowing Availability (the lesser of (i) the total of lines 5, 10 and 11
minus the sum of lines 12 and 13,
or (ii) the Maximum Amount of $12,000,000) $______________
15. Revolving Credit Loan Balance $______________
16. Letter of Credit Obligations $______________
17. Net Borrowing Availability (Line 14 minus the total of Lines 15 and 16) $______________
</TABLE>
<PAGE> 107
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Borrowing Base Certificate as of the date first set forth above.
CODE-ALARM, INC.
By: ______________________
Title: ___________________
<PAGE> 108
SCHEDULE A
TESSCO LIQUIDATION RESERVE
Item 12 on the Form of Borrowing Base Certificate
[To be provided by Borrower]
<PAGE> 109
EXHIBIT 9.1(a)
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Agreement") is made as of
___________ __, ____ by and between __________________________________
("Assignor Lender") and ________________________ ("Assignee Lender") and
acknowledged and consented to by GENERAL ELECTRIC CAPITAL CORPORATION, as agent
("Agent"). All capitalized terms used in this Agreement and not otherwise
defined herein will have the respective meanings set forth in the Credit
Agreement as hereinafter defined.
RECITALS:
WHEREAS, Code-Alarm, Inc., a Michigan corporation (in such
capacity, the "Borrower"), the Persons signatory thereto as Credit Parties,
Agent, Assignor Lender and other Persons signatory thereto from time to time as
Lenders have entered into that certain Credit Agreement dated as of October 24,
1997 (as amended, restated, supplemented or otherwise modified from time to
time, the "Basic Credit Agreement") pursuant to which Assignor Lender has
agreed to make certain Loans to, and incur certain Letter of Credit Obligations
for, Borrower;
WHEREAS, Borrower, Agent, Assignor Term Lender and the Persons
signatory thereto from time to time as Term Lenders have entered into that
certain Litigation L/C and Term Loan C Agreement dated as of October 24, 1997
(including all annexes, exhibits and schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the "L/C Credit
Agreement") pursuant to which Assignor Lender has agreed to incur Litigation
L/C Obligations and certain other Litigation Obligations including the
obligations constituting Term Loan C for Borrower;
WHEREAS, Assignor Lender desires to assign to Assignee Lender
[all/a portion] of its interest in the Loans (as described below), the Letter
of Credit Obligations, L/C Litigation Obligations and the Collateral and to
delegate to Assignee Lender [all/a portion] of its Commitments and other duties
with respect to such Loans, Letter of Credit Obligations, L/C Litigation
Obligations and Collateral;
WHEREAS, Assignee Lender desires to become a Lender under the
Basic Credit Agreement and the L/C Credit Agreement (collectively, the "Credit
Agreement") and to accept such assignment and delegation from Assignor Lender;
and
WHEREAS, Assignee Lender desires to appoint Agent to serve as
agent for Assignee Lender under the Credit Agreement.
<PAGE> 110
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions, and covenants herein contained, Assignor Lender and
Assignee Lender agree as follows:
1. ASSIGNMENT, DELEGATION, AND ACCEPTANCE
1.1 Assignment. Assignor Lender hereby transfers and assigns to
Assignee Lender, without recourse and without representations or warranties of
any kind [all/such percentage] of Assignor Lender's right, title, and interest
in [the Revolving Loan ], [the Swing Line Loan], [Term Loan A], [Term Loan B],
[Term Loan ], [the Loans], [Letter of Credit Obligations], [Litigation L/C
Obligations], Loan Documents and Collateral as will result in Assignee Lender
having as of the Effective Date (as hereinafter defined) a Pro Rata Share
thereof, as follows:
<TABLE>
<CAPTION>
Assignee Lender's Loans Principal Amount Pro Rata Share
<S> <C> <C>
Revolving Loan $____________ ____%
Swing Line Loan $____________ ____%
Term Loan A $____________ ____%
Term Loan B $____________ ____%
Term Loan C $____________ ____%
Letter of Credit Obligations $____________ ____%
Litigation L/C Obligations $____________ ____%
Capital Expenditure Loan $____________ ____%
</TABLE>
1.2 Delegation. Assignor Lender hereby irrevocably assigns and
delegates to Assignee Lender [all/a portion] of its Commitments and its other
duties and obligations as a Lender under the Loan Documents equivalent to
[100%/___%] of Assignor Lender's Revolving Loan Commitment (such percentage
representing a commitment of $ ___________), [100%/___%] of Assignor Lender's
Term Loan Commitment (such percentage representing a commitment of $ ______),
and [100%/____%] of Assignor Lender's Capital Expenditure Loan Commitment (such
percentage representing a commitment of $ ___________)].
1.3 Acceptance by Assignee Lender. By its execution of this
Agreement, Assignee Lender irrevocably purchases, assumes and accepts such
assignment and delegation and agrees to be a Lender with respect to the
delegated interest under the Loan Documents and to be bound by the terms and
conditions thereof. By its execution of this Agreement, Assignor Lender
agrees, to the extent provided herein, to relinquish its rights and be released
from its obligations and duties under the Credit Agreement.
1.4 Effective Date. Such assignment and delegation by Assignor
Lender and acceptance by Assignee Lender will be effective and Assignee Lender
will become a Lender under the Loan Documents as of [the date of this
Agreement] ("Effective Date") and upon
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payment of the Assigned Amount and the Assignment Fee (as each term is defined
below). [Interest and Fees accrued prior to the Effective Date are for the
account of Assignor Lender.]
2. INITIAL PAYMENT AND DELIVERY OF NOTES
2.1 Payment of the Assigned Amount. Assignee Lender will pay to
Assignor Lender, in immediately available funds, not later than 12:00 noon (New
York time) on the Effective Date, an amount equal to its Pro Rata Share of the
then outstanding principal amount of the Loans as set forth above in Section
1.1 (but not contingent Letter of Credit Obligations or Litigation L/C
Obligations) [together with accrued interest, fees and other amounts as set
forth on Schedule 2.1] (the "Assigned Amount").
2.2 Payment of Assignment Fee. [Assignor Lender and/or Assignee
Lender] will pay to Agent, for its own account in immediately available funds,
not later than 12:00 noon (New York time) on the Effective Date, the assignment
fee in the amount of $3,500 (the "Assignment Fee") as required pursuant to
Section 9.1(a) of the Credit Agreement.
2.3 Execution and Delivery of Notes. Following payment of the
Assigned Amount and the Assignment Fee, Assignor Lender will deliver to Agent
the Notes previously delivered to Assignor Lender for redelivery to Borrower
and Agent will obtain from Borrower for delivery to [Assignor Lender and]
Assignee Lender, new executed Notes evidencing Assignee Lender's [and Assignor
Lender's respective] Pro Rata Share[s] in the Loans after giving effect to the
assignment described in Section 1. Each new Note will be issued in the
aggregate maximum principal amount of the [applicable] Commitment [of the
Lender to whom such Note is issued] OR [the Assignee Lender].
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Assignee Lender's Representations, Warranties and Covenants.
Assignee Lender hereby represents, warrants, and covenants the following to
Assignor Lender and Agent:
(a) This Agreement is a legal, valid, and binding agreement of
Assignee Lender, enforceable according to its terms;
(b) The execution and performance by Assignee Lender of its duties
and obligations under this Agreement and the Loan Documents will not require
any registration with, notice to, or consent or approval by any Governmental
Authority;
(c) Assignee Lender is familiar with transactions of the kind and
scope reflected in the Loan Documents and in this Agreement;
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(d) Assignee Lender has made its own independent investigation and
appraisal of the financial condition and affairs of each Credit Party, has
conducted its own evaluation of the Loans and Letter of Credit Obligations, the
Loan Documents and each Credit Party's creditworthiness, has made its decision
to become a Lender to Borrower under the Credit Agreement independently and
without reliance upon Assignor Lender or Agent, and will continue to do so;
(e) Assignee Lender is entering into this Agreement in the
ordinary course of its business, and is acquiring its interest in the Loans and
Letter of Credit Obligations for its own account and not with a view to or for
sale in connection with any subsequent distribution; provided, however, that at
all times the distribution of Assignee Lender's property shall, subject to the
terms of the Credit Agreement, be and remain within its control;
(f) No future assignment or participation granted by Assignee
Lender pursuant to Section 9.1 of the Credit Agreement will require Assignor
Lender, Agent, or Borrower to file any registration statement with the
Securities and Exchange Commission or to apply to qualify under the blue sky
laws of any state;
(g) Assignee Lender has no loans to, written or oral agreements
with, or equity or other ownership interest in any Credit Party;
(h) Assignee Lender will not enter into any written or oral
agreement with, or acquire any equity or other ownership interest in, any
Credit Party without the prior written consent of Agent; and
(i) As of the Effective Date, Assignee Lender (i) is entitled to
receive payments of principal and interest in respect of the Obligations
without deduction for or on account of any taxes imposed by the United States
of America or any political subdivision thereof [, (ii) is not subject to
capital adequacy or similar requirements under Section 1.16(a) of the Credit
Agreement, (iii) does not require the payment of any increased costs under
Section 1.16(b) of the Credit Agreement, and (iv) is not unable to fund LIBOR
Loans under Section 1.16(c) of the Credit Agreement, ] and Assignee Lender will
indemnify Agent from and against all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, or expenses that result from
Assignee Lender's failure to fulfill its obligations under the terms of Section
1.15(c) of the Credit Agreement [or from any other inaccuracy in the
foregoing].
3.2 Assignor Lender's Representations, Warranties and Covenants.
Assignor Lender hereby represents, warrants and covenants the following to
Assignee Lender:
(a) Assignor Lender is the legal and beneficial owner of the
Assigned Amount;
(b) This Agreement is a legal, valid and binding agreement of
Assignor Lender, enforceable according to its terms;
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(c) The execution and performance by Assignor Lender of its duties
and obligations under this Agreement and the Loan Documents will not require
any registration with, notice to or consent or approval by any Governmental
Authority;
(d) Assignor Lender has full power and authority, and has taken
all action necessary to execute and deliver this Agreement and to fulfill the
obligations hereunder and to consummate the transactions contemplated hereby;
(e) Assignor Lender is the legal and beneficial owner of the
interests being assigned hereby, free and clear of any adverse claim, lien,
encumbrance, security interest, restriction on transfer, purchase option, call
or similar right of a third party; and
(f) This Assignment by Assignor Lender to Assignee Lender
complies, in all material respects, with the terms of the Loan Documents.
4. LIMITATIONS OF LIABILITY
Neither Assignor Lender (except as provided in Section 3.2)
nor Agent makes any representations or warranties of any kind, nor assumes any
responsibility or liability whatsoever, with regard to (a) the Loan Documents
or any other document or instrument furnished pursuant thereto or the Loans,
Letter of Credit Obligations or other Obligations, (b) the creation, validity,
genuineness, enforceability, sufficiency, value or collectibility of any of
them, (c) the amount, value or existence of the Collateral, (d) the perfection
or priority of any Lien upon the Collateral, or (e) the financial condition of
any Credit Party or other obligor or the performance or observance by any
Credit Party of its obligations under any of the Loan Documents. Neither
Assignor Lender nor Agent has or will have any duty, either initially or on a
continuing basis, to make any investigation, evaluation, appraisal of, or any
responsibility or liability with respect to the accuracy or completeness of,
any information provided to Assignee Lender which has been provided to Assignor
Lender or Agent by any Credit Party. Nothing in this Agreement or in the Loan
Documents shall impose upon the Assignor Lender or Agent any fiduciary
relationship in respect of the Assignee Lender.
5. FAILURE TO ENFORCE
No failure or delay on the part of Agent or Assignor Lender in
the exercise of any power, right, or privilege hereunder or under any Loan
Document will impair such power, right, or privilege or be construed to be a
waiver of any default or acquiescence therein. No single or partial exercise
of any such power, right, or privilege will preclude further exercise thereof
or of any other right, power, or privilege. All rights and remedies existing
under this Agreement are cumulative with, and not exclusive of, any rights or
remedies otherwise available.
6. NOTICES
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Unless otherwise specifically provided herein, any notice or
other communication required or permitted to be given will be in writing and
addressed to the respective party as set forth below its signature hereunder,
or to such other address as the party may designate in writing to the other.
7. AMENDMENTS AND WAIVERS
No amendment, modification, termination, or waiver of any
provision of this Agreement will be effective without the written concurrence
of Assignor Lender, Agent and Assignee Lender.
8. SEVERABILITY
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law.
In the event any provision of this Agreement is or is held to be invalid,
illegal, or unenforceable under applicable law, such provision will be
ineffective only to the extent of such invalidity, illegality, or
unenforceability, without invalidating the remainder of such provision or the
remaining provisions of the Agreement. In addition, in the event any provision
of or obligation under this Agreement is or is held to be invalid, illegal, or
unenforceable in any jurisdiction, the validity, legality, and enforceability
of the remaining provisions or obligations in any other jurisdictions will not
in any way be affected or impaired thereby.
9. SECTION TITLES
Section and Subsection titles in this Agreement are included
for convenience of reference only, do not constitute a part of this Agreement
for any other purpose, and have no substantive effect.
10. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
11. APPLICABLE LAW
THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.
12. COUNTERPARTS
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This Agreement and any amendments, waivers, consents, or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, will be deemed an original and all of which shall together
constitute one and the same instrument.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
Assignee Lender Assignor Lender
______________________________ _______________________________
By: __________________________ By:____________________________
Title:________________________ Title:_________________________
Notice Address Notice Address
Account Information: Account Information:
Acknowledged and Consented to:
GENERAL ELECTRIC CAPITAL CORPORATION as Agent
By: ____________________________________
Its Duly Authorized Signatory
<PAGE> 117
SCHEDULE 2.1
ASSIGNOR LENDER'S LOANS
<TABLE>
<CAPTION>
Principal Amount
<S> <C>
Revolving Loan $
------------
Term Loan A $
------------
Term Loan B $
------------
[Term Loan C $ ]
------------
[Capital Expenditure Loan] $
------------
Subtotal $
============
Accrued Interest $
------------
Unused Line Fee $
------------
Other + or - $
------------
Total $
</TABLE> ============
All determined as of the Effective Date
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ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings and all section references in the following definitions
shall refer to Sections of the Agreement:
"Account Debtor" shall mean any Person who may become
obligated to any Credit Party under, with respect to, or on account of, an
Account.
"Accounts" shall mean all "accounts," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party and, in any
event, including (a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to any Credit Party, whether arising out of
goods sold or services rendered by it or from any other transaction (including
any such obligations which may be characterized as an account or contract right
under the Code), (b) all of each Credit Party's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, (c) all of each Credit Party's rights to any goods represented by any
of the foregoing (including unpaid sellers' rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or
repossessed goods), (d) all monies due or to become due to any Credit Party,
under all purchase orders and contracts for the sale of goods or the
performance of services or both by such Credit Party or in connection with any
other transaction (whether or not yet earned by performance on the part of such
Credit Party) now or hereafter in existence, including the right to receive the
proceeds of said purchase orders and contracts, and (e) all collateral security
and guarantees of any kind, now or hereafter in existence, given by any Person
with respect to any of the foregoing.
"Advance" shall mean any Revolving Credit Advance or Swing
Line Advance, as the context may require.
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, five percent (5%) or more of the
Stock having ordinary voting power in the election of directors of such
Persons, (b) each Person that controls, is controlled by or is under common
control with such Person, (c) each of such Person's officers, directors, joint
venturers and partners and (d) in the case of Borrower, the immediate family
members, spouses and lineal descendants of individuals who are Affiliates of
Borrower. For the purposes of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause
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direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided, however, that the term
"Affiliate" shall specifically exclude Agent and each Lender.
"Agent" shall mean GE Capital or its successor appointed
pursuant to Section 9.7.
"Agreement" shall mean the Credit Agreement by and among
Borrower, the other Credit Parties named therein, GE Capital, as Agent and
Lender and the other Lenders signatory from time to time to the Agreement.
"Appendices" shall have the meaning assigned to it in the
recitals to the Agreement.
"Applicable Revolver Index Margin" shall mean one and one-half
of one percent (1.50%) per annum.
"Applicable Revolver LIBOR Margin" shall mean three and
one-quarter of one percent (3.25%) per annum.
"Applicable Term Loan Index Margin" shall mean (a) in the case
of the Term Loan A, one and three-quarters of one percent (1.75%) per annum and
(b) in the case of the Term Loan B and Term Loan C, two percent (2.00%) per
annum.
"Applicable Term Loan LIBOR Margin" shall mean (a) in the case
of the Term Loan A, three and one-half of one percent (3.50%) per annum and (b)
in the case of the Term Loan B and Term Loan C, three and three-quarters of one
percent (3.75%) per annum.
"Assignment Agreement" shall have the meaning assigned to it
in Section 9.1(a).
"Bond" shall have the meaning assigned to it in Section
2.3(I).
"Borrower Accounts" shall have the meaning assigned to it in
Annex C.
"Borrower" shall have the meaning assigned thereto in the
recitals to the Agreement.
"Borrowing Availability" shall have the meaning assigned to
it in Section 1.1(a)(i).
"Borrowing Base" shall mean, as of any date of determination
by Agent, from time to time, an amount equal to the sum at such time of the
following, minus the Tessco Liquidation Reserve then in effect:
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(a) eighty-five percent (85%) of Borrower's and Tessco's
Eligible Accounts, less any Reserves established by Agent at such
time;
(b) twenty-five percent (25%) of the book value of
Borrower's and Tessco's Eligible Inventory valued on a first-in,
first-out basis (at the lower of cost or market), less any Reserves
established by Agent at such time; and
(c) the Supplemental Amount.
"Borrowing Base Certificate" shall mean a certificate to be
executed and delivered from time to time by Borrower in the form attached to
the Agreement as Exhibit 4.1(b).
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of Illinois or New York and in reference to LIBOR Loans shall mean any
such day that is also a LIBOR Business Day.
"California Award" shall mean any judgment, settlement or
other award payable to any Credit Party in connection with the litigation
pending with the United States District Court for the Southern District of
California known as Directed Electronics, Inc. v. Code-Alarm, Inc., case
number 95-0513(CGA), or any appeal thereof.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures (by the expenditure of cash or the incurrence of Indebtedness)
by such Person during any measuring period for any fixed assets or improvements
or for replacements, substitutions or additions thereto, that have a useful
life of more than one year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as
lessee that, in accordance with GAAP, would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance sheet of
such lessee in respect of such Capital Lease.
"Cash Management Systems" shall have the meaning assigned to
it in Section 1.8.
"Change of Control" means (a) any person or group of persons
(within the meaning of the Securities Exchange Act of 1934, as amended), other
than either of the Pegasus Funds, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) of 20% or
more (computed on a fully diluted basis) of the issued and outstanding
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shares of capital Stock of Borrower having the right to vote for the election
of directors of Borrower under ordinary circumstances; (b) during any period of
twelve consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors of Borrower (together with any new
directors whose election by the board of directors of Borrower or whose
nomination for election by the stockholders of Borrower was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose elections or nomination for
election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office, (c)
Borrower shall cease to own and control all of the economic and voting rights
associated with all of the outstanding capital Stock of Tessco (other than as a
result of the Tessco Liquidation, if consummated in compliance with Section
6.1) or any of its other Subsidiaries, (d) Rand W. Mueller shall cease to hold
the office of, or cease to perform the duties substantially to the same degree
as currently being performed of, President and Chief Executive Officer of
Borrower (provided, however, that no such event shall constitute an Event of
Default as a result of Mr. Mueller's death, disability or termination for cause
if Mr. Mueller is thereafter replaced within forty-five (45) days with an
officer acceptable to the Requisite Lenders), or (e) Rand W. Mueller, his wife
and trusts with respect to which he or his wife are sole beneficiaries or
trustees shall cease to own, collectively, less than 400,000, 320,000 and
250,000 shares of Common Stock of Borrower on the first, second and third
anniversaries, respectfully, of the date of this Agreement.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes (including taxes owed to
the PBGC at the time due and payable), levies, assessments, charges, liens,
claims or encumbrances upon or relating to, but in any event in favor of or
owed to a Governmental Authority, (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.
"Chattel Paper" shall mean any "chattel paper," as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Closing Checklist" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex D.
"Closing Date" shall mean October 24, 1997.
"Code" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of Illinois; provided,
however, in the event that, by reason of mandatory provisions of law, any or
all of the attachment, perfection or priority of Agent's or any Lender's
security interest in any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of Illinois,
the
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term "Code" shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of definitions
related to such provisions.
"Collateral" shall mean the property covered by the Security
Agreements, the Pledge Agreements, the Mortgages and the other Collateral
Documents and Litigation Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on behalf of itself and Lenders, to secure the Obligations or Litigation
Obligations or a Credit Party's guaranty obligations with respect to the
Obligations or Litigation Obligations.
"Collateral Documents" shall mean the Security Agreements, the
Pledge Agreements, the Guaranties, the Litigation Guaranty, the Supplemental
Guaranty, the Mortgages, the Patent Security Agreements, the Trademark Security
Agreements, the Copyright Security Agreements and all similar agreements
entered into, guaranteeing payment of, or granting a Lien upon property as
security for payment of, the Obligations or a Credit Party's guaranty
obligations with respect to the Obligations.
"Collateral Reports" shall mean the reports with respect to
the Collateral referred to in Annex F.
"Collection Account" shall mean that certain account of Agent,
account number 502-328-54 in the name of Agent at Bankers Trust Company in New
York, New York.
"Commitment Termination Date" shall mean the earliest of (a)
October 24, 2000, (b) the date of termination of Lenders' obligations to make
Advances and/or incur Letter of Credit Obligations and/or Litigation L/C
Obligations or permit existing Loans to remain outstanding pursuant to Section
8.2(b), and (c) the date of indefeasible prepayment in full by Borrower of the
Loans and the cancellation and return (or stand-by guarantee) of all Letters of
Credit or the cash collateralization of all Letter of Credit Obligations and
Litigation L/C Obligations pursuant to Annex B, and the permanent reduction of
the Revolving Loan Commitment and the Swing Line Commitment to zero dollars
($0), in accordance with the provisions of Section 1.3(a).
"Commitments" shall mean (a) as to any Lender, the aggregate
of such Lender's Revolving Loan Commitment (including without duplication the
Swing Line Lender's Swing Line Commitment) and Term Loan Commitment as set
forth on the signature page to the Agreement or in the most recent Assignment
Agreement executed by such Lender and (b) as to all Lenders, the aggregate of
all Lenders' Revolving Loan Commitments (including without duplication the
Swing Line Lender's Swing Line Commitment) and Term Loan Commitments, which
aggregate maximum commitment shall be Twenty-Five Million Five Hundred Thousand
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Dollars ($25,500,000.00) on the Closing Date, as such amount may be adjusted,
if at all, from time to time in accordance with the Agreement.
"Compliance Certificate" shall have the meaning assigned to it
in Annex E.
"Concentration Accounts" shall have the meaning assigned to it
in Annex C.
"Contracts" shall mean all "contracts," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party, in
any event, including all contracts, undertakings, or agreements (other than
rights evidenced by Chattel Paper, Documents or Instruments) in or under which
any Credit Party may now or hereafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account.
"Control Letter" means a letter agreement between Agent and
(i) the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party, (ii) a securities intermediary with
respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the
name of any Credit Party, (iii) a futures commission merchant or clearing house
with respect to commodity accounts and commodity contracts held by any Credit
Party, whereby, among other things, the issuer, securities intermediary or
futures commission merchant disclaims any security interest in the applicable
financial assets, acknowledges the Lien of Agent, on behalf of itself and
Lenders, on such financial assets, and agrees to follow the instructions or
entitlement orders of Agent without further consent by the affected Credit
Party.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright or Copyright registration.
"Copyright Security Agreements" shall mean, collectively, each
Copyright Security Agreement executed by a Credit Party in favor of Agent, on
behalf of itself and Lenders, with respect to Copyrights, as security for the
obligations or for such Credit Party's guaranty obligations with respect to the
Obligations.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all copyrights and general
intangibles of like nature (whether registered or unregistered), now owned or
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any state or
territory thereof, or any other country or any political subdivision thereof,
and (b) all reissues, extensions or renewals thereof.
"Credit Parties" shall mean Borrower and each of its
Subsidiaries.
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"DEI Litigation" shall mean the litigation currently pending
with the United States District Court for the Eastern District of Michigan
known as Code Alarm, Inc. v. Electromotive Technologies Corporation and
Directed Electronics, Inc., case number 87-CV-74022-DT, and all appeals with
respect thereto.
"Default" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in
Section 1.5(d).
"Disbursement Accounts" shall have the meaning assigned to it
on Annex C.
"Disclosure Schedules" shall mean the Schedules prepared by
Borrower and denominated as Disclosure Schedules 1.4 through 6.7 in the Index
to the Agreement.
"Documents" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Dollars" or "$" shall mean lawful currency of the United
States of America.
"EBITDA" shall mean, with respect to any Person for any fiscal
period, an amount equal to (a) consolidated net income before stock dividends
of such Person for such period, minus (b) the sum of (i) income tax credits,
(ii) interest income, (iii) gain from extraordinary items for such period, (iv)
any aggregate net gain (but not any aggregate net loss) during such period
arising from the sale, exchange or other disposition of capital assets by such
Person (including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets and all
securities), and (v) any other non-cash gains which have been added in
determining consolidated net income, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense (other than preferred stock
dividends), (iii) the amount of non-cash charges (including depreciation and
amortization) for such period, (iv) amortized debt discount for such period,
and (v) the amount of any deduction to consolidated net income as the result of
any grant to any members of the management of such Person of any Stock, in each
case to the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without duplication.
For purposes of this definition, and notwithstanding the foregoing, the
following items shall be excluded in determining consolidated net income of a
Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person's Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of
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dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any
net gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over
the cost to such Person of the investment in such Subsidiary (10) any ordinary
or extraordinary gain realized after the Closing Date as a result of any
judgment entered with respect to the litigation relating to any potential
California Award, and (11) any ordinary or extraordinary loss incurred after
the Closing Date of up to $12,000,000 in respect of the DEI Litigation.
"Eligible Accounts" shall have the meaning assigned to it in
Section 1.6 of the Agreement.
"Eligible Inventory" shall have the meaning assigned to it in
Section 1.7 of the Agreement.
"Environmental Laws" shall mean all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards and
regulations, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for the
regulation and protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
Section Section 9601 et seq.) ("CERCLA"); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. Section Section 5101 et
seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section Section 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. Section
Section 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. Section
Section 2601 et seq.); the Clean Air Act (42 U.S.C. Section Section 7401 et
seq.); the Federal Water Pollution Control Act (33 U.S.C. Section Section 1251
et seq.); the Occupational Safety and Health Act (29 U.S.C. Section Section
651 et seq.); and the Safe Drinking Water Act (42 U.S.C. Section Section
300(f) et seq.), and any and all regulations promulgated thereunder, and all
analogous state, local and foreign counterparts or equivalents and any transfer
of ownership notification or approval statutes.
"Environmental Liabilities" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages, property
damages, natural resource damages, consequential damages, treble damages, costs
and expenses (including all fees, disbursements and expenses of counsel,
experts and consultants),
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fines, penalties, sanctions and interest incurred as a result of or related to
any claim, suit, action, investigation, proceeding or demand by any Person,
whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law, arising under or related to any
Environmental Laws, Environmental Permits, or in connection with any Release or
threatened Release or presence of a Hazardous Material whether on, at, about,
in, under, or migrating from or to any real or personal property of that
Person.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals, registrations or other written
documents required by any Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located and, in any event, including all such Credit Party's machinery
and equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment (other
than software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, all whether now owned or hereafter acquired,
and wherever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit
Party, any trade or business (whether or not incorporated) which, together with
such Credit Party, are treated as a single employer within the meaning of
Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Credit Party or
any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (c) the complete or partial withdrawal of any Credit Party or any
ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
any Credit Party or ERISA Affiliate to make when due required contributions to
a Multiemployer Plan or Title IV Plan unless such failure is cured within 30
days; (g) any other
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event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt
status.
"ESOP" shall mean a Plan which is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in
Section 8.1.
"Excess Cash Flow" shall mean, without duplication, with
respect to any Fiscal Year of Borrower and its Subsidiaries, consolidated net
income plus (a) depreciation, amortization and other non cash charges and
Interest Expense to the extent deducted in determining consolidated net income,
minus (c) Capital Expenditures during such Fiscal Year (excluding the portion
thereof which is financed other than with the proceeds of Loans hereunder and
excluding any Capital Expenditures in such Fiscal Year to the extent in excess
of the amount permitted to be made in such Fiscal Year pursuant to clause (a)
of Annex G), minus (d) Interest Expense paid or accrued (excluding any original
issue discount, interest paid in kind or amortized debt discount, to the extent
included in determining Interest Expense) and scheduled principal payments paid
or payable in respect of Funded Debt, plus or minus (as the case may be), (e)
extraordinary gains or losses which are cash items not included in the
calculation of net income, minus (f) mandatory prepayments paid in cash
pursuant to Section 1.3 other than mandatory prepayments made pursuant to
Sections 1.3(b)(i), 1.3(b)(iv) or 1.3(d), minus voluntary prepayments paid in
cash pursuant to Section 1.3 to the extent such prepayments are applied to any
Term Loan installments in the inverse order of their maturities, and plus (g)
taxes deducted in determining consolidated net income to the extent not paid
for in cash. Notwithstanding the foregoing, losses with respect to the DEI
Litigation shall not reduce Excess Cash Flow for any period.
"Fair Salable Balance Sheet" shall mean a balance sheet of
Borrower prepared in accordance with Section 3.4(d).
"Federal Funds Rate" shall mean, for any day, a floating rate
equal to the weighted average of the rates on overnight Federal funds
transactions among members of the Federal Reserve System, as determined by
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to Agent or any
Lender pursuant to the Agreement or any of the other Loan Documents.
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"Final Judgment" shall mean (a) an order, judgment, ruling or
other decree (or any revision, modification or amendment thereto) issued and
entered by the Lower Court in or relating to the DEI Litigation or by any other
Federal court or state court as may have jurisdiction over any proceeding in
connection with the DEI Litigation, which order, judgment, ruling or other
decree has not been reversed, vacated, stayed, modified or amended and as to
which (i) no appeal, petition for review, reargument, rehearing,
reconsideration or certiorari has been taken and is pending and the time for
filing of such appeal, petition for review, reargument, rehearing,
reconsideration or certiorari has expired, or (ii) such appeal or petition has
been heard and dismissed, denied or otherwise resolved and the time to further
appeal or petition has expired with no further appeal or petition pending; or
(b) a settlement agreement, stipulation or other agreement entered into which
has the effect of any aforesaid order, judgment, ruling or other decree with
like finality.
"Financial Statements" shall mean the consolidated and
consolidating income statements, statements of cash flows and balance sheets of
Borrower delivered in accordance with Section 3.4 of the Agreement and Annex E
to the Agreement.
"Fiscal Month" shall mean any of the monthly accounting
periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting
periods of Borrower, ending on March 31, June 30, September 30 and December 31
of each year.
"Fiscal Year" shall mean any of the annual accounting periods
of Borrower ending on December 31 of each year.
"Fixed Charge Coverage Ratio" shall mean, with respect to any
Person for any fiscal period, the ratio of (i) EBITDA, minus Capital
Expenditures, minus current federal tax expenses paid or accrued to (ii)
scheduled payments of principal (excluding mandatory and voluntary prepayments)
with respect to Indebtedness during such period, plus Interest Expense for such
period.
"Fixtures" shall mean any "fixtures" as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and which by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year from the
date of creation thereof, and specifically including Capital Lease Obligations,
current maturities of long-term debt, revolving credit and short-term debt
extendible beyond one year at the option of the debtor, and also including, in
the case of Borrower, the Obligations.
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"Funding Accounts" shall have the meaning assigned in Annex C.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the Closing Date, consistently
applied as such term is further defined in Annex G to the Agreement.
"GE Capital Fee Letter" shall mean that certain letter, dated
as of October 24, 1997, between GE Capital and Borrower with respect to certain
Fees to be paid from time to time by Borrower to GE Capital.
"GECC Warrant Documents" shall mean, collectively, the GECC
Warrants, the GECC Warrant Purchase Agreement and that certain Registration
Rights Agreement dated as of October 24, 1997 among Borrower and certain
holders of equity securities issued by Borrower.
"GECC Warrants" shall mean that certain Warrant To Purchase
Common Stock of Code-Alarm, Inc. issued by Borrower on October 24, 1997 to GECC
for the purchase of 131,718 initial shares of Borrower's Common Stock, no par
value, for an initial exercise price of approximately $1.88 per share, and each
warrant issued in substitution thereof pursuant to the terms thereof.
"GECC Warrant Purchase Agreement" shall mean that certain
Warrant Purchase Agreement of even date herewith between Borrower and GECC with
respect to the GECC Warrant.
"General Intangibles" shall mean any "general intangibles," as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, and, in any event, including all right, title and interest which such
Credit Party may now or hereafter have in or under any Contract, all customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights , all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights
of indemnification, all books and records, correspondence, credit files,
invoices and other papers, including without limitation all tapes, cards,
computer runs and other papers and documents in the possession or under the
control of such Credit Party or any computer bureau or service company from
time to time acting for such Credit Party.
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"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
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"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
(a) to purchase or repurchase any such primary obligation, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof. The amount of any Guaranteed Indebtedness at any time
shall be deemed to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the primary obligation in respect of which
such Guaranteed Indebtedness is made and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness; or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect
thereof.
"Guaranties" shall mean, collectively, each Guaranty executed
by a Credit Party in favor of Agent and Lenders, in respect of the Obligations.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by or forms the basis of liability under any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance (except for radioactive
substances occurring as a result of natural conditions).
"Indebtedness" of any Person shall mean without duplication
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred six (6) months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business other than those that are overdue by more than six (6)
months unless being contested in good faith, (b) all reimbursement and other
obligations with respect to letters of credit, bankers' acceptances and surety
bonds, whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations, (f)
all obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar agreement
or other similar agreement
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or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.
"Indemnified Liabilities" shall have the meaning assigned to
it in Section 1.13.
"Index Rate" shall mean, for any day, a floating rate equal to
the higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "PRIME RATE" or "base rate on corporate loans posted by at least
75% of the nations 30 largest banks" (or, if The Wall Street Journal ceases
quoting a base rate of the type described, the highest per annum rate of
interest published by the Federal Reserve Board in Federal Reserve statistical
release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan
rate or its equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis
points per annum. Each change in any interest rate provided for in the
Agreement based upon the Index Rate shall take effect at the time of such
change in the Index Rate.
"Index Rate Loan" shall mean a Loan or portion thereof bearing
interest by reference to the Index Rate.
"Instruments" shall mean any "instrument," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other, without limitation, evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses,
Patents, Copyrights, Trademarks, trade secrets and customer lists.
"Intercompany Note" shall have the meaning assigned to it in
Section 6.3.
"Interest Expense" shall mean, with respect to any Person for
any fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP which is paid or accrued during the relevant
period ended on such date, including, in any event, interest expense with
respect to any Funded Debt of such Person, together with all cash dividends
paid or accrued during such period with respect to any capital stock of such
Person (including, without limitation, with respect to Borrower, its Series A
Preferred Stock).
"Interest Payment Date" means (a) as to any Index Rate Loan,
the first Business Day of each month to occur while such Loan is outstanding,
(b) as to any LIBOR Loan, the last day of the applicable LIBOR Period;
provided that in the case of any LIBOR Period greater than
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three months in duration, interest shall be payable at three-month intervals
and on the last day of such LIBOR Period; and provided further that, in
addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and (y)
the Commitment Termination Date shall be deemed to be an "Interest Payment
Date" with respect to any interest which is then accrued under the Agreement.
"Inventory" shall mean any "inventory," as such term is
defined in the Code, now or hereafter owned or acquired by any Credit Party,
wherever located, and in any event including inventory, merchandise, goods and
other personal property which are held by or on behalf of any Credit Party for
sale or lease or are furnished or are to be furnished under a contract of
service, or which constitute raw materials, work in process or materials used
or consumed or to be used or consumed in such Credit Party's business or in the
processing, production, packaging, promotion, delivery or shipping of the same,
including other supplies.
"Investment Property" shall have the meaning ascribed thereto
in Section 9-115 of the Code in those jurisdictions in which such definition
has been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of any Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all commodity contracts held by any Credit
Party; and (iv) all commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"L/C Issuer" shall have the meaning assigned to such term in
Annex B.
"L/C Sublimit" shall have the meaning assigned to such term in
Annex B.
"Lenders" shall mean GE Capital, the other Lenders named on
the signature page of the Agreement, and, if any such Lender shall decide to
assign all or any portion of the Obligations, such term shall include such
assignee.
"Letter of Credit Fee" has the meaning ascribed thereto in
Annex B.
"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Agent and Lenders at the request of Borrower, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of a reimbursement agreement or guaranty by Agent with respect to
any Letter of Credit other than the Litigation L/C. The amount of such
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Letter of Credit Obligations shall equal the maximum amount which may be
payable by Agent or Lenders thereupon or pursuant thereto.
"Letters of Credit" shall mean commercial or standby letters
of credit (including, without limitation, the Litigation L/C), issued for the
account of Borrower by any L/C Issuer, and bankers' acceptances issued by
Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations or Litigation L/C Obligations.
"Letter of Credit Cash Collateral Account" has the meaning
ascribed in Annex B.
"LIBOR Business Day" shall mean a Business Day on which banks
in the city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan,
each period commencing on a LIBOR Business Day selected by Borrower pursuant to
the Agreement and ending one, two, three or six months thereafter, as selected
by Borrower's irrevocable notice to Agent as set forth in Section 1.5(e);
provided that the foregoing provision relating to LIBOR Periods is subject to
the following:
(a) if any LIBOR Period would otherwise end on a day that is
not a LIBOR Business Day, such LIBOR Period shall be extended to the
next succeeding LIBOR Business Day unless the result of such extension
would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding
LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days
prior to such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins
on the last LIBOR Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such LIBOR Period) shall end on the last LIBOR Business
Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require
a payment or prepayment of any LIBOR Loan during a LIBOR Period for
such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall
be no more than five (5) separate LIBOR Loans in existence at any one
time.
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"LIBOR Rate" shall mean for each LIBOR Period, a rate of
interest determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for
the applicable LIBOR Period which appears on Telerate Page 3750 as of
11:00 a.m., London time, on the second full LIBOR Business Day next
preceding the first day of each LIBOR Period (unless such date is not
a Business Day, in which event the next succeeding Business Day will
be used); divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve system or other
governmental authority having jurisdiction with respect thereto, as
now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D
of such Board which are required to be maintained by a member bank of
the Federal Reserve System (such rate to be adjusted to the nearest
one sixteenth of one percent (1/16th of 1%) or, if there is not a
nearest one sixteenth of one percent (1/16th of 1%), to the next
highest one sixteenth of one percent (1/16th of 1%).
If such interest rates shall cease to be available from
Telerate News Service, the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be mutually
acceptable to Agent and Borrower.
"License" shall mean any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Credit Party.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, collateral assignment, deposit arrangement, lien, charge with
respect to specific property, claim with respect to specific property, security
interest, easement or encumbrance, or preference, priority with respect to
specific property or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law of
any jurisdiction other than a financing statement filed solely with respect to
a lessor's interest in property owned by such lessor).
"Litigation" shall have the meaning assigned to it in Section
3.13.
"Litigation Collateral Documents" shall mean, collectively,
all Collateral Documents pursuant to which any Litigation Obligations are
secured or guaranteed.
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"Litigation Guaranty" shall mean that certain Limited
Litigation Guaranty of even date herewith executed and delivered by the
Pegasus Funds in favor of Agent and Lenders.
"Litigation L/C" shall mean a standby letter of credit issued
for the account of Borrower by the L/C Issuer to secure the Bond and with
respect to which Agent and Lenders have incurred Litigation L/C Obligations.
"Litigation L/C Agreement" shall mean that certain Litigation
L/C and Term Loan C Agreement of even date herewith among Borrower, Agent and
the Term Lenders pursuant to which the Agent and the Term Lender have agreed,
subject to certain terms and conditions, to incur the Litigation L/C
Obligations, advance Term Loan C and incur other Litigation Obligations and
each of the parties thereto have agreed to the terms of repayment thereof.
"Litigation L/C Cash Collateral Account" has the meaning
ascribed thereto in Annex B.
"Litigation L/C Issuance Date" shall mean a Business Day on or
after which the conditions set forth in Sections 2.1, 2.3(I) and 2.4 shall have
been satisfied and on which Borrower has requested the L/C Issuer to issue the
Litigation L/C pursuant to the terms and conditions of Annex B and the
Litigation L/C Agreement.
"Litigation L/C Obligations" shall mean all outstanding
obligations incurred by Agent and Lenders, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of a
reimbursement agreement, guaranty or similar accommodation by Agent with
respect to the Litigation L/C. The amount of such Litigation L/C Obligations
shall equal the maximum amount which may be payable by Agent or Lenders
thereupon or pursuant thereto.
"Litigation Obligations" shall mean, collectively, the
Litigation L/C Obligations, the outstanding principal balance of, and accrued
interest on, Term Loan C, all Fees and expenses with respect to the Litigation
L/C, and all other Obligations with respect to the Litigation L/C, the
Litigation L/C Obligations or Term Loan C.
"Loan Account" shall have the meaning assigned to it in
Section 1.12.
"Loan Documents" shall mean the Agreement, the Notes, the
Collateral Documents, the GECC Warrant Documents and all other agreements,
instruments, documents and certificates identified in the Closing Checklist
executed and delivered to, or in favor of, Agent and/or Lenders and including
all other pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of any Credit Party, or any employee of any Credit
Party, and delivered to Agent or any Lender in connection with the Agreement or
the transactions contemplated hereby. Any reference in the Agreement or any
other Loan Document to a Loan Document shall include all
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appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to such Agreement
as the same may be in effect at any and all times such reference becomes
operative.
"Loans" shall mean the Revolving Loan, the Swing Line Loan and
the Term Loan.
"Lower Court" shall mean the United States District Court for
the Eastern District of Michigan.
"Lower Court Judgment" shall mean a judgment or other award
entered against Borrower (and, possibly, other Credit Parties) by the United
States District Court for the Eastern District of Michigan with respect to the
DEI Litigation (excluding any partial judgment or award until such time as a
complete judgment or award has been entered by such court with respect to all
matters at issue in the DEI Litigation).
"Management Options" shall mean, collectively, the stock
options from time to time issued by Borrower pursuant to the Code- Alarm, Inc.
1987 Stock Option Plan dated as of May 29, 1987, as amended by Amendment No. 1
thereto dated as of March 16, 1990, and Amendment No. 2 thereto dated as of
March 27, 1992, and the Code-Alarm, Inc. 1997 Stock Option Plan dated as of
October 24, 1997.
"Margin Stock" shall have the meaning assigned to it in
Section 3.10.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations, prospects or financial or other
condition of any Credit Party, (b) Borrower's ability to pay any of the Loans
or any of the other Obligations in accordance with the terms of the Agreement,
or any Credit Party's ability to perform its obligations under the terms of any
Loan Document to which it is a party, (c) the Collateral or Agent's Liens, on
behalf of itself and Lenders, on the Collateral or the priority of such Liens,
or (d) Agent's or any Lender's rights and remedies under the Agreement and the
other Loan Documents. Without limiting the foregoing, any event or occurrence
which results or could reasonably be expected to result in costs or liabilities
in excess of $250,000 shall, for purposes of this Agreement and the other Loan
Documents, be deemed to have a Material Adverse Effect. Notwithstanding the
foregoing, the DEI Litigation shall not be deemed to have had, or reasonably be
expected to have, a Material Adverse Effect unless (i) the sum of (A) the
amount of the Lower Court Judgment, the Final Judgment or any other judgment
with respect to the DEI Litigation plus (B) the aggregate amount of accrued and
unpaid expenses (including, without limitation, legal fees) incurred by the
Credit Parties with respect to the DEI Litigation as of the time of the entry
or other determination of such judgment, exceeds $12,000,000 (provided,
however, the amount determined pursuant to clause (B) shall not be included in
such sum to the extent that, as the date of determination hereof, the Net
Borrowing Base Availability minus the Letter of Credit Obligations and minus
such amount, exceeds $500,000), (ii) the Lower Court Judgment is reasonably
expected to be
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entered and the conditions described in Section 2.3(I) shall not have been
satisfied, or could reasonably be expected to be unsatisfied, by the time
specified in Section 2.3(I)(c), or the Bond or the Litigation L/C is otherwise
reasonably expected not to be issued or (iii) the Final Judgment is reasonably
expected to be entered and the conditions described in Section 2.2 shall not
have been satisfied, or could reasonably be expected to be unsatisfied, by the
time specified in Section 2.2(c), or Term Loan B is otherwise reasonably
expected not to be made.
"Maximum Amount" shall mean, at any particular time, an amount
equal to the Revolving Loan Commitment of all Lenders.
"Mortgaged Properties" shall have the meaning assigned to it
in Annex D.
"Mortgages" shall mean, collectively, each mortgage, deed of
trust, leasehold mortgage, leasehold deeds of trust, collateral assignment of
leases or other real estate security document executed by a Credit Party in
favor of Agent, on behalf of itself and Lenders, with respect to the Mortgaged
Properties, as security for the Obligations or for such Credit Party's guaranty
obligations with respect to the Obligations.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of
them.
"Net Borrowing Availability" shall mean as of any date of
determination, the lesser of (a) the Maximum Amount and (b) the Borrowing Base,
less the sum of the aggregate Revolving Loan and Swing Line Loan then
outstanding.
"Net Litigation Liability" shall have the meaning assigned to
it in Section 2.2.
"Net Worth" shall mean, with respect to any Person as of any
date of determination, and without duplication, the book value of the total
gross assets of such Person, minus (a) reserves applicable thereto, and minus
(b) all of such Person's liabilities on a consolidated basis (including accrued
and deferred income taxes), all as determined in accordance with GAAP,
excluding the effects of losses incurred after the Closing Date of up to
$12,000,000 in respect of the DEI Litigation, and the effects of charge-offs or
writedowns of up to $3,500,000 related to the Tessco Liquidation (all such
charge-offs or writedowns to occur by December 31, 1997).
"Notes" shall mean the Revolving Notes, the Swing Line Notes
and the Term Notes, collectively.
"Notice of Conversion/Continuation" shall have the meaning
assigned to it in Section 1.5(e).
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"Notice of Revolving Credit Advance" shall have the meaning
assigned to it in Section 1.1(a).
"Notice of Term Loan B Advance" shall have the meaning
assigned to it in Section 1.1(c)(i).
"Notice of Term Loan C Advance" shall have the meaning
assigned to it in Section 1.1(d)(iii).
"Obligations" shall mean all loans, advances, debts,
liabilities and obligations for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing
by any Credit Party to Agent or any Lender, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. This term includes all
principal, interest (including all interest which accrues after the
commencement of any case or proceeding in bankruptcy after the insolvency of,
or for the reorganization of any Credit Party, whether or not allowed in such
proceeding), Fees, Charges, Letter of Credit Obligations, Litigation L/C
Obligations, expenses, attorneys' fees and any other sum chargeable to any
Credit Party under the Agreement or any of the other Loan Documents.
"OEM Accreditations" shall mean, collectively, the
accreditations and similar awards granted or afforded to Borrower or any other
Credit Party by one or more customers party to an OEM Contract with respect to
any products or services sold or provided by Borrower or any other Credit
Parties to such customers pursuant to such OEM Contracts, including, without
limitation, the accreditations described on Disclosure Schedule (3.22).
"OEM Contracts" shall mean, collectively, the agreements to
which one or more Credit Parties is party, together with their related purchase
orders, renewals, exhibits and schedules, of the type described in Section
3.22, including, without limitation, those listed on Disclosure Schedule
(3.22), in any case pursuant to which revenues have been generated (or are
reasonably expected to be generated) by the Credit Parties in excess of
$1,000,000 per annum.
"Overadvance" shall have the meaning assigned to it in Section
1.1(a)(iii).
"Patent License" shall mean rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right with
respect to any invention on which a Patent is in existence.
"Patent Security Agreements" shall mean, collectively, each
Patent Security Agreement executed by a Credit Party in favor of Agent, on
behalf of itself and Lenders, with respect to Patents and Patent Licenses, as
security for the Obligations or for such Credit Party's guaranty obligation
with respect to the Obligations.
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"Patents" shall mean all of the following in which any Credit
Party now holds or hereafter acquires any interest: (a) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State or Territory thereof, or any other country, and
(b) all reissues, continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pegasus Funds" shall mean, collectively, Pegasus Partners,
L.P., a Delaware limited partnership, and Pegasus Related Partners, L.P., a
Delaware limited partnership.
"Permitted Encumbrances" shall mean the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable; (b) pledges or deposits of money securing obligations
under workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (c) pledges or deposits of money made in
the ordinary course of business securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which any Credit Party is a
party as lessee; (d) deposits of money securing statutory obligations of any
Credit Party; (e) inchoate and unperfected workers', mechanics' or similar
liens arising in the ordinary course of business, so long as such Liens attach
only to Equipment, Fixtures and/or Real Estate; (f) carriers', warehousemen's,
suppliers' or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount not in
excess of $25,000 at any time, so long as such Liens attach only to Inventory;
(g) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Credit Party is a party; (h) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j); (i)
zoning restrictions, easements, licenses, or other restrictions on the use of
any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (j) presently existing or hereinafter
created Liens in favor of Agent, on behalf of Lenders; and (k) Liens expressly
permitted under clauses (b) and (c) of Section 6.7 of the Agreement.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit
corporation, other entity or government (whether federal, state, county, city,
municipal, local, foreign, or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean, at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which any Credit Party maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any Credit Party.
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"Pledge Agreements" shall mean, collectively, each Pledge
Agreement, executed by a Credit Party in favor of Agent, on behalf of itself
and Lenders, with respect to Stock or investment property, as security for the
Obligations or for such Credit Party's guaranty obligations with respect to the
Obligations.
"Prior Lender" shall mean NBD Bank.
"Prior Lender Obligations" shall mean all loans, letter of
credit obligations, fees, expense reimbursement obligations, indemnification
obligations, and other obligations of payment or performance, whether
liquidated or contingent, and whether or not due and payable, owing by any of
the Credit Parties to the Prior Lender or any participant or assignee of the
Prior Lender, other than unsecured obligations to such parties with respect to
unknown reimbursement or indemnification obligations and ongoing fees, expenses
and other obligations arising from the continuation of portions of the Cash
Management System with the Prior Lender.
"Proceeds" shall mean "proceeds," as such term is defined in
the Code and, in any event, shall include (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to any Credit Party from
time to time with respect to any of the Collateral, (b) any and all payments
(in any form whatsoever) made or due and payable to any Credit Party from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of governmental authority), (c) any
claim of any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
"Pro Forma" means the unaudited consolidated and consolidating
balance sheet of Borrower and its Subsidiaries delivered pursuant to Section
3.4 after giving pro forma effect to the Related Transactions.
"Projections" means Borrower's forecasted consolidated: (a)
balance sheets; (b) profit and loss statements; (c) cash flow statements; and
(d) capitalization statements, in each case prepared in a manner consistent
with the historical Financial Statements of the Borrower, together with
appropriate supporting details and a statement of underlying assumptions.
"Pro Rata Share" shall mean with respect to all matters
relating to any Lender (a) with respect to the Revolving Loan or the Swing Line
Loan, the percentage obtained by dividing (i) the Revolving Loan Commitment,
including the Swing Line Commitment of that Lender by (ii) the aggregate
Revolving Loan Commitments, including the Swing Line Commitment of all Lenders,
and (b) with respect to the Term Loans, the percentage obtained by dividing (i)
the
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Term Loan Commitments of that Lender by (ii) the aggregate Term Loan
Commitments of all Lenders, as any such percentages may be adjusted by
assignments permitted pursuant to Section 9.1.
"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"Qualified Public Offering" shall mean a firm underwritten
public offering of common stock registered under the Securities Act of 1933, as
amended, by a nationally recognized investment banking firm, and after giving
effect to which the issuer shall be or remain qualified for listing on the
NASDAQ National Market, the American Stock Exchange or the New York Stock
Exchange.
"Real Estate" shall have the meaning assigned to it in Section
3.6.
"Refinancing" shall mean the repayment in full by Borrower of
the Prior Lender Obligations on the Closing Date and the replacement,
termination or securing of any letter of credit obligations constituting Prior
Lender Obligations pursuant to Section 2.1(b) on the Closing Date.
"Refunded Swing Line Loan" shall have the meaning assigned to
it in Section 1.1(e)(iii).
"Related Transactions" means the initial borrowing under the
Revolving Loan and borrowing of the Term Loan A on the Closing Date, the
issuance of the GECC Warrants, the Refinancing, the issuance of the Series A
Preferred Stock and the "Attached Warrants" and "Shortfall Warrants" (as
defined in the Series A Preferred Stock Documents), the issuance of the Series
B Preferred Stock, the payment of all fees, costs and expenses associated with
all of the foregoing, and the execution and delivery of all of the Related
Transactions Documents.
"Related Transactions Documents" shall mean the Loan
Documents, the Series A Preferred Stock Documents, the Series B Preferred Stock
Documents, and the agreements and documents evidencing and governing the terms
of the Refinancing.
"Release" shall mean any release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.
"Requisite Lenders" shall mean (a) Lenders having more than
sixty-six and two-thirds percent (66 2/3%) of the Commitments of all Lenders,
or (b) if the Commitments have been terminated, more than sixty-six and
two-thirds percent (66 2/3%) of the aggregate
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outstanding amount of all Loans (with the Swing Line Loan being attributed to
the Lender making such loan), Letter of Credit Obligations and Litigation L/C
Obligations.
"Requisite Revolving Lenders" shall mean (a) Lenders having
more than sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan
Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been
terminated, more than sixty-six and two-thirds percent (66 2/3%) of the
aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan
being attributed to the Lender making such Loan) and Letter of Credit
Obligations.
"Reserves" shall mean, with respect to the Borrowing Base (a)
reserves established by Agent from time to time against Borrower's and/or
Tessco's Eligible Inventory pursuant to Section 5.9, (b) reserves established
pursuant to Section 5.4(c), and (c) such other reserves against Borrower's
and/or Tessco's Eligible Accounts or Eligible Inventory of Borrower or Tessco
which Agent may, in its reasonable credit judgment, establish from time to
time. Without limiting the generality of the foregoing, reasonable Reserves
established to ensure the payment of accrued Interest Expenses or Indebtedness,
Reserves for product warranty liabilities and expenses, and Reserves for
physical Inventory test counts, shall be deemed to be a reasonable exercise of
Agent's credit judgment.
"Restricted Payment" shall mean (a) the declaration or payment
of any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock
(other than common stock dividends and, in the case of the Series A Preferred
Stock, non-cash, payment-in-kind dividends), (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of a
Person's Stock or any other payment or distribution made in respect thereof,
either directly or indirectly, (c) any payment or prepayment of principal of,
premium, if any, or interest, fees or other charges on or with respect to, and
any redemption, purchase, put, call, retirement, defeasance, sinking fund or
similar payment and any claim for rescission with respect to, any Subordinated
Debt; (d) any payment made to redeem, purchase, repurchase, put, call or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Person's Stock or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to
any stockholder of such Person; and (g) any payment of management fees (or
other fees of a similar nature) by such Person to any stockholder of such
Person or their Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Plan that is
a "welfare plan" as defined in Section 3(2) of ERISA, that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
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"Revolving Credit Advance" shall have the meaning assigned to
it in Section 1.1(a)(i).
"Revolving Lenders" shall mean, as of any date of
determination, Lenders having a Revolving Loan Commitment.
"Revolving Loan" shall mean as the context may require, at any
time, the sum of (i) the aggregate amount of outstanding Revolving Credit
Advances plus (ii) the aggregate Letter of Credit Obligations.
"Revolving Loan Commitment" shall mean (a) as to any Lender,
the aggregate commitment of such Lender to make Revolving Credit Advances
(including without duplication Swing Line Advances) and/or incur Letter of
Credit Obligations as set forth in the signature page to the Agreement or in
the most recent Assignment Agreement executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make Revolving Credit
Advances (including without duplication Swing Line Advances) and/or incur
Letter of Credit Obligations, which aggregate commitment shall be Twelve
Million Dollars ($12,000,000.00) on the Closing Date, as such amount may be
adjusted, if at all, from time to time in accordance with the Agreement.
"Revolving Note" shall have the meaning assigned to it in
Section 1.1(a)(ii).
"Security Agreements" shall mean, collectively, each Security
Agreement executed by a Credit Party in favor of Agent, on behalf of itself and
Lenders, as security for the Obligations or for such Credit Party's guaranty
obligations with respect to the Obligations.
"Series A Preferred Stock" shall mean Borrower's Series A
Preferred Stock, $0.01 par value, and Series A-2 Preferred Stock, $0.01 par
value.
"Series A Preferred Stock Documents" shall mean, collectively,
(a) that certain Unit Purchase Agreement dated as of October 24, 1997 among
Borrower and the Pegasus Funds, (b) that certain Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and Other
Rights of Series A Preferred Stock of Code-Alarm, Inc. adopted by Borrower's
board of directors as of October 24, 1997, (c) that certain Registration Rights
Agreement dated as of October 24, 1997 among Borrower and certain holders of
equity securities issued by Borrower and (d) the Series A Warrants.
"Series A Warrants" shall mean, collectively, the "Attached
Warrants", "Shortfall Warrants" and "Litigation Warrants", as each of such
terms is defined in the Series A Preferred Stock Documents.
"Series B Pledgor" shall mean Mr. Craig S. Camalo.
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"Series B Preferred Stock" shall mean Borrower's Series B
Preferred Stock, no par value.
"Series B Preferred Stock Documents" shall mean (a) that
certain Subscription Agreement for Code-Alarm Inc. Series B Preferred Stock of
even date herewith between the Series B Pledgor and Borrower and (b) that
certain Certificate of Designation, Number, Powers, Preference and Relative,
Participating, Optional, and Other Rights of Series B Preferred Stock of
Code-Alarm, Inc.
"Solvent" shall mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such
Person on a going concern basis is greater than the total amount of
liabilities, including contingent liabilities, of such Person; (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probably liability of such Person on its debts
as they become absolute and matured; (c) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such Person's
ability to pay such debts and liabilities as they mature; and (d) such Person
is not engaged in a business or transaction, and is not about to engage in a
business or transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities (such as
litigation, guarantees and pension plan liabilities) at any time shall be
computed as the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can reasonably be expected to
become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including common stock, preferred stock or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Subordinated Debt" shall mean any Indebtedness of any Credit
Party subordinated to the Obligations in a manner and form satisfactory to
Agent and Lenders in their sole discretion, as to right and time of payment and
as to any other rights and remedies thereunder, including, without limitation,
any Subordinated Debt issued by Borrower for the purposes described in Section
2.2(b).
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, 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) is at the time,
directly or indirectly, owned legally or beneficially by such Person and/or one
or more Subsidiaries of such Person, or with respect to which any such Person
has the right to vote or designate the vote of fifty percent
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(50%) or more of such Stock whether by proxy, agreement, operation of law or
otherwise, and (b) any partnership or limited liability company in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%) or of which any such Person is a
general partner or may exercise the powers of a general partner.
"Supermajority Revolving Lenders" shall mean (a) Lenders
having eighty percent (80%) or more of the Revolving Loan Commitments of all
Lenders, or (b) if the Revolving Loan Commitments have been terminated, eighty
percent (80%) or more of the aggregate outstanding amount of the Revolving Loan
(with the Swing Line Loan being attributed to the Lender making such Loan) and
Letter of Credit Obligations.
"Supplemental Amount" shall mean $4,000,000, provided that the
Supplemental Guaranty is valid, binding and enforceable, and otherwise the
"Supplemental Amount" shall equal zero..
"Supplemental Guaranty" shall mean that certain Limited
Supplemental Guaranty of even date herewith executed and delivered by the
Pegasus Funds.
"Swing Line Advance" has the meaning assigned to it in Section
1.1(e)(i).
"Swing Line Availability" has the meaning assigned to it in
Section 1.1(e)(i).
"Swing Line Commitment" shall mean, as to the Swing Line
Lender, the commitment of the Swing Line Lender to make Swing Line Loans as set
forth on the signature page to the Agreement, which commitment constitutes a
subfacility of the Revolving Loan Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean, as the context may require, at
any time, the aggregate amount of outstanding Swing Line Advances.
"Swing Line Note" has the meaning assigned to it in Section
1.1(e)(ii).
"Taxes" shall mean taxes, levies, imposts, deductions, Charges
or withholdings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income of Agent or a Lender by the
jurisdictions under the laws of which Agent and Lenders are organized or in
which they otherwise conduct operations, or any political subdivision thereof.
"Term A Note" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term B Note" shall have the meaning assigned to it in Section
1.1(c)(i).
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"Term C Note" shall have the meaning assigned to it in Section
1.1(d).
"Term Lenders" shall mean those Lenders having Term Loan
Commitments.
"Term Loan A" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term Loan A Commitment" shall mean (a) as to any Lender, the
commitment of such Lender to make its Pro Rata Share of the Term Loan A as set
forth on the signature page to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all such Lenders, the
aggregate commitment of all Lenders to make the Term Loan A, which aggregate
commitment shall be One Million Five Hundred Thousand Dollars ($1,500,000) on
the Closing Date.
"Term Loan B" shall have the meaning assigned to it in Section
1.1(c)(i).
"Term Loan B Commitment" shall mean (a) as to any Lender, the
commitment of such Lender to make its Pro Rata Share of the Term Loan B as set
forth in the signature page to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all such Lenders, the
aggregate commitment of all Lenders to make the Term Loan B, which aggregate
commitment shall be Three Million Dollars ($3,000,000.00) on the Closing Date.
"Term Loan B Funding Date" shall mean a Business Day on or
after which the conditions set forth in Sections 2.1, 2.2 and 2.4 shall have
been satisfied and on which the Term Lenders have been requested to fund the
Term Loan B pursuant to Section 1.1(c)(i).
"Term Loan C" shall have the meaning assigned to it in Section
1.1(d).
"Term Loan C Commitment" shall mean (a) as to any Lender, the
commitment of such Lender to make its Pro Rata Share of the Term Loan C as set
forth in the signature pages to the Agreement or in the most recent Assignment
Agreement executed by such Lender and (b) as to all such Lenders, the aggregate
commitment of all Lenders to make the Term Loan C, which aggregate commitment
shall be Twelve Million Dollars ($12,000,000) on the Closing Date.
"Term Loan C Funding Date" shall mean a Business Day on or
after which the conditions set forth in Sections 2.1, 2.3(II) and 2.4 shall
have been satisfied and on which the Term Lenders have been requested to fund
the Term Loan C pursuant to Section 1.1(c) of the Litigation L/C Agreement.
"Term Loan Commitment" shall mean, collectively, the Term Loan
A Commitment, the Term Loan B Commitment and the Term Loan C Commitment.
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"Term Loan(s)" shall mean the Term Loan A, the Term Loan B,
the Term Loan C, any portion or component of the Term Loan A, Term Loan B or
Term Loan C, or the Term Loan A, the Term Loan B and the Term Loan C,
collectively, in each case as the context requires.
"Term Note" shall mean, collectively, the Term A Note, the
Term B Note and the Term C Note, or any one of such instruments.
"Termination Date" shall mean the date on which the Loans have
been indefeasibly repaid in full and all other Obligations under the Agreement
and the other Loan Documents have been completely discharged and Letter of
Credit Obligations and Litigation L/C Obligations have been cash
collateralized, cancelled or backed by stand-by letters of credit in accordance
with Annex B, and Borrower shall have no further right to borrow any monies or
obtain additional financial accommodations under the Agreement or the
Litigation L/C Agreement.
"Tessco" means Tessco Group, Inc., a Michigan corporation.
"Tessco Liquidation" shall mean the merger of Tessco with and
into Borrower, or the liquidation or dissolution of Tessco such that the assets
and liabilities of Tessco immediately prior to such liquidation or dissolution
are assigned to and assumed by Borrower upon the consummation of such
liquidation or dissolution.
"Tessco Liquidation Reserve" shall mean, as of any date of
determination, the total liabilities and contingent liabilities (to the extent
known and probable) of Tessco, other than Tessco's intercompany liabilities
owing to Borrower and Tessco's obligations to Agent and Lenders under the Loan
Documents, plus an amount equal to two months' rental obligations with respect
to all existing operating leases of Tessco.
"Title IV Plan" shall mean an employee pension benefit plan,
as defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which
is covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party granting any
right to use any Trademark.
"Trademark Security Agreements" shall mean, collectively, each
Trademark Security Agreement executed by a Credit Party in favor of Agent, on
behalf of Lenders, with respect to Trademarks and Trademark Licenses, as
security for the Obligations or for such Credit Party's guaranty obligations
with respect to the Obligations.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles,
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service marks, logos, other source or business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs and general
intangibles of like nature (whether registered or unregistered), now owned or
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all goodwill associated with
or symbolized by any of the foregoing.
"Unfunded Pension Liability" shall mean, at any time, the
aggregate amount, if any, of the sum of (a) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of
five (5) years following a transaction which might reasonably be expected to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.
All other undefined terms contained in any of the Loan
Documents shall, unless the context indicates otherwise, have the meanings
provided for by the Code as in effect in the State of Illinois to the extent
the same are used or defined therein. Unless otherwise specified, references
in the Agreement or any of the Appendices to a Section, subsection or clause
refer to such Section, subsection or clause as contained in the Agreement. The
words "herein," "hereof" and "hereunder" and other words of similar import
refer to the Agreement as a whole, including all Annexes, Exhibits and
Schedules, as the same may from time to time be amended, restated, modified or
supplemented, and not to any particular section, subsection or clause contained
in the Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders. The words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that the chief financial officer or chief executive officer of such
Credit Party has actual knowledge or awareness of a particular fact or
circumstance or that either such officer, if it had exercised reasonable
diligence, would have known or been aware of such fact or circumstance.
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* * * *
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ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the
Agreement and the Litigation L/C Agreement, Agent and Revolving Lenders agree
to incur (or in the case of the Litigation L/C, the Term Lenders agree to
incur), from time to time prior to the Commitment Termination Date, upon the
request of Borrower, Letter of Credit Obligations and Litigation L/C
Obligations by causing Letters of Credit to be issued (by a bank or other
legally authorized Person selected by or acceptable to Agent in its sole
discretion (each, an "L/C Issuer")) for Borrower's account and guaranteed by
Agent; provided, however, that if the L/C Issuer is a Revolving Lender, then
such Letters of Credit (other than the Litigation L/C) shall not be guaranteed
by Agent but rather each Revolving Lender shall, subject to the terms and
conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (b)(ii) below; and,
provided, further, that if the L/C Issuer is a Term Lender, then the Litigation
L/C shall not be guaranteed by Agent but rather each Term Lender shall, subject
to the terms and conditions hereinafter set forth, purchase (or be deemed to
have purchased) risk participations in the Litigation L/C, as more fully
described in paragraph (b)(ii) below. The aggregate amount of all such Letter
of Credit Obligations shall not at any time exceed the least of (i) One Million
Dollars ($1,000,000.00) (the "L/C Sublimit"), and (ii) the Maximum Amount less
the aggregate outstanding principal balance of the Revolving Credit Advances
and the Swing Line Loan, and (iii) the Borrowing Base less the aggregate
outstanding principal balance of the Revolving Credit Advances and the Swing
Line Loan. The aggregate amount of all Litigation L/C Obligations shall not at
any time exceed the least of (i) $12,000,000, (ii) the amount necessary to
obtain and secure the Bond and (iii) the aggregate maximum amount of Litigation
L/C Obligations which are guaranteed pursuant to the terms and conditions of
the Litigation Guaranty. No such Letter of Credit shall have an expiry date
which is more than one year following the date of issuance thereof, and neither
Agent nor any Lenders shall be under any obligation to incur Letter of Credit
Obligations in respect of, or purchase risk participations in, any Letter of
Credit having an expiry date which is later than the Commitment Termination
Date.
(b) Advances Automatic; Participations. (i) In the event
that Agent or any Revolving Lender shall make any payment on or pursuant to any
Letter of Credit Obligation, such payment shall then be deemed automatically to
constitute a Revolving Credit Advance to the applicable Borrower under Section
1.1(a) of the Agreement regardless of whether a Default or Event of Default
shall have occurred and be continuing and notwithstanding Borrower's failure to
satisfy the conditions precedent set forth in Section 2, and each Revolving
Lender shall be obligated to pay its Pro Rata Share thereof in accordance with
the Agreement. The failure of any Revolving Lender to make available to Agent
for Agent's own account its Pro Rata Share of any such Revolving Credit Advance
or payment by Agent under or in respect of a Letter of
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Credit (other than the Litigation L/C) shall not relieve any other Revolving
Lender of its obligation hereunder to make available to Agent its Pro Rata
Share thereof, but no Revolving Lender shall be responsible for the failure of
any other Revolving Lender to make available such other Revolving Lender's Pro
Rata Share of any such payment.
(ii) In the event that Agent or any Term Lender shall make
payments on or pursuant to the Litigation L/C Obligations, such payments shall
then be deemed automatically to constitute all or part of the Term Loan C to
Borrower pursuant to Section 1.1(d)(ii) of the Agreement and pursuant to the
Litigation L/C Agreement regardless of whether a Default or Event of Default
shall have occurred and be continuing and notwithstanding Borrower's failure to
satisfy any of the conditions precedent set forth in Section 2.4, and each Term
Lender shall be obligated to pay its Pro Rata Share thereof to the Agent in
accordance with the Agreement. The failure of any Term Lender to make
available to Agent for Agent's own account its Pro Rata Share of any such
payment by Agent under or in respect of the Litigation L/C shall not relieve
any other Term Lender of its obligation hereunder to make available to Agent
its Pro Rata Share thereof, but no Term Lender shall be responsible for the
failure of any other Term Lender to make available such other Term Lender's Pro
Rata Share of any such payment.
(iii) If it shall be illegal or unlawful for Borrower to
incur Revolving Credit Advances as contemplated by paragraph (b)(i) above
because of an Event of Default described in Section 8.1(h) or (i) or otherwise
or if it shall be illegal or unlawful for any Revolving Lender to be deemed to
have assumed a ratable share of the reimbursement obligations owed to an L/C
Issuer, or if the L/C Issuer is a Revolving Lender, then (i) immediately and
without further action whatsoever, each Revolving Lender shall be deemed to
have irrevocably and unconditionally purchased from Agent (or such L/C Issuer,
as the case may be) an undivided interest and participation equal to such
Revolving Lender's Pro Rata Share (based on the Revolving Loan Commitments) of
the Letter of Credit Obligations in respect of all Letters of Credit then
outstanding and (ii) thereafter, immediately upon issuance of any Letter of
Credit, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be)
an undivided interest and participation in such Revolving Lender's Pro Rata
Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations with respect to such Letter of Credit on the date of such issuance.
Each Revolving Lender shall fund its participation in all payments or
disbursements made under the Letters of Credit in the same manner as provided
in the Agreement with respect to Revolving Credit Advances.
(iv) If it shall be illegal or unlawful for Borrower to incur
the Term Loan C as contemplated by paragraph (b)(ii) above because of an Event
of Default described in Section 8.1(h) or (i) or otherwise or if it shall be
illegal or unlawful for any Term Lender to be deemed to have assumed a ratable
share of the reimbursement obligations owed to an L/C Issuer, or if the L/C
Issuer is a Term Lender, then immediately and without further action
whatsoever, each Term Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be)
an undivided interest and participation equal to such Term
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Lender's Pro Rata Share (based on the Term Loan C Commitments) of the
Litigation L/C Obligations. Each Term Lender shall fund its participation in
all payments or disbursements made under the Litigation L/C as provided in the
Agreement.
(c) Cash Collateral. If Borrower is required to provide
cash collateral for any Letter of Credit Obligations or Litigation L/C
Obligations pursuant to the Agreement prior to the Commitment Termination Date,
Borrower will pay to Agent for the benefit of the applicable Lenders cash or
cash equivalents acceptable to Agent ("Cash Equivalents") in an amount equal to
105% of the maximum amount then available to be drawn under each applicable
Letter of Credit outstanding for the benefit of Borrower. Any and all such
funds or Cash Equivalents securing or otherwise relating to any Letter of
Credit Obligations shall be held by Agent in a cash collateral account (the
"Letter of Credit Cash Collateral Account") maintained at a bank or financial
institution acceptable to Agent. Any and all such funds or Cash Equivalents
securing or otherwise relating to the Litigation L/C Obligations shall be held
by Agent in a cash collateral account (the "Litigation L/C Cash Collateral
Account") maintained at a bank or financial institution acceptable to Agent.
The Letter of Credit Cash Collateral Account and the Litigation L/C Cash
Collateral Account shall collectively be referred to as the "Cash Collateral
Accounts." The Cash Collateral Accounts shall be in the name of Borrower and
shall be pledged to, and subject to the control of, Agent, for the benefit of
Agent and Lenders, in a manner satisfactory to Agent. Borrower hereby pledges
and grants to Agent, on behalf of Lenders, a security interest in all such
funds and Cash Equivalents held in the Cash Collateral Accounts from time to
time and all proceeds thereof, as security for the payment of all amounts due
in respect of the Letter of Credit Obligations, Litigation L/C Obligations and
other Obligations, whether or not then due. The Agreement, including this
Annex B, shall constitute a security agreement under applicable law. The
funds, Cash Equivalents and proceeds of, in or relating to the Litigation L/C
Cash Collateral Account shall at all times be segregated from, and shall not at
any time be commingled or deposited with, the funds, Cash Equivalents and
proceeds of, in or relating to the Letter of Credit Cash Collateral Account,
and the Borrower hereby agrees and acknowledges to take all necessary and
appropriate actions to effect such segregation and to prevent any such
commingling.
If any Letter of Credit Obligations or Litigation L/C
Obligations, whether or not then due and payable, shall for any reason be
outstanding on the Commitment Termination Date, Borrower shall either (i)
provide cash collateral therefor in the manner described above, or (ii) cause
all such Letters of Credit and guaranties thereof to be canceled and returned,
or (iii) deliver a stand-by letter (or letters) of credit in guaranty of such
Letter of Credit Obligations and Litigation L/C Obligations, which stand-by
letter (or letters) of credit shall be of like tenor and duration as, and in an
amount equal to 105% of the aggregate maximum amount then available to be drawn
under, the Letters of Credit to which such outstanding Letter of Credit
Obligations or Litigation L/C Obligations relate and shall be issued by a
Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.
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From time to time after funds are deposited in the Cash
Collateral Accounts by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Accounts to the payment of any amounts, in such order as
Agent may elect, as shall be or shall become due and payable by Borrower to
Lenders with respect to such Letter of Credit Obligations and Litigation L/C
Obligations of Borrower and, upon the satisfaction in full of all Letter of
Credit Obligations and Litigation L/C Obligations, to any other Obligations
then due and payable.
Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Accounts, except that upon the
termination of all Letter of Credit Obligations and Litigation L/C Obligations
and the payment of all amounts payable by Borrower to Lenders in respect
thereof, any funds remaining in the Cash Collateral Accounts shall be applied
to other Obligations when due and owing and upon payment in full of such
Obligations, any remaining amount shall be paid to Borrower or as otherwise
required by law.
(d) Fees and Expenses. Borrower agrees to pay to Agent
for the benefit of Revolving Lenders and Term Lenders, as applicable, as
compensation to such Lenders for Letter of Credit Obligations and Litigation
L/C Obligations incurred hereunder, (x) all costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations and
Litigation L/C Obligations, and (y) for each month during which any Letter of
Credit Obligation or Litigation L/C Obligations shall remain outstanding, a fee
(the "Letter of Credit Fee") in an amount equal to (i) in the case of Letters
of Credit other than the Litigation L/C, two percent (2.00%) per annum
multiplied by the maximum amount available from time to time to be drawn under
the applicable Letter of Credit and (ii) in the case of the Litigation L/C,
three percent (3.00%) per annum multiplied by the maximum amount available from
time to time to be drawn under the Litigation L/C. Such fee shall be paid to
Agent for the benefit of the applicable Lenders in arrears, on the first day of
each month. In addition, Borrower shall pay to any L/C Issuer, on demand, such
fees (including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.
(e) Request for Incurrence of Letter of Credit
Obligations or Litigation L/C Obligations. Borrower shall give Agent at least
two (2) Business Days prior written notice requesting the incurrence of any
Letter of Credit Obligation or Litigation L/C Obligations, specifying the date
such Letter of Credit Obligation or Litigation L/C Obligations is to be
incurred, identifying the beneficiary to which such Letter of Credit Obligation
or Litigation L/C Obligations relates and describing the nature of the
transactions proposed to be supported thereby. The notice shall be accompanied
by the form of the Letter of Credit (which shall be acceptable to the L/C
Issuer) to be guarantied and shall include (i) a representation and warranty by
Borrower that all of the conditions set forth in Sections 2.1, 2.3(II) and 2.4
of the Credit Agreement have been satisfied and (ii) a reaffirmation by
Borrower of the granting and
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continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the
Litigation Collateral Documents. Notwithstanding anything contained herein to
the contrary, Letter of Credit applications by Borrower and approvals by Agent
may be made and transmitted pursuant to electronic codes and security measures
mutually agreed upon and established by and among Borrower, Agent and the L/C
Issuer.
(f) Obligation Absolute. The obligation of Borrower to
reimburse Agent, Revolving Lenders and Term Lenders, as applicable, for
payments made with respect to any Letter of Credit Obligation or Litigation L/C
Obligation shall be absolute, unconditional and irrevocable, without necessity
of presentment, demand, protest or other formalities, and the obligations of
each such Lender to make payments to Agent with respect to Letters of Credit
shall be unconditional and irrevocable. Such obligations of Borrower and
Lenders shall be paid strictly in accordance with the terms hereof under all
circumstances including the following circumstances:
(i) any lack of validity or enforceability of any Letter
of Credit, the Litigation Guaranty, the Agreement or the other Loan
Documents or any other agreement;
(ii) the existence of any claim, set-off, defense or other
right which Borrower or any of their respective Affiliates or any
Lender may at any time have against a beneficiary or any transferee of
any Letter of Credit (or any Persons or entities for whom any such
transferee may be acting), Agent, any Lender, or any other Person,
whether in connection with the Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated
transaction (including any underlying transaction between Borrower or
any of their respective Affiliates and the beneficiary for which the
Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly
provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guaranty thereof against presentation of a demand,
draft or certificate or other document which does not strictly comply
with the terms of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever,
which is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall
have occurred and be continuing.
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(g) Indemnification; Nature of Lenders' Duties.
(i) In addition to amounts payable as elsewhere provided in the Agreement,
Borrower hereby agrees to pay and to protect, indemnify, and save harmless
Agent and each Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including attorneys'
fees and allocated costs of internal counsel) which Agent or any Lender may
incur or be subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or guaranty thereof, or (B) the failure of
Agent or any Lender seeking indemnification or of any L/C Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority, in each case other
than to the extent as a result of the gross negligence or willful misconduct of
Agent or such Lender (as finally determined by a court of competent
jurisdiction).
(ii) As between Agent and any Lender and Borrower, Borrower
assumes all risks of the acts and omissions of, or misuse of any Letter of
Credit by beneficiaries of any Letter of Credit. In furtherance and not in
limitation of the foregoing, to the fullest extent permitted by law neither
Agent nor any Lender shall be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document issued by
any party in connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) for failure of the beneficiary of any Letter of
Credit to comply fully with conditions required in order to demand payment
under such Letter of Credit; provided that, in the case of any payment by Agent
under any Letter of Credit or guaranty thereof, Agent shall be liable to the
extent such payment was made as a result of its gross negligence or willful
misconduct (as finally determined by a court of competent jurisdiction) in
determining that the demand for payment under such Letter of Credit or guaranty
thereof complies on its face with any applicable requirements for a demand for
payment under such Letter of Credit or guaranty thereof; (D) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in
cipher; (E) for errors in interpretation of technical terms; (F) for any loss
or delay in the transmission or otherwise of any document required in order to
make a payment under any Letter of Credit or guaranty thereof or of the
proceeds thereof; (G) for the credit of the proceeds of any drawing under any
Letter of Credit or guaranty thereof; and (H) for any consequences arising from
causes beyond the control of Agent or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent's or any Lender's rights
or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by Borrower in favor of any
L/C Issuer in any letter of credit application, reimbursement agreement or
similar document, instrument or agreement between Borrower and such L/C Issuer.
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* * * *
B-7
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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the
Termination Date, Borrower shall (i) establish lock boxes ("Lock Boxes") at one
or more of the banks set forth on Disclosure Schedule (3.19), and shall request
in writing and otherwise take such reasonable steps to ensure that all Account
Debtors forward payment directly to such Lock Boxes, and (ii) deposit and cause
its Subsidiaries to deposit or cause to be deposited promptly, and in any event
no later than the third Business Day after the date of receipt thereof (unless
the aggregate face amount of such items exceeds $25,000, in which case such
items shall be deposited no later than the first Business Day after receipt
thereof), all cash, checks, drafts or other similar items of payment relating
to or constituting payments made in respect of any and all Collateral (whether
or not otherwise delivered to a Lock Box) into bank accounts in Borrower's name
or any such Subsidiary's name (collectively, the "Borrower Accounts") at banks
set forth on Disclosure Schedule (3.19) (each, a "Relationship Bank"). On or
before the Closing Date, Borrower shall have established a concentration
account in its name (each a "Concentration Account" and, collectively, the
"Concentration Accounts") at the bank or banks which shall be designated as the
Concentration Account bank for Borrower on Disclosure Schedule (3.19) (each a
"Concentration Account Bank" and collectively, the "Concentration Account
Banks"), which banks shall be satisfactory to Agent.
(b) On or before the Closing Date (or such later date as
Agent shall consent to in writing), each Concentration Account Bank, each bank
where a Funding Account or other Disbursement Account is located and all other
Relationship Banks, shall have entered into tri- party blocked account
agreements with Agent, for the benefit of itself and Lenders, and the
applicable Borrower and Subsidiaries thereof, as applicable, in form and
substance acceptable to Agent, which shall become operative on or prior to the
Closing Date. Each such blocked account agreement shall provide, among other
things, that (i) all items of payment deposited in such account and proceeds
thereof deposited in the applicable Concentration Account are held by such bank
as agent or bailee-in-possession for Agent, on behalf of Lenders, (ii) the bank
executing such agreement has no rights of setoff or recoupment or any other
claim against such account, as the case may be, other than for payment of its
service fees and other charges directly related to the administration of such
account and for returned checks or other items of payment, and (iii) from and
after the Closing Date (A) with respect to banks at which a Borrower Account is
located, such bank agrees to forward immediately all available amounts in each
Borrower Account to Borrower's Concentration Account Bank and to commence the
process of daily
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sweeps from such Borrower Account into the applicable Concentration Account and
(B) with respect to each Concentration Account Bank, such bank agrees to
immediately forward all available amounts received in the applicable
Concentration Account to the Collection Account through daily sweeps from such
Concentration Account into the Collection Account. Borrower shall not, nor
shall it cause or permit any Subsidiary thereof to, accumulate or maintain cash
in any disbursement or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has
occurred and is continuing, Borrower may amend Disclosure Schedule (3.19) to
add or replace a Relationship Bank, Lock Box or Borrower Account or to replace
any Concentration Account or any Funding Account or other Disbursement Account;
provided, however, that (i) Agent shall have consented in writing in advance to
the opening of such account or Lock Box with the relevant bank and (ii) prior
to the time of the opening of such account or Lock Box, the applicable Borrower
and/or the Subsidiaries thereof, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account agreement, in form
and substance satisfactory to Agent (except in the case of other Disbursement
Accounts which are zero balance accounts). Borrower shall close any of their
accounts (and establish replacement accounts in accordance with the foregoing
sentence) promptly and in any event within thirty (30) days of notice from
Agent that the creditworthiness of any bank holding an account is no longer
acceptable in Agent's reasonable judgment, or as promptly as practicable and in
any event within sixty (60) days of notice from Agent that the operating
performance, funds transfer and/or availability procedures or performance with
respect to accounts or lockboxes of the bank holding such accounts or Agent's
liability under any tri-party blocked account agreement with such bank is no
longer acceptable in Agent's reasonable judgment.
(d) The Lock Boxes, Borrower Accounts, the "Funding
Accounts" (as defined below), the Concentration Accounts, and to the extent not
"zero balance accounts", each other disbursement account, payroll account or
similar account now or hereafter used for payments by the Borrower or any of
its Subsidiaries (collectively, "Disbursement Accounts"), shall be cash
collateral accounts, with all cash, checks and other similar items of payment
in such accounts securing payment of the Loans and all other Obligations, and
in which Borrower and each Subsidiary thereof shall have granted a Lien to
Agent, on behalf of itself and Lenders, pursuant to the Security Agreement.
(e) All amounts deposited in the Collection Account shall
be deemed received by Agent in accordance with Section 1.10 of the Agreement
and shall be applied (and allocated) by Agent in accordance with Section 1.11
of the Agreement. In no event shall any amount be so applied unless and until
such amount shall have been credited in immediately available funds to the
Collection Account.
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(f) Borrower may maintain, in its name, an account (each
a "_"Funding Account" and collectively, the "Funding Accounts") at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances and Swing Line Advances made to Borrower pursuant
to Section 1.1 for use by Borrower solely in accordance with the provisions of
Section 1.4.
(g) Borrower shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in
concert with Borrower (each a "Related Person") to (i) hold in trust for Agent,
for the benefit of itself and Lenders, all checks, cash and other items of
payment received by Borrower or any such Related Person, and (ii) within three
(3) Business Days after receipt by Borrower or any such Related Person (unless
the aggregate face amount of such items exceeds $25,000, in which case such
items shall be deposited within one (1) Business Day after such receipt), of
any checks, cash or other items or payment, deposit the same into a Borrower
Account. Borrower and each Related Person thereof acknowledges and agrees that
all cash, checks or items of payment constituting proceeds of Collateral are
the property of Agent and Lenders. All proceeds of the sale or other
disposition of any Collateral, shall be deposited directly into the applicable
Borrower Accounts.
* * * *
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ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
LIST OF CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described in Section
2.1 of the Agreement, pursuant to Section 2.1(a), the items described on the
attached List of Closing Documents must be received by Agent in form and
substance satisfactory to Agent on or prior to the Closing Date (each
capitalized term used but not otherwise defined herein shall have the meaning
ascribed thereto in Annex A to the Agreement), unless otherwise indicated
therein as permitted to be delivered on a later date.
* * * *
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ANNEX D
Execution Copy
GENERAL ELECTRIC CAPITAL CORPORATION
AS AGENT
$25,500,000
CREDIT FACILITY
TO
CODE-ALARM, INC.
AS OF
OCTOBER 24, 1997
LIST OF CLOSING DOCUMENTS
A. LOAN DOCUMENTS
1. Credit Agreement dated as of October 24, 1997 (the "Credit
Agreement") among Code-Alarm, Inc., a Michigan corporation ("Code-Alarm", in
such capacity, the "Borrower"), General Electric Capital Corporation, a New
York corporation ("GECC"), in its capacity as a "Lender", and the other
financial institutions which may from time to time become parties to the Credit
Agreement (GECC, in such capacity, and such other financial institutions being
sometimes hereinafter referred to collectively as the "Lenders" and
individually as a "Lender"), and General Electric Capital Corporation, a New
York corporation, in its separate capacity as agent for the Lenders (the
"Agent"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Credit Agreement.
Exhibits and Schedules
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Term A Note
Exhibit 1.1(c)(i) - Form of Term B Note
Exhibit 1.1(c)(ii) - Form of Notice of Term Loan B Advance
Exhibit 1.1(d)(iii) - Form of Notice of Term Loan C Advance
Exhibit 1.1(e) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
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Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.4(D) - Fair Salable Balance Sheet
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.21 - Customer and Trade Relations
Schedule 3.22 - Material Agreements
Schedule 5.1 - Trade Names
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - List of Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
2. Revolving Notes in an aggregate amount of up to $12,000,000
payable by Borrower to the Lenders in the amounts listed on Schedule I.
3. Swing Line Notes in an aggregate amount of $1,200,000 payable
by Borrower to GECC in its capacity as Swing Line Lender.
4. Term A Notes in an aggregate amount of $1,500,000 payable by
Borrower to the Lenders in the amounts listed on Schedule I.
5. Term B Notes in an aggregate amount of up to $3,000,000
payable by Borrower to the Lenders in the amounts listed on Schedule I.
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6. Term C Notes in an aggregate amount of up to $12,000,000
payable by Borrower to the Lenders in the amounts listed on Schedule I.
B. GUARANTY AND COLLATERAL DOCUMENTS
7. Security Agreements executed by each of the Borrower and
Tessco Group, Inc., a Michigan corporation ("Tessco") in favor of the Agent and
the Lenders pursuant to which Borrower and Tessco respectively grants a
security interest in substantially all of its personal property as security for
the Obligations.
8. Guaranty and Security Agreements executed by each of the
following Credit Parties in favor of the Agent and the Lenders pursuant
to which each such Credit Party unconditionally guarantees all of the
Obligations:
a. Anes, Inc., a Michigan corporation ("Anes");
b. Chapman Security Systems, Inc., a Michigan corporation
("Chapman"); and
c. Intercept Systems, Inc., a Michigan corporation
("Intercept").
9. Guaranty executed by Tessco in favor of the Agent and the
Lenders pursuant to which Tessco unconditionally guarantees all of the
Obligations.
10. Pledge Agreement executed by Borrower in favor of the Agent
and the Lenders pursuant to which Borrower grants a security interest in all of
the issued and outstanding capital stock of Tessco, Anes, Chapman and
Intercept, as security for the Obligations, together with stock certificates
and stock powers executed in blank.
11. Pledge Agreement executed by Mr. Craig S. Camalo (the
"Series B Pledgor") in favor of the Agent and the Lenders pursuant to which
the Series B Pledgor grants a security interest in all of the issued and
outstanding Series B Preferred Stock of Borrower as security for the
Obligations, together with stock certificates and stock powers executed in
blank.
12. Patent Security Agreement executed by Borrower in favor of
the Agent and the Lenders pursuant to which Borrower grants a security
interest in substantially all of its patents, patent applications and related
licenses as security for the Obligations.
13. Trademark Security Agreements executed by each of the
following Credit Parties in favor of the Agent and the Lenders pursuant to
which each such Credit Party grants a security interest in substantially
all of its trademarks, service marks and related applications and licenses as
security for the Obligations and, in the case of such Credit Parties (other
than Borrower), as security for their respective obligations under their
Guaranties:
a. Borrower;
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b. Anes; and
c. Chapman.
14. Copyright Security Agreements executed by Borrower in favor
of the Agent and the Lenders pursuant to which Borrower grants a security
interest in substantially all of its copyrights and related applications and
licenses as security for the Obligations.
15. Contribution and Indemnification Agreement among the Credit
Parties with respect to their obligations and grants of collateral in favor of
the Agent and the Lenders pursuant to the Loan Documents.
16. Loss Payable Endorsements and certificates of insurance
relating to the Credit Parties' property and casualty insurance policies naming
the Agent as loss payee, and certificates of insurance relating to the Credit
Parties' liability insurance policies naming the Agent and the Lenders as
additional insureds.
17. Lockbox and Blocked Account Agreements and Pledged Account
Agreements for Borrower with each lockbox and concentration account bank and
other banks at which each such Borrower maintains a depository account,
together with evidence that the Cash Management Systems complying with Annex C
have been established.
18. Landlord Agreements executed by each lessor of the premises
of each Credit Party at the respective locations listed on Schedule II.
19. Collateral assignment of key-man life insurance policies
aggregating $3,000,000 on the life of Mr. Rand W. Mueller, together with
certificates of insurance with respect to such policies and copies of such
policies.
20. Master Intercompany Demand Note between the Borrower and
Tessco.
C. LITIGATION L/C AGREEMENTS
21. Litigation L/C and Term Loan C Agreement (the "Litigation
Agreement") dated as of October 24, 1997 among Borrower, Agent and the other
financial institutions which may from time to time become parties to the
Litigation Agreement as Term Lenders.
Exhibit A - Form of Term C Note
22. Security Agreements executed by each of the Borrower and
Tessco Group, Inc., a Michigan corporation ("Tessco") in favor of the Agent and
the Term Lenders pursuant to which Borrower and Tessco respectively grants a
security interest in substantially all of its personal property as
security for the Litigation Obligations.
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23. Guaranty and Security Agreements executed by each of the
following Credit Parties in favor of the Agent and the Term Lenders pursuant to
which each such Credit Party unconditionally guarantees all of the Litigation
Obligations:
a. Anes, Inc., a Michigan corporation ("Anes");
b. Chapman Security Systems, Inc., a Michigan
corporation ("Chapman"); and
c. Intercept Systems, Inc., a Michigan corporation
("Intercept").
24. Guaranty executed by Tessco in favor of the Agent and the
Term Lenders pursuant to which Tessco unconditionally guarantees all
of the Litigation Obligations.
25. Pledge Agreement executed by Borrower in favor of the Agent
and the Term Lenders pursuant to which Borrower grants a security interest
in all of the issued and outstanding capital stock of Tessco, Anes, Chapman
and Intercept, as security for the Litigation Obligations, together with stock
certificates and stock powers executed in blank.
26. Pledge Agreement executed by Mr. Craig S. Camalo (the
"Series B Pledgor") in favor of the Agent and the Term Lenders pursuant to
which the Series B Pledgor grants a security interest in all of the issued and
outstanding Series B Preferred Stock of Borrower as security for the
Litigation Obligations, together with stock certificates and stock powers
executed in blank.
27. Patent Security Agreement executed by Borrower in favor of
the Agent and the Term Lenders pursuant to which Borrower grants a security
interest in substantially all of its patents, patent applications and related
licenses as security for the Litigation Obligations.
28. Trademark Security Agreements executed by each of the
following Credit Parties in favor of the Agent and the Term Lenders
pursuant to which each such Credit Party grants a security interest in
substantially all of its trademarks, service marks and related applications and
licenses as security for the Litigation Obligations and, in the case of such
Credit Parties (other than Borrower), as security for their respective
obligations under their Guaranties:
a. Borrower;
b. Anes; and
c. Chapman.
29. Copyright Security Agreements executed by Borrower in favor
of the Agent and the Term Lenders pursuant to which Borrower grants a security
interest in substantially all of its copyrights and related applications and
licenses as security for the Litigation Obligations.
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D. PEGASUS SUPPORT DOCUMENTS
30. Limited Supplemental Guaranty ("Supplemental Guaranty")
executed and delivered by Pegasus Partners, L.P., a Delaware limited
partnership ("Pegasus Partners"), and Pegasus Related Partners, L.P., a
Delaware limited partnership ("Pegasus Related Partners"), in favor of the
Agent and the Lenders pursuant to which Pegasus Partners and Pegasus Related
Partners jointly and severally guaranty up to $4,000,000 of the Borrowers
Obligations.
31. Limited Litigation Guaranty ("Litigation Guaranty") executed
and delivered by Pegasus Partners and Pegasus Related Partners in favor of the
Agent and the Lenders pursuant to which Pegasus Partners and Pegasus Related
Partners jointly and severally guaranty up to $12,000,000 of the Litigation L/C
Obligations.
E. UCC FINANCING STATEMENTS AND SEARCHES
32. Intellectual property title searches.
33. Pre-Filing UCC Lien Search Reports (including fixture
filings) relating to the Credit Parties and certain of their predecessors and
former names, in the offices and against the names set forth on Schedule III.
34. Tax Lien and Judgment Search Reports relating to the Credit
Parties and certain of their predecessors and former names, in the offices
and against the names set forth on Schedule III.
35. Acknowledgment copies of UCC-1 Financing Statements filed
against the Credit Parties in the offices set forth on Schedule IV.
36. Acknowledgment copies of Fixture Financing Statements filed
against the Credit Parties in the offices set forth on Schedule IV.
37. Post-Filing Search Reports of filings against the Credit
Parties in the offices set forth on Schedule IV.
F. OTHER LOAN DOCUMENTS
38. Initial Borrowing Base Certificate delivered to the Agent by
Borrower.
39. Disbursement Direction Letter delivered to the Agent by
Borrower, setting forth the disbursement instructions for Loans to be
made on the Closing Date.
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40. Appointment by each Credit Party of CT Corporation as their
agent for service of process in Illinois.
G. RELEASE DOCUMENTS
41. Estoppel Letter executed by NBD Bank ("NBD") in connection
with the repayment in full of amounts outstanding under the credit facilities
or other evidences of debt and security held by NBD with respect to the Credit
Parties.
42. UCC Termination Statements and the other release documents
executed and delivered by NBD and described on Schedule V
H. ORGANIZATION AND AUTHORIZATION DOCUMENTS
43. Certificate executed by the Secretary or Assistant Secretary
of each Credit Party certifying (i) the resolutions adopted by the Board of
Directors of such Credit Party authorizing or ratifying the execution, delivery
and performance of the Credit Agreement and/or the other Loan Documents
(including, without limitation, GECC Warrant Documents), Series A Preferred
Stock Documents, and Series B Preferred Stock Documents to which such Credit
Party is a party, (ii) the names, signatures, and incumbency of the officers of
such Credit Party authorized to execute such documents on behalf of such Credit
Party and (iii) the Articles or Certificates of Incorporation and Bylaws of
such Credit Party as in effect on the date of such certification.
44. Articles and Certificates of Incorporation of each Credit
Party certified by the Secretaries of State of its jurisdiction of organization.
45. Good Standing Certificates for each Credit Party from the
offices designated on Schedule VII
46. Limited Partnership Agreements and Certificates of
Organization of Pegasus Partners, Pegasus Related Partners, and Pegasus
Investors, L.P. ("Pegasus Investors") certified by the Secretary of State of
Delaware.
47. Articles and Certificate of Incorporation of Pegasus
Investors GP, Inc. ("Pegasus GP") certified by the Secretary of State of
Delaware.
48. Good Standing Certificates for Pegasus Partners, Pegasus
Related Partners, Pegasus Investors and Pegasus GP from the Secretary of
State of Delaware.
I. OPINIONS AND CERTIFICATES
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49. Opinions of counsel to the Credit Parties and the Series B
Pledgor addressed to the Agent and the Lenders, in form, scope and substance
acceptable to Agent.
50. Opinions of counsel to Pegasus Partners and Pegasus Related
Partners, in form, scope and substance acceptable to Agent.
51. Financial Condition Certificates executed and delivered by
the Chief Financial Officer or Treasurer of the Borrower, together with
Pro Forma, Fair Salable Balance Sheet and Projections of the Borrower and its
subsidiaries, prepared after giving effect to the consummation of each of the
Related Transactions pursuant to the Related Transactions Documents.
52. Officer's Certificate executed and delivered by the Chief
Financial Officer of Borrower stating that (i) since December 31, 1996, (a) no
event or condition has occurred or is existing which could reasonably be
expected to have a Material Adverse Effect; (b) there has been no material
adverse change in the industry in which Borrower operates; (c) no Litigation
has been commenced which could reasonably be expected to have, or which has
had, a Material Adverse Effect or could challenge any of the transactions
contemplated by the Agreement and the other Loan Documents; (d) there have been
no Restricted Payments made by any Credit Party; and (e) there has been no
material increase in liabilities, liquidated or contingent, and no material
decrease in assets of Borrower or any of its Subsidiaries, (ii) each of the
Related Transactions have been consummated in accordance with the terms and
conditions of the Related Transaction Documents, and (iii) Code-Alarm has
received $7,000,000 in cash proceeds from the issuance of the Series A
Preferred Stock.
J. EQUITY DOCUMENTS
53. Unit Purchase Agreement ("Unit Purchase Agreement") among
Code-Alarm and Pegasus Partners and Pegasus Related Partners.
54. Certificate of Designation Number, Powers, Preferences and
Relative Participating, Optional and Other Rights of Series A Preferred Stock
of Code-Alarm, Inc., adopted by Borrower's Board of Directors.
55. Registration Rights Agreements among Borrower, Pegasus
Partners, Pegasus Related Partners and GECC.
56. "Attached Warrants", "Shortfall Warrants" and "Litigation
Warrants" (as such terms are defined in the Unit Purchase Agreement
executed by Pegasus Partners, Pegasus Related Partners and GECC).
57. Subscription Agreement among Borrower and the Series B
Pledgor.
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58. Certificate of Designation, Preference and Rights of Series
B Preferred Stock of Borrower adopted by Borrower's Board of Directors.
59. Warrant Purchase Agreement executed by GECC and Borrower.
60. Warrant To Purchase Common Stock of Code-Alarm, Inc.
executed by Borrower in favor of GECC.
K. MISCELLANEOUS
61. GECC Fee Letter.
* * * *
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SCHEDULE I
LOAN ALLOCATIONS
Revolving Notes
General Electric Capital Corporation $12,000,000
Term A Notes
General Electric Capital Corporation $1,500,000
Term B Notes
General Electric Capital Corporation $3,000,000
Term C Notes
General Electric Capital Corporation $12,000,000
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SCHEDULE II
LANDLORD AGREEMENT LOCATIONS
Lessor's Name
Property Address and Address
1. 950 E. Whitcomb Diversified Real Estate Fund Limited
Madison Heights, Michigan Partnership
[to be obtained post-closing] Heitman Properties of Michigan
11100 Metro Airport Center Drive/140
Romulus, Michigan 48174
2. 1000 E. Whitcomb Heitman Michigan Trustee I Corporation
Madison Heights, Michigan Heitman Properties of Michigan
[to be obtained post-closing] 11100 Metro Airport Center Drive/140
Romulus, Michigan 48174-1467
3. 16742 Burke Lane Princeland Properties (International), Inc.
Huntington Beach, California P.O. Box 3938
Laguna Hills, California 92654
4. 300 Industrial Avenue BSR Investments Co.
Georgetown, Texas P.O. Box 541177
Dallas, TX 75354-1177
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SCHEDULE III
PRE-FILING UCC LIEN SEARCH REPORTS
1. DEBTOR NAME: CODE-ALARM, INC.
JURISDICTIONS: (1) California
(a) Secretary of State
(b) Orange County
(2) Michigan
(a) Secretary of State
(b) Oakland County
(3) Texas
(a) Secretary of State
(b) Williamson County
2. DEBTOR NAME: TESSCO GROUP, INC.
JURISDICTIONS: (1) California
(a) Secretary of State
(b) Orange County
(2) Michigan
(a) Secretary of State
(b) Oakland County
(3) Texas
(a) Secretary of State
(b) Williamson County
3. DEBTOR NAME: ANES, INC.
JURISDICTIONS: (1) Michigan
(a) Secretary of State
(b) Oakland County
4. DEBTOR NAME: ANES SECURITY, INC.
JURISDICTIONS: (1) Michigan
(a) Secretary of State
(b) Oakland County
5. DEBTOR NAME: CHAPMAN SECURITY SYSTEMS, INC.
JURISDICTIONS: (1) Michigan
(a) Secretary of State
(b) Oakland County
6. DEBTOR NAME: INTERCEPT SYSTEM, INC.
JURISDICTIONS: (1) Michigan
(a) Secretary of State
(b) Oakland County
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FEDERAL AND STATE
TAX LIEN AND JUDGMENT SEARCH REPORTS
1. DEBTOR NAME: CODE-ALARM, INC.
JURISDICTIONS: (1) California
(a) US District Court - Central District
(b) Orange County
(2) Michigan
(a) US District Court - Eastern District
(b) Oakland County
(3) Texas
(a) US District Court - Western District
(b) Williamson County
2. DEBTOR NAME: TESSCO GROUP, INC.
JURISDICTIONS: (1) California
(a) US District Court - Central District
(b) Orange County
(2) Michigan
(a) US District Court - Eastern District
(b) Oakland County
(3) Texas
(a) US District Court - Western District
(b) Williamson County
3. DEBTOR NAME: ANES, INC.
JURISDICTIONS: (1) Michigan
(a) US District Court - Eastern District
(b) Oakland County
4. DEBTOR NAME: ANES SECURITY, INC.
JURISDICTIONS: (1) Michigan
(a) US District Court - Eastern District
(b) Oakland County
5. DEBTOR NAME: CHAPMAN SECURITY SYSTEMS, INC.
JURISDICITONS: (1) Michigan
(a) US District Court - Eastern District
(b) Oakland County
6. DEBTOR NAME: INTERCEPT SYSTEM, INC.
JURISDICITONS: (1) Michigan
(a) US District Court - Eastern District
(b) Oakland County
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SCHEDULE IV
UCC-1 FINANCING STATEMENTS AND FIXTURE FILINGS
(AND POST-FILING SEARCH LOCATIONS)
1. UCC-1 Financing Statements:
Debtor: CODE-ALARM, INC.
Locations: (1) Secretary of State of California
(2) Secretary of State of Michigan
(3) Secretary of State of Texas
Debtor: TESSCO GROUP, INC.
Locations: (1) Secretary of State of California
(2) Secretary of State of Michigan
(3) Secretary of State of Texas
Debtor: ANES, INC.
Locations: (1) Secretary of State of Michigan
Debtor: CHAPMAN SECURITY SYSTEMS, INC.
Locations: (1) Secretary of State of Michigan
Debtor: INTERCEPT SYSTEM, INC.
Locations: (1) Secretary of State of Michigan
Debtor: CRAIG S. CAMALO
Locations: (1) Secretary of State of Michigan
2. UCC Fixture Financing Statements:
Debtor: CODE-ALARM, INC.
Locations: (1) Oakland County, Michigan
(2) Williamson County, Texas
Debtor: TESSCO GROUP, INC.
Locations: (1) Oakland County, Michigan
(2) Williamson County, Texas
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SCHEDULE V
RELEASE AND TERMINATION DOCUMENTS
UCCS
CALIFORNIA
(1) Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank
Jurisdiction: Secretary of State
File No.: 9515060645
File Date: 5/26/95
(2) Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank
Jurisdiction: Orange County
File No.: 95-0343051
File Date: 8/9/95
MICHIGAN
(1) Debtor: (1) Code-Alarm, Inc.
(2) Tessco Group, Inc.
Secured Party: NBD Bank
Jurisdiction: Secretary of State
File No.: 56238B
File Date: 5/25/95
(2) Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank
Jurisdiciton: Macomb County
File No.: 134979
15545/372
File Date: 7/26/95
(3) Debtor: (1) Chapman Security Systems, Inc.
(2) Intercept Systems, Inc.
Secured Party: NBD Bank
Jurisdiction: Secretary of State
File No.: 56236B
File Date: 5/25/95
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(4) Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank
Jurisdiction: Macomb County
File No.: 134980
15545/375
File Date: 7/26/95
(5) Debtor: (1) Anes, Inc., d/b/a Anes Security, Inc.
(2) Anes Security, Inc., a d/b/a of Anes, Inc.
Secured Party: NBD Bank
Jurisdiction: Secretary of State
File No.: 56237B
File Date: 5/25/95
(6) Debtor: Anes, Inc., d/b/a Anes Security, Inc.
Secured Party: NBD Bank
Jurisdiction: Macomb County
File No.: 134976
15545/363
File Date: 7/26/95
(7) Debtor: Anes Security, Inc. a d/b/a of Anes, Inc.
Secured Party: NBD Bank
Jurisdiction: Macomb County
File No.: 134977
15545/366
File Date: 7/26/95
TEXAS
(1) Debtor: (1) Tessco Group, Inc.
(2) Code-Alarm, Inc.
Secured Party: NBD Bank
Jurisdiction: Secretary of State
File No.: 105891
File Date: 5/26/95
(2) Debtor: (1) Code-Alarm, Inc.
(2) Tessco Group, Inc.
Secured Party: NBD Bank
Jurisdiction: Williamson County
File No.: vol: 2730
pg: 0328
File Date: 5/30/95
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TRADEMARKS
(1) Trademark: ELITE
Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,709,313
Registration Date: 8/18/92
(2) Trademark: CHAPMAN
Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,161,795
Registration Date: 7/21/81
(3) Trademark: PROTECTION RACKET
Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,256,806
Registration Date: 10/25/82
(4) Trademark: "INSURANCE MAN"
Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,183,685
Registration Date: 12/29/81
(5) Trademark: CHAPMAN-LOK
Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,113,544
Registration Date: 2/20/79
(6) Trademark: TOTAL PROTECTION
Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,195,137
Registration Date: 5/11/82
(7) Trademark: CHAPMAN
Debtor: Chapman Security Systems, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,183,684
Registration Date: 12/29/81
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<PAGE> 180
(8) Trademark: THE BIG STICK
Debtor: Anes, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,720,117
Registration Date: 9/29/92
(9) Trademark: EWS
Debtor: Anes, Inc.
Secured Party: NBD Bank, N.A.
Registration Number: 1,758,074
Registration Date: 3/16/93
PATENTS
(1) Patent: AUTOMOBILE BURGLAR ALARM
Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank, N.A.
Patent Number: 4,740,775
Issue Date: 4/26/88
(2) Patent: SECURITY SYSTEM
Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank, N.A.
Patent Number: 5,543,778
Issue Date: 8/6/96
(3) Patent: VEHICLE ANTITHEFT SYSTEM
Debtor: Code-Alarm, Inc.
Secured Party: NBD Bank, N.A.
Patent Number: 4,107,543
Issue Date: 8/15/78
OTHER
Release and Reassignment of Life Insurance Policy
D-19
<PAGE> 181
SCHEDULE VI
GOOD STANDING JURISDICTIONS
CREDIT PARTY: CODE-ALARM, INC.
JURISDICTIONS: (1) Secretary of State of Michigan
(2) Secretary of State of California
CREDIT PARTY: TESSCO GROUP, INC.
JURISDICTIONS: (1) Secretary of State of Michigan
(2) Secretary of State of Texas
CREDIT PARTY: ANES, INC.
JURISDICTIONS: (1) Secretary of State of Michigan
CREDIT PARTY: CHAPMAN SECURITY SYSTEMS, INC.
JURISDICTIONS: (1) Secretary of State of Michigan
CREDIT PARTY: INTERCEPT SYSTEMS, INC.
JURISDICTIONS: (1) Secretary of State of Michigan
<PAGE> 182
ANNEX E (SECTION 4.1(A))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agent or to
Agent and Lenders, as indicated, the following:
(a) Monthly Financials. To Agent and Lenders, within
thirty (30) days after the end of each Fiscal Month, financial information
regarding Borrower and its Subsidiaries, certified by the Chief Financial
Officer of Borrower, consisting of consolidated and consolidating (i) unaudited
balance sheets as of the close of such Fiscal Month and the related statements
of income and cash flow for that portion of the Fiscal Year ending as of the
close of such Fiscal Month; (ii) unaudited statements of income and cash flows
for such Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a schedule of the outstanding
balance of all intercompany Indebtedness among Borrower and each of its
Subsidiaries as of the last day of that Fiscal Month. Such financial
information shall be accompanied by (A) a statement in reasonable detail (each,
a "Compliance Certificate") showing the calculations used in determining
compliance with each financial covenant set forth on Annex G which is tested on
a monthly basis, and (B) the certification of the chief financial officer of
Borrower that (i) such financial information presents fairly in accordance with
GAAP (subject to normal year-end adjustments) the financial position and
results of operations of Borrower and its Subsidiaries, on a consolidated and
consolidating basis, in each case as at the end of such month and for the
period then ended and (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default shall
have occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default;
(b) Quarterly Financials. To Agent and Lenders, within
forty-five (45) days after the end of each Fiscal Quarter, consolidated and
consolidating financial information regarding Borrower and its Subsidiaries,
certified by the chief financial officer of Borrower, including (i) unaudited
balance sheets as of the close of such Fiscal Quarter and the related
statements of income and cash flow for that portion of the Fiscal Year ending
as of the close of such Fiscal Quarter and (ii) unaudited statements of income
and cash flows for such Fiscal Quarter, in each case setting forth in
comparative form the figures for the corresponding period in the prior year and
the figures contained in the Projections for such Fiscal Year, all prepared in
accordance with GAAP (subject to normal year-end adjustments). Such financial
information shall be accompanied by (A) a Compliance Certificate in respect of
each of the financial covenants set forth on Annex G which is tested on a
quarterly basis and (B) the certification of
<PAGE> 183
the chief financial officer of Borrower that (i) such financial information
presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position, results of operations and statements of
cash flows of Borrower and its Subsidiaries, on both a consolidated and
consolidating basis, as at the end of such Fiscal Quarter and for the period
then ended, (ii) any other information presented is true, correct and complete
in all material respects and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default. In addition, Borrower
shall deliver to Agent and Lenders, within forty-five (45) days after the end
of its first Fiscal Quarter ending in 1998 and each Fiscal Quarter thereafter,
a management discussion and analysis which includes a comparison to budget for
that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to
the corresponding period in the prior year;
(c) Operating Plan. To Agent and Lenders, as soon as
available, but not later than thirty (30) days after the end of each Fiscal
Year, an annual operating plan for Borrower, approved by the Board of Directors
of Borrower, for the following year, which will include a statement of all of
the material assumptions on which such plan is based, will include monthly
balance sheets and a monthly budget for the following year and will integrate
sales, gross profits, operating expenses, operating profit, cash flow
projections and Borrowing Availability projections all prepared on the same
basis and in similar detail as that on which operating results are reported
(and in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(d) Annual Audited Financials. To Agent and
Lenders, within ninety (90) days after the end of each Fiscal Year, audited
Financial Statements for Borrower and its Subsidiaries on a consolidated and
consolidating basis, consisting of balance sheets and statements of income and
retained earnings and cash flows, setting forth in comparative form in each
case the figures for the previous Fiscal Year and the figures contained in the
Projections for such Fiscal Year, which Financial Statements shall be prepared
in accordance with GAAP, certified without qualification, (as to the
consolidated financial statements) by an independent certified public
accounting firm of national standing or otherwise acceptable to Agent. Such
Financial Statements shall be accompanied by (i) a statement prepared in
reasonable detail showing the calculations used in determining compliance with
each of the financial covenants set forth on Annex G, (ii) the annual letters
to such accountants in connection with their audit examination detailing
contingent liabilities and material litigation matters, and (iii) the
certification of the chief executive officer or chief financial officer of
Borrower that all such Financial Statements present fairly in accordance with
GAAP the financial position, results of operations and statements of cash flows
of Borrower and its Subsidiaries on a consolidated and consolidating basis, as
at the end of such year and for the period then ended, and that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default;
E-2
<PAGE> 184
(e) Management Letters. To Agent and Lenders, within
five (5) Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants;
(f) Default Notices. To Agent and Lenders, as soon as
practicable, and in any event within five (5) Business Days after the chief
executive officer or chief financial officer of Borrower has actual knowledge
of the existence of any Default, Event of Default, or other event which has had
a Material Adverse Effect, telephonic or telecopied notice specifying the
nature of such Default or Event of Default or other event, including the
anticipated effect thereof, which notice, if given telephonically, shall be
promptly confirmed in writing on the next Business Day;
(g) SEC Filings and Press Releases. To Agent and
Lenders, promptly upon their becoming available, copies of: (i) all Financial
Statements, reports, notices and proxy statements made publicly available by
any Credit Party to its security holders; (ii) all regular and periodic reports
and all registration statements and prospectuses, if any, filed by any Credit
Party with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority; and (iii) all
press releases and other statements made available by any Credit Party to the
public concerning material adverse changes or developments in the business of
any such Person;
(h) Subordinated Debt and Equity Notices. To Agent, as
soon as practicable, copies of all material written notices given or received
by any Credit Party with respect to any Subordinated Debt or Stock of such
Person, and, within three (3) Business Days after any Credit Party obtains
knowledge of any matured or unmatured event of default with respect to any
Subordinated Debt, notice of such event of default;
(i) Supplemental Schedules. To Agent, supplemental
disclosures, if any, required by Section 5.6 of the Agreement;
(j) Litigation. To Agent in writing, (i) promptly upon
learning thereof, notice of any Litigation commenced or threatened against any
Credit Party that (A) seeks damages in excess of $100,000, (B) seeks injunctive
relief, (C) is asserted or instituted against any Plan, its fiduciaries or its
assets or against any Credit Party or ERISA Affiliate in connection with any
Plan, (D) alleges criminal misconduct by any Credit Party, or (E) alleges the
violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities of the Credit Parties, (ii) promptly upon hearing
thereof, notice of any material development in any such Litigation referred to
in clause (i) hereof or described in the Disclosure Schedules (including,
without limitation, the DEI Litigation) and (iii) monthly (prior to the Term
Loan B Funding Date or the date on which the Litigation L/C is issued,
whichever is later), together with the delivery of the monthly financial
statements referred to in clause (a) above, a description of the status of the
DEI Litigation and a schedule disclosing the amount that would be determined
pursuant to
E-3
<PAGE> 185
Sections 2.2(a)(iv) or 2.3(a)(iii) of the Credit Agreement as if the Term Loan
B Funding Date occurred on the date such schedule was prepared.
(k) Insurance Notices. To Agent, disclosure of losses or
casualties required by Section 5.4 of the Agreement;
(l) Leases; Warehouses. To Agent, copies of (i) any and
all default notices received under or with respect to any leased location or
public warehouse where Collateral is located, and (ii) such other notices or
documents as Agent may request in its reasonable discretion;
(m) OEM Contracts. To Agent and Lenders, copies of all
notices received indicating or asserting that (i) any Credit Party is in
material default or breach of any OEM Contract, (ii) any OEM Contract is or
will be terminated or expired and will not replaced, or (iii) any OEM
Accreditation will expire or be withdrawn or terminated; and
(n) Other Documents. To Agent and Lenders, such other
financial and other information respecting any Credit Party's business or
financial condition as Agent or any Lender shall, from time to time, request.
* * * *
E-4
<PAGE> 186
ANNEX F (SECTION 4.1(B))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in no event less
frequently than monthly (together with a copy of all or any part of such
delivery requested by any Lender in writing after the Closing Date), each of
the following, in each case providing information as of the Friday of the then
immediately preceding month:
(i) a Borrowing Base Certificate, in each case
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(ii) a summary of Inventory by location and type with a
supporting perpetual Inventory report, in each case accompanied by
such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
(iii) a trial balance showing Accounts outstanding aged
from invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to
90 days and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion; and
(iv) a calculation of the Tessco Liquidation Reserve.
(b) To Agent, on a monthly basis or at such more frequent
intervals as Agent may request from time to time (together with a copy of all
or any part of such delivery requested by any Lender in writing after the
Closing Date), collateral reports, including all additions and reductions (cash
and non-cash) with respect to Accounts, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(c) To Agent, at the time of delivery of each of the
monthly Financial Statements delivered pursuant to Annex E, a reconciliation of
the Accounts trial balance and month-end Inventory reports of Borrower to
Borrower's general ledger and monthly Financial Statements delivered pursuant
to such Annex E, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;
(d) To Agent, at the time of delivery of each of the
quarterly and annual Financial Statements delivered pursuant to Annex E, (i) a
listing of government contracts of
<PAGE> 187
Borrower and Tessco subject to the Federal Assignment of Claims Act of 1940;
and (ii) a list of any applications 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 which any Credit
Party thereof has filed in the prior Fiscal Quarter;
(e) Borrower, at its own expense, shall deliver to Agent
the results of each physical verification, if any, which Borrower or any of its
Subsidiaries may in their discretion have made, or caused any other Person to
have made on their behalf, of all or any portion of their Inventory (and, if a
Default or an Event of Default shall have occurred and be continuing, Borrower
shall, upon the request of Agent, conduct, and deliver the results of, such
physical verifications as Agent may require);
(f) Borrower, at its own expense, shall deliver to Agent
such appraisals of its assets as Agent may request at any time after the
occurrence and during the continuance of a Default or an Event of Default, such
appraisals to be conducted by an appraiser, and in form and substance,
satisfactory to Agent; and
(g) Such other reports, statements and reconciliations
with respect to the Borrowing Base or Collateral of any or all Credit Parties
as Agent shall from time to time request in its reasonable discretion.
* * * *
F-2
<PAGE> 188
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries
on a consolidated basis shall not make Capital Expenditures during any of its
Fiscal Years of more than (i) the amount set forth below opposite such Fiscal
Year plus (ii) in the case of Fiscal Year 1998 and each Fiscal Year thereafter,
25% of the unused portion of the maximum amount of Capital Expenditures
permitted hereunder for the then immediately preceding Fiscal Year (but without
giving effect to an additional amounts permitted during such preceding Fiscal
Year because of this clause (ii)):
<TABLE>
<CAPTION>
Fiscal Year Maximum Amount
----------- --------------
<S> <C>
1997 $1,000,000
1998 $1,300,000
1999 and each Fiscal
Year thereafter $1,000,000.
</TABLE>
(b) Minimum Fixed Charge Coverage Ratio. Borrower and its
Subsidiaries shall have on a consolidated basis at the end of any Fiscal
Quarter ending on or after December 31, 1997, a Fixed Charge Coverage Ratio for
the 12-month period then ended, taken as a single accounting period (or with
respect to the Fiscal Quarters ending on or before June 30, 1998, the period
commencing on October 1, 1997 and ending on the last day of such Fiscal
Quarter, taken as a single accounting period) of not less 1.5 to 1.0; provided,
however, that, if Term Loan C shall be outstanding during any such Fiscal
Quarter, such ratio shall not be less than, for any such Fiscal Quarter, the
ratio set forth below and corresponding to the outstanding principal balance of
Term Loan C as of the last day of such Fiscal Quarter:
<TABLE>
<CAPTION>
Term Loan C Balance Minimum Ratio
------------------- -------------
<S> <C>
$0 to $3,000,000 1.15 to 1.0
Greater than $3,000,000
and less than or equal to
$6,000,000 1.10 to 1.0
</TABLE>
<PAGE> 189
<TABLE>
<S> <C>
Greater than $6,000,000
and less than or equal to
$9,000,000 1.05 to 1.0
Greater than $9,000,000 1.00 to 1.0.
</TABLE>
(c) Cumulative Minimum EBITDA. Borrowers and its Subsidiaries on
a consolidated basis shall have, for the period commencing October 1, 1997 and
ending as of the end of each Fiscal Month set forth below, EBITDA for such
period then ended (taken as a single accounting period) of not less than the
following:
<TABLE>
<CAPTION>
Month Ending Amount
------------ ------
<S> <C>
October, 1997 $ 175,000
November, 1997 $ 375,000
December, 1997 $ 850,000
January, 1998 $1,200,000
February, 1998 $1,500,000
March, 1998 $1,900,000
April, 1998 $2,250,000
May, 1998 $2,600,000
June, 1998 $3,000,000.
</TABLE>
(d) Minimum Quarterly EBITDA. Borrower and its Subsidiaries on a
consolidated basis shall have, for the Fiscal Quarter ending September 30, 1998
and for each Fiscal Quarter ending thereafter, EBITDA for such Fiscal Quarter
of not less than $1,500,000.
(e) Minimum Net Worth. Borrower and its Subsidiaries on a
consolidated basis shall have Net Worth at all times of not less than the
"Minimum Net Worth" (as defined below). "Minimum Net Worth" shall mean
$6,500,000 as of the Closing Date and shall increase (on a cumulative basis),
as of the end of the Fiscal Quarter ending December 31, 1997 and each
subsequent Fiscal Quarter, by 80% of an amount equal to (i) Borrower's and its
Subsidiaries' consolidated net income, determined in accordance with GAAP for
such Fiscal Quarter minus (ii) all dividends paid or accrued with respect to
the Series A Preferred Stock for such Fiscal Quarter (and without duplication
of such amounts that were accrued in prior periods and paid in the current
period).
Unless otherwise specifically provided herein, any accounting
term used in the Agreement shall have the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed in accordance with GAAP consistently
G-2
<PAGE> 190
applied as in effect on the Closing Date (and without giving effect to any
changes in GAAP except to the extent agreed to in writing by Borrowers and the
Requisite Lenders). That certain items or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing.
* * * *
G-3
<PAGE> 191
ANNEX H (SECTION 9.9(A))
TO
CREDIT AGREEMENT
WIRE TRANSFER INFORMATION
Attached.
<PAGE> 192
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
10 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
Attention: Account Manager
Telecopier No.: (312) 419-5957
Telephone No.: (312) 419-0985
with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: H. Bruce Bernstein
Telecopier No.: (312) 853-7000
Telephone No.: (312) 853-7036
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to Borrower, at
Code-Alarm, Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: Craig S. Camalo
Telecopier No.: (248) 585-4799
Telephone No.: (248) 583-9620
<PAGE> 193
with copies to:
Pepper, Hamilton & Scheetz
100 Renaissance Center
36th Floor
Detroit, Michigan 48243-1157
Attention: Dennis S. Kayes
Telecopier No.: (313) 259-7926
Telephone No.: (313) 393-7450
* * * *
I-2
<PAGE> 1
EXHIBIT 10.41
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 24, 1997, between CODE-ALARM,
INC., a Michigan corporation ("Grantor"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, in its capacity as Agent for Lenders.
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof by and among Grantor (in such capacity, "Borrower"), the other Persons
signatory thereto as Credit Parties, Agent and the Persons signatory thereto
from time to time as Lenders (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), Lenders have agreed to make the Loans to,
and to incur Letter of Credit Obligations for the benefit of, the Borrower;
WHEREAS, in order to induce Agent and Lenders to enter into the Credit
Agreement and the Loan Documents other than Litigation Collateral Documents
(hereinafter, the "Loan Documents") and to induce Lenders to make the Loans and
to incur Letter of Credit Obligations as provided for in the Credit Agreement,
Grantor has agreed to grant a continuing Lien on the Collateral (as hereinafter
defined) to secure the Obligations other than the Litigation Obligations
(hereinafter, 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. 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 Grantor's Obligations, 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, other than
Permitted Encumbrances, 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"):
<PAGE> 2
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all goods;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Borrower Accounts, Concentration Accounts,
Disbursement Accounts, Funding 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.
-2-
<PAGE> 3
3. AGENT'S AND LENDERS' RIGHTS; LIMITATIONS ON AGENT'S AND LENDERS'
OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder. Neither Agent
nor any Lender shall have any obligation or liability under any Contract or
License by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by Agent or any Lender of any payment
relating to any Contract or License pursuant hereto. Neither Agent nor any
Lender shall be required or obligated in any manner to perform or fulfill any
of the obligations of Grantor under or pursuant to any Contract or License, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any
party under any Contract or License, or to present or file any claims, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.
(b) Agent may at any time after an Event of Default shall have occurred
and be continuing, without prior notice to Grantor, notify Account Debtors,
parties to the Contracts and obligors in respect of Instruments and Chattel
Paper, that the Accounts and the right, title and interest of Grantor in and
under such Contracts, Instruments and Chattel Paper have been assigned to
Agent, and that payments shall be made directly to Agent, for itself and the
benefit of Lenders. Upon the request of Agent, Grantor shall so notify Account
Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of Grantor
communicate with Account Debtors, parties to Contracts, obligors in respect of
Instruments and obligors in respect of Chattel Paper to verify with such
Persons, to Agent's satisfaction, the existence, amount and terms of any such
Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and 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:
-3-
<PAGE> 4
(a) Grantor is the sole owner of each item of the Collateral upon which it
purports to grant a Lien hereunder, and has good and marketable title thereto
free and clear of any and all Liens other than Permitted Encumbrances.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the Loan Documents, and (ii) in connection with any other
Permitted Encumbrances.
(c) This Security Agreement is effective to create a valid and continuing
Lien on and, upon the filing of the appropriate financing statements listed on
Schedule I hereto and, with respect to locations of Collateral established
after the Closing Date, such additional financing statements delivered to Agent
pursuant to Section 4(g), a perfected Lien in favor of Agent, for itself and
the benefit of Lenders, on the Collateral with respect to which a Lien may be
perfected by filing pursuant to the Code. Such Lien is prior to all other
Liens, except Permitted Encumbrances that would be prior to Liens in favor of
Agent for the benefit of Agent and Lenders as a matter of law, and is
enforceable as such as against any and all creditors of and purchasers from
Grantor (other than purchasers of Inventory in the ordinary course of
business). All action by Grantor necessary or desirable to protect and perfect
such Lien on each item of the Collateral has been duly taken.
(d) As of the Closing Date, Schedule II hereto lists all Instruments and
Chattel Paper of Grantor, other than those having a face amount of less than
$5,000 individually and an aggregate face amount of less than $10,000. All
action by Grantor necessary or desirable to protect and perfect the Lien of
Agent on each item set forth on Schedule II (including the delivery of all
originals thereof to Agent and the legending of all Chattel Paper as required
by Section 5(b) hereof), and on all Instruments and Chattel Paper of Grantor
acquired after the Closing Date (other than those having a face amount of less
than $5,000 individually and less than $10,000 in the aggregate, including
those existing on the Closing Date), has been duly taken. The Lien of Agent,
for the benefit of Agent and Lenders, on the Collateral listed on Schedule II
hereto, and such Instruments and Chattel Paper acquired after the Closing Date,
is prior to all other Liens, except Permitted Encumbrances that would be prior
to the Liens in favor of Agent as a matter of law, and is enforceable as such
against any and all creditors of and purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, and, as of the Closing Date, all warehouses and premises
where Collateral is stored or located and all locations of its books and
records concerning the Collateral, are set forth on Schedule III hereto. Prior
to Grantor's maintaining any Collateral at any other location, Grantor shall
have obtained Agent's written consent thereto and shall have delivered to Agent
signed financing statements with respect thereto and such additional
documentation as may be required by Section 4(g) hereto.
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<PAGE> 5
(f) With respect to the Accounts, except as specifically disclosed on
the most recent Collateral Report delivered to Agent, (i) they represent bona
fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of Grantor's business and are not evidenced by a judgment,
Instrument or Chattel Paper; (ii) there are no setoffs, claims or disputes
existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof,
any release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be expected
to reduce the amount payable thereunder as shown on Grantor's books and records
and any invoices, statements and Collateral Reports delivered to Agent and
Lenders with respect thereto; (iv) Grantor has not received any notice of
proceedings or actions which are threatened or pending against any Account
Debtor which might result in any adverse change in such Account Debtor's
financial condition; (v) Grantor has no knowledge that any Account Debtor is
unable generally to pay its debts as they become due, (vi) the amounts shown on
all invoices, statements and Collateral Reports which may be delivered to the
Agent with respect thereto are actually and absolutely owing to Grantor as
indicated thereon and are not in any way contingent; (vii) no payments have
been or shall be made thereon except payments immediately delivered to the
Borrower Accounts or the Agent as required pursuant to the terms of Annex C to
the Credit Agreement; and (viii) to Grantor's knowledge, all Account Debtors
have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most recent
Collateral Report delivered to Agent pursuant to the terms of this Security
Agreement or the Credit Agreement, except as specifically disclosed on such
Collateral Report, (i) such Inventory is located at one of Grantor's locations
set forth on Schedule III hereto, or at such other locations with respect to
which Grantor shall have obtained Agent's prior written consent pursuant to
clause (ii) hereof and delivered to Agent additional financing statements and
other documents as may be required by clause (ii) hereof, (ii) no Inventory is
now, or shall at any time or times hereafter be stored at any other location
without Agent's prior written consent, and if Agent 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, 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
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<PAGE> 6
shall not require the consent of any Person and shall not constitute a breach
or default under any contract or agreement to which Grantor is a party or to
which such property is subject.
(h) Grantor has no interest in, nor title to, any Patent, Trademark or
Copyright except as set forth in Schedule IV hereto or, with respect to such
property acquired or created after the Closing Date, as is described in writing
to Agent within thirty (30) days of Grantor's acquisition or creation thereof.
This Security Agreement is effective to create a valid and continuing Lien on
and, upon filing of the Copyright Security Agreements with the United States
Copyright Office and filing of the Patent Security Agreements and the Trademark
Security Agreements with the United States Patent and Trademark Office, and the
filing of appropriate financing statements listed on Schedule I hereto,
perfected Liens, other than Permitted Encumbrances, in favor of Agent on
Grantor's Patents, Trademarks and Copyrights and such perfected Liens are
enforceable as such as against any and all creditors of and purchasers from
Grantor. Upon filing of the Copyright Security Agreements with the United
States Copyright Office and filing of the Patent Security Agreements and the
Trademark Security Agreements with the United States Patent and Trademark
Office and the filing of appropriate financing statements listed on Schedule I
hereto, all action necessary or desirable to protect and perfect Agent's Lien
on Grantor's Patents, Trademarks or Copyrights shall have been duly taken.
5. COVENANTS. Grantor covenants and agrees with Agent, for the benefit of
Agent and Lenders, that from and after the date of this Security Agreement and
until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from time
to time, upon the written request of Agent and at the sole expense of Grantor,
Grantor shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further actions as Agent may deem
desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment
to or for the benefit of Agent of any License or Contract held by Grantor or in
which Grantor has any rights not heretofore assigned, (ii) filing any financing
or continuation statements under the Code with respect to the Liens granted
hereunder or under any other 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.
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<PAGE> 7
(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 mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby.
Subject to the materiality exceptions set forth in Section 4(d), Chattel Paper
shall be marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of General
Electric Capital Corporation, as Agent, for the benefit of Agent and certain
Lenders."
(c) Covenants Regarding Patent, Trademark and Copyright Collateral.
(i) Grantor shall notify Agent immediately if it knows or has
reason to know that any application or registration relating to any Patent,
Trademark or Copyright (now or hereafter existing) may become abandoned
or dedicated, or of any adverse determination or development (including
the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any court) regarding Grantor's ownership of
any Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(ii) In no event shall Grantor, either directly or through any
agent, employee, licensee or designee, file an application for the
registration of any Patent, Trademark or Copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency without giving Agent prior written notice thereof,
and, upon request of Agent, Grantor shall execute and deliver any and all
Patent Security Agreements, Copyright Security Agreements or Trademark
Security Agreements as Agent may request to evidence Agent's Lien on such
Patent, Trademark or Copyright, and the General Intangibles of Grantor
relating thereto or represented thereby.
(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 sue for infringement,
misappropriation
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<PAGE> 8
or dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other actions as Agent
shall deem appropriate under the circumstances to protect such Patent,
Trademark or Copyright Collateral.
(d) Indemnification. In any suit, proceeding or action brought by
Agent or any Lender relating to any Account, Chattel Paper, Contract, Document,
General Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep Agent and Lenders harmless
from and against all expense (including reasonable attorneys' fees and
expenses), loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Grantor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from Grantor, except in the
case of Agent or any Lender, to the extent such expense, loss, or damage is
attributable to the gross negligence or willful misconduct of Agent or such
Lender as finally determined by a court of competent jurisdiction. All such
obligations of Grantor shall be and remain enforceable against and only against
Grantor and shall not be enforceable against Agent or any Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of
its Accounts, Chattel Paper, Contracts and Licenses and all other agreements to
which it is a party or by which it is bound relating to the Collateral.
(f) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Encumbrances, and will defend the right, title and interest of
Agent and Lenders in and to any of Grantor's rights under the Collateral
against the claims and demands of all Persons whomsoever.
(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 other Loan Document.
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<PAGE> 9
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a power of
attorney (the "Power of Attorney") substantially in the form attached hereto as
Exhibit A. The power of attorney granted pursuant to the Power of Attorney is
a power coupled with an interest and shall be irrevocable until the Termination
Date. The powers conferred on Agent, for the benefit of Agent and Lenders,
under the Power of Attorney are solely to protect Agent's interests (for the
benefit of Agent and Lenders) in the Collateral and shall not impose any duty
upon Agent or any Lender to exercise any such powers. Agent agrees that (a) it
shall not exercise any power or authority granted under the Power of Attorney
unless an Event of Default has occurred and is continuing, and (b) Agent shall
account for any moneys received by Agent in respect of any foreclosure on or
disposition of Collateral pursuant to the Power of Attorney provided that none
of Agent nor any Lender shall have any duty as to any Collateral, and Agent and
Lenders shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers. NONE OF AGENT, LENDERS OR THEIR
RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES TO THE
EXTENT ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under this
Security Agreement, the Credit Agreement, the Loan Documents and under any
other instrument or agreement securing, evidencing or relating to any of the
Obligations, if any Event of Default 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
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<PAGE> 10
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent and Lenders, the whole or any part of said Collateral so
sold, free of any right or equity of redemption, which equity of redemption
Grantor hereby releases. Such sales may be adjourned and continued from time
to time with or without notice. Agent shall have the right to conduct such
sales on Grantor's premises or elsewhere and shall have the right to use
Grantor's premises without charge for such time or times as Agent deems
necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the Collateral and
make it available to Agent at places which Agent shall select, whether at
Grantor's premises or elsewhere. Until Agent is able to effect a sale, lease,
or other disposition of Collateral, Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for
the purpose of preserving Collateral or its value or for any other purpose
deemed appropriate by Agent. Agent shall have no obligation to Grantor to
maintain or preserve the rights of Grantor as against third parties with
respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies (for the
benefit of Agent and Lenders), with respect to such appointment without prior
notice or hearing as to such appointment. Agent shall apply the net proceeds
of any such collection, recovery, receipt, appropriation, realization or sale
to the Obligations as provided in the Credit Agreement, and only after so
paying over such net proceeds, and after the payment by Agent of any other
amount required by any provision of law, need Agent account for the surplus, if
any, to Grantor. To the maximum extent permitted by applicable law, Grantor
waives all claims, damages, and demands against Agent or any Lender arising out
of the repossession, retention or sale of the Collateral except to the extent
such arise out of the gross negligence or willful misconduct of Agent or such
Lender as finally determined by a court of competent jurisdiction. Grantor
agrees that ten (10) days' prior written notice by Agent of the time and place
of any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any attorneys' fees or other
expenses incurred by Agent or any Lender to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7
hereof (including, without limiting the terms of Section 7 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Agent shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby
grants to Agent, for the benefit of Agent and Lenders, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter
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<PAGE> 11
acquired by Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof.
9. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.
Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control. Neither Agent nor any Lender shall
have any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Agent or such Lender, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.
10. REINSTATEMENT. Notwithstanding anything contained herein to the
contrary, this Security Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of Grantor's assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded, avoided or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent transfer," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made.
Notwithstanding anything contained herein to the contrary, in the event that
any payment, or any part thereof, is rescinded, avoided, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, avoided, reduced, restored or returned.
11. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration or other communication 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.
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<PAGE> 12
13. NO WAIVER; CUMULATIVE REMEDIES. Neither Agent nor any Lender shall
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder, and no waiver shall be valid unless in writing,
signed by Agent and then only to the extent therein set forth. A waiver by
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Agent would otherwise have had
on any future occasion. No failure to exercise nor any delay in exercising on
the part of Agent or any Lender, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10 hereof,
this Security Agreement shall terminate upon the Termination Date.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor (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
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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 COOK COUNTY, CITY OF
CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES AMONG GRANTOR, AGENT AND LENDERS PERTAINING TO THIS SECURITY
AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE LOAN DOCUMENTS, PROVIDED,
THAT AGENT, LENDERS AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK 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
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JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, LENDERS, AND
GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Security Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other party
hereto that it has discussed this Security Agreement and, specifically, the
provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Lenders. All Liens granted or contemplated hereby shall be
for the benefit of Agent and Lenders, and all proceeds or payments realized
from Collateral in accordance herewith shall be applied to the Obligations in
accordance with the terms of the Credit Agreement.
-14-
<PAGE> 15
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
---------------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
--------------------------------------
Name: Timothy S. Van Kirk
----------------------------
Title: Duly Authorized Signatory
----------------------------
<PAGE> 16
SCHEDULE I
FILING JURISDICTIONS
1. UCC-1 Financing Statements:
Debtor: CODE-ALARM, 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: CODE-ALARM, INC.
Locations: (1) Oakland County, Michigan
(2) Williamson County, Texas
<PAGE> 17
SCHEDULE II
INSTRUMENTS
None.
<PAGE> 18
SCHEDULE III
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING GRANTOR'S COLLATERAL
I. Chief Executive Office and principal place of business of Grantor:
950 E. Whitcomb
Madison Heights, Michigan
II. Corporate Offices of Grantor:
950 E. Whitcomb
Madison Heights, Michigan
III. Warehouses:
950 E. Whitcomb
Madison Heights, Michigan
16742 Burke Lane
Huntington Beach, California
IV. Other Premises at which Collateral is Stored or Located:
300 Industrial Drive
Georgetown, Texas
V. Locations of Records Concerning Collateral:
950 E. Whitcomb
Madison Heights, Michigan
16742 Burke Lane
Huntington Beach, California
<PAGE> 19
SCHEDULE IV
PATENTS, TRADEMARKS AND COPYRIGHTS
PATENTS: CODE-ALARM
PATENT REGISTRATIONS
Mark Patent No. Issue Date
---- ---------- ----------
AUTOMOBILE BURGLAR 4,740,775 4/26/88
ALARM
SECURITY SYSTEM 5,543,778 8/6/96
VEHICLE ANTITHEFT 4,107,543 8/15/78
SYSTEM
SECURITY SYSTEM 4,333,074 6/1/82
PATENT APPLICATIONS
Serial No. Filing Date
---------- -----------
08/624,146 5/28/93
08/774,954 4/19/93
08/842,374 4/23/97
08/838,684 4/9/97
<PAGE> 20
PATENT LICENSES
Name of Agreement Parties/Purpose Date of Agreement
----------------- --------------- -----------------
MAGNADYNE/NUTEK: Code-Alarm licensed April 1996
Cross License Agreement "Price" patent to
Magnadyne/Nutek;
Magnadyne/Nutek
licensed "Chen"
patent to
Code-Alarm
BULLDOG Code-Alarm, Inc. September 1994
licensed "Price"
patent use to
Bulldog
AUDIOVOX Code-Alarm, Inc. August 1994
licensed "Stouffer"
patent to Audiovox
AUDIOVOX: Cross Code-Alarm licensed August 1994
License Agreement use of "Price" patent to
patent to Audiovox;
Audiovox licensed use of
"Posse" patent to
Code-Alarm
SHERWOOD Code-Alarm licensed use of January 1997
"Price" patent to Sherwood
<PAGE> 21
TRADEMARKS: CODE-ALARM
TRADEMARK REGISTRATIONS
Mark Reg. No. Date
---- -------- ----
ELITE 1,709,313 8/18/92
The following table lists Code-Alarm's Common Law Trademarks. Where a federal
Trademark has been abandoned, the prior Registration Number and Registration
Date are included; where a federal Trademark Application has been abandoned,
the Serial Number and Filing Date are included.
Mark Prior Reg. No./Serial No. Prior Reg./Filing Date
---- ------------------------- ----------------------
MIRAGE 1,528,131 (cancelled) 3/7/89
CODE-ALARM 1,537,231 (cancelled) 5/2/89
SCORPION 1,588,738 (cancelled) 3/27/90
FOCUS BAND 74/360,227 (abandoned) 2/19/93
CRF 74/360,230 (abandoned) 2/19/93
INTERCEPT 74/020,162 (abandoned) 1/18/90
FALCON (abandoned)
LIVEWIRES Not Registered
MICRO-SHIELD Not Registered
NIGHTHAWK Not Registered
PREDATOR Not Registered
RADICAL AUDIO DESIGN Not Registered
RAD WIRES Not Registered
<PAGE> 22
TRADEMARK APPLICATIONS
Mark Serial No. Filing Date
---- ---------- -----------
CODE-ALARM 75/333,752 7/31/97
CODE-ALARM 75/333,753 7/31/97
CODE 75/333,754 7/31/97
CODE-ALARM and Design 75/333,755 7/31/97
CODE-ALARM 75/333,756 7/31/97
PRO 75/333,757 7/31/97
TRADEMARK LICENSES
Name of Agreement Parties Date of Agreement
----------------- ------- -----------------
None.
<PAGE> 23
EXHIBIT A
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by Code-Alarm, 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)
<PAGE> 24
cause the certified public accountants then engaged by Grantor to
prepare and deliver to Attorney at any time and from time to time, promptly
upon Attorney's request, the following reports: (1) a reconciliation of all
accounts; (2) an aging of all accounts, (3) trial balances, (4) test
verifications of such accounts as Attorney may request, and (5) the results of
each physical verification of inventory; (g) communicate in its own name with
any party to any Contract with regard to the assignment of the right, title and
interest of such Grantor in and under the Contracts and other matters relating
thereto; and (h) execute, in connection with sale provided for in any Loan
Document, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral and to otherwise direct such sale or
resale, all as though Attorney were the absolute owner of the property of
Grantor for all purposes, and to do, at Attorney's option and Grantor's
expense, at any time or from time to time, all acts and other things that
Attorney reasonably deems necessary to perfect, preserve, or realize upon
Grantor's property or assets and Attorney's Liens thereon, all as fully and
effectively as Grantor might do. Grantor hereby ratifies, to the extent
permitted by law, all that said Attorney shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor and
Grantor has caused its seal to be affixed pursuant to the authority of its
board of directors this 24th day of October, 1997.
CODE-ALARM, INC.
By: /s/ Rand Mueller
-------------------------------
Name: Rand Mueller
------------------------
Title: President
------------------------
ATTEST:
By: /s/ Craig S. Camalo
-------------------------------
(SEAL) Title: Vice President and CFO
<PAGE> 1
EXHIBIT 10.42
EXECUTION COPY
(TESSCO)
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 24, 1997, between
TESSCO GROUP, INC., a Michigan corporation ("Grantor"), and GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, in its capacity as Agent for
Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as
of the date hereof by and among Code-Alarm, Inc., a Michigan corporation (in
such capacity, the "Borrower"), the other Persons signatory thereto as Credit
Parties, Agent and the Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the "Credit Agreement"),
Lenders have agreed to make the Loans to, and to incur Letter of Credit
Obligations for the benefit of, the Borrower;
WHEREAS, Grantor is currently a wholly-owned subsidiary of
Borrower and will derive direct and indirect economic benefits from the making
of the Loans and other financial accommodations provided to Borrower pursuant to
the Credit Agreement;
WHEREAS, Agent and Lenders are willing to make the Loans and
to incur Letter of Credit Obligations as provided for in the Credit Agreement,
but only upon the condition, among others, that Grantor shall have executed and
delivered to Agent, for itself and the ratable benefit of Lenders, that certain
Guaranty dated as of the date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the "Guaranty");
WHEREAS, in order to induce Agent and Lenders to enter into
the Credit Agreement and Loan Documents other than Litigation Collateral
Documents (hereinafter, "Loan Documents") and to induce Lenders to make the
Loans and to incur Letter of Credit Obligations as provided for in the Credit
Agreement, Grantor has agreed to grant to Agent, for the benefit of itself and
Lenders, a lien on and security interest in substantially all of its property as
security for such Guaranteed Obligations (as defined in the Guaranty).
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. All capitalized terms used but not
otherwise defined herein have the meanings given to them in the Credit Agreement
or in Annex A thereto. All other undefined terms contained in this Security
Agreement, unless the context indicates otherwise, have the meanings provided
for by the Code to the extent the same are used or defined therein.
<PAGE> 2
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Guaranteed Obligations and all other Obligations other
than Permitted Encumbrances and Litigation Obligations (hereinafter,
"Obligations") of Grantor hereunder and under each of the Loan Documents to
which it is a party, Grantor hereby grants, assigns, conveys, mortgages,
pledges, hypothecates and transfers to Agent, for itself and the benefit of
Lenders, a security interest in and lien upon all of its right, title and
interest in, to and under the following property, whether now owned by or owing
to, or hereafter acquired by or arising in favor of Grantor (including under any
trade names, styles or derivations thereof), and whether owned or consigned by
or to, or leased from or to, Grantor, and regardless of where located (all of
which being hereinafter collectively referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all goods;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Borrower Accounts, Concentration
Accounts, Disbursement Accounts, and all
other deposit and other bank accounts and
all deposits therein;
(xiii) all money, cash or cash equivalents of
Grantor; and
-2-
<PAGE> 3
(xiv) to the extent not otherwise included, all
Proceeds and products of the foregoing and all accessions to, substitutions and
replacements for, and rents and profits of, each of the foregoing.
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce Agent and
Lenders as aforesaid, Grantor hereby grants to Agent, for itself and the benefit
of Lenders, a right of setoff against the property of Grantor held by Agent or
any Lender, consisting of property described above in Section 2(a) now or
hereafter in the possession or custody of or in transit to Agent or any Lender,
for any purpose, including safekeeping, collection or pledge, for the account of
Grantor, or as to which Grantor may have any right or power.
3. AGENT'S AND LENDERS' RIGHTS; LIMITATIONS ON AGENT'S
AND LENDERS' OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to
the contrary notwithstanding, Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder. Neither Agent nor any
Lender shall have any obligation or liability under any Contract or License by
reason of or arising out of this Security Agreement or the granting herein of a
Lien thereon or the receipt by Agent or any Lender of any payment relating to
any Contract or License pursuant hereto. Neither Agent nor any Lender shall be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract or License, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of any payment
received by it or the sufficiency of any performance by any party under any
Contract or License, or to present or file any claims, or to take any action to
collect or enforce any performance or the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
(b) Agent may at any time after an Event of Default shall have
occurred and be continuing, without prior notice to Grantor, notify Account
Debtors, parties to the Contracts and obligors in respect of Instruments and
Chattel Paper, that the Accounts and the right, title and interest of Grantor in
and under such Contracts, Instruments and Chattel Paper have been assigned to
Agent, and that payments shall be made directly to Agent, for itself and the
benefit of Lenders. Upon the request of Agent, Grantor shall so notify Account
Debtors, parties to Contracts and obligors in respect of Instruments and Chattel
Paper.
(c) Agent may at any time in Agent's own name or in the name
of Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and
-3-
<PAGE> 4
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 grant a Lien hereunder, and has good and marketable
title thereto free and clear of any and all Liens other than Permitted
Encumbrances.
(b) No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is on file or of record in any public office, except
such as may have been filed (i) by Grantor in favor of Agent pursuant to this
Security Agreement or the Loan Documents, and (ii) in connection with any other
Permitted Encumbrances.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto and, with respect to locations of Collateral
established after the Closing Date, such additional financing statements
delivered to Agent pursuant to Section 4(g), a perfected Lien in favor of Agent,
for itself and the benefit of Lenders, on the Collateral with respect to which a
Lien may be perfected by filing pursuant to the Code. Such Lien is prior to all
other Liens, except Permitted Encumbrances that would be prior to Liens in favor
of Agent for the benefit of Agent and Lenders as a matter of law, and is
enforceable as such as against any and all creditors of and purchasers from
Grantor (other than purchasers of Inventory in the ordinary course of business).
All action by Grantor necessary or desirable to protect and perfect such Lien on
each item of the Collateral has been duly taken.
(d) As of the Closing Date, Schedule II hereto lists all
Instruments and Chattel Paper of Grantor, other than those having a face amount
of less than $5,000 individually and an aggregate face amount of less than
$10,000. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof), and on all Instruments and Chattel Paper of
Grantor acquired after the Closing Date (other than those having a face amount
of less than $5,000 individually and less than $10,000 in the aggregate,
including those existing on the Closing Date), has been duly taken. The Lien of
Agent, for the benefit of Agent and Lenders, on the Collateral listed on
Schedule II hereto, and such Instruments and Chattel Paper acquired after the
Closing Date, is
-4-
<PAGE> 5
prior to all other Liens, except Permitted Encumbrances that would be prior to
the Liens in favor of Agent as a matter of law, and is enforceable as such
against any and all creditors of and purchasers from Grantor.
(e) Grantor's chief executive office, principal place of
business, corporate offices, and, as of the Closing Date, all warehouses and
premises where Collateral is stored or located and all locations of its books
and records concerning the Collateral, are set forth on Schedule III hereto.
Prior to Grantor's maintaining any Collateral at any other location, Grantor
shall have obtained Agent's written consent thereto and shall have delivered to
Agent signed financing statements with respect thereto and such additional
documentation as may be required by Section 4(g) hereto.
(f) With respect to the Accounts, except as specifically
disclosed on the most recent Collateral Report delivered to Agent, (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be expected to
reduce the amount payable thereunder as shown on Grantor's books and records and
any invoices, statements and Collateral Reports delivered to Agent and Lenders
with respect thereto; (iv) Grantor has not received any notice of proceedings or
actions which are threatened or pending against any Account Debtor which might
result in any adverse change in such Account Debtor's financial condition; (v)
Grantor has no knowledge that any Account Debtor is unable generally to pay its
debts as they become due, (vi) the amounts shown on all invoices, statements and
Collateral Reports which may be delivered to the Agent with respect thereto are
actually and absolutely owing to Grantor as indicated thereon and are not in any
way contingent; (vii) no payments have been or shall be made thereon except
payments immediately delivered to the Borrower Accounts or the Agent as required
pursuant to the terms of Annex C to the Credit Agreement; and (viii) to
Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the
most recent Collateral Report delivered to Agent pursuant to the terms of this
Security Agreement or the Credit Agreement, except as specifically disclosed on
such Collateral Report, (i) such Inventory is located at one of Grantor's
locations set forth on Schedule III hereto, or at such other locations with
respect to which Grantor shall have obtained Agent's prior written consent
pursuant to clause (ii) hereof and delivered to Agent additional financing
statements and other documents as may be required by clause (ii) hereof, (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior written consent, and if Agent
-5-
<PAGE> 6
gives such consent, Grantor will concurrently therewith deliver to Agent such
additional financingstatements as may be required by Agent with respect thereto
and obtain, to the extent required by the Credit Agreement, bailee, consignee,
landlord and mortgagee agreements with respect thereto, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, for the benefit of Agent and Lenders, and except for
Permitted Encumbrances, (iv) such Inventory is Eligible Inventory of good and
merchantable quality, free from any defects, (v) such Inventory is not subject
to any licensing, patent, royalty, trademark, trade name or copyright agreements
with any third parties which would require any consent of any third party upon
sale or disposition of that Inventory or the payment of any monies to any third
party as a precondition of such sale or other disposition, and (vi) the
completion of manufacture, sale or other disposition of such Inventory by Agent
following an Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or agreement to
which Grantor is a party or to which such property is subject.
(h) Grantor has no interest in, nor title to, any Patent,
Trademark or Copyright except as set forth in Schedule IV hereto or, with
respect to such property acquired or created after the Closing Date, as is
described in writing to Agent within [thirty (30)] days of Grantor's acquisition
or creation thereof. This Security Agreement is effective to create a valid and
continuing Lien on and, upon filing of the Copyright Security Agreements with
the United States Copyright Office and filing of the Patent Security Agreements
and the Trademark Security Agreements with the United States Patent and
Trademark Office, and the filing of appropriate financing statements listed on
Schedule I hereto, perfected Liens, other than Permitted Encumbrances, in favor
of Agent on Grantor's Patents, Trademarks and Copyrights and such perfected
Liens are enforceable as such as against any and all creditors of and purchasers
from Grantor. Upon filing of the Copyright Security Agreements with the United
States Copyright Office and filing of the Patent Security Agreements and the
Trademark Security Agreements with the United States Patent and Trademark Office
and the filing of appropriate financing statements listed on Schedule I hereto,
all action necessary or desirable to protect and perfect Agent's Lien on
Grantor's Patents, Trademarks or Copyrights shall have been duly taken.
5. COVENANTS. Grantor covenants and agrees with Agent, for
the benefit of Agent and Lenders, that from and after the date of this Security
Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and
from time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any License or Contract held by Grantor or in which
Grantor has any rights not heretofore assigned, (ii) filing any financing or
continuation statements under the Code with
-6-
<PAGE> 7
respect to the Liens granted hereunder or under any Loan Document, (iii)
transferring Collateralto Agent's possession (for the benefit of Agent and
Lenders) if such Collateral consists of Chattel Paper, Instruments (subject to
the provisions of Section 4(d)) or if a Lien on such Collateral can be perfected
only by possession, and (iv) obtaining, or using its best efforts to obtain,
waivers of Liens, if any exist, from landlords, bailees, consignees and
mortgagees in accordance with the Credit Agreement. Grantor also hereby
authorizes Agent, for the benefit of Agent and Lenders, to file any such
financing or continuation statements without the signature of Grantor to the
extent permitted by applicable law. If any amount payable under or in connection
with any of the Collateral is or shall become evidenced by any Instrument, such
Instrument, other than checks and notes received in the ordinary course of
business, shall be duly endorsed in a manner satisfactory to Agent immediately
upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain,
at its own cost and expense, satisfactory and complete records of the
Collateral, including a record of any and all payments received and any and all
credits granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby.
Subject to the materiality exceptions set forth in Section 4(d), Chattel Paper
shall be marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of General
Electric Capital Corporation, as Agent, for the benefit of Agent and certain
Lenders."
(c) Covenants Regarding Patent, Trademark and Copyright
Collateral.
(i) Grantor shall notify Agent immediately if it knows or has
reason to know that any application or registration relating to any
Patent, Trademark or Copyright (now or hereafter existing) may become
abandoned or dedicated, or of any adverse determination or development
(including the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court)
regarding Grantor's ownership of any Patent, Trademark or Copyright,
its right to register the same, or to keep and maintain the same.
(ii) In no event shall Grantor, either directly or through
any agent, employee, licensee or designee, file an application for the
registration of any Patent, Trademark or Copyright with the United
States Patent and Trademark Office, the United States Copyright Office
or any similar office or agency without giving Agent prior written
notice thereof, and, upon request of Agent, Grantor shall execute and
deliver any and all Patent Security Agreements, Copyright Security
Agreements or Trademark Security Agreements as Agent may request to
evidence Agent's Lien on such Patent, Trademark or Copyright, and the
General Intangibles of Grantor relating thereto or represented
thereby.
-7-
<PAGE> 8
(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
sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution,
and shall take such other actions as Agent shall deem appropriate
under the circumstances to protect such Patent, Trademark or Copyright
Collateral.
(d) Indemnification. In any suit, proceeding or action brought
by Agent or any Lender relating to any Account, Chattel Paper, Contract,
Document, General Intangible or Instrument for any sum owing thereunder or to
enforce any provision of any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument, Grantor will save, indemnify and keep Agent and
Lenders harmless from and against all expense (including reasonable attorneys'
fees and expenses), loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Grantor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from Grantor, except in the
case of Agent or any Lender, to the extent such expense, loss, or damage is
attributable to the gross negligence or willful misconduct of Agent or such
Lender as finally determined by a court of competent jurisdiction. All such
obligations of Grantor shall be and remain enforceable against and only against
Grantor and shall not be enforceable against Agent or any Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper, Contracts and Licenses and all other agreements to
which it is a party or by which it is bound relating to the Collateral.
(f) Limitation on Liens on Collateral. Grantor will not
create, permit or suffer to exist, and Grantor will defend the Collateral
against, and take such other action as is necessary to remove, any Lien on the
Collateral except Permitted Encumbrances, and will defend the right, title and
interest of Agent and Lenders in and to any of Grantor's rights under the
Collateral against the claims and demands of all Persons whomsoever.
-8-
<PAGE> 9
(g) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(h) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(i) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Encumbrances) or claim made or
asserted against any of the Collateral, and (ii) of the occurrence of any other
event which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any Loan Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent
a power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent, for the benefit of Agent and
Lenders, under the Power of Attorney are solely to protect Agent's interests
(for the benefit of Agent and Lenders) in the Collateral and shall not impose
any duty upon Agent or any Lender to exercise any such powers. Agent agrees that
(a) it shall not exercise any power or authority granted under the Power of
Attorney unless an Event of Default has occurred and is continuing, and (b)
Agent shall account for any moneys received by Agent in respect of any
foreclosure on or disposition of Collateral pursuant to the Power of Attorney
provided that none of Agent nor any Lender shall have any duty as to any
Collateral, and Agent and Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers.
NONE OF AGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT
OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF
DAMAGES TO THE EXTENT ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR
ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it
under this Security Agreement, the Credit Agreement, the Loan Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Obligations, if any Event of Default
-9-
<PAGE> 10
shall have occurred and be continuing, Agent may exercise all rights and
remedies of a secured party under the Code. Without limiting the generality of
the foregoing, Grantor expressly agrees that in any such event Agent, without
demand of performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale)
to or upon Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code and other applicable law), may forthwith enter upon the
premises of Grantor where any Collateral is located through self-help, without
judicial process, without first obtaining a final judgment or giving Grantor or
any other Person notice and opportunity for a hearing on Agent's claim or action
and may collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at a public or private sale or sales, at any exchange at such prices as it may
deem acceptable, for cash or on credit or for future delivery without assumption
of any credit risk. Agent or any Lender shall have the right upon any such
public sale or sales and, to the extent permitted by law, upon any such private
sale or sales, to purchase for the benefit of Agent and Lenders, the whole or
any part of said Collateral so sold, free of any right or equity of redemption,
which equity of redemption Grantor hereby releases. Such sales may be adjourned
and continued from time to time with or without notice. Agent shall have the
right to conduct such sales on Grantor's premises or elsewhere and shall have
the right to use Grantor's premises without charge for such time or times as
Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies (for the benefit
of Agent and Lenders), with respect to such appointment without prior notice or
hearing as to such appointment. Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale to the
Obligations as provided in the Credit Agreement, and only after so paying over
such net proceeds, and after the payment by Agent of any other amount required
by any provision of law, need Agent account for the surplus, if any, to Grantor.
To the maximum extent permitted by applicable law, Grantor waives all claims,
damages, and demands against Agent or any Lender arising out of the
repossession, retention or sale of the Collateral except to the extent such
arise out of the gross negligence or willful misconduct of Agent or such Lender
as finally determined by a court of competent jurisdiction. Grantor agrees that
ten (10) days' prior written notice by Agent of the time and place of any public
sale or of the time after which a private sale may take place is reasonable
notification of such matters. Grantor shall remain liable for any deficiency if
the proceeds of any sale or disposition of the Collateral are
-10-
<PAGE> 11
insufficient to pay all Obligations, including any attorneys' fees or other
expenses incurred by Agent or any Lender to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL.
For the purpose of enabling Agent to exercise rights and remedies under Section
7 hereof (including, without limiting the terms of Section 7 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Agent shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby grants
to Agent, for the benefit of Agent and Lenders, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to
Grantor) to use, license or sublicense any Intellectual Property now owned or
hereafter acquired by Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
9. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF
COLLATERAL. Agent and each Lender shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither Agent nor any Lender
shall have any other duty as to any Collateral in its possession or control or
in the possession or control of any agent or nominee of Agent or such Lender, or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto.
10. REINSTATEMENT. Notwithstanding anything contained herein
to the contrary, this Security Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Grantor
for liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of Grantor's assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded, avoided or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent transfer," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made.
Notwithstanding anything contained herein to the contrary, in the event that any
payment, or any part thereof, is rescinded, avoided, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, avoided, reduced, restored or returned.
11. NOTICES. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication
-11-
<PAGE> 12
shall or may be given to or served upon any of the parties by any other party,
or whenever any of the parties desires to give and serve upon any other party
any communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall be given in the manner, and deemed received, as provided
for in the Credit Agreement.
12. SEVERABILITY. Whenever possible, each provision of this
Security Agreement shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the Loan Documents which, taken together, set
forth the complete understanding and agreement of Agent, Lenders and Grantor
with respect to the matters referred to herein and therein.
13. NO WAIVER; CUMULATIVE REMEDIES. Neither Agent nor any
Lender shall by any act, delay, omission or otherwise be deemed to have waived
any of its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Agent and then only to the extent therein set forth. A waiver
by Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Agent would otherwise have had
on any future occasion. No failure to exercise nor any delay in exercising on
the part of Agent or any Lender, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be limited
to the extent necessary so that they shall not render this Security Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to
Section 10 hereof, this Security Agreement shall terminate upon the Termination
Date.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor
-12-
<PAGE> 13
(including any debtor-in-possession on behalf of Grantor) and shall, together
with the rights and remedies of Agent, for the benefit of Agent and Lenders,
hereunder, inure to the benefit of Agent and Lenders, all future holders of any
instrument evidencing any of the Obligations and their respective successors
fand assigns. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Obligations or any portion thereof or interest therein shall in any manner
affect the Lien granted to Agent, for the benefit of Agent and Lenders,
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in
any number of separate counterparts, each of which shall collectively and
separately constitute one and the same agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN COOK COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG GRANTOR, AGENT
AND LENDERS PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE LOAN DOCUMENTS
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF
THE LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND GRANTOR ACKNOWLEDGE THAT
ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK 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
-13-
<PAGE> 14
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET
FORTH ON ANNEX I TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, LENDERS,
AND GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
21. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Security Agreement.
In the event an ambiguity or question of intent or interpretation arises, this
Security Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Security
Agreement.
22. Advice of Counsel. Each of the parties represents to each
other party hereto that it has discussed this Security Agreement and,
specifically, the provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Obligations in accordance with the terms of the Credit Agreement.
-14-
<PAGE> 15
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
TESSCO GROUP, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
------------------------------
Title: President
-----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By:/s/ Timothy S. Van Kirk
------------------------------------
Name: Timothy S. Van Kirk
-------------------------------
Title: Duly Authorized Signatory
------------------------------
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<PAGE> 16
SCHEDULE I
FILING JURISDICTIONS
1. UCC-1 Financing Statements:
Debtor: TESSCO GROUP, INC.
Locations: (1) Secretary of State of California
(2) Secretary of State of Michigan
(3) Secretary of State of Texas
2. UCC Fixture Financing Statements:
Debtor: TESSCO GROUP, INC.
Locations: (1) Oakland County, Michigan
(2) Williamson County, Texas
<PAGE> 17
SCHEDULE II
INSTRUMENTS
None.
<PAGE> 18
SCHEDULE III
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING GRANTOR'S COLLATERAL
I. Chief Executive Office and principal place of business of Grantor:
300 Industrial Avenue
Georgetown, Texas
II. Corporate Offices of Grantor:
300 Industrial Avenue
Georgetown, Texas
III. Warehouses:
300 Industrial Avenue
Georgetown, Texas
IV. Other Premises at which Collateral is Stored or Located:
None.
V. Locations of Records Concerning Collateral:
300 Industrial Avenue
Georgetown, Texas
<PAGE> 19
SCHEDULE IV
PATENTS, TRADEMARKS AND COPYRIGHTS
None.
<PAGE> 20
EXHIBIT A
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by Tessco
Group, Inc., a Michigan corporation ("Grantor") to General Electric Capital
Corporation, a New York corporation (hereinafter referred to as "Attorney"), as
Agent for the benefit of Agent and Lenders, under a Credit Agreement and a
Security Agreement, both dated as of October 24, 1997 and other related
documents (the "Loan Documents"). No person to whom this Power of Attorney is
presented, as authority for Attorney to take any action or actions contemplated
hereby, shall be required to inquire into or seek confirmation from Grantor as
to the authority of Attorney to take any action described below, or as to the
existence of or fulfillment of any condition to this Power of Attorney, which is
intended to grant to Attorney unconditionally the authority to take and perform
the actions contemplated herein, and Grantor irrevocable waives any right to
commence any suit or action, in law or equity, against any person or entity
which acts in reliance upon or acknowledges the authority granted under this
Power of Attorney. The power of attorney granted hereby is coupled with an
interest, and may not be revoked or canceled by Grantor without Attorney's
written consent.
Grantor hereby irrevocably constitutes and appoints Attorney
(and all officers, employees or agents designated by Attorney), with full power
of substitution, as Grantor's true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Grantor and in the
name of Grantor or in its own name, from time to time in Attorney's discretion,
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of the Loan Documents and, without limiting the generality of the
foregoing, Grantor hereby grants to Attorney the power and right, on behalf of
Grantor, without notice to or assent by Grantor, and at any time following the
occurrence and during the continuation of an Event of Default, to do the
following: (a) change the mailing address of Grantor, open a post office box on
behalf of Grantor, open mail for Grantor, and ask, demand, collect, give
acquittances and receipts for, take possession of, endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, and notices in connection with any property
of Grantor; (b) effect any repairs to any asset of Grantor, or continue to
obtain any insurance and pay all or any part of the premiums therefor and costs
thereof, and make, settle and adjust all claims under such policies of
insurance, and make all determinations and decisions with respect to such
policies; (c) pay or discharge any taxes, liens, security interests, or other
encumbrances levied or placed on or threatened against Grantor or its property;
(d) defend any suit, action or proceeding brought against Grantor if Grantor
does not defend such suit, action or proceeding or if Attorney believes that
Grantor is not pursuing such defense in a manner that will maximize the recovery
to Attorney, and settle, compromise or adjust any suit, action, or proceeding
described above and, in connection therewith, give such discharges or releases
as Attorney may deem appropriate; (e) file or prosecute any claim, litigation,
suit or proceeding in any court of competent jurisdiction or before any
arbitrator, or take any other action otherwise deemed appropriate by Attorney
for the purpose of collecting any and all such moneys due to Grantor whenever
payable and to enforce any other right in respect of Grantor's property; (f)
<PAGE> 21
cause the certified public accountants then engaged by Grantor to prepare and
deliver to Attorney at any time and from time to time, promptly upon Attorney's
request, the following reports: (1) a reconciliation of all accounts; (2) an
aging of all accounts, (3) trial balances, (4) test verifications of such
accounts as Attorney may request, and (5) the results of each physical
verification of inventory; (g) communicate in its own name with any party to any
Contract with regard to the assignment of the right, title and interest of such
Grantor in and under the Contracts and other matters relating thereto; and (h)
execute, in connection with sale provided for in any Loan Document, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral and to otherwise direct such sale or resale, all as
though Attorney were the absolute owner of the property of Grantor for all
purposes, and to do, at Attorney's option and Grantor's expense, at any time or
from time to time, all acts and other things that Attorney reasonably deems
necessary to perfect, preserve, or realize upon Grantor's property or assets and
Attorney's Liens thereon, all as fully and effectively as Grantor might do.
Grantor hereby ratifies, to the extent permitted by law, all that said Attorney
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney is executed by
Grantor and Grantor has caused its seal to be affixed pursuant to the authority
of its board of directors this 24th day of October, 1997.
TESSCO GROUP, INC.
By: /s/ Rand Mueller
----------------------------------
Name: Rand Mueller
---------------------------
Title: President
--------------------------
ATTEST:
By: /s/ Craig S. Camalo
----------------------------------
(SEAL)
Title: Vice President and CFO
--------------------------
-2-
<PAGE> 1
EXHIBIT 10.43
EXECUTION COPY
(TESSCO)
GUARANTY
This GUARANTY (this "Guaranty"), dated as of October 24, 1997,
by and between TESSCO GROUP, INC., a Michigan corporation ("Guarantor"), and
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, individually and
as agent (in such capacity, "Agent") for itself and the lenders from time to
time signatory to the "Credit Agreement" hereinafter defined ("Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among Code-Alarm, Inc., a Michigan corporation (in such
capacity, the "Borrower"), the other Persons signatory thereto as Credit
Parties, Agent and the Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the "Credit Agreement"),
Lenders have agreed to make Loans to, and incur Letter of Credit Obligations for
the benefit of, Borrower.
WHEREAS, Guarantor is a currently wholly-owned subsidiary of
Borrower and will derive direct and indirect economic benefits from the making
of the Loans and other financial accommodations provided to Borrower pursuant to
the Credit Agreement; and
WHEREAS, in order to induce Agent and Lenders to enter into
the Credit Agreement and Loan Documents other than Litigation Collateral
Documents (hereinafter, the "Loan Documents") and to induce Lenders to make the
Loans and to incur Letter of Credit Obligations as provided for in the Credit
Agreement, Guarantor has agreed to guarantee payment of the Obligations other
than Litigation Obligations.
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lenders to provide the Loans and
other financial accommodations under the Credit Agreement, it is agreed as
follows:
1. DEFINITIONS. Capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement, unless otherwise defined
herein.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any annexes,
exhibits and schedules to any of the foregoing, and shall refer to this Guaranty
as the same may be in effect at the time such reference becomes operative.
<PAGE> 2
2. THE GUARANTY.
2.1. Guaranty of Guaranteed Obligations of Borrower.
Guarantor hereby unconditionally guarantees to Agent and Lenders, and their
respective successors, endorsees, transferees and assigns, the prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
the Obligations of Borrower other than Litigation Obligations (hereinafter the
"Guaranteed Obligations"). Guarantor agrees that this Guaranty is a guaranty of
payment and performance and not of collection, and that its obligations under
this Guaranty shall be primary, absolute and unconditional, irrespective of, and
unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in this Guaranty,
any Loan Document or any other agreement, document or instrument to
which any Credit Party are or may become a party;
(b) the absence of any action to enforce this
Guaranty or any Loan Document or the waiver or consent by Agent and/or
Lenders with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure
to perfect its Lien against, any Collateral for the Guaranteed
Obligations or any action, or the absence of any action, by Agent in
respect thereof;
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor;
it being agreed by Guarantor that its obligations under this Guaranty shall not
be discharged until the Termination Date. Guarantor shall be regarded, and shall
be in the same position, as principal debtor with respect to the Guaranteed
Obligations. Guarantor agrees that any notice or directive given at any time to
Agent which is inconsistent with the waiver in the immediately preceding
sentence shall be null and void and may be ignored by Agent and Lenders, and, in
addition, may not be pleaded or introduced as evidence in any litigation
relating to this Guaranty for the reason that such pleading or introduction
would be at variance with the written terms of this Guaranty, unless Agent and
Lenders have specifically agreed otherwise in writing. It is agreed among
Guarantor, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by the Loan Documents and that, but for this
Guaranty and such waivers, Agent and Lenders would decline to enter into the
Credit Agreement.
2.2. Demand by Agent or Lenders. In addition to the terms of
the Guaranty set forth in Section 2.1 hereof, and in no manner imposing any
limitation on such terms, it is expressly understood and agreed that, if, at any
time, the outstanding principal amount of the Guaranteed Obligations under the
Credit Agreement (including all accrued interest thereon) is
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<PAGE> 3
declared to be immediately due and payable (hereinafter, a "Guaranty Default"),
then Guarantor shall, without demand, pay to the holders of the Guaranteed
Obligations the entire outstanding Guaranteed Obligations due and owing to such
holders. Payment by Guarantor shall be made to Agent in immediately available
Federal funds to an account designated by Agent or at the address set forth
herein for the giving of notice to Agent or at any other address that may be
specified in writing from time to time by Agent, and shall be credited and
applied to the Guaranteed Obligations.
2.3. Enforcement of Guaranty. In no event shall Agent have
any obligation (although it is entitled, at its option) to proceed against
Borrower or any other Credit Party before seeking satisfaction from Guarantor.
2.4. Waiver. In addition to the waivers contained in Section
2.1 hereof, Guarantor waives, and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshaling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by Guarantor of its
Guaranteed Obligations under, or the enforcement by Agent or Lenders of, this
Guaranty. Guarantor hereby waives diligence, presentment and demand (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Guaranteed Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of, the Guaranteed Obligations, notice of adverse change
in Borrower's financial condition or any other fact which might increase the
risk to Guarantor) with respect to any of the Guaranteed Obligations or all
other demands whatsoever and waive the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty. Guarantor
represents, warrants and agrees that, as of the date of this Guaranty, its
obligations under this Guaranty are not subject to any offsets or defenses
against Agent or Lenders or any other Credit Party of any kind. Guarantor
further agrees that its obligations under this Guaranty shall not be subject to
any counterclaims, offsets or defenses against Agent or any Lender or against
any other Credit Party of any kind which may arise in the future.
2.5. Benefit of Guaranty. The provisions of this Guaranty are
for the benefit of Agent and Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between any Credit Party and Agent or Lenders, the obligations of any Credit
Party under the Loan Documents. In the event all or any part of the Guaranteed
Obligations are transferred, indorsed or assigned by Agent or any Lender to any
Person or Persons, any reference to "Agent" or "Lender" herein shall be deemed
to refer equally to such Person or Persons.
2.6. Modification of Guaranteed Obligations, Etc. Guarantor
hereby acknowledges and agrees that Agent and Lenders may at any time or from
time to time, with or without the consent of, or notice to, Guarantor:
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<PAGE> 4
(a) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, the Guaranteed
Obligations;
(b) take any action under or in respect of the Loan
Documents in the exercise of any remedy, power or privilege contained
therein or available to it at law, equity or otherwise, or waive or
refrain from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the
Loan Documents;
(d) extend or waive the time for any Credit Party's
performance of, or compliance with, any term, covenant or agreement on
its part to be performed or observed under the Loan Documents, or waive
such performance or compliance or consent to a failure of, or departure
from, such performance or compliance;
(e) take and hold Collateral for the payment of the
Guaranteed Obligations guaranteed hereby or sell, exchange, release,
dispose of, or otherwise deal with, any property pledged, mortgaged or
conveyed, or in which Agent or Lenders have been granted a Lien, to
secure any Obligations;
(f) release anyone who may be liable in any manner
for the payment of any amounts owed by Guarantor or any other Credit
Party to Agent or any Lender;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which claims of
other creditors of Guarantor or any other Credit Party are subordinated
to the claims of Agent and Lenders; and/or
(h) apply any sums by whomever paid or however
realized to any amounts owing by Guarantor or any other Credit Party to
Agent or any Lender in such manner as Agent or any Lender shall
determine in its discretion;
and Agent and Lenders shall not incur any liability to Guarantor as a result
thereof, and no such action shall impair or release the Guaranteed Obligations
of Guarantor under this Guaranty.
2.7. Reinstatement. Notwithstanding anything contained herein
to the contrary, this Guaranty shall remain in full force and effect and
continue to be effective should any petition be filed by or against any Credit
Party or Guarantor for liquidation or reorganization, should any Credit Party or
Guarantor become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
such Credit Party's or Guarantor'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
Guaranteed Obligations, or any part thereof, is, pursuant to applicable law,
rescinded, avoided or reduced in amount, or must otherwise be restored or
returned by Agent or any Lender, whether as a "voidable preference", "fraudulent
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<PAGE> 5
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,
reduced, restored or returned, the Guaranteed Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, avoided,
reduced, restored or returned.
2.8. Deferral of Subrogation, Etc. Notwithstanding anything
to the contrary in this Guaranty, or in any Loan Document, Guarantor hereby:
(a) expressly and irrevocably waives, on behalf of itself and
its successors and assigns (including any surety) until the Termination Date,
any and all rights at law or in equity to subrogation, to reimbursement, to
exoneration, to contribution, to indemnification, to set off or to any other
rights that could accrue to a surety against a principal, to a guarantor against
a principal, to a guarantor against a maker or obligor, to an accommodation
party against the party accommodated, to a holder or transferee against a maker,
or to the holder of any claim against any Person, and which Guarantor may have
or hereafter acquire against any Credit Party in connection with or as a result
of Guarantor's execution, delivery and/or performance of this Guaranty, or any
other documents to which Guarantor is a party or otherwise; and
(b) acknowledges and agrees (i) that this waiver is intended
to benefit Agent and Lenders and shall not limit or otherwise effect Guarantor's
liability hereunder or the enforceability of this Guaranty, and (ii) that Agent,
Lenders and their respective successors and assigns are intended third party
beneficiaries of the waivers and agreements set forth in this Section 2.9 and
their rights under this Section 2.9 shall survive payment in full of the
Guaranteed Obligations.
2.9. Election of Remedies. If Agent may, under applicable law,
proceed to realize benefits under any of the Loan Documents giving Agent and
Lenders a Lien upon any Collateral owned by any Credit Party, either by judicial
foreclosure or by non-judicial sale or enforcement, Agent may, at its sole
option, determine which of such remedies or rights it may pursue without
affecting any of such rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Agent shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Credit Party, whether because of any applicable laws pertaining to "election
of remedies" or the like, Guarantor hereby consents to such action by Agent and
waives any claim based upon such action, even if such action by Agent shall
result in a full or partial loss of any rights of subrogation which Guarantor
might otherwise have had but for such action by Agent. Any election of remedies
which results in the denial or impairment of the right of Agent to seek a
deficiency judgment against any Credit Party shall not impair Guarantor's
obligation to pay the full amount of the Guaranteed Obligations. In the event
Agent shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or the Loan Documents, Agent may bid all or less than the
amount of the Guaranteed Obligations and the amount of such bid need not be paid
by Agent but shall be credited against the Guaranteed Obligations. The amount of
the successful bid at any such sale shall be conclusively deemed to be the fair
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<PAGE> 6
market value of the collateral and the difference between such bid amount and
the remaining balance of the Guaranteed Obligations shall be conclusively deemed
to be the amount of the Guaranteed Obligations guaranteed under this Guaranty,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
and Lenders might otherwise be entitled but for such bidding at any such sale.
2.10. Funds Transfers. If Guarantor shall engage in any
transaction as a result of which Borrower is required to make a mandatory
prepayment with respect to the Guaranteed Obligations under the terms of the
Credit Agreement (including any sale of Guarantor's Stock or assets), Guarantor
shall distribute to, or make a contribution to the capital of, the Borrower an
amount equal to the mandatory prepayment required under the terms of the Credit
Agreement.
3. DELIVERIES. In a form satisfactory to Agent, Guarantor
shall deliver to Agent (with sufficient copies for each Lender), concurrently
with the execution of this Guaranty and the Credit Agreement, the Loan Documents
and other instruments, certificates and documents as are required to be
delivered by Guarantor to Agent under the Credit Agreement.
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders to make
the Loans and incur Letter of Credit Obligations under the Credit Agreement,
Guarantor makes the representations and warranties as to Guarantor contained in
the Credit Agreement, each of which is incorporated herein by reference, and the
following representations and warranties to Agent and each Lender, each and all
of which shall survive the execution and delivery of this Guaranty:
4.1. Corporate Existence; Compliance with Law. Guarantor (i)
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; (ii) is duly qualified to do business
and is in good standing under the laws of each jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification;
(iii) has the requisite corporate power and authority and the legal right to
own, pledge, mortgage and operate its properties, to lease the property it
operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (iv) has all licenses, permits, consents or approvals
from or by, and has made all material filings with, and has given all notices
to, all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance with its charter and
by-laws; and (vi) is in compliance with all applicable provisions of law, except
where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
4.2. Executive Offices. Guarantor's executive office and
principal place of business are as set forth in Schedule I hereto.
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<PAGE> 7
4.3. Name. Guarantor's exact legal name is correctly set forth
in the introductory paragraph to this Guaranty.
4.4. Corporate Power; Authorization; Enforceable Guaranteed
Obligations. The execution, delivery and performance of this Guaranty and all
Loan Documents and all instruments and documents to be delivered by Guarantor
hereunder and under the Credit Agreement are within Guarantor's corporate power,
have been duly authorized by all necessary or proper corporate action, including
the consent of stockholders where required, are not in contravention of any
provision of Guarantor's charter or by-laws, do not violate any law or
regulation, or any order or decree of any Governmental Authority, do not
conflict with or result in the breach of, or constitute a default under, or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of its property is
bound, do not result in the creation or imposition of any Lien upon any of the
property of any Guarantor, other than those in favor of Agent, for itself and
the benefit of Lenders, and the same do not require the consent or approval of
any Governmental Authority or any other Person except those referred to in
Section 2.1(c) of the Credit Agreement, all of which have been duly obtained,
made or complied with prior to the Closing Date. On or prior to the Closing
Date, this Guaranty and each of the Loan Documents to which Guarantor is a party
shall have been duly executed and delivered for the benefit of or on behalf of
Guarantor, and each shall then constitute a legal, valid and binding obligation
of Guarantor, enforceable against Guarantor in accordance with its terms.
5. FURTHER ASSURANCES. Guarantor agrees, upon the written
request of Agent or any Lender, to execute and deliver to Agent or such Lender,
from time to time, any additional instruments or documents reasonably considered
necessary by Agent or such Lender to cause this Guaranty to be, become or remain
valid and effective in accordance with its terms.
6. PAYMENTS FREE AND CLEAR OF TAXES. All payments required to
be made by each Guarantor hereunder shall be made to Agent and Lenders free and
clear of, and without deduction for, any and all present and future Taxes. If
Guarantor shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder, (a) the sum payable shall be increased as much as shall
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 6) Agent or Lenders, as
applicable, receive an amount equal to the sum they would have received had no
such deductions been made, (b) Guarantor shall make such deductions, and (c)
Guarantor shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law. Within thirty (30) days after the
date of any payment of Taxes, Guarantor shall furnish to Agent the original or a
certified copy of a receipt evidencing payment thereof. Guarantor shall
indemnify and, within ten (10) days of demand therefor, pay Agent and each
Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 6) paid by Agent or such
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted.
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7. OTHER TERMS.
7.1. Entire Agreement. This Guaranty, together with the Loan
Documents, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements relating to a
guaranty of the loans and advances under the Loan Documents and/or the
Guaranteed Obligations.
7.2. Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.
7.3. Severability. Whenever possible, each provision of this
Guaranty shall be interpreted in such a manner to be effective and valid under
applicable law, but if any provision of this Guaranty 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 Guaranty.
7.4. Notices. 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 or serve upon another any such
communication with respect to this Guaranty, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be addressed to the party to be notified as follows:
(a) If to Agent, at:
General Electric Capital Corporation
10 South LaSalle Street, Suite 2800
Chicago, Illinois 60603
Attention: Account Manager
Telecopy Number: (312) 419-5957
Telephone Number: (312) 419-0985
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with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: H. Bruce Bernstein
Telecopy Number: (312) 853-7036
Telephone Number: (312) 853-7000
and:
General Electric Capital Corporation
201 High Ridge Road
Stanford, Connecticut 06927-5100
Attention: General Counsel
Telecopy Number: (203) 316-7889
Telephone Number: (203) 316-7552
(b) If to any Lender, at the address of such Lender
specified in the Credit Agreement.
(c) If to Guarantor, at the address of Guarantor
specified on Schedule I hereto.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) Business Days after the same shall have been deposited
with the United States mail, registered or certified mail, return receipt
requested, with proper postage prepaid, (ii) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 7.4), (iii) one (1)
Business Day after deposit with a reputable overnight carrier with all charges
prepaid, or (iv) when delivered, if hand-delivered by messenger. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any of the above-listed persons designated
to receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
7.5. Successors and Assigns. This Guaranty and all obligations
of Guarantor hereunder shall be binding upon the successors and assigns of
Guarantor (including a debtor-in-possession on behalf of Guarantor) and shall,
together with the rights and remedies of Agent, for itself and for the benefit
of Lenders, hereunder, inure to the benefit of Agent and Lenders, all
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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 rights of Agent and Lenders hereunder. Guarantor
may not assign, sell, hypothecate or otherwise transfer any interest in or
obligation under this Guaranty.
7.6. No Waiver; Cumulative Remedies; Amendments. 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, for itself and the ratable benefit of Lenders, of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Guaranty may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed by
Agent and Guarantor.
7.7. Termination. This Guaranty is a continuing guaranty and
shall remain in full force and effect until the Termination Date. Upon payment
and performance in full of the Guaranteed Obligations, Agent shall deliver to
Guarantor such documents as Guarantor may reasonably request to evidence such
termination.
7.8. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which shall collectively and separately constitute one
and the same agreement.
7.9. Credit Agreement. Guarantor agrees to perform, comply
with and be bound by, the covenants contained in Sections 4, 5 and 6 of the
Credit Agreement, and each other provision thereof which is specifically
applicable to each Credit Party, which covenants and provisions are incorporated
herein by reference.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Guaranty as of the date first above written.
TESSCO GROUP, INC.
By: /s/ Rand Mueller
------------------------------------
Name: Rand Mueller
-------------------------
Title: President
------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Timothy S. Van Kirk
------------------------------------
Name: Timothy S. Van Kirk
-------------------------
Title: Duly Authorized
Signatory
------------------------
<PAGE> 12
SCHEDULE I
A. Executive Office; Principal Place of Business:
300 Industrial Avenue
Georgetown, TX 78626
B. Address for Notices:
300 Industrial Avenue
Georgetown, TX 78626
<PAGE> 1
EXHIBIT 10.44
EXECUTION COPY
(CODE ALARM)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of October 24, 1997 (together
with all amendments, if any, from time to time hereto, this "Agreement") between
CODE-ALARM, INC., a Michigan corporation (the "Pledgor") and GENERAL ELECTRIC
CAPITAL CORPORATION in its capacity as Agent for "Lenders", as defined below
("Agent").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among Pledgor (in such capacity, the "Borrower"), the
Persons named therein as Credit Parties, Agent and the Persons signatory thereto
from time to time as Lenders (including all annexes, exhibits and schedules
thereto, and as from time to time amended, restated, supplemented or otherwise
modified (the "Credit Agreement"), the Lenders have agreed to make Loans to, and
incur Letter of Credit Obligations for the benefit of, Borrower;
WHEREAS, Pledgor is the record and beneficial owner of the
shares of Stock listed in Schedule I hereto;
WHEREAS, in order to induce Agent and Lenders to make the
Loans and to incur the Letter of Credit Obligations as provided for in the
Credit Agreement, Pledgor has agreed to pledge the Pledged Collateral to Agent
in accordance herewith;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained and to induce Lenders to make Loans and to incur
Letter of Credit Obligations under the Credit Agreement, it is agreed as
follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as therein defined, and the following
shall have (unless otherwise provided elsewhere in this Agreement) the following
respective meanings (such meanings being equally applicable to both the singular
and plural form of the terms defined):
"Bankruptcy Code" means title 11, United States Code, as
amended from time to time, and any successor statute thereto.
"Pledged Collateral" has the meaning assigned to such term in
Section 2 hereof.
"Pledged Entity" means an issuer of Pledged Stock.
"Pledged Shares" means those shares listed in Schedule I
hereto.
"Secured Obligations" has the meaning assigned to such term in
Section 3 hereof.
<PAGE> 2
2. Pledge. Pledgor hereby pledges to Agent, and grants to
Agent for itself and the benefit of Lenders, a continuing security interest in
all of the following, other than Permitted Encumbrances collectively, the
"Pledged Collateral"):
(i) the Pledged Shares and the certificates
representing the Pledged Shares, and all dividends,
distributions, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Pledged Shares; and
(ii) such portion, as determined by Agent as provided
in Section 6(d) below, of any additional shares of Stock of a
Pledged Entity from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged
Shares), and the certificates representing such additional
shares, and all dividends, distributions, cash, instruments
and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such Stock.
3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is security for, the prompt payment in full when due, whether
at stated maturity, by acceleration or otherwise, and performance of all
Obligations other than the Litigation Obligations of any kind under or in
connection with the Credit Agreement and the other Loan Documents other than the
Litigation Collateral Documents and all obligations of Pledgor now or hereafter
existing under this Agreement including, without limitation, all fees, costs and
expenses whether in connection with collection actions hereunder or otherwise
(collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates evidencing
the Pledged Collateral shall be delivered to and held by or on behalf of Agent,
for itself and the benefit of Lenders, pursuant hereto. All Pledged Shares shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to Agent.
5. Representations and Warranties. Pledgor represents and
warrants to Agent that on the Closing Date and, unless otherwise specified
below, as of each time Pledgor requests or accepts the proceeds of an Advance or
Loan under the Credit Agreement:
(a) Pledgor is, and at the time of delivery of the Pledged
Shares to Agent will be, the sole holder of record and the sole
beneficial owner of such Pledged Collateral pledged by Pledgor free and
clear of any Lien thereon or affecting the title thereto, except for
Permitted Encumbrances or any Lien created by this Agreement;
(b) All of the Pledged Shares have been duly authorized,
validly issued and are fully paid and non-assessable;
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(c) Pledgor has the right and requisite authority to pledge,
assign, transfer, deliver, deposit and set over the Pledged Collateral
pledged by Pledgor to Agent as provided herein;
(d) None of the Pledged Shares has been issued or transferred
in violation of the securities registration, securities disclosure or
similar laws of any jurisdiction to which such issuance or transfer may
be subject;
(e) All of the Pledged Shares are presently owned by Pledgor,
and are presently represented by the certificates listed in Schedule I
hereto. As of the date hereof, there are no existing options, warrants,
calls or commitments of any character whatsoever relating to the
Pledged Shares;
(f) No consent, approval, authorization or other order or
other action by, and no notice to or filing with, any Governmental
Authority or any other Person is required (i) for the pledge by Pledgor
of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by Pledgor, or
(ii) for the exercise by Agent of the voting or other rights provided
for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in
connection with such disposition by laws affecting the offering and
sale of securities generally;
(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid Lien on and a
continuing perfected security interest in favor of the Agent for the
benefit of Agent and Lenders in the Pledged Collateral and the proceeds
thereof, securing the payment of the Secured Obligations, subject to no
other Lien (other than Permitted Encumbrances and Liens created
pursuant to the Litigation Collateral Documents);
(h) This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes a legal, valid and binding
obligation of Pledgor enforceable against Pledgor in accordance with
its terms; and
(i) The Pledged Shares constitute 100% of the issued and
outstanding shares of Stock of each Pledged Entity.
The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor covenants and agrees that until the
Termination Date:
(a) Without the prior written consent of Agent, Pledgor will
not sell, assign, transfer, pledge, or otherwise encumber any of its
rights in or to the Pledged Collateral, or any unpaid dividends,
interest or other distributions or payments with respect to the
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Pledged Collateral or grant a Lien in the Pledged Collateral, unless
otherwise expressly permitted by the Credit Agreement;
(b) Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such actions
as Agent from time to time may request in order to ensure to Agent and
Lenders the benefits of the Liens in and to the Pledged Collateral
intended to be created by this Agreement, including the filing of any
necessary Code financing statements, which may be filed by Agent with
or (to the extent permitted by law) without the signature of Pledgor,
and will cooperate with Agent, at Pledgor's expense, in obtaining all
necessary approvals and making all necessary filings under federal,
state, local or foreign law in connection with such Liens or any sale
or transfer of the Pledged Collateral;
(c) Pledgor has and will defend the title to the Pledged
Collateral and the Liens of Agent in the Pledged Collateral against the
claim of any Person and will maintain and preserve such Liens; and
(d) Pledgor will, upon obtaining ownership of any additional
Stock of a Pledged Entity or Stock otherwise required to be pledged to
Agent pursuant to any of the Loan Documents (other than the Litigation
Collateral Documents), which Stock is not already Pledged Collateral,
promptly (and in any event within three (3) Business Days) deliver to
Agent a Pledge Amendment, duly executed by Pledgor, in substantially
the form of Schedule II hereto (a "Pledge Amendment") in respect of any
such additional Stock, pursuant to which Pledgor shall pledge to Agent
all of such additional Stock. Pledgor hereby authorizes Agent to attach
each Pledge Amendment to this Agreement and agrees that all Pledged
Shares listed on any Pledge Amendment delivered to Agent shall for all
purposes hereunder be considered Pledged Collateral.
7. Pledgor's Rights. As long as no Default or Event of Default
shall have occurred and be continuing and until written notice shall be given to
Pledgor in accordance with Section 8(a) hereof:
(a) Pledgor shall have the right, from time to time, to vote
and give consents with respect to the Pledged Collateral, or any part
thereof for all purposes not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document; provided,
however, that no vote shall be cast, and no consent shall be given or
action taken, which would have the effect of impairing the position or
interest of Agent in respect of the Pledged Collateral or which would
authorize, effect or consent to (unless and to the extent expressly
permitted by the Credit Agreement):
(i) the dissolution or liquidation, in whole or in part, of a
Pledged Entity;
4
<PAGE> 5
(ii) the consolidation or merger of a Pledged Entity with any
other Person;
(iii) the sale, disposition or encumbrance of all or
substantially all of the assets of a Pledged Entity, except for Liens
in favor of Agent;
(iv) any change in the authorized number of shares, the stated
capital or the authorized share capital of a Pledged Entity or the
issuance of any additional shares of its Stock; or
(v) the alteration of the voting rights with respect to the
Stock of a Pledged Entity; and
(b) (i) Pledgor shall be entitled, from time to time, to collect and
receive for its own use all cash dividends paid in respect of the
Pledged Shares to the extent not in violation of the Credit Agreement
other than any and all: (A) dividends paid or payable other than in
cash in respect of any Pledged Collateral, and instruments and other
property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral; (B) dividends and other
distributions paid or payable in cash in respect of any Pledged Shares
in connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in
capital of a Pledged Entity; and (C) cash paid, payable or otherwise
distributed, in respect of principal of, or in redemption of, or in
exchange for, any Pledged Collateral; provided, however, that until
actually paid all rights to such distributions shall remain subject to
the Lien created by this Agreement; and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to Pledgor in accordance with clause (i) above)
and all other distributions in respect of any of the Pledged Shares,
whenever paid or made, shall be delivered to Agent to hold as Pledged
Collateral and shall, if received by Pledgor, be received in trust for
the benefit of Agent, be segregated from the other property or funds of
Pledgor, and be forthwith delivered to Agent as Pledged Collateral in
the same form as so received (with any necessary indorsement).
8. Defaults and Remedies.
(a) Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and concurrently with written
notice to Pledgor, Agent (personally or through an agent) is hereby
authorized and empowered to transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged Collateral, to
exchange certificates representing or evidencing Pledged Collateral for
certificates of smaller or larger denominations, to exercise the voting
rights with respect thereto, to collect and receive all cash dividends
and other distributions made thereon, to sell in one
5
<PAGE> 6
or more sales after ten (10) days' notice of the time and place of any
public sale or of the time at which a private sale is to take place
(which notice Pledgor agrees is commercially reasonable) the whole or
any part of the Pledged Collateral and to otherwise act with respect to
the Pledged Collateral as though Agent was the outright owner thereof,
Pledgor hereby irrevocably constituting and appointing Agent as the
proxy and attorney-in-fact of Pledgor, with full power of substitution
to do so, and which appointment shall remain in effect until the
Termination Date; provided, however, Agent shall not have any duty to
exercise any such right or to preserve the same and shall not be liable
for any failure to do so or for any delay in doing so. Any sale shall
be made at a public or private sale at Agent's place of business, or at
any place to be named in the notice of sale, either for cash or upon
credit or for future delivery at such price as Agent may deem fair, and
Agent may be the purchaser of the whole or any part of the Pledged
Collateral so sold and hold the same thereafter in its own right free
from any claim of Pledgor or any right of redemption. Each sale shall
be made to the highest bidder, but Agent reserves the right to reject
any and all bids at such sale which, in its discretion, it shall deem
inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the
presence of property at sale are hereby waived and any sale hereunder
may be conducted by an auctioneer or any officer or agent of Agent.
(b) If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid, if
there be but one sale, shall be inadequate to discharge in full all the
Secured Obligations, or if the Pledged Collateral be offered for sale
in lots, if at any of such sales, the highest bid for the lot offered
for sale would indicate to Agent, in its discretion, that the proceeds
of the sales of the whole of the Pledged Collateral would be unlikely
to be sufficient to discharge all the Secured Obligations, Agent may,
on one or more occasions and in its discretion, postpone any of said
sales by public announcement at the time of sale or the time of
previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby
waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to Pledgor.
c) If, at any time when Agent in its sole discretion
determines, following the occurrence and during the continuance of an
Event of Default, that, in connection with any actual or contemplated
exercise of its rights (when permitted under this Section 8) to sell
the whole or any part of the Pledged Shares hereunder, it is necessary
or advisable to effect a public registration of all or part of the
Pledged Collateral pursuant to the Securities Act of 1933, as amended
(or any similar statute then in effect) (the "Act"), Pledgor shall, in
an expeditious manner, cause the Pledged Entities to:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with
respect to the Pledged Shares and in good faith use
commercially reasonable efforts to cause such registration
statement to become and remain effective;
6
<PAGE> 7
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Act with respect to the sale
or other disposition of the Pledged Shares covered by such
registration statement whenever Agent shall desire to sell or
otherwise dispose of the Pledged Shares;
(iii) Furnish to Agent such numbers of copies of a
prospectus and a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as Agent
may request in order to facilitate the public sale or other
disposition of the Pledged Shares by Agent;
(iv) Use commercially reasonable efforts to register
or qualify the Pledged Shares covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions within the United States and Puerto Rico as
Agent shall request, and do such other reasonable acts and
things as may be required of it to enable Agent to consummate
the public sale or other disposition in such juris dictions of
the Pledged Shares by Agent;
(v) Furnish, at the request of Agent, on the date
that shares of the Pledged Collateral are delivered to the
underwriters for sale pursuant to such registration or, if the
security is not being sold through underwriters, on the date
that the registration statement with respect to such Pledged
Shares becomes effective, (A) an opinion, dated such date, of
the independent counsel representing such registrant for the
purposes of such registration, addressed to the underwriters,
if any, and in the event the Pledged Shares are not being sold
through underwriters, then to Agent, in customary form and
covering matters of the type customarily covered in such legal
opinions; and (B) a comfort letter, dated such date, from the
independent certified public accountants of such registrant,
addressed to the underwriters, if any, and in the event the
Pledged Shares are not being sold through underwriters, then
to Agent, in a customary form and covering matters of the type
customarily covered by such comfort letters and as the
underwriters or Agent shall reasonably request. The opinion of
counsel referred to above shall additionally cover such other
legal matters with respect to the registration in respect of
which such opinion is being given as Agent may reasonably
request. The letter referred to above from the independent
certified public accountants shall additionally cover such
other financial matters (including information as to the
period ending not more than five (5) Business Days prior to
the date of such letter) with respect to the registration in
respect of which such letter is being given as Agent may
reasonably request; and
(vi) Otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as
soon as reasonably practicable but not later than 18 months
7
<PAGE> 8
after the effective date of the registration statement, an
earnings statement covering the period of at least 12 months
beginning with the first full month after the effective date
of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(d) All expenses incurred in complying with Section 8(c)
hereof, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel for the registrant, the fees and expenses of
counsel for Agent, expenses of the independent certified public
accountants (including any special audits incident to or required by
any such registration) and expenses of complying with the securities or
blue sky laws or any jurisdictions, shall be paid by Pledgor.
(e) If, at any time when Agent shall determine to exercise its
right to sell the whole or any part of the Pledged Collateral
hereunder, such Pledged Collateral or the part thereof to be sold shall
not, for any reason whatsoever, be effectively registered under the
Securities Act of 1933, as amended (or any similar statute then in
effect) (the "Act"), Agent may, in its discretion (subject only to
applicable requirements of law), sell such Pledged Collateral or part
thereof by private sale in such manner and under such circumstances as
Agent may deem necessary or advisable, but subject to the other
requirements of this Section 8, and shall not be required to effect
such registration or to cause the same to be effected. Without limiting
the generality of the foregoing, in any such event, Agent in its
discretion (x) may, in accordance with applicable securities laws,
proceed to make such private sale notwithstanding that a registration
statement for the purpose of registering such Pledged Collateral or
part thereof could be or shall have been filed under said Act (or
similar statute), (y) may approach and negotiate with a single possible
purchaser to effect such sale, and (z) may restrict such sale to a
purchaser who is an accredited investor under the Act and who will
represent and agree that such purchaser is purchasing for its own
account, for investment and not with a view to the distribution or sale
of such Pledged Collateral or any part thereof. In addition to a
private sale as provided above in this Section 8, if any of the Pledged
Collateral shall not be freely distributable to the public without
registration under the Act (or similar statute) at the time of any
proposed sale pursuant to this Section 8, then Agent shall not be
required to effect such registration or cause the same to be effected
but, in its discretion (subject only to applicable requirements of
law), may require that any sale hereunder (including a sale at auction)
be conducted subject to restrictions:
(i) as to the financial sophistication and ability
of any Person permitted to bid or purchase at any such sale;
(ii) as to the content of legends to be placed upon
any certificates representing the Pledged Collateral sold in
such sale, including restrictions on future transfer thereof;
8
<PAGE> 9
(iii) as to the representations required to be made
by each Person bidding or purchasing at such sale relating to
that Person's access to financial information about Pledgor
and such Person's intentions as to the holding of the Pledged
Collateral so sold for investment for its own account and not
with a view to the distribution thereof; and
(iv) as to such other matters as Agent may, in its
discretion, deem necessary or appropriate in order that such
sale (notwithstanding any failure so to register) may be
effected in compliance with the Bankruptcy Code and other laws
affecting the enforcement of creditors' rights and the Act and
all applicable state securities laws.
(f) Pledgor recognizes that Agent may be unable to effect a
public sale of any or all the Pledged Collateral and may be compelled
to resort to one or more private sales thereof in accordance with
clause (e) above. Pledgor also acknowledges that any such private sale
may result in prices and other terms less favorable to the seller than
if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall not be deemed to
have been made in a commercially unreasonable manner solely by virtue
of such sale being private. Agent shall be under no obligation to delay
a sale of any of the Pledged Collateral for the period of time
necessary to permit the Pledged Entity to register such securities for
public sale under the Act, or under applicable state securities laws,
even if Pledgor and the Pledged Entity would agree to do so.
(g) Pledgor agrees to the maximum extent permitted by
applicable law that following the occurrence and during the continuance
of an Event of Default it will not at any time plead, claim or take the
benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay
the enforcement of this Agreement, or the absolute sale of the whole or
any part of the Pledged Collateral or the possession thereof by any
purchaser at any sale hereunder, and Pledgor waives the benefit of all
such laws to the extent it lawfully may do so. Pledgor agrees that it
will not interfere with any right, power and remedy of Agent provided
for in this Agreement or now or hereafter existing at law or in equity
or by statute or otherwise, or the exercise or beginning of the
exercise by Agent of any one or more of such rights, powers or
remedies. No failure or delay on the part of Agent to exercise any such
right, power or remedy and no notice or demand which may be given to or
made upon Pledgor by Agent with respect to any such remedies shall
operate as a waiver thereof, or limit or impair Agent's right to take
any action or to exercise any power or remedy hereunder, without notice
or demand, or prejudice its rights as against Pledgor in any respect.
(h) Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
Agent, that Agent shall have no adequate remedy at law in respect of
such breach and, as a consequence, agrees that each and every covenant
contained in this Section 8 shall be specifically enforceable against
Pledgor, and
9
<PAGE> 10
Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that the Secured Obligations are not then due and payable in accordance
with the agreements and instruments governing and evidencing such
obligations.
9. Waiver. No delay on Agent's part in exercising any power of
sale, Lien, option or other right hereunder, and no notice or demand which may
be given to or made upon Pledgor by Agent with respect to any power of sale,
Lien, option or other right hereunder, shall constitute a waiver thereof, or
limit or impair Agent's right to take any action or to exercise any power of
sale, Lien, option, or any other right hereunder, without notice or demand, or
prejudice Agent's rights as against Pledgor in any respect.
10. Assignment. Agent may assign, indorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Credit Agreement, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
11. Termination. Immediately following the Termination Date,
Agent shall deliver to Pledgor the Pledged Collateral pledged by Pledgor at the
time subject to this Agreement and all instruments of assignment executed in
connection therewith, free and clear of the Liens hereof and, except as
otherwise provided herein, all of Pledgor's obligations hereunder shall at such
time terminate.
12. Lien Absolute. All rights of Agent hereunder, and all
obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from
the Credit Agreement, any other Loan Document or any other agreement or
instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
(d) the insolvency of any Credit Party; or
(e) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
10
<PAGE> 11
13. Release. Pledgor consents and agrees that Agent may at any
time, or from time to time, in its discretion:
(a) renew, extend or change the time of payment, and/or the
manner, place or terms of payment of all or any part of the Secured
Obligations; and
(b) exchange, release and/or surrender all or any of the
Collateral (including the Pledged Collateral), or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by Agent in
connection with all or any of the Secured Obligations; all in such
manner and upon such terms as Agent may deem proper, and without notice
to or further assent from Pledgor, it being hereby agreed that Pledgor
shall be and remain bound upon this Agreement, irrespective of the
value or condition of any of the Collateral, and notwithstanding any
such change, exchange, settlement, compromise, surrender, release,
renewal or extension, and notwithstanding also that the Secured
Obligations may, at any time, exceed the aggregate principal amount
thereof set forth in the Credit Agreement, or any other agreement
governing any Secured Obligations. Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and
notice of dishonor of any and all of the Secured Obligations, and
promptness in commencing suit against any party hereto or liable
hereon, and in giving any notice to or of making any claim or demand
hereunder upon Pledgor. No act or omission of any kind on Agent's part
shall in any event affect or impair this Agreement.
14. Reinstatement. Notwithstanding anything contained herein
to the contrary, this Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Pledgor or
any Pledged Entity for liquidation or reorganization, should Pledgor or any
Pledged Entity become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of Pledgor's or a Pledged Entity'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 Secured 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 Secured 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 Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, avoided, reduced, restored or returned.
15. Miscellaneous.
(a) Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder.
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<PAGE> 12
(b) Pledgor agrees to promptly reimburse Agent for actual
out-of-pocket expenses, including, without limitation, reasonable
counsel fees, incurred by Agent in connection with the administration
and enforcement of this Agreement as provided in the Credit Agreement.
(c) Neither Agent, nor any of its respective officers,
directors, employees, agents or counsel shall be liable for any action
lawfully taken or omitted to be taken by it or them hereunder or in
connection herewith, except for its or their own gross negligence or
willful misconduct as finally determined by a court of competent
jurisdiction.
(d) THIS AGREEMENT SHALL BE BINDING UPON PLEDGOR AND ITS
SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF OF
PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY,
AGENT AND ITS SUCCESSORS AND ASSIGNS, AND 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
NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED,
ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON
BEHALF OF AGENT AND PLEDGOR.
16. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or effect those
portions of this Agreement which are valid.
17. 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 or serve upon any other a communication with respect to this 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.
18. Section Titles. The Section titles contained in this
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.
19. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
20. Benefit of Lenders. All security interests granted or
contemplated hereby shall be for the benefit of Agent and Lenders, and all
proceeds or payments realized from the Pledged Collateral in accordance herewith
shall be applied to the Secured Obligations in accordance with the terms of the
Credit Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
----------------------------------
Name: Timothy S. Van Kirk
------------------------------
Its Duly Authorized Signatory
<PAGE> 14
SCHEDULE I
PLEDGED SHARES
<TABLE>
<CAPTION>
Class Stock Certificate Number Percentage of
Pledged Entity of Stock Number(s) of Shares Outstanding Shares
-------------- -------- ----------- --------- ------------------
<S> <C> <C> <C> <C>
Tessco Group, Inc. Common 001 1000 100%
Anes, Inc. Common 1001 1000 100%
Chapman Security Systems, Inc. Common 1001 1000 100%
Intercept Systems, Inc. Common 1001 1000 100%
</TABLE>
<PAGE> 15
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated October 24, 1997 is delivered
pursuant to Section 6(d) of the Pledge Agreement referred to below. All defined
terms herein shall have the meanings ascribed thereto or incorporated by
reference in the Pledge Agreement. The undersigned hereby certifies that the
representations and warranties in Section 5 of the Pledge Agreement are and
continue to be true and correct, both as to the shares pledged prior to this
Pledge Amendment and as to the shares pledged pursuant to this Pledge Amendment.
The undersigned further agrees that this Pledge Amendment may be attached to
that certain Pledge Agreement, dated October 24, 1997, between undersigned, as
Pledgor, and General Electric Capital Corporation, as Agent, (the "Pledge
Agreement") and that the Pledged Shares listed on this Pledge Amendment shall be
and become a part of the Pledged Collateral referred to in said Pledge Agreement
and shall secure all Secured Obligations referred to in said Pledge Agreement.
The undersigned acknowledges that any shares not included in the Pledged
Collateral at the discretion of Agent may not otherwise be pledged by Pledgor to
any other Person or otherwise used as security for any obligations other than
the Secured Obligations or the Litigation Obligations.
CODE-ALARM, INC.
By:____________________________
Name:_______________________
Title:______________________
<TABLE>
<CAPTION>
Name and Class Certificate Number
Address of Pledgor Pledged Entity of Stock Number(s) of Shares
------------------ -------------- -------- ---------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 16
EXHIBIT
to
PLEDGE AGREEMENT
dated as of October 24, 1997
Form of Stock Power
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of Capital
Stock of Tessco Group, Inc., a Michigan corporation, represented by Certificate
No. _____________ (the "Stock"), standing in the name of the undersigned on the
books of said corporation and does hereby irrevocably constitute and appoint
____________ as the undersigned's true and lawful attorney, for it and in its
name and stead, to sell, assign and transfer all or any of the Stock, and for
that purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with like
full power, hereby ratifying and confirming all that said attorney or substitute
or substitutes shall lawfully do by virtue hereof.
Dated: October 24, 1997
CODE-ALARM, INC.
By:______________________
Title:
<PAGE> 17
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of Capital
Stock of Tessco Group, Inc., a Michigan corporation, represented by Certificate
No. _________ (the "Stock"), standing in the name of the undersigned on the
books of said corporation and does hereby irrevocably constitute and appoint
__________ as the undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the Stock, and for that
purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with like
full power, hereby ratifying and confirming all that said attorney or substitute
or substitutes shall lawfully do by virtue hereof.
Dated: October 24, 1997
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------
Title: President
<PAGE> 18
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of Capital
Stock of Anes, Inc., a Michigan corporation, represented by Certificate No.
_________ (the "Stock"), standing in the name of the undersigned on the books of
said corporation and does hereby irrevocably constitute and appoint
_______________________________________ as the undersigned's true and lawful
attorney, for it and in its name and stead, to sell, assign and transfer all or
any of the Stock, and for that purpose to make and execute all necessary
endorsements or other acts of assignment and transfer thereof; and to substitute
one or more persons with like full power, hereby ratifying and confirming all
that said attorney or substitute or substitutes shall lawfully do by virtue
hereof.
Dated: October 24, 1997
CODE-ALARM, INC.
By: /s/ Rand Mueller
----------------------
Title: President
<PAGE> 19
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of Capital
Stock of Chapman Security Systems, Inc., a Michigan corporation, represented by
Certificate No. ___________ (the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint_____________________________ as the undersigned's true
and lawful attorney, for it and in its name and stead, to sell, assign and
transfer all or any of the Stock, and for that purpose to make and execute all
necessary endorsements or other acts of assignment and transfer thereof; and to
substitute one or more persons with like full power, hereby ratifying and
confirming all that said attorney or substitute or substitutes shall lawfully do
by virtue hereof.
Dated: October 24, 1997
CODE-ALARM, INC.
By: /s/ Rand Mueller
------------------------
Title: President
<PAGE> 20
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of Capital
Stock of Intercept Systems, Inc., a Michigan corporation, represented by
Certificate No. (the "Stock"), standing in the name of the undersigned on the
books of said corporation and does hereby irrevocably constitute and appoint
_______ as the undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the Stock, and for that
purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with like
full power, hereby ratifying and confirming all that said attorney or substitute
or substitutes shall lawfully do by virtue hereof.
Dated: October 24, 1997
CODE-ALARM, INC.
By: /s/ Rand Mueller
------------------------
Title: President
<PAGE> 1
EX-10.45
EXECUTION COPY
(Craig Camalo)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of October 24, 1997 (together
with all amendments, if any, from time to time hereto, this "Agreement")
between Craig S. Camalo (the "Pledgor"), Code-Alarm, Inc., a Michigan
corporation (the "Borrower") and GENERAL ELECTRIC CAPITAL CORPORATION in its
capacity as Agent for "Lenders", as defined below ("Agent").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among Borrower, the Persons named therein as Credit
Parties, Agent and the Persons signatory thereto from time to time as Lenders
(including all annexes, exhibits and schedules thereto, and as from time to
time amended, restated, supplemented or otherwise modified (the "Credit
Agreement"), the Lenders have agreed to make Loans to, and incur Letter of
Credit Obligations for the benefit of, Borrower;
WHEREAS, Pledgor is the record and beneficial owner of the
shares of stock listed in Schedule I hereto;
WHEREAS, in order to induce Agent and Lenders to make the
Loans and to incur the Letter of Credit Obligations as provided for in the
Credit Agreement, Pledgor has agreed to pledge the Pledged Collateral to Agent
in accordance herewith;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained and to induce Lenders to make Loans and to
incur Letter of Credit Obligations under the Credit Agreement, it is agreed as
follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined, and the
following shall have (unless otherwise provided elsewhere in this Agreement)
the following respective meanings (such meanings being equally applicable to
both the singular and plural form of the terms defined):
"Bankruptcy Code" means title 11, United States Code, as
amended from time to time, and any successor statute thereto.
"Pledged Collateral" has the meaning assigned to such term in
Section 2 hereof.
"Pledged Entity" means Borrower.
"Pledged Shares" means those shares listed in Schedule I
hereto.
"Secured Obligations" has the meaning assigned to such term in
Section 3 hereof.
<PAGE> 2
2. Pledge. Pledgor hereby pledges to Agent, and grants to Agent
for itself and the benefit of Lenders, a continuing security interest in all of
the following, other than Permitted Encumbrances (collectively, the "Pledged
Collateral"):
(i) the Pledged Shares and the certificates representing
the Pledged Shares; and
(ii) such portion, as determined by Agent as provided in
Section 6(d) below, of any additional shares of the same series of stock
as the Pledged Shares from time to time acquired by Pledgor in any manner
(which shares shall be deemed to be part of the Pledged Shares), and the
certificates representing such additional shares.
3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of
all Obligations other than the Litigation Obligations of any kind under or in
connection with the Credit Agreement and the other Loan Documents other than
the Litigation Collateral Documents and all obligations of Pledgor now or
hereafter existing under this Agreement including, without limitation, all
fees, costs and expenses whether in connection with collection actions
hereunder or otherwise (collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates evidencing the
Pledged Collateral shall be delivered to and held by or on behalf of Agent, for
itself and the benefit of Lenders, pursuant hereto. All Pledged Shares shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to Agent.
5. Representations and Warranties.
(a) Pledgor represents and warrants to Agent that on the Closing
Date:
(i) Pledgor is, and at the time of delivery of the Pledged Shares
to Agent will be, the sole holder of record and the sole beneficial owner of
such Pledged Collateral pledged by Pledgor free and clear of any Lien thereon
or affecting the title thereto, except for Permitted Encumbrances or any Lien
created by this Agreement;
(ii) Pledgor has the right to pledge, assign, transfer, deliver,
deposit and set over the Pledged Collateral pledged by Pledgor to Agent as
provided herein;
(b) Borrower represents and warrants to the Agent that on the
Closing Date and, unless otherwise specified below, as of each time Borrower
requests or accepts the proceeds of an Advance or Loan under the Credit
Agreement:
2
<PAGE> 3
(i) All Pledged Shares have been duly authorized, validly issued
and are fully paid and non-assessable;
(ii) None of the Pledged Shares has been issued in violation of
applicable federal and state securities laws;
(iii) The Pledged Shares are currently owned of record by Pledgor,
and are currently represented by the certificates listed in Schedule I hereto.
As of the date hereof, there are no existing options, warrants, calls or
commitments issued by the Borrower of any character whatsoever relating to the
Pledged Shares;
(iv) No consent, approval, authorization or other order or other
action by, and no notice to or filing with, any Governmental Authority is
required (i) for the pledge by Pledgor of the Pledged Collateral pursuant to
this Agreement or for the execution, delivery or performance of this Agreement
by Pledgor, or (ii) for the exercise by Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in connection
with such disposition by applicable securities laws and except as may be
required by a change in control of Borrower;
(v) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create a valid Lien on and perfected security
interest in favor of the Agent for the benefit of Agent and Lenders in the
Pledged Collateral, securing the payment of the Secured Obligations;
(vi) This Agreement has been duly authorized, executed and
delivered by Borrower and constitutes a legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its terms; and
(vii) The Pledged Shares constitute 100% of the issued and
outstanding shares of Series B Preferred Stock of Borrower.
(c) The representations and warranties set forth in this
Section 5 shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor or Borrower, as applicable, covenants and
agrees that until the Termination Date:
(a) Without the prior written consent of Agent, Pledgor will not
sell, assign, transfer, pledge, or otherwise encumber any of its rights in or
to the Pledged Collateral, or grant a Lien in the Pledged Collateral, unless
otherwise expressly permitted by the Agent or the Credit Agreement;
3
<PAGE> 4
(b) Pledgor will, at Borrower's expense, promptly execute,
acknowledge and deliver all such instruments and take all such actions as Agent
from time to time may request in order to ensure to Agent and Lenders the
benefits of the Liens in and to the Pledged Collateral intended to be created
by this Agreement, including the filing of any necessary Code financing
statements, which may be filed by Agent with or (to the extent permitted by
law) without the signature of Pledgor, and will cooperate with Agent, at
Borrower's expense, in maintaining and preserving Agent's Lien in the Pledged
Collateral and in obtaining all necessary approvals and making all necessary
filings under federal, state, local or foreign law in connection with such
Liens or any sale or transfer of the Pledged Collateral;
(c) Borrower will defend Pledgor's title to the Pledged Collateral
and the Liens of Agent in the Pledged Collateral against the claim of any
Person; and
(d) Pledgor will, upon obtaining ownership of any additional
shares of the same series of stock as the Pledged Shares as is being pledged
hereby on the date hereof, which stock is not already Pledged Collateral.
7. Pledgor's Rights. As long as no Default or Event of
Default shall have occurred and be continuing and until written notice shall be
given to Pledgor in accordance with Section 8(a) hereof:
(a) Pledgor shall have the right, from time to time, to vote and
give consents with respect to the Pledged Collateral, or any part thereof for
all purposes not inconsistent with the provisions of this Agreement, the Credit
Agreement or any other Loan Document; provided, however, that no vote shall be
cast, and no consent shall be given or action taken, which would have the
effect of impairing the position or interest of Agent in respect of the Pledged
Collateral or which would authorize, effect or consent to (unless and to the
extent expressly permitted by the Credit Agreement):
(i) the dissolution or liquidation, in whole or in part,
of a Pledged Entity;
(ii) the consolidation or merger of a Pledged Entity with
any other Person;
(iii) the sale, disposition or encumbrance of all or
substantially all of the assets of a Pledged Entity, except for Liens
in favor of Agent;
(iv) any change in the authorized number of shares of the
Borrower's Series B Preferred Stock; or
(v) the alteration of the voting rights with respect to
the Stock of a Pledged Shares; and
4
<PAGE> 5
(b) (i) Pledgor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid in respect
of the Pledged Shares to the extent not in violation of the Credit
Agreement; and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to Pledgor in accordance with clause (i) above)
and all other distributions in respect of any of the Pledged Shares,
whenever paid or made, shall be delivered to Agent to hold as Pledged
Collateral and shall, if received by Pledgor, be received in trust for
the benefit of Agent, be segregated from the other property or funds
of Pledgor, and be forthwith delivered to Agent as Pledged Collateral
in the same form as so received (with any necessary indorsement).
8. Defaults and Remedies.
(a) Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and concurrently with written notice to
Pledgor, Agent (personally or through an agent) is hereby authorized and
empowered to transfer and register in its name or in the name of its nominee
the whole or any part of the Pledged Collateral, to exchange certificates
representing or evidencing Pledged Collateral for certificates of smaller or
larger denominations, to exercise the voting rights with respect thereto, to
collect and receive all cash dividends and other distributions made thereon, to
sell in one or more sales after ten (10) days' notice to Pledgor and to
Borrower of the time and place of any public sale or of the time at which a
private sale is to take place (which notice Pledgor agrees is commercially
reasonable) the whole or any part of the Pledged Collateral and to otherwise
act with respect to the Pledged Collateral as though Agent was the outright
owner thereof, Pledgor hereby irrevocably constituting and appointing Agent as
the proxy and attorney-in-fact of Pledgor, with full power of substitution to
do so, and which appointment shall remain in effect until the Termination Date;
provided, however, Agent shall not have any duty to exercise any such right or
to preserve the same and shall not be liable for any failure to do so or for
any delay in doing so. Any sale shall be made at a public or private sale at
Agent's place of business, or at any place to be named in the notice of sale,
either for cash or upon credit or for future delivery at such price as Agent
may deem fair, and Agent may be the purchaser of the whole or any part of the
Pledged Collateral so sold and hold the same thereafter in its own right free
from any claim of Pledgor or any right of redemption. Each sale shall be made
to the highest bidder, but Agent reserves the right to reject any and all bids
at such sale which, in its discretion, it shall deem inadequate. Demands of
performance, except as otherwise herein specifically provided for, notices of
sale, advertisements and the presence of property at sale are hereby waived and
any sale hereunder may be conducted by an auctioneer or any officer or agent of
Agent.
(b) If, at the original time or times appointed for the sale of
the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at
any of such sales, the highest bid for the lot offered for
5
<PAGE> 6
sale would indicate to Agent, in its discretion, that the proceeds of the sales
of the whole of the Pledged Collateral would be unlikely to be sufficient to
discharge all the Secured Obligations, Agent may, on one or more occasions and
in its discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to Pledgor.
(c) If, at any time when Agent shall determine to exercise its
right to sell the whole or any part of the Pledged Collateral hereunder, such
Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as
amended (or any similar statute then in effect) (the "Act"), Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event, Agent in its discretion (x)
may, in accordance with applicable securities laws, proceed to make such
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under said Act (or similar statute), (y) may approach and negotiate with
a single possible purchaser to effect such sale, and (z) may restrict such sale
to a purchaser who is an accredited investor under the Act and who will
represent and agree that such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of such Pledged
Collateral or any part thereof. In addition to a private sale as provided
above in this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act (or similar
statute) at the time of any proposed sale pursuant to this Section 8, then
Agent shall not be required to effect such registration or cause the same to be
effected but, in its discretion (subject only to applicable requirements of
law), may require that any sale hereunder (including a sale at auction) be
conducted subject to restrictions:
(i) as to the financial sophistication and ability of any Person
permitted to bid or purchase at any such sale;
(ii) as to the content of legends to be placed upon any
certificates representing the Pledged Collateral sold in such sale,
including restrictions on future transfer thereof;
(iii) as to the representations required to be made by each
Person bidding or purchasing at such sale relating to that Person's
access to financial information about Pledgor and such Person's
intentions as to the holding of the
6
<PAGE> 7
Pledged Collateral so sold for investment for its own account and not
with a view to the distribution thereof; and
(iv) as to such other matters as Agent may, in its discretion,
deem necessary or appropriate in order that such sale (notwithstanding
any failure so to register) may be effected in compliance with the
Bankruptcy Code and other laws affecting the enforcement of creditors'
rights and the Act and all applicable state securities laws.
(d) Pledgor recognizes that Agent may be unable to effect a public
sale of any or all the Pledged Collateral and may be compelled to resort to one
or more private sales thereof in accordance with clause (e) above. Pledgor
also acknowledges that any such private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall not
be deemed to have been made in a commercially unreasonable manner solely by
virtue of such sale being private. Agent shall be under no obligation to delay
a sale of any of the Pledged Collateral for the period of time necessary to
permit the Pledged Entity to register such securities for public sale under the
Act, or under applicable state securities laws, even if Pledgor and the Pledged
Entity would agree to do so.
(e) Pledgor agrees to the maximum extent permitted by applicable
law that following the occurrence and during the continuance of an Event of
Default it will not at any time plead, claim or take the benefit of any
appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder,
and Pledgor waives the benefit of all such laws to the extent it lawfully may
do so. Pledgor agrees that it will not interfere with any right, power and
remedy of Agent provided for in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise, or the exercise or beginning of
the exercise by Agent of any one or more of such rights, powers or remedies.
No failure or delay on the part of Agent to exercise any such right, power or
remedy and no notice or demand which may be given to or made upon Pledgor by
Agent with respect to any such remedies shall operate as a waiver thereof, or
limit or impair Agent's right to take any action or to exercise any power or
remedy hereunder, without notice or demand, or prejudice its rights as against
Pledgor in any respect.
(f) Pledgor further agrees that a breach of any of the covenants
contained in this Section 8 will cause irreparable injury to Agent, that Agent
shall have no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against Pledgor, and Pledgor hereby waives
and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that the Secured Obligations
are not
7
<PAGE> 8
then due and payable in accordance with the agreements and instruments
governing and evidencing such obligations.
9. Waiver. No delay on Agent's part in exercising any power of
sale, Lien, option or other right hereunder, and no notice or demand which may
be given to or made upon Pledgor by Agent with respect to any power of sale,
Lien, option or other right hereunder, shall constitute a waiver thereof, or
limit or impair Agent's right to take any action or to exercise any power of
sale, Lien, option, or any other right hereunder, without notice or demand, or
prejudice Agent's rights as against Pledgor in any respect.
10. Assignment. Agent may assign, indorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided
in, and in accordance with, the Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
11. Termination. Immediately following the Termination Date,
Agent shall deliver to Pledgor the Pledged Collateral pledged by Pledgor at the
time subject to this Agreement and all instruments of assignment executed in
connection therewith, free and clear of the Liens hereof and, except as
otherwise provided herein, all of Pledgor's obligations hereunder shall at such
time terminate.
12. Lien Absolute. All rights of Agent hereunder, and all
obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
(d) the insolvency of any Credit Party; or
(e) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
13. Release. Pledgor consents and agrees that Agent may
at any time, or from time to time, in its discretion:
8
<PAGE> 9
(a) renew, extend or change the time of payment, and/or the
manner, place or terms of payment of all or any part of the Secured
Obligations; and
(b) exchange, release and/or surrender all or any of the
Collateral (including the Pledged Collateral), or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by Agent in
connection with all or any of the Secured Obligations; all in such manner
and upon such terms as Agent may deem proper, and without notice to or
further assent from Pledgor, it being hereby agreed that Pledgor shall be
and remain bound upon this Agreement, irrespective of the value or
condition of any of the Collateral, and notwithstanding any such change,
exchange, settlement, compromise, surrender, release, renewal or extension,
and notwithstanding also that the Secured Obligations may, at any time,
exceed the aggregate principal amount thereof set forth in the Credit
Agreement, or any other agreement governing any Secured Obligations.
Pledgor hereby waives notice of acceptance of this Agreement, and also
presentment, demand, protest and notice of dishonor of any and all of the
Secured Obligations, and promptness in commencing suit against any party
hereto or liable hereon, and in giving any notice to or of making any claim
or demand hereunder upon Pledgor. No act or omission of any kind on
Agent's part shall in any event affect or impair this Agreement.
14. Reinstatement. Notwithstanding anything contained
herein to the contrary, this Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Pledgor
or any Pledged Entity for liquidation or reorganization, should Pledgor or any
Pledged Entity become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of Pledgor's or a Pledged Entity'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 Secured 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 Secured 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 Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, avoided, reduced, restored or
returned.
15. Miscellaneous.
(a) Agent may execute any of its duties hereunder by or through
agents or employees and shall be entitled to advice of counsel concerning
all matters pertaining to its duties hereunder.
(b) Borrower agrees to promptly reimburse Agent for actual
out-of-pocket expenses, including, without limitation, reasonable counsel
fees, incurred by Agent in connection with the administration and
enforcement of this Agreement as provided in the Credit Agreement.
9
<PAGE> 10
(c) The Pledgor shall have no personal liability for
payment of the Secured Obligations, and in any action or suit to
collect the Secured Obligations Agent shall not seek any in personam
judgment against the Pledgor or any judgment for a deficiency but shall
look solely to the security interests hereunder and the Pledged Collateral
described herein for payment of the Secured Obligations. Nothing contained
in this Section shall be construed to impair the validity of the Secured
Obligations or this Agreement or affect or impair in any way the right of
Agent to exercise its rights and remedies under the Credit Agreement in
accordance with its terms.
(d) Neither Agent, nor any of its respective officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken
or omitted to be taken by it or them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
(e) THIS AGREEMENT SHALL BE BINDING UPON PLEDGOR AND ITS
SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF OF
PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY, AGENT
AND ITS SUCCESSORS AND ASSIGNS, AND 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 NONE OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED
EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF AGENT AND PLEDGOR.
16. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
17. 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 or serve upon any other a communication with respect to this 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.
18. Section Titles. The Section titles contained in this
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.
19. Counterparts. This Agreement may be executed in any
number of counterparts, which shall, collectively and separately, constitute
one agreement.
10
<PAGE> 11
20. Benefit of Lenders. All security interests granted or
contemplated hereby shall be for the benefit of Agent and Lenders, and all
proceeds or payments realized from the Pledged Collateral in accordance
herewith shall be applied to the Secured Obligations in accordance with the
terms of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
CRAIG S. CAMALO
/s/ Craig S. Camalo
-------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
--------------------------------
Name: Timothy S. Van Kirk
--------------------------------
Its Duly Authorized Signatory
CODE-ALARM, INC.,
as Borrower
By: /s/ Rand Mueller
---------------------------------
Name: Rand Mueller
-------------------------------
Its Duly Authorized Signatory
<PAGE> 12
SCHEDULE I
PLEDGED SHARES
<TABLE>
Class Stock Certificate Number Percentage of
Pledged Entity of Stock Number(s) of Shares Outstanding Shares
-------------- -------- ----------------- --------- ------------------
<S> <C> <C> <C> <C>
Code-Alarm, Inc. Series B B-1 1 100%
Preferred
Stock
</TABLE>
<PAGE> 13
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated October 24, 1997 is delivered
pursuant to Section 6(d) of the Pledge Agreement referred to below. All
defined terms herein shall have the meanings ascribed thereto or incorporated
by reference in the Pledge Agreement. The undersigned hereby certifies that
the representations and warranties in Section 5 of the Pledge Agreement are and
continue to be true and correct, both as to the shares pledged prior to this
Pledge Amendment and as to the shares pledged pursuant to this Pledge
Amendment. The undersigned further agrees that this Pledge Amendment may be
attached to that certain Pledge Agreement, dated October 24, 1997, between
undersigned, as Pledgor, and General Electric Capital Corporation, as Agent,
(the "Pledge Agreement") and that the Pledged Shares listed on this Pledge
Amendment shall be and become a part of the Pledged Collateral referred to in
said Pledge Agreement and shall secure all Secured Obligations referred to in
said Pledge Agreement. The undersigned acknowledges that any shares not
included in the Pledged Collateral at the discretion of Agent may not otherwise
be pledged by Pledgor to any other Person or otherwise used as security for any
obligations other than the Secured Obligations and the other Obligations (as
defined in that certain Credit Agreement dated as of October 24, 1997 among
Code-Alarm, Inc., the Persons named therein as Credit Parties, the Persons
signatory thereto from time to time as Lenders and General Electric Capital
Corporation, as Agent).
CODE-ALARM, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
<TABLE>
Class Certificate Number
Name and Address of Pledgor Pledged Entity of Stock Number(s) of Shares
------------------ -------------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 14
EXHIBIT
to
PLEDGE AGREEMENT
dated as of October 24, 1997
Form of Stock Power
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of
Series B Preferred Capital Stock of Code-Alarm, Inc., a Michigan corporation,
represented by Certificate No. ______________________ (the "Stock"), standing
in the name of the undersigned on the books of said corporation and does hereby
irrevocably constitute and appoint ______________________________________as the
undersigned's true and lawful attorney, for it and in its name and stead, to
sell, assign and transfer all or any of the Stock, and for that purpose to make
and execute all necessary endorsements or other acts of assignment and transfer
thereof; and to substitute one or more persons with like full power, hereby
ratifying and confirming all that said attorney or substitute or substitutes
shall lawfully do by virtue hereof.
Dated: October 24, 1997
CRAIG S. CAMALO
_________________________
<PAGE> 15
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Shares of
Series B Preferred Capital Stock of Code-Alarm, Inc., a Michigan corporation,
represented by Certificate No. _______________________ (the "Stock"), standing
in the name of the undersigned on the books of said corporation and does hereby
irrevocably constitute and appoint ______________________________________as the
undersigned's true and lawful attorney, for it and in its name and stead, to
sell, assign and transfer all or any of the Stock, and for that purpose to make
and execute all necessary endorsements or other acts of assignment and transfer
thereof; and to substitute one or more persons with like full power, hereby
ratifying and confirming all that said attorney or substitute or substitutes
shall lawfully do by virtue hereof.
Dated: October 24, 1997
CRAIG S. CAMALO
/s/ Craig S. Camalo
-----------------------------------
<PAGE> 1
EXHIBIT 10.46
EXECUTION COPY
PATENT SECURITY AGREEMENT
-------------------------
PATENT SECURITY AGREEMENT, dated as of October 24, 1997, by CODE-ALARM,
INC., a Michigan corporation ("Grantor"), in favor of GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, in its capacity as Agent for Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof by and among Grantor, the Persons signatory thereto as Credit Parties,
Agent and the Persons signatory thereto from time to time as Lenders (including
all annexes, exhibits or schedules thereto, as from time to time amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders
have agreed to make the Loans, and to incur Letter of Credit Obligations, for
the benefit of Grantor;
WHEREAS, Agent and Lenders are willing to make the Loans and to incur
Letter of Credit Obligations as provided for in the Credit Agreement, but only
upon the condition, among others, that Grantor shall have executed and
delivered to Agent, for itself and the ratable benefit of Lenders, that certain
Security Agreement 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 "Security Agreement");
WHEREAS, pursuant to the Security Agreement, Grantor is required to
execute and deliver to Agent, for itself and the ratable benefit of Lenders,
this Patent Security Agreement;
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, Grantor hereby agrees as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in Annex A thereto to the Credit
Agreement.
2. GRANT OF SECURITY INTEREST IN PATENT COLLATERAL. Grantor hereby grants
to Agent, on behalf of itself and Lenders, as security for all of Grantor's
Obligations other than Litigation Obligations, a continuing security interest
in all of Grantor's right, title and interest in, to and under the following,
other than Permitted Encumbrances, whether presently existing or hereafter
created or acquired (collectively, the "Patent Collateral"):
(a) all of its Patents and Patent Licenses to which it is a party,
including, without limitation, those referred to on Schedule I hereto;
<PAGE> 2
(b) all reissues, continuations or extensions of the
foregoing;
(c) all products and proceeds of the foregoing,
including, without limitation, any claim by Grantor against
third parties for past, present or future (i) infringement or
dilution of any Patent or Patent licensed under any Patent
License.
3. SECURITY AGREEMENT. The security interests granted pursuant to
this Patent Security Agreement are granted in conjunction with the security
interests granted to Agent, on behalf of itself and Lenders, pursuant to the
Security Agreement. Grantor hereby acknowledges and affirms that the rights
and remedies of Agent with respect to the security interest in the Patent
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
* * * *
-2-
<PAGE> 3
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to
be executed and delivered by its duly authorized officer as of the date first
set forth above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
------------------------------
Name: Rand Mueller
-----------------------
Title: President
-----------------------
ACCEPTED AND ACKNOWLEDGED BY:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
----------------------------------
Name: Timothy S. Van Kirk
----------------------------
Title: Duly Authorized Signatory
--------------------------
ACKNOWLEDGMENT OF GRANTOR
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 24th day of October, 1997 before me personally appeared Rand Mueller,
proved to me on the basis of satisfactory evidence to be the person who
executed the foregoing instrument on behalf of Code-Alarm, Inc., who being by
me duly sworn did depose and say that he is an authorized officer of said
corporation, that the said instrument was signed on behalf of said corporation
as authorized by its Board of Directors and that he acknowledged said
instrument to be the free act and deed of said corporation.
/s/ Monique Wilson
---------------------------
{seal} Notary Public
Monique Wilson
Notary Public, State of New York
No. 01W15054453
Qualified in Queens County
Commission Expires: 1-16-98
<PAGE> 4
SCHEDULE I
----------
to
PATENT SECURITY AGREEMENT
PATENT REGISTRATIONS
---------------------
Mark Patent No. Issue Date
---- ---------- ----------
<TABLE>
<S> <C> <C>
AUTOMOBILE BURGLAR ALARM 4,740,775 4/26/88
SECURITY SYSTEM 5,543,778 8/6/96
VEHICLE ANTITHEFT SYSTEM 4,107,543 8/15/78
SECURITY SYSTEM 4,333,074 6/1/82
</TABLE>
PATENT APPLICATIONS
-------------------
Serial No. Filing Date
---------- -----------
<TABLE>
<S> <C> <C>
08/624,146 5/28/93
08/774,954 4/19/93
08/842,374 4/23/97
08/838,684 4/9/97
</TABLE>
<PAGE> 5
PATENT LICENSES
---------------
Name of Agreement Parties/Purpose Date of Agreement
----------------- --------------- -----------------
<TABLE>
<S> <C> <C>
MAGNADYNE/NUTEK: Cross Code-Alarm licensed "Price" April 1996
License Agreement patent to Magnadyne/Nutek;
Magnadyne/Nutek licensed
"Chen" patent to Code-Alarm
BULLDOG Code-Alarm, Inc. licensed September 1994
"Price" patent use to Bulldog
AUDIOVOX Code-Alarm, Inc. licensed August 1994
"Stouffer" patent to Audiovox
AUDIOVOX: Cross License Code-Alarm licensed use of August 1994
Agreement "Price" patent to Audiovox;
Audiovox licensed use of
"Posse" patent to Code-Alarm
SHERWOOD Code-Alarm licensed use of January 1997
</TABLE> "Price" patent to Sherwood
- 5 -
<PAGE> 1
EXHIBIT 10.47
EXECUTION COPY
CONTRIBUTION, INDEMNIFICATION AND
SUBORDINATION AGREEMENT
THIS CONTRIBUTION, INDEMNIFICATION AND SUBORDINATION AGREEMENT
("Agreement") is made as of this 24th day of October, 1997 among Code-Alarm,
Inc., a Michigan corporation ("Code Alarm"), Tessco Group, Inc., a Michigan
corporation ("Tessco"), Anes, Inc., a Michigan corporation ("Anes"), Chapman
Security Systems, Inc., a Michigan corporation ("Chapman"), Intercept Systems,
Inc., a Michigan corporation ("Intercept") (Code Alarm, Tessco, Anes, Chapman
and Intercept being sometimes hereinafter collectively referred to as the
"Credit Parties" and each individually referred to as a "Credit Party"), and
General Electric Capital Corporation as "Agent" for the "Lenders" from time to
time party to that certain Credit Agreement of even date herewith among Code
Alarm (the "Borrower"), the other Credit Parties, the Agent and the Lenders
(including all annexes, exhibits or schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the "Credit Agreement").
Undefined capitalized terms which are used herein shall have the meanings
ascribed to such terms in the Credit Agreement.
1. Contribution and Indemnification among the Credit Parties.
(a) Pursuant to the Credit Agreement, the Agent and the Lenders have
provided, and from time to time hereafter may provide, Loans and Letters of
Credit to and for the benefit of the Borrower.
(b) As a condition to the Agent's and the Lenders' entering into the
Credit Agreement, each of the Credit Parties have guaranteed all of the
Obligations under and as defined in the Credit Agreement and each have granted
security interests in and liens on substantially all of their properties as
security for such guaranty obligations and Obligations pursuant to certain Loan
Documents.
(c) To the extent that any Credit Party shall, under the Loan Documents
as a guarantor, pledgor, mortgagor or other third party accommodation party,
repay (whether directly or with the proceeds of property constituting
Collateral) any of the Obligations (an "Accommodation Payment"), then the
Credit Party making such Accommodation Payment shall be entitled to
contribution and indemnification from, and be reimbursed by, each of the other
Credit Parties in an amount, for each of the Credit Parties, equal to a
fraction of such Accommodation Payment, the numerator of which fraction is such
Credit Party's "Allocable Amount" (as defined below) and the denominator of
which is the sum of the Allocable Amounts of all of the Credit Parties.
(d) As of any date of determination, the "Allocable Amount" of each
Credit Party shall be equal to the maximum amount of liability for
Accommodation Payments which could be asserted against such Credit Party under
the Loan Documents without (i) rendering such Credit
<PAGE> 2
Party "insolvent" within the meaning of Section 101(32) of the Federal
Bankruptcy Code (11 U.S.C. Section 101 et. seq.) (the "Bankruptcy Code"),
Section 2 of the Uniform Fraudulent Transfer Act (the "UFTA") or Section 2 of
the Uniform Fraudulent Conveyance Act (the "UFCA"), (ii) leaving such Credit
Party with unreasonably small capital or assets, within the meaning of Section
548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA,
(iii) leaving such Credit Party unable to pay its debts as they mature or
become due within the meaning of Section 548 of the Bankruptcy Code or Section
4 of the UFTA, or Section 6 of the UFCA, or (iv) having any similar result
under any other applicable insolvency law.
(e) The provisions of this Agreement shall, to the extent
inconsistent with any provision in any other Loan Document, supersede any such
inconsistent provision.
2. Subordination of Intercompany Claims Among Credit Parties.
(a) Each Credit Party hereby agrees that, until the payment in full of all
Obligations, the termination of the Commitments and the expiration of all
Letters of Credit, and without in any way limiting any provisions of any
Guaranty:
(i) all obligations and claims which are now or hereafter owing to
such Credit Party from another Credit Party, including, without
limitation, all intercompany loans, advances and other obligations
heretofore, now or hereafter made to such Credit Party by the other
Credit Parties, including, without limitation, amounts evidenced by the
Master Intercompany Demand Note, and all claims arising under the terms
of this Agreement (collectively, the "Intercompany Claims"), are hereby
subordinated in right of payment to all Obligations of the Credit Parties
now existing or hereafter arising under any of the Loan Documents,
whether fixed or contingent, matured or unmatured, including, without
limitation, all such obligations arising after the filing of a petition
in bankruptcy under the Bankruptcy Code, regardless of whether or not
allowed under such case or proceeding; provided, however, that
Intercompany Claims may be repaid in the ordinary course of the Credit
Parties' businesses as conducted on the Closing Date and; provided,
further, however, that following the occurrence of an Event of Default
and Agent's notice to the Credit Parties of Agent's exercise of its
rights under this paragraph, all such payments with respect to the
Intercompany Claims shall be paid directly to Agent for application to
the Obligations;
(ii) it shall not, without the written consent of Agent, enforce,
or seek to enforce, any right or remedy with respect to the Intercompany
Claims or any security therefor, by judicial or administrative action or
otherwise, nor shall it file or join the filing of any involuntary
petition in bankruptcy, appoint a trustee, receiver, conservator or
liquidator of any Credit Party, in each case with respect to its
Intercompany Claims, or otherwise initiate or participate in the
initiation of any similar proceedings for the benefit of creditors of any
Credit Party;
2
<PAGE> 3
(iii) except as permitted under the proviso of Section 2(a)(i) of
this Agreement or under the other Loan Documents, it shall not receive
any payments in cash or other property with respect to any Intercompany
Claim, whether by payment or set-off;
(iv) it shall pay over to Agent all amounts received by it in
payment of its Intercompany Claims which, pursuant to the terms of this
Agreement, it is not entitled to retain, in the precise form in which
such amounts are received (with any endorsements thereon as may be
required by Agent), for application to the Obligations, and until so paid
over, it shall hold such amounts in trust for Agent; and
(v) in the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization or arrangement
with creditors, whether or not pursuant to bankruptcy law, the sale of
all or substantially all of the assets of any Credit Party, dissolution,
liquidation or any other marshalling of the assets or liabilities of any
Credit Party, each other Credit Party will file all claims, proofs of
claim or other instruments of similar character necessary to enforce the
Intercompany Claims and promptly pay over to Agent in the form received
(except for any necessary endorsement) for application to the Obligations
any and all moneys, dividends or other assets received in any such
proceedings on account of the Intercompany Claims, unless and until the
Obligations have been paid in full. If any Credit Party shall fail to
take any such action, Agent, as attorney-in-fact for such Credit Party,
may take such action on any Credit Party's behalf. Each Credit Party
hereby irrevocably appoints Agent, or any of its officers or employees,
as the attorney-in-fact for such Credit Party (which appointment is
coupled with an interest) with the power but not the duty to demand, sue
for, collect and receive any and all such moneys, dividends or other
assets and give acquittance therefor and to file any claim, proof of
claim or other instrument of similar character, to vote claims comprising
Intercompany Claims to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension and to
take such other action in Agent's own name or in the name of any Credit
Party as Agent may deem necessary or advisable for the enforcement of the
agreements contained herein; and each Credit Party will execute and
deliver to Agent such other and further powers-of-attorney or instruments
as Agent may request in order to accomplish the foregoing.
(b) If any Credit Party shall have any right under applicable
law or otherwise to terminate or revoke the provisions of this Section 2, which
right cannot be waived, such termination or revocation shall not be effective
until written notice of such termination or revocation, signed by such Credit
Party, is actually received by Agent. Absent the circumstances described in
the preceding sentence, this is a continuing agreement of each Credit Party
that Agent may continue, at any time and without notice to any Credit Party, to
extend credit or other financial accommodations and loan monies to or for the
benefit of any Credit Party on the faith hereof. Any termination or revocation
described hereinabove shall not affect this Agreement in relation to any of the
Obligations which arose prior to receipt thereof or which are created after
receipt thereof, if such Obligations were incurred either through readvances by
Agent pursuant to Agent's financing arrangements with any Credit Parties,
and/or for the purpose of protecting any
3
<PAGE> 4
collateral, including, but not limited to, all protective advances, costs,
expenses, and attorneys' and paralegals' fees, whensoever made, advanced or
incurred by Agent in connection with the Obligations. If, in reliance on this
Agreement, Agent makes loans or other advances to or for the benefit of any
Credit Party, or take other action under the Loan Documents after such
termination or revocation by any Credit Party but prior to the receipt by
Lender of said written notice as set forth above, the rights of Lender shall be
the same as if such termination or revocation had not occurred.
(c) All of the Obligations shall be deemed to have been made or incurred
in reliance upon this Agreement. Each Credit Party expressly waives all
notices not specifically required pursuant to the terms of this Agreement, and
each Credit Party expressly waives reliance by Agent upon the subordination and
other agreements provided herein. Except as expressly set forth herein, each
Credit Party acknowledges that Agent has made no warranties or representations
with respect to the due execution, legality, validity, completeness or
enforceability of any Loan Documents or the collectibility of the Obligations.
Agent shall be entitled to manage and supervise its loans to any Credit Party
in accordance with applicable law and Agent's usual practices, modified from
time to time as Agent deem appropriate under the circumstances, without regard
to the existence of any rights that any Credit Party may now or hereafter have
with respect to other Credit Parties, and Agent shall have no liability to any
Credit Party for, and each Credit Party hereby waives any claim which any
Credit Party may now or hereafter have against, Agent arising out of any and
all actions which Agent, in good faith, takes or omits to take (including,
without limitation, actions with respect to the creation, perfection or
continuation of liens or security interests in any Collateral or proceeds
thereof, actions with respect to the occurrence of any Event of Default,
actions with respect to the foreclosure upon, sale, release, or depreciation
of, or failure to realize upon, any of Collateral or proceeds thereof, and
actions with respect to the collection of any claim for all or any part of the
Obligations from any account debtor, guarantor or any other party) with respect
to any Loan Documents or to the collection of the Obligations or the valuation,
use, protection or release of any Collateral or proceeds thereof, and/or other
security for the Obligations.
3. Governing Law. This Agreement shall be construed and enforced and the
rights and duties of the parties shall be in all respects governed by and in
accordance with the internal laws and decisions (as opposed to the conflict of
laws provisions) of the State of Illinois.
4. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute part of this Agreement.
5. Counterparts. This Agreement may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
agreement.
* * * *
4
<PAGE> 5
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
TESSCO GROUP, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
ANES, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
CHAPMAN SECURITY SYSTEMS, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
<PAGE> 6
INTERCEPT SYSTEMS, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
Agreed and Accepted as of
this 24th day of October, 1997:
GENERAL ELECTRIC CAPITAL CORPORATION
as the Agent
By: /s/ Timothy S. Van Kirk
----------------------------------
Name: Timothy S. Van Kirk
-----------------------------
Title: Duly Authorized Signatory
----------------------------
<PAGE> 1
EXHIBIT 10.48
EXECUTION COPY
LITIGATION L/C AND TERM LOAN C AGREEMENT
LITIGATION L/C AND TERM LOAN C AGREEMENT, dated as of October 24, 1997
among Code-Alarm, Inc., a Michigan corporation (a "Borrower"); GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation (in its individual capacity, "GE
Capital"), for itself, as a Term Lender, and as Agent for Term Lenders, and the
other Term Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrower desires that the Term Lenders provide financial
accommodations in the form of a risk participated guaranty issued by Agent for
the benefit of a surety which may issue a Bond or Bonds in connection with
Borrower's potential appeal of a certain potential adverse judgment or
judgments in or relating to the DEI Litigation; and for these purposes, Agent
is willing to enter into this Agreement and issue such guaranty and the Term
Lenders are willing to provide the Term Loan C Commitment, advance Term Loan C
and enter into such risk participations, subject to the terms and conditions
set forth herein and in the "Credit Agreement" referred to below;
WHEREAS, Borrower desires that the Term Lenders may alternatively make a
direct term loan for Borrower's benefit to satisfy a final judgment or
settlement with respect to the DEI Litigation without first issuing a
Litigation L/C or after terminating the Litigation L/C prior to its being
drawn;
WHEREAS, Borrower desires to secure all of its obligations under this
Agreement by granting to Agent, for the benefit of Agent and the Term Lenders,
security interests in and liens upon all of its existing and after-acquired
personal and real property, provided that such security interests and liens
shall be subordinate to all other liens and security interests granted to
Agent, for the benefit of Agent and the Term Lenders, in connection with the
Credit Agreement (as defined below) in accordance with the terms and condition
of this Agreement; and
WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in that certain Credit Agreement of even date herewith among
Borrower, certain other Credit Parties thereto, the Lenders from time to time
party thereto and Agent, and in Annex A thereto (such Credit Agreement,
together with its exhibits, schedules and annexes, as amended, restated,
supplemented, extended and otherwise modified from time to time being
hereinafter referred to as the "Credit Agreement").
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Reimbursement of Litigation L/C Obligations; Term Loan C. (a)
Subject to the terms and conditions set forth in this Agreement, the Credit
Agreement and Annex B to the Credit Agreement, Agent and Term Lenders shall
incur Litigation L/C Obligations in connection with the issuance of the
Litigation L/C. Alternatively, and subject to the terms and conditions set forth
in this Agreement and the Credit Agreement, the Term Lenders shall make a term
loan in connection with the settlement or other final disposition of the DEI
Litigation. Borrower hereby acknowledges and agrees that, notwithstanding
anything contained herein to the contrary, Borrower's Litigation Obligations
shall arise, and shall be deemed to arise, immediately upon Borrower's execution
of this Agreement.
1.1 (b) If Agent and Term Lenders shall have incurred Litigation L/C
Obligations, then, upon payment by the L/C Issuer under the Litigation L/C, and
regardless of whether an Event of Default or Default shall then exist and
notwithstanding the failure of Borrower to satisfy any of the conditions set
forth in Section 2.4 of the Credit Agreement, each Term Lender shall fund its
Pro Rata Share of such payment to Agent pursuant to Annex B of the Credit
Agreement and in accordance with their respective Term Loan C Commitments, and,
upon such payments, Borrower's Obligations to reimburse Agent for the
Litigation L/C Obligations shall thereafter be payable directly to such Term
Lenders pursuant to the terms of this Agreement and Annex B to the Credit
Agreement (which Obligations to the Term Lenders shall thereafter constitute
"Term Loan C" hereunder and thereunder). Borrower's request for Agent's and
Term Lenders' incurrence of Litigation L/C Obligations shall be made on notice
by Borrower to Agent two (2) Business Days prior to incurrence pursuant to
Annex B of the Credit Agreement. Notwithstanding anything herein to the
contrary, such recharacterization of Borrower's Litigation L/C Obligations
hereunder shall occur solely for purposes of references herein, in the Credit
Agreement and in the other Loan Documents, to such Obligations and shall not be
construed to constitute a refinancing, repayment or novation of any such
Obligations. All liens and security interests in the Collateral which are
granted to Agent under the Litigation Collateral Documents to secure the
Litigation L/C Obligations shall continue to secure Borrower's Obligations with
respect to Term Loan C as so recharacterized. The obligations of the Term
Lenders to pay to Agent their respective Pro Rata Shares of payments under the
Litigation L/C hereunder shall be several and not joint.
(c) If Agent shall not have incurred Litigation L/C Obligations, or shall
have terminated the Litigation L/C prior to its being drawn, Borrower may
request that Term Lenders directly advance the Term Loan C by delivering to
Agent a Notice of Term Loan C Advance pursuant to the terms of the Credit
Agreement.
-2-
<PAGE> 3
(d) Each Term Loan C shall be evidenced by a promissory note substantially
in the form of Exhibit A hereto (each a "Term C Note" and collectively the
"Term C Notes"), and Borrower shall execute and deliver its Term C Note to each
Term Lender on the Closing Date in an amount equal to such Term Lender's Term
Loan C Commitment. Each Term C Note, following the applicable Term Lenders'
payment to Agent of its Pro Rata Share of payment under the Litigation L/C, or
following Term Lenders' advance of the Term Loan C pursuant to the Credit
Agreement, shall represent the Obligation of Borrower to pay the amount of the
applicable Term Lender's Term Loan C, together with interest thereon as
prescribed in Section 1.4.
(e) The Litigation L/C and Litigation L/C Obligations shall be subject to
all of the terms and conditions set forth in Annex B to the Credit Agreement,
which Annex is hereby incorporated in its entirety by this reference.
(f) Borrower shall pay the aggregate principal amount of the Term Loan C
in equal, consecutive quarterly installments equal to the lesser of $250,000
and one-twelfth (1/12) of the aggregate original principal amount of such Loan,
on the first day of January, April, July and October of each year, commencing
on the first of such dates occurring after the date on which the L/C Issuer
makes payment under the Litigation L/C or the Term Lenders otherwise advance
the Term Loan C (unless the first of such dates is less than forty-five (45)
days following the date of such payment by the L/C Issuer, in which case such
installments shall commence on the second of such dates occurring after the
date of such payment).
(g) Notwithstanding the foregoing clause (b), the aggregate outstanding
principal balance of the Term Loan C, shall be due and payable in full in
immediately available funds on the Commitment Termination Date, if not sooner
paid in full.
(h) Each payment of principal with respect to the Term Loan C shall be
paid to Agent for the ratable benefit of each Term Lender making a Term Loan C
ratably in proportion to each such Term Lender's respective Term Loan C
Commitment.
1.2 Payments and Prepayments. Borrower may voluntarily prepay, and shall
mandatorily prepay and provide cash collateral for, the Litigation Obligations
in accordance with the terms and conditions of the Credit Agreement. The
proceeds of such prepayments and cash collateral payments, and all other
payments received by Agent and the Term Lenders shall be applied by Agent in
accordance with the terms and conditions of the Credit Agreement.
1.3 Utilization of Litigation L/C and Use of Proceeds. Borrower shall
utilize the Litigation L/C solely to obtain and secure a Bond or Bonds
exclusively in accordance with the terms and conditions set forth in the Credit
Agreement. Borrower shall utilize the proceeds of any direct advance of Term
Loan C under Section 1.1(c) hereof solely for the payment of the Final
Judgment.
-3-
<PAGE> 4
1.4 Interest on Term Loan C. (a) Borrower shall pay interest to Agent,
for the ratable benefit of the Term Lenders, in arrears on each applicable
Interest Payment Date with respect to the outstanding principal balance of Term
Loan C, at the Index Rate plus the Applicable Term Loan Index Margin per annum
or, at the election of Borrower, the applicable LIBOR Rate plus the Applicable
Term Loan LIBOR Margin per annum.
(b) Borrower shall pay Fees with respect to the Litigation L/C as provided
in Annex B to the Credit Agreement.
(c) If any payment on Term Loan C becomes due and payable on a day other
than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension.
(d) All computations of Fees calculated on a per annum basis and interest
shall be made by Agent on the basis of a three hundred and sixty (360) day
year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable. The Index Rate shall be determined
each day based upon the Index Rate as in effect each day. Each determination
by Agent of an interest rate hereunder shall be conclusive, absent manifest
error.
(e) At the election of Agent (or upon the written request of Requisite
Lenders) confirmed by written notice from Agent to Borrower, and so long as any
Default or Event of Default shall have occurred and be continuing, the interest
rates applicable to the Term Loan C and the Letter of Credit Fees with respect
to the Litigation L/C shall be increased by two percentage points (2%) per
annum above the rates of interest or the rate of such Fees otherwise applicable
hereunder ("Default Rate"). Interest and Letter of Credit Fees at the Default
Rate shall accrue from the date of such notice until such Default or Event of
Default is cured or waived, or the Agent (upon written authorization therefor
from the Requisite Lenders) notifies Borrower that the Default Rate no longer
applies, and shall be payable upon demand.
(f) So long as no Default or Event of Default shall have occurred and be
continuing, and subject to the additional conditions precedent set forth in
Section 2.4 of the Credit Agreement Borrower shall have the option to (i)
convert at any time all or any part of outstanding Term Loan C from Index Rate
Loans to LIBOR Loans, (ii) convert any portion thereof constituting a LIBOR
Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in
accordance with Section 1.13(b) of the Credit Agreement if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or (iii)
continue all or any portion of Term Loan C as a LIBOR Loan upon the expiration
of the applicable LIBOR Period and the succeeding LIBOR Period of that
continued portion of Term Loan C shall commence on the last day of the LIBOR
Period of the Loan to be continued. Any portion of Term Loan C to be made or
continued as, or converted into, a LIBOR Loan must be in a minimum amount of
$1,000,000 and integral multiples of $100,000 in excess of such amount. Any
such election must
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<PAGE> 5
be made by 11:00 a.m. (Chicago time) on the third (3rd) Business Day prior to
(1) the date of any proposed Advance which is to bear interest at the LIBOR
Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be
continued as such, or (3) the date on which Borrower wishes to convert any
Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in
such election. If no election is received with respect to a LIBOR Loan by
11:00 a.m. (Chicago time) on the third (3rd) Business Day prior to the end of
the LIBOR Period with respect thereto (or if a Default or an Event of Default
shall have occurred and be continuing or if the additional conditions precedent
set forth in Section 2.4 of the Credit Agreement shall not have been
satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end
of its LIBOR Period. Borrower must make such election by notice to Agent in
writing, by telecopy or overnight courier. In the case of any conversion or
continuation, such election must be made pursuant to a Notice of
Conversion/Continuation.
(g) Notwithstanding anything to the contrary set forth in this Section
1.4, if a court of competent jurisdiction determines in a final order that the
rate of interest payable hereunder exceeds the Maximum Lawful Rate, then so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable hereunder shall be equal to the Maximum Lawful Rate; provided, however,
that if at any time thereafter the rate of interest payable hereunder is less
than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time as the total interest received by
Agent, on behalf of Term Lenders, is equal to the total interest which would
have been received had the interest rate payable hereunder been (but for the
operation of this paragraph) the interest rate payable since the Closing Date
as otherwise provided in this Agreement. Thereafter, interest hereunder shall
be paid at the rate(s) of interest and in the manner provided elsewhere in this
section, unless and until the rate of interest again exceeds the Maximum Lawful
Rate, and at that time this paragraph shall again apply. In no event shall the
total interest received by any Term Lender pursuant to the terms hereof exceed
the amount which such Term Lender could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the Maximum Lawful
Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph,
such interest shall be calculated at a daily rate equal to the Maximum Lawful
Rate divided by the number of days in the year in which such calculation is
made. If, notwithstanding the provisions of this Section 1.4(g), a court of
competent jurisdiction shall finally determine that a Term Lender has received
interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the
extent permitted by applicable law, promptly apply such excess in the order
specified in Section 1.11 of the Credit Agreement and thereafter shall refund
any excess to Borrower or as a court of competent jurisdiction may otherwise
order.
2. CONDITIONS PRECEDENT
The Agent and Term Lenders shall not be obligated to incur Litigation L/C
Obligations, cause the Litigation L/C to be issued or renewed, extended or
modified, or directly advance the Term Loan C pursuant to Section 1.1(c)
hereof, unless and until each of the conditions set forth in Sections 2.1, 2.3
and 2.4 of the Credit Agreement shall have been satisfied
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<PAGE> 6
or provided for in a manner satisfactory to Agent, or waived in writing by
Agent and Term Lenders.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
Agent and Term Lenders, in connection with their respective obligations
under this Agreement, have relied upon the truth, accuracy and completeness of
each of the representations, warranties and covenants set forth in the Credit
Agreement, and all other provisions set forth in the Credit Agreement and
Litigation Collateral Documents, all of which are hereby incorporated herein in
their entirety by this reference.
4. EVENTS OF DEFAULT
Upon the occurrence and during the continuation of any Event of Default or
Default, Agent and Term Lenders shall have, with respect to this Agreement, the
Litigation Obligations and the Collateral securing the Litigation Obligations,
all of the rights and remedies as are provided in the Credit Agreement and the
Litigation Collateral Documents following such occurrences.
5. MISCELLANEOUS
5.1 Amendments and Waivers. This Agreement may be amended or otherwise
modified only upon the express written agreement of the parties hereto.
5.2 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this 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 Agreement.
5.3 GOVERNING LAW. THIS AGREEMENT, LITIGATION COLLATERAL DOCUMENTS AND
THE LITIGATION OBLIGATIONS 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. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN COOK COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
CREDIT PARTIES, AGENT AND TERM LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF
THE LITIGATION COLLATERAL DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE LITIGATION COLLATERAL DOCUMENTS,
-6-
<PAGE> 7
PROVIDED, THAT AGENT, TERM LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK 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 LITIGATION OBLIGATIONS, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION
WHICH SUCH CREDIT PARTY 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. EACH
CREDIT PARTY 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 CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THE
CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
5.4 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 parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been
validly served, given or delivered as provided in the Credit Agreement. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrower or Agent) designated on Annex I of the
Credit Agreement to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
5.5 Section Titles. The Section titles contained in this 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.
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<PAGE> 8
5.6 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
5.7 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 THEIR
DISPUTES 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, TERM LENDERS AND ANY CREDIT PARTY
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
LITIGATION COLLATERAL DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
5.8 Reinstatement. Notwithstanding anything contained herein to the
contrary, this Agreement shall remain in full force and effect and continue to
be effective should any petition be filed by or against Borrower for
liquidation or reorganization, should Borrower 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 Borrower's assets, and
shall continue to be effective or to be reinstated, as the case may be, if at
any time payment and performance of the Litigation 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
Litigation 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 Litigation Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
avoided, reduced, restored or returned.
5.9 Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 5.3 and 5.7, with its counsel.
5.10 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this 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 Agreement.
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<PAGE> 9
5.11 Subordination. The Credit Parties, Agent and Term Lenders hereby
agree that, notwithstanding anything in any of the Loan Documents to the
contrary, all Liens of Agent and Term Lenders now or hereafter securing the
Litigation Obligations or any portion thereof shall be subordinate in priority
to all Liens of Agent and Lenders now or hereafter securing the Obligations
which do not constitute Litigation Obligations. From and after the occurrence
of any Event of Default, unless consented to by Agent and the Requisite
Lenders, no payments shall be made, received or enforced with respect to the
Litigation Obligations unless and until all other Obligations shall have been
indefeasibly paid in full and all Commitments shall have expired or been
terminated.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
-------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Term Lender
By: /s/ Timothy S. Van Kirk
----------------------------------
Name: Timothy S. Van Kirk
----------------------------
Title: Duly Authorized Signatory
---------------------------
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<PAGE> 10
EXHIBIT A
TO
LITIGATION L/C AND TERM LOAN C AGREEMENT
DATED AS OF OCTOBER 24, 1997
Form of Term Loan C Note
Attached.
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<PAGE> 11
EXHIBIT A (1.1 (d)(i))
TO
LITIGATION L/C AND TERM LOAN C AGREEMENT
FORM OF TERM C NOTE
Chicago, Illinois
12,000,000 October 24, 1997
FOR VALUE RECEIVED, the undersigned, CODE-ALARM, INC., a Michigan
corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of GENERAL
ELECTRIC CAPITAL CORPORATION ("Lender") at the offices of GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as Agent for Lenders ("Agent"), at
its address at 10 South LaSalle Street, Suite 2800, Chicago, Illinois 60603,
or at such other place as Agent may designate from time to time in writing, in
lawful money of the United States of America and in immediately available
funds, the amount of TWELVE MILLION DOLLARS AND NO CENTS ($12,000,000) or such
lesser amount as may have been advanced as Term Loan C to the undersigned under
the "Credit Agreement" (as hereinafter defined). All capitalized terms used
but not otherwise defined herein have the meanings given to them in the Credit
Agreement or in Annex A thereto.
This Term C Note is one of the Term C Notes issued pursuant to that
certain Litigation L/C and Term Loan C Agreement dated as of October 24, 1997
by and among Borrower, the other Persons named therein as Credit Parties,
Agent, Lender and the other Persons signatory thereto from time to time as
Lenders (including all annexes, exhibits and schedules thereto and as from time
to time amended, restated, supplemented or otherwise modified, the "Credit
Agreement"), evidences Lender's Term Loan C, and is entitled to the benefit and
security of the Credit Agreement and the Litigation Collateral Documents
referred to therein. Reference is hereby made to the Credit Agreement for a
statement of all of the terms and conditions under which such Term Loan C is
made and is to be repaid. The principal balance of such Term Loan C, the rates
of interest applicable thereto and the date and amount of each payment made on
account of the principal thereof, shall be recorded by Agent on its books;
provided that the failure of Agent to make any such recordation shall not
affect the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement or this Term C Note.
Borrower shall pay the aggregate amount of the Term Loan C evidenced
hereby in equal, consecutive quarterly installments equal to the lesser of
(i) $250,000 or (ii) one-twelfth (1/12) of the aggregate original principal
amount of such Loan on the first day of January, April, July and October of
each year, commencing, subject to the terms of the Credit Agreement, on the
first of such dates occurring after the Term Loan C Funding Date. Interest
thereon shall be paid
<PAGE> 12
until such principal amount is paid in full at such interest rates and at such
times, and pursuant to such calculations, as are specified in the Credit
Agreement. The terms of the Credit Agreement are hereby incorporated herein by
reference.
If any payment on this Term C Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (except as otherwise provided in the Credit Agreement)
and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension.
Upon and after the occurrence of any Event of Default, this Term Note
may, as provided in the Credit Agreement, and without demand, notice or legal
process of any kind, be declared, and immediately shall become, due and
payable.
Time is of the essence of this Term C Note. Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower.
Except as provided in the Credit Agreement, this Term C Note may not be
assigned by Lender to any Person.
THIS TERM C NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.
CODE-ALARM, INC.
By:___________________________
Name:___________________
Title:__________________
<PAGE> 1
EX 10.49
[LITIGATION]
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 24, 1997, between CODE-ALARM,
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 Grantor (in such capacity,
"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, in order to induce Agent and Lenders to enter into the Credit
Agreement and Litigation Collateral Documents (hereinafter, the "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 a continuing 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. 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 Grantor's Obligations, 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, other than
Permitted Encumbrances, 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"):
<PAGE> 2
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all goods;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) all Borrower Accounts, Concentration Accounts, Disbursement
Accounts, Funding 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
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<PAGE> 3
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 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.
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<PAGE> 4
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 grant a Lien 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 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.
-4-
<PAGE> 5
(e) Grantor's chief executive office, principal place of business,
corporate offices, and, as of the Closing Date, all warehouses
and premises where Collateral is stored or located and all locations of its
books and records concerning the Collateral, are set forth on Schedule III
hereto. Prior to Grantor's maintaining any Collateral at any other location,
Grantor shall have obtained Agent's written consent thereto and shall have
delivered to Agent signed financing statements with respect thereto and such
additional documentation as may be required by Section 4(g) hereto.
(f) With respect to the Accounts, except as specifically disclosed on the
most recent Collateral Report delivered to Agent, (i) they represent bona fide
sales of Inventory or rendering of services to Account Debtors in the ordinary
course of Grantor's business and are not evidenced by a judgment, Instrument or
Chattel Paper; (ii) there are no setoffs, claims or disputes existing or
asserted with respect thereto and Grantor has not made any agreement with any
Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by Grantor in the ordinary course of its business
for prompt payment and disclosed to Agent; (iii) to Grantor's knowledge, there
are no facts, events or occurrences which in any way impair the validity or
enforceability thereof or could reasonably be expected to reduce the amount
payable thereunder as shown on Grantor's books and records and any invoices,
statements and Collateral Reports delivered to Agent and Lenders with respect
thereto; (iv) Grantor has not received any notice of proceedings or actions
which are threatened or pending against any Account Debtor which might result
in any adverse change in such Account Debtor's financial condition; (v) Grantor
has no knowledge that any Account Debtor is unable generally to pay its debts
as they become due, (vi) the amounts shown on all invoices, statements and
Collateral Reports which may be delivered to the Agent with respect thereto are
actually and absolutely owing to Grantor as indicated thereon and are not in
any way contingent; (vii) no payments have been or shall be made thereon except
payments immediately delivered to the Borrower Accounts or the Agent as
required pursuant to the terms of Annex C to the Credit Agreement; and (viii)
to Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most recent
Collateral Report delivered to Agent pursuant to the terms of this Security
Agreement or the Credit Agreement, except as specifically disclosed on such
Collateral Report, (i) such Inventory is located at one of Grantor's locations
set forth on Schedule III hereto, or at such other locations with respect to
which Grantor shall have obtained Agent's prior written consent pursuant to
clause (ii) hereof and delivered to Agent additional financing statements and
other documents as may be required by clause (ii) hereof, (ii) no Inventory is
now, or shall at any time or times hereafter be stored at any other location
without Agent's prior written consent, and if Agent 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
-5-
<PAGE> 6
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 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 other 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
-6-
<PAGE> 7
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 mark its books and records
pertaining to the Collateral to evidence this Security Agreement and the
Liens granted hereby. Subject to the materiality exceptions set forth in
Section 4(d), Chattel Paper shall be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are subject
to the security interest of General Electric Capital Corporation, as
Agent, for the benefit of Agent and certain Lenders."
(c) Covenants Regarding Patent, Trademark and Copyright Collateral.
(i) Grantor shall notify Agent immediately if it knows or has reason
to know that any application or registration relating to any Patent,
Trademark or Copyright (now or hereafter existing) may become abandoned
or dedicated, or of any adverse determination or development (including
the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any court) regarding Grantor's ownership of
any Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(ii) In no event shall Grantor, either directly or through any
agent, employee, licensee or designee, file an application for the
registration of any Patent, Trademark or Copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency without giving Agent prior written notice
thereof, and, upon request of Agent, Grantor shall execute and deliver
any and all Patent Security Agreements, Copyright Security Agreements or
Trademark Security Agreements as Agent may request to evidence Agent's
Lien on such Patent, Trademark or Copyright, and the General Intangibles
of Grantor relating thereto or represented thereby.
(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
-7-
<PAGE> 8
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 sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other
actions as Agent shall deem appropriate under the circumstances to
protect such Patent, Trademark or Copyright Collateral.
(d) Indemnification. In any suit, proceeding or action brought by
Agent or any Lender relating to any Account, Chattel Paper, Contract,
Document, General Intangible or Instrument for any sum owing thereunder
or to enforce any provision of any Account, Chattel Paper, Contract,
Document, General Intangible or Instrument, Grantor will save, indemnify
and keep Agent and Lenders harmless from and against all expense
(including reasonable attorneys' fees and expenses), loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out
of a breach by Grantor of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to, or in
favor of, such obligor or its successors from Grantor, except in the case
of Agent or any Lender, to the extent such expense, loss, or damage is
attributable to the gross negligence or willful misconduct of Agent or
such Lender as finally determined by a court of competent jurisdiction.
All such obligations of Grantor shall be and remain enforceable against
and only against Grantor and shall not be enforceable against Agent or
any Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in
respect of its Accounts, Chattel Paper, Contracts and Licenses and all
other agreements to which it is a party or by which it is bound relating
to the Collateral.
(f) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral
against, and take such other action as is necessary to remove, any Lien
on the Collateral except 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.
-8-
<PAGE> 9
(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 other Loan Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a power of
attorney (the "Power of Attorney") substantially in the form attached hereto as
Exhibit A. The power of attorney granted pursuant to the Power of Attorney is
a power coupled with an interest and shall be irrevocable until the Termination
Date. The powers conferred on Agent, for the benefit of Agent and Lenders,
under the Power of Attorney are solely to protect Agent's interests (for the
benefit of Agent and Lenders) in the Collateral and shall not impose any duty
upon Agent or any Lender to exercise any such powers. Agent agrees that (a) it
shall not exercise any power or authority granted under the Power of Attorney
unless an Event of Default has occurred and is continuing, and (b) Agent shall
account for any moneys received by Agent in respect of any foreclosure on or
disposition of Collateral pursuant to the Power of Attorney provided that none
of Agent nor any Lender shall have any duty as to any Collateral, and Agent and
Lenders shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers. NONE OF AGENT, LENDERS OR THEIR
RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES TO THE
EXTENT ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under this
Security Agreement, the Credit Agreement, the Loan Documents and under any
other instrument or agreement securing, evidencing or relating to any of the
Obligations, if any Event of Default 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)
-9-
<PAGE> 10
to or upon Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code and other applicable law), may forthwith enter upon the
premises of Grantor where any Collateral is located through self-help, without
judicial process, without first obtaining a final judgment or giving Grantor or
any other Person notice and opportunity for a hearing on Agent's claim or
action and may collect, receive, assemble, process, appropriate and realize
upon the Collateral, or any part thereof, and may forthwith sell, lease,
assign, give an option or options to purchase, or sell or otherwise dispose of
and deliver said Collateral (or contract to do so), or any part thereof, in one
or more parcels at a public or private sale or sales, at any exchange at such
prices as it may deem acceptable, for cash or on credit or for future delivery
without assumption of any credit risk. Agent or any Lender shall have the
right upon any such public sale or sales and, to the extent permitted by law,
upon any such private sale or sales, to purchase for the benefit of Agent and
Lenders, the whole or any part of said Collateral so sold, free of any right or
equity of redemption, which equity of redemption Grantor hereby releases. Such
sales may be adjourned and continued from time to time with or without notice.
Agent shall have the right to conduct such sales on Grantor's premises or
elsewhere and shall have the right to use Grantor's premises without charge for
such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the Collateral and
make it available to Agent at places which Agent shall select, whether at
Grantor's premises or elsewhere. Until Agent is able to effect a sale, lease,
or other disposition of Collateral, Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for
the purpose of preserving Collateral or its value or for any other purpose
deemed appropriate by Agent. Agent shall have no obligation to Grantor to
maintain or preserve the rights of Grantor as against third parties with
respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies (for the
benefit of Agent and Lenders), with respect to such appointment without prior
notice or hearing as to such appointment. Agent shall apply the net proceeds
of any such collection, recovery, receipt, appropriation, realization or sale
to the Obligations as provided in the Credit Agreement, and only after so
paying over such net proceeds, and after the payment by Agent of any other
amount required by any provision of law, need Agent account for the surplus, if
any, to Grantor. To the maximum extent permitted by applicable law, Grantor
waives all claims, damages, and demands against Agent or any Lender arising out
of the repossession, retention or sale of the Collateral except to the extent
such arise out of the gross negligence or willful misconduct of Agent or such
Lender as finally determined by a court of competent jurisdiction. Grantor
agrees that ten (10) days' prior written notice by Agent of the time and place
of any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any attorneys' fees or other
expenses incurred by Agent or any Lender to collect such deficiency.
-10-
<PAGE> 11
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 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-
<PAGE> 12
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, 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.
-12-
<PAGE> 13
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 COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES AMONG GRANTOR, AGENT AND LENDERS
PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE LOAN
DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND GRANTOR ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK 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.
-13-
<PAGE> 14
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.
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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<PAGE> 15
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
---------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
-----------------------------------
Name: Timothy S. Van Kirk
----------------------------
Title: Duly Authorized Signatory
---------------------------
<PAGE> 16
SCHEDULE I
----------
FILING JURISDICTIONS
--------------------
1. UCC-1 Financing Statements:
Debtor: CODE-ALARM, 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: CODE-ALARM, INC.
Locations: (1) Oakland County, Michigan
(2) Williamson County, Texas
<PAGE> 17
SCHEDULE II
-----------
INSTRUMENTS
-----------
None.
<PAGE> 18
SCHEDULE III
------------
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING GRANTOR'S COLLATERAL
-------------------------------------------
I. Chief Executive Office and principal place of business of Grantor:
950 E. Whitcomb
Madison Heights, Michigan
II. Corporate Offices of Grantor:
950 E. Whitcomb
Madison Heights, Michigan
III. Warehouses:
950 E. Whitcomb
Madison Heights, Michigan
16742 Burke Lane
Huntington Beach, California
IV. Other Premises at which Collateral is Stored or Located:
300 Industrial Drive
Georgetown, Texas
V. Locations of Records Concerning Collateral:
950 E. Whitcomb
Madison Heights, Michigan
16742 Burke Lane
Huntington Beach, California
<PAGE> 19
SCHEDULE IV
-----------
PATENTS, TRADEMARKS AND COPYRIGHTS
----------------------------------
PATENTS: CODE-ALARM
- --------------------
PATENT REGISTRATIONS
---------------------
<TABLE>
<CAPTION>
Mark Patent No. Issue Date
---- ---------- ----------
<S> <C> <C>
AUTOMOBILE BURGLAR 4,740,775 4/26/88
ALARM
SECURITY SYSTEM 5,543,778 8/6/96
VEHICLE ANTITHEFT 4,107,543 8/15/78
SYSTEM
SECURITY SYSTEM 4,333,074 6/1/82
PATENT APPLICATIONS
Serial No. Filing Date
---------- -----------
08/624,146 5/28/93
08/774,954 4/19/93
08/842,374 4/23/97
08/838,684 4/9/97
</TABLE>
<PAGE> 20
PATENT LICENSES
---------------
<TABLE>
<CAPTION>
Name of Agreement Parties/Purpose Date of Agreement
----------------- --------------- -----------------
<S> <C> <C>
MAGNADYNE/NUTEK: Code-Alarm licensed "Price" April 1996
Cross License patent to Magnadyne/Nutek;
Agreement Magnadyne/Nutek licensed "Chen"
patent to Code-Alarm
BULLDOG Code-Alarm, Inc. licensed September 1994
"Price" patent use to Bulldog
AUDIOVOX Code-Alarm, Inc. August 1994
licensed "Stouffer"
patent to Audiovox
AUDIOVOX: Cross Code-Alarm licensed use of August 1994
License Agreement "Price" patent to Audiovox;
Audiovox licensed use of "Posse"
patent to Code-Alarm
SHERWOOD Code-Alarm licensed use of January 1997
"Price" patent to Sherwood
</TABLE>
<PAGE> 21
TRADEMARKS: CODE-ALARM
- -----------------------
TRADEMARK REGISTRATIONS
------------------------
<TABLE>
<CAPTION>
Mark Reg. No. Date
---- -------- ----
<S> <C> <C>
ELITE 1,709,313 8/18/92
</TABLE>
The following table lists Code-Alarm's Common Law Trademarks. Where a federal
Trademark has been abandoned, the prior Registration Number and Registration
Date are included; where a federal Trademark Application has been abandoned,
the Serial Number and Filing Date are included.
<TABLE>
<CAPTION>
Mark Prior Reg. No./Serial No. Prior Reg./Filing Date
---- ------------------------- ----------------------
<S> <C> <C>
MIRAGE 1,528,131 (cancelled) 3/7/89
CODE-ALARM 1,537,231 (cancelled) 5/2/89
SCORPION 1,588,738 (cancelled) 3/27/90
FOCUS BAND 74/360,227 (abandoned) 2/19/93
CRF 74/360,230 (abandoned) 2/19/93
INTERCEPT 74/020,162 (abandoned) 1/18/90
FALCON (abandoned)
LIVEWIRES Not Registered
MICRO-SHIELD Not Registered
NIGHTHAWK Not Registered
PREDATOR Not Registered
RADICAL AUDIO DESIGN Not Registered
RAD WIRES Not Registered
</TABLE>
<PAGE> 22
TRADEMARK APPLICATIONS
----------------------
<TABLE>
<CAPTION>
Mark Serial No. Filing Date
---- ---------- -----------
<S> <C> <C>
CODE-ALARM 75/333,752 7/31/97
CODE-ALARM 75/333,753 7/31/97
CODE 75/333,754 7/31/97
CODE-ALARM and Design 75/333,755 7/31/97
CODE-ALARM 75/333,756 7/31/97
PRO 75/333,757 7/31/97
TRADEMARK LICENSES
------------------
Name of Agreement Parties Date of Agreement
----------------- ------- -----------------
None.
</TABLE>
<PAGE> 23
EXHIBIT A
---------
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by Code-Alarm, 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
<PAGE> 24
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) cause the certified public accountants then engaged
by Grantor to prepare and deliver to Attorney at any time and from time to time,
promptly upon Attorney's request, the following reports: (1) a reconciliation of
all accounts; (2) an aging of all accounts, (3) trial balances, (4) test
verifications of such accounts as Attorney may request, and (5) the results of
each physical verification of inventory; (g) communicate in its own name with
any party to any Contract with regard to the assignment of the right, title and
interest of such Grantor in and under the Contracts and other matters relating
thereto; and (h) execute, in connection with sale provided for in any Loan
Document, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral and to otherwise direct such sale or
resale, all as though Attorney were the absolute owner of the property of
Grantor for all purposes, and to do, at Attorney's option and Grantor's expense,
at any time or from time to time, all acts and other things that Attorney
reasonably deems necessary to perfect, preserve, or realize upon Grantor's
property or assets and Attorney's Liens thereon, all as fully and effectively as
Grantor might do. Grantor hereby ratifies, to the extent permitted by law, all
that said Attorney shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor and
Grantor has caused its seal to be affixed pursuant to the authority of its
board of directors this 24th day of October, 1997.
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------------------
Name: Rand Mueller
----------------------------
Title: President
---------------------------
ATTEST:
By: /s/ Craig S. Camalo
---------------------------------
(SEAL)
Title: Vice President and CFO
------------------------
<PAGE> 1
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:
<PAGE> 2
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;
-2-
<PAGE> 3
(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
-3-
<PAGE> 4
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 grant a Lien 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
-4-
<PAGE> 5
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
-5-
<PAGE> 6
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
-6-
<PAGE> 7
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 mark 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
-7-
<PAGE> 8
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 sue 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
-8-
<PAGE> 9
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
-9-
<PAGE> 10
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
-10-
<PAGE> 11
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
-11-
<PAGE> 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,
-12-
<PAGE> 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 COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
-13-
<PAGE> 14
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
COOK 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.
-14-
<PAGE> 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.
-15-
<PAGE> 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/ Rand Mueller
--------------------------------
Name: Rand Mueller
-------------------------
Title: President
------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
--------------------------------
Name: Timothy S. Van Kirk
-------------------------
Title: Duly Authorized
Signatory
-------------------------
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<PAGE> 17
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) Williamson County, Texas
<PAGE> 18
SCHEDULE II
INSTRUMENTS
None.
<PAGE> 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:
300 Industrial Drive
Georgetown, Texas
II. Corporate Offices of Grantor:
300 Industrial Drive
Georgetown, Texas
III. Warehouses:
300 Industrial Drive
Georgetown, Texas
IV. Other Premises at which Collateral is Stored or Located:
None.
V. Locations of Records Concerning Collateral:
300 Industrial Drive
Georgetown, Texas
<PAGE> 20
SCHEDULE IV
PATENTS, TRADEMARKS AND COPYRIGHTS
None.
<PAGE> 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)
<PAGE> 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/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
--------------------------
ATTEST:
By: /s/ Craig S. Camalo
--------------------------------
(SEAL)
Title: Vice President and CFO
----------------------
-2-
<PAGE> 1
EXHIBIT 10.51
[LITIGATION]
EXECUTION COPY
(TESSCO)
GUARANTY
This GUARANTY (this "Guaranty"), dated as of October 24, 1997, by and
between TESSCO GROUP, INC., a Michigan corporation ("Guarantor"), and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, individually and as agent
(in such capacity, "Agent") for itself and the "Lenders" from time to time
signatory to the "Credit Agreement" hereinafter defined.
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof by and among Code-Alarm, Inc., a Michigan corporation (in such capacity,
the "Borrower"), 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 (hereinafter, "Lenders") have agreed to incur
Litigation Obligations for the benefit of Borrower.
WHEREAS, Guarantor is a currently wholly-owned subsidiary of Borrower and
will derive direct and indirect economic benefits from the financial
accommodations provided to Borrower pursuant to the Credit Agreement; and
WHEREAS, in order to induce Agent and Lenders to enter into the Credit
Agreement and Litigation Collateral Documents (hereinafter, the "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"), Guarantor has agreed to
guarantee payment of the Obligations.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce Lenders to provide the financial
accommodations under the Credit Agreement, it is agreed as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement, unless otherwise defined herein.
References to this "Guaranty" shall mean this Guaranty, including all
amendments, modifications and supplements and any annexes, exhibits and
schedules to any of the foregoing, and shall refer to this Guaranty as the same
may be in effect at the time such reference becomes operative.
<PAGE> 2
2. THE GUARANTY.
2.1 Guaranty of Guaranteed Obligations of Borrower. Guarantor hereby
unconditionally guarantees to Agent and Lenders, and their respective
successors, endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of the
Obligations of Borrower (hereinafter the "Guaranteed Obligations"). Guarantor
agrees that this Guaranty is a guaranty of payment and performance and not of
collection, and that its obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, any Loan Document or any
other agreement, document or instrument to which any Credit Party are or may
become a party;
(b) the absence of any action to enforce this Guaranty or any Loan
Document or the waiver or consent by Agent and/or Lenders with respect to
any of the provisions thereof;
(c) the existence, value or condition of, or failure to perfect
its Lien against, any Collateral for the Guaranteed Obligations or any
action, or the absence of any action, by Agent in respect thereof;
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor;
it being agreed by Guarantor that its obligations under this Guaranty shall not
be discharged until the Termination Date. Guarantor shall be regarded, and
shall be in the same position, as principal debtor with respect to the
Guaranteed Obligations. Guarantor agrees that any notice or directive given at
any time to Agent which is inconsistent with the waiver in the immediately
preceding sentence shall be null and void and may be ignored by Agent and
Lenders, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless Agent and Lenders have specifically agreed otherwise in writing. It is
agreed among Guarantor, Agent and Lenders that the foregoing waivers are of the
essence of the transaction contemplated by the Loan Documents and that, but for
this Guaranty and such waivers, Agent and Lenders would decline to enter into
the Credit Agreement.
2.2 Demand by Agent or Lenders. In addition to the terms of the
Guaranty set forth in Section 2.1 hereof, and in no manner imposing any
limitation on such terms, it is expressly understood and agreed that, if, at
any time, the outstanding principal amount of the Guaranteed Obligations under
the Credit Agreement (including all accrued interest thereon) is
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<PAGE> 3
declared to be immediately due and payable (hereinafter, a "Guaranty Default"),
then Guarantor shall, without demand, pay to the holders of the Guaranteed
Obligations the entire outstanding Guaranteed Obligations due and owing to such
holders. Payment by Guarantor shall be made to Agent in immediately available
Federal funds to an account designated by Agent or at the address set forth
herein for the giving of notice to Agent or at any other address that may be
specified in writing from time to time by Agent, and shall be credited and
applied to the Guaranteed Obligations.
2.3 Enforcement of Guaranty. In no event shall Agent have any obligation
(although it is entitled, at its option) to proceed against Borrower or any
other Credit Party before seeking satisfaction from Guarantor.
2.4 Waiver. In addition to the waivers contained in Section 2.1 hereof,
Guarantor waives, and agrees that it shall not at any time insist upon, plead
or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshaling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by Guarantor of its Guaranteed
Obligations under, or the enforcement by Agent or Lenders of, this Guaranty.
Guarantor hereby waives diligence, presentment and demand (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Guaranteed Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of, the Guaranteed Obligations, notice of adverse
change in Borrower's financial condition or any other fact which might increase
the risk to Guarantor) with respect to any of the Guaranteed Obligations or all
other demands whatsoever and waive the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty. Guarantor
represents, warrants and agrees that, as of the date of this Guaranty, its
obligations under this Guaranty are not subject to any offsets or defenses
against Agent or Lenders or any other Credit Party of any kind. Guarantor
further agrees that its obligations under this Guaranty shall not be subject to
any counterclaims, offsets or defenses against Agent or any Lender or against
any other Credit Party of any kind which may arise in the future.
2.5 Benefit of Guaranty. The provisions of this Guaranty are for the
benefit of Agent and Lenders and their respective successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
any Credit Party and Agent or Lenders, the obligations of any Credit Party
under the Loan Documents. In the event all or any part of the Guaranteed
Obligations are transferred, indorsed or assigned by Agent or any Lender to any
Person or Persons, any reference to "Agent" or "Lender" herein shall be deemed
to refer equally to such Person or Persons.
2.6 Modification of Guaranteed Obligations, Etc. Guarantor hereby
acknowledges and agrees that Agent and Lenders may at any time or from time to
time, with or without the consent of, or notice to, Guarantor:
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<PAGE> 4
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Guaranteed Obligations;
(b) take any action under or in respect of the Loan Documents in the
exercise of any remedy, power or privilege contained therein or available
to it at law, equity or otherwise, or waive or refrain from exercising any
such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan Documents;
(d) extend or waive the time for any Credit Party's performance of,
or compliance with, any term, covenant or agreement on its part to be
performed or observed under the Loan Documents, or waive such performance
or compliance or consent to a failure of, or departure from, such
performance or compliance;
(e) take and hold Collateral for the payment of the Guaranteed
Obligations guaranteed hereby or sell, exchange, release, dispose of, or
otherwise deal with, any property pledged, mortgaged or conveyed, or in
which Agent or Lenders have been granted a Lien, to secure any
Obligations;
(f) release anyone who may be liable in any manner for the payment
of any amounts owed by Guarantor or any other Credit Party to Agent or any
Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
Guarantor or any other Credit Party are subordinated to the claims of Agent
and Lenders; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by Guarantor or any other Credit Party to Agent or any Lender
in such manner as Agent or any Lender shall determine in its discretion;
and Agent and Lenders shall not incur any liability to Guarantor as a result
thereof, and no such action shall impair or release the Guaranteed Obligations
of Guarantor under this Guaranty.
2.7 Reinstatement. Notwithstanding anything contained herein to the
contrary, this Guaranty shall remain in full force and effect and continue to
be effective should any petition be filed by or against any Credit Party or
Guarantor for liquidation or reorganization, should any Credit Party or
Guarantor become insolvent or make an assignment for the benefit of creditors
or should a receiver or trustee be appointed for all or any significant part of
such Credit Party's or Guarantor'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 Guaranteed Obligations, or any part thereof, is, pursuant to applicable
law, rescinded, avoided or reduced in amount, or must otherwise be restored or
returned by Agent or any Lender, whether as a "voidable preference",
"fraudulent
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<PAGE> 5
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 Guaranteed Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
avoided, reduced, restored or returned.
2.8 Deferral of Subrogation, Etc. Notwithstanding anything to the
contrary in this Guaranty, or in any Loan Document, Guarantor hereby:
(a) expressly and irrevocably waives, on behalf of itself and its
successors and assigns (including any surety) until the Termination Date, any
and all rights at law or in equity to subrogation, to reimbursement, to
exoneration, to contribution, to indemnification, to set off or to any other
rights that could accrue to a surety against a principal, to a guarantor
against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, to a holder or transferee
against a maker, or to the holder of any claim against any Person, and which
Guarantor may have or hereafter acquire against any Credit Party in connection
with or as a result of Guarantor's execution, delivery and/or performance of
this Guaranty, or any other documents to which Guarantor is a party or
otherwise; and
(b) acknowledges and agrees (i) that this waiver is intended to benefit
Agent and Lenders and shall not limit or otherwise effect Guarantor's liability
hereunder or the enforceability of this Guaranty, and (ii) that Agent, Lenders
and their respective successors and assigns are intended third party
beneficiaries of the waivers and agreements set forth in this Section 2.9 and
their rights under this Section 2.9 shall survive payment in full of the
Guaranteed Obligations.
2.9. Election of Remedies. If Agent may, under applicable law, proceed
to realize benefits under any of the Loan Documents giving Agent and Lenders a
Lien upon any Collateral owned by any Credit Party, either by judicial
foreclosure or by non-judicial sale or enforcement, Agent may, at its sole
option, determine which of such remedies or rights it may pursue without
affecting any of such rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Agent shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Credit Party, whether because of any applicable laws pertaining to
"election of remedies" or the like, Guarantor hereby consents to such action by
Agent and waives any claim based upon such action, even if such action by Agent
shall result in a full or partial loss of any rights of subrogation which
Guarantor might otherwise have had but for such action by Agent. Any election
of remedies which results in the denial or impairment of the right of Agent to
seek a deficiency judgment against any Credit Party shall not impair
Guarantor's obligation to pay the full amount of the Guaranteed Obligations. In
the event Agent shall bid at any foreclosure or trustee's sale or at any
private sale permitted by law or the Loan Documents, Agent may bid all or less
than the amount of the Guaranteed Obligations and the amount of such bid need
not be paid by Agent but shall be credited against the Guaranteed Obligations.
The amount of the successful bid at any such sale shall be conclusively deemed
to
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<PAGE> 6
be the fair market value of the collateral and the difference between such bid
amount and the remaining balance of the Guaranteed Obligations shall be
conclusively deemed to to be the amount of the Guaranteed Obligations guaranteed
under this Guaranty, notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Agent and Lenders might otherwise be entitled but for such
bidding at any such sale.
2.10 Funds Transfers. If Guarantor shall engage in any transaction as a
result of which Borrower is required to make a mandatory prepayment with
respect to the Guaranteed Obligations under the terms of the Credit Agreement
(including any sale of Guarantor's Stock or assets), Guarantor shall distribute
to, or make a contribution to the capital of, the Borrower an amount equal to
the mandatory prepayment required under the terms of the Credit Agreement.
3. DELIVERIES. In a form satisfactory to Agent, Guarantor shall
deliver to Agent (with sufficient copies for each Lender), concurrently with
the execution of this Guaranty and the Credit Agreement, the Loan Documents and
other instruments, certificates and documents as are required to be delivered
by Guarantor to Agent under the Credit Agreement.
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders to incur the
Obligations under the Credit Agreement, Guarantor makes the representations and
warranties as to Guarantor contained in the Credit Agreement, each of which is
incorporated herein by reference, and the following representations and
warranties to Agent and each Lender, each and all of which shall survive the
execution and delivery of this Guaranty:
4.1 Corporate Existence; Compliance with Law. Guarantor (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; (ii) is duly qualified to do
business and is in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification; (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage and operate its properties, to lease the
property it operates under lease, and to conduct its business as now,
heretofore and proposed to be conducted; (iv) has all licenses, permits,
consents or approvals from or by, and has made all material filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct; (v) is in
compliance with its charter and by-laws; and (vi) is in compliance with all
applicable provisions of law, except where the failure to comply, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
4.2 Executive Offices. Guarantor's executive office and principal
place of business are as set forth in Schedule I hereto.
4.3 Name. Guarantor's exact legal name is correctly set forth in the
introductory paragraph to this Guaranty.
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<PAGE> 7
4.4 Corporate Power; Authorization; Enforceable Guaranteed Obligations.
The execution, delivery and performance of this Guaranty and all Loan Documents
and all instruments and documents to be delivered by Guarantor hereunder and
under the Credit Agreement are within Guarantor's corporate power, have been
duly authorized by all necessary or proper corporate action, including the
consent of stockholders where required, are not in contravention of any
provision of Guarantor's charter or by-laws, do not violate any law or
regulation, or any order or decree of any Governmental Authority, do not
conflict with or result in the breach of, or constitute a default under, or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of its property is
bound, do not result in the creation or imposition of any Lien upon any of the
property of any Guarantor, other than those in favor of Agent, for itself and
the benefit of Lenders, and the same do not require the consent or approval of
any Governmental Authority or any other Person except those referred to in
Section 2.1(c) of the Credit Agreement, all of which have been duly obtained,
made or complied with prior to the Closing Date. On or prior to the Closing
Date, this Guaranty and each of the Loan Documents to which Guarantor is a
party shall have been duly executed and delivered for the benefit of or on
behalf of Guarantor, and each shall then constitute a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms.
5. FURTHER ASSURANCES. Guarantor agrees, upon the written request of
Agent or any Lender, to execute and deliver to Agent or such Lender, from time
to time, any additional instruments or documents reasonably considered
necessary by Agent or such Lender to cause this Guaranty to be, become or
remain valid and effective in accordance with its terms.
6. PAYMENTS FREE AND CLEAR OF TAXES. All payments required to be made by
each Guarantor hereunder shall be made to Agent and Lenders free and clear of,
and without deduction for, any and all present and future Taxes. If Guarantor
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder, (a) the sum payable shall be increased as much as shall be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 6) Agent or Lenders,
as applicable, receive an amount equal to the sum they would have received had
no such deductions been made, (b) Guarantor shall make such deductions, and (c)
Guarantor shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law. Within thirty (30) days after the
date of any payment of Taxes, Guarantor shall furnish to Agent the original or
a certified copy of a receipt evidencing payment thereof. Guarantor shall
indemnify and, within ten (10) days of demand therefor, pay Agent and each
Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 6) paid by Agent or such
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted.
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<PAGE> 8
7. OTHER TERMS.
7.1 Entire Agreement. This Guaranty, together with the Loan Documents,
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements relating to a
guaranty of the loans and advances under the Loan Documents and/or the
Guaranteed Obligations.
7.2 Headings. The headings in this Guaranty are for convenience of
reference only and are not part of the substance of this Guaranty.
7.3 Severability. Whenever possible, each provision of this Guaranty
shall be interpreted in such a manner to be effective and valid under
applicable law, but if any provision of this Guaranty 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 Guaranty.
7.4 Notices. 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 or serve upon another any such communication
with respect to this Guaranty, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
addressed to the party to be notified as follows:
(a) If to Agent, at:
General Electric Capital Corporation
10 South LaSalle Street, Suite 2800
Chicago, Illinois 60603
Attention: Account Manager
Telecopy Number: (312) 419-5957
Telephone Number: (312) 419-0985
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with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: H. Bruce Bernstein
Telecopy Number: (312) 853-7036
Telephone Number: (312) 853-7000
and:
General Electric Capital Corporation
201 High Ridge Road
Stanford, Connecticut 06927-5100
Attention: General Counsel
Telecopy Number: (203) 316-7889
Telephone Number: (203) 316-7552
(b) If to any Lender, at the address of such Lender specified in the
Credit Agreement.
(c) If to Guarantor, at the address of Guarantor specified on Schedule I
hereto.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) Business Days after the same shall have been deposited
with the United States mail, registered or certified mail, return receipt
requested, with proper postage prepaid, (ii) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 7.4), (iii) one (1)
Business Day after deposit with a reputable overnight carrier with all charges
prepaid, or (iv) when delivered, if hand-delivered by messenger. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any of the above-listed persons
designated to receive copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration or other
communication.
7.5 Successors and Assigns. This Guaranty and all obligations of
Guarantor hereunder shall be binding upon the successors and assigns of
Guarantor (including a debtor-in-possession on behalf of Guarantor) and shall,
together with the rights and remedies of Agent, for itself and for the benefit
of Lenders, hereunder, inure to the benefit of Agent and Lenders, all
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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 rights of Agent and Lenders hereunder.
Guarantor may not assign, sell, hypothecate or otherwise transfer any interest
in or obligation under this Guaranty.
7.6 No Waiver; Cumulative Remedies; Amendments. 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, for itself and the ratable benefit of Lenders, of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Agent would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Guaranty may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed by
Agent and Guarantor.
7.7 Termination. This Guaranty is a continuing guaranty and shall
remain in full force and effect until the Termination Date. Upon payment and
performance in full of the Guaranteed Obligations, Agent shall deliver to
Guarantor such documents as Guarantor may reasonably request to evidence such
termination.
7.8 Counterparts. This Guaranty may be executed in any number of
counterparts, each of which shall collectively and separately constitute one
and the same agreement.
7.9 Credit Agreement. Guarantor agrees to perform, comply with and be
bound by, the covenants contained in Sections 4, 5 and 6 of the Credit
Agreement, and each other provision thereof which is specifically applicable to
each Credit Party, which covenants and provisions are incorporated herein by
reference.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Guaranty as of the date first above written.
TESSCO GROUP, INC.
By: /s/ Rand Mueller
----------------------------------
Name: Rand Mueller
----------------------------
Title: President
----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Timothy S. Van Kirk
-----------------------------------
Name: Timothy S. Van Kirk
--------------------------
Title: Duly Authorized Signatory
--------------------------
<PAGE> 12
SCHEDULE I
A. Executive Office; Principal Place of Business:
300 Industrial Avenue
Georgetown, TX 78626
B. Address for Notices:
300 Industrial Avenue
Georgetown, TX 78626
<PAGE> 1
EXHIBIT 10.52
[LITIGATION]
EXECUTION COPY
(CODE ALARM)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of October 24, 1997 (together
with all amendments, if any, from time to time hereto, this "Agreement")
between CODE-ALARM, INC., a Michigan corporation (the "Pledgor") and GENERAL
ELECTRIC CAPITAL CORPORATION in its capacity as Agent for "Lenders," as defined
below ("Agent").
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 Pledgor (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, and 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 Borrower;
WHEREAS, Pledgor is the record and beneficial owner of the
shares of Stock listed in Schedule I hereto;
WHEREAS, in order to induce Agent and 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, Pledgor has agreed to pledge the Pledged
Collateral to Agent in accordance herewith;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained and to induce Lenders to incur Obligations
under the Credit Agreement, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined, and the
following shall have (unless otherwise provided elsewhere in this Agreement)
the following respective meanings (such meanings being equally applicable to
both the singular and plural form of the terms defined):
"Bankruptcy Code" means title 11, United States Code, as amended from
time to time, and any successor statute thereto.
"Pledged Collateral" has the meaning assigned to such term in Section
2 hereof.
"Pledged Entity" means an issuer of Pledged Stock.
"Pledged Shares" means those shares listed in Schedule I hereto.
<PAGE> 2
"Secured Obligations" has the meaning assigned to such term in Section
3 hereof.
2. Pledge. Pledgor hereby pledges to Agent, and grants
to Agent for itself and the benefit of Lenders, a continuing security interest
in all of the following, other than Permitted Encumbrances (collectively, the
"Pledged Collateral"):
(i) the Pledged Shares and the certificates representing
the Pledged Shares, and all dividends, distributions, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares; and
(ii) such portion, as determined by Agent as provided in
Section 6(d) below, of any additional shares of Stock of a Pledged
Entity from time to time acquired by Pledgor in any manner (which
shares shall be deemed to be part of the Pledged Shares), and
the certificates representing such additional shares, and all
dividends, distributions, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Stock.
3. Security for Obligations. This Agreement secures,
and the Pledged Collateral is security for, the prompt payment in full when
due, whether at stated maturity, by acceleration or otherwise, and performance
of all Litigation Obligations of any kind under or in connection with the
Credit Agreement and the other Litigation Collateral Documents (hereinafter,
the "Loan Documents") and all obligations of Pledgor now or hereafter existing
under this Agreement including, without limitation, all fees, costs and
expenses whether in connection with collection actions hereunder or otherwise
(collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates
evidencing the Pledged Collateral shall be delivered to and held by or on
behalf of Agent, for itself and the benefit of Lenders, pursuant hereto. All
Pledged Shares shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Agent.
5. Representations and Warranties. Pledgor represents
and warrants to Agent that on the Closing Date and, unless otherwise specified
below, as of each time Pledgor requests or accepts the proceeds of an Advance
or Loan under the Credit Agreement:
(a) Pledgor is, and at the time of delivery of the Pledged Shares
to Agent will be, the sole holder of record and the sole beneficial owner of
such Pledged Collateral pledged by Pledgor free and clear of any Lien thereon
or affecting the title thereto, except for Permitted Encumbrances or any Lien
created by this Agreement;
(b) All of the Pledged Shares have been duly authorized, validly
issued and are fully paid and non-assessable;
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(c) Pledgor has the right and requisite authority to pledge,
assign, transfer, deliver, deposit and set over the Pledged Collateral pledged
by Pledgor to Agent as provided herein;
(d) None of the Pledged Shares has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject;
(e) All of the Pledged Shares are presently owned by Pledgor, and
are presently represented by the certificates listed in Schedule I hereto. As
of the date hereof, there are no existing options, warrants, calls or
commitments of any character whatsoever relating to the Pledged Shares;
(f) No consent, approval, authorization or other order or other
action by, and no notice to or filing with, any Governmental Authority or any
other Person is required (i) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Pledgor, or (ii) for the exercise by Agent of
the voting or other rights provided for in this Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Agreement, except as may be
required in connection with such disposition by laws affecting the offering and
sale of securities generally;
(g) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create a valid Lien on and a continuing
perfected security interest in favor of the Agent for the benefit of Agent and
Lenders in the Pledged Collateral and the proceeds thereof, securing the
payment of the Secured Obligations, subject to no other Lien (other than
Permitted Encumbrances and Liens created pursuant to the Litigation Collateral
Documents);
(h) This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes a legal, valid and binding obligation of
Pledgor enforceable against Pledgor in accordance with its terms; and
(i) The Pledged Shares constitute 100% of the issued and
outstanding shares of Stock of each Pledged Entity.
The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor covenants and agrees that until
the Termination Date:
(a) Without the prior written consent of Agent, Pledgor will not
sell, assign, transfer, pledge, or otherwise encumber any of its rights in or
to the Pledged Collateral, or any unpaid dividends, interest or other
distributions or payments with respect to the
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Pledged Collateral or grant a Lien in the Pledged Collateral, unless otherwise
expressly permitted by the Credit Agreement;
(b) Pledgor will, at its expense, promptly execute, acknowledge
and deliver all such instruments and take all such actions as Agent from time
to time may request in order to ensure to Agent and Lenders the benefits of the
Liens in and to the Pledged Collateral intended to be created by this
Agreement, including the filing of any necessary Code financing statements,
which may be filed by Agent with or (to the extent permitted by law) without
the signature of Pledgor, and will cooperate with Agent, at Pledgor's expense,
in obtaining all necessary approvals and making all necessary filings under
federal, state, local or foreign law in connection with such Liens or any sale
or transfer of the Pledged Collateral;
(c) Pledgor has and will defend the title to the Pledged
Collateral and the Liens of Agent in the Pledged Collateral against the claim
of any Person and will maintain and preserve such Liens; and
(d) Pledgor will, upon obtaining ownership of any additional Stock
of a Pledged Entity or Stock otherwise required to be pledged to Agent pursuant
to any of the Loan Documents, which Stock is not already Pledged Collateral,
promptly (and in any event within three (3) Business Days) deliver to Agent a
Pledge Amendment, duly executed by Pledgor, in substantially the form of
Schedule II hereto (a "Pledge Amendment") in respect of any such additional
Stock, pursuant to which Pledgor shall pledge to Agent all of such additional
Stock. Pledgor hereby authorizes Agent to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge Amendment
delivered to Agent shall for all purposes hereunder be considered Pledged
Collateral.
7. Pledgor's Rights. As long as no Default or Event of Default
shall have occurred and be continuing and until written notice shall be given
to Pledgor in accordance with Section 8(a) hereof:
(a) Pledgor shall have the right, from time to time, to vote and
give consents with respect to the Pledged Collateral, or any part thereof for
all purposes not inconsistent with the provisions of this Agreement, the Credit
Agreement or any other Loan Document; provided, however, that no vote shall be
cast, and no consent shall be given or action taken, which would have the
effect of impairing the position or interest of Agent in respect of the Pledged
Collateral or which would authorize, effect or consent to (unless and to the
extent expressly permitted by the Credit Agreement):
(i) the dissolution or liquidation, in whole or
in part, of a Pledged Entity;
4
<PAGE> 5
(ii) the consolidation or merger of a Pledged
Entity with any other Person;
(iii) the sale, disposition or encumbrance of all
or substantially all of the assets of a Pledged Entity, except
for Liens in favor of Agent;
(iv) any change in the authorized number of shares, the
stated capital or the authorized share capital of a Pledged Entity or
the issuance of any additional shares of its Stock; or
(v) the alteration of the voting rights with respect to
the Stock of a Pledged Entity; and
(b) (i) Pledgor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid in respect
of the Pledged Shares to the extent not in violation of the Credit Agreement
other than any and all: (A) dividends paid or payable other than in cash in
respect of any Pledged Collateral, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for, any
Pledged Collateral; (B) dividends and other distributions paid or payable in
cash in respect of any Pledged Shares in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in capital of a Pledged Entity; and (C) cash paid,
payable or otherwise distributed, in respect of principal of, or in redemption
of, or in exchange for, any Pledged Collateral; provided, however, that until
actually paid all rights to such distributions shall remain subject to the Lien
created by this Agreement; and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to Pledgor in accordance with clause (i) above)
and all other distributions in respect of any of the Pledged Shares, whenever
paid or made, shall be delivered to Agent to hold as Pledged Collateral and
shall, if received by Pledgor, be received in trust for the benefit of Agent,
be segregated from the other property or funds of Pledgor, and be forthwith
delivered to Agent as Pledged Collateral in the same form as so received (with
any necessary indorsement).
8. Defaults and Remedies.
(a) Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and concurrently with written notice to
Pledgor, Agent (personally or through an agent) is hereby authorized and
empowered to transfer and register in its name or in the name of its nominee
the whole or any part of the Pledged Collateral, to exchange certificates
representing or evidencing Pledged Collateral for certificates of smaller or
larger denominations, to exercise the voting rights with respect thereto, to
collect and receive all cash dividends and other distributions made thereon, to
sell in one
5
<PAGE> 6
or more sales after ten (10) days' notice of the time and place of any public
sale or of the time at which a private sale is to take place (which notice
Pledgor agrees is commercially reasonable) the whole or any part of the Pledged
Collateral and to otherwise act with respect to the Pledged Collateral as
though Agent was the outright owner thereof, Pledgor hereby irrevocably
constituting and appointing Agent as the proxy and attorney-in-fact of Pledgor,
with full power of substitution to do so, and which appointment shall remain in
effect until the Termination Date; provided, however, Agent shall not have any
duty to exercise any such right or to preserve the same and shall not be liable
for any failure to do so or for any delay in doing so. Any sale shall be made
at a public or private sale at Agent's place of business, or at any place to be
named in the notice of sale, either for cash or upon credit or for future
delivery at such price as Agent may deem fair, and Agent may be the purchaser
of the whole or any part of the Pledged Collateral so sold and hold the same
thereafter in its own right free from any claim of Pledgor or any right of
redemption. Each sale shall be made to the highest bidder, but Agent reserves
the right to reject any and all bids at such sale which, in its discretion, it
shall deem inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by
an auctioneer or any officer or agent of Agent.
(b) If, at the original time or times appointed for the sale of
the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at
any of such sales, the highest bid for the lot offered for sale would indicate
to Agent, in its discretion, that the proceeds of the sales of the whole of the
Pledged Collateral would be unlikely to be sufficient to discharge all the
Secured Obligations, Agent may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time of sale or the
time of previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby waived;
provided, however, that any sale or sales made after such postponement shall be
after ten (10) days' notice to Pledgor.
c) If, at any time when Agent in its sole discretion determines,
following the occurrence and during the continuance of an Event of Default,
that, in connection with any actual or contemplated exercise of its rights
(when permitted under this Section 8) to sell the whole or any part of the
Pledged Shares hereunder, it is necessary or advisable to effect a public
registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
"Act"), Pledgor shall, in an expeditious manner, cause the Pledged Entities to:
(i) Prepare and file with the Securities and Exchange
Commission (the " Commission") a registration statement with
respect to the Pledged Shares and in good faith use commercially
reasonable efforts to cause such registration statement to become and
remain effective;
6
<PAGE> 7
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of the Pledged Shares covered by such registration
statement whenever Agent shall desire to sell or otherwise dispose of the
Pledged Shares;
(iii) Furnish to Agent such numbers of copies of a prospectus and a
preliminary prospectus, in conformity with the requirements of the Act, and
such other documents as Agent may request in order to facilitate the public
sale or other disposition of the Pledged Shares by Agent;
(iv) Use commercially reasonable efforts to register or qualify the
Pledged Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as Agent shall request, and do such other reasonable acts and
things as may be required of it to enable Agent to consummate the public sale
or other disposition in such jurisdictions of the Pledged Shares by Agent;
(v) Furnish, at the request of Agent, on the date that shares of the
Pledged Collateral are delivered to the underwriters for sale pursuant to such
registration or, if the security is not being sold through underwriters, on the
date that the registration statement with respect to such Pledged Shares
becomes effective, (A) an opinion, dated such date, of the independent counsel
representing such registrant for the purposes of such registration, addressed
to the underwriters, if any, and in the event the Pledged Shares are not being
sold through underwriters, then to Agent, in customary form and covering
matters of the type customarily covered in such legal opinions; and (B) a
comfort letter, dated such date, from the independent certified public
accountants of such registrant, addressed to the underwriters, if any, and in
the event the Pledged Shares are not being sold through underwriters, then to
Agent, in a customary form and covering matters of the type customarily covered
by such comfort letters and as the underwriters or Agent shall reasonably
request. The opinion of counsel referred to above shall additionally cover
such other legal matters with respect to the registration in respect of which
such opinion is being given as Agent may reasonably request. The letter
referred to above from the independent certified public accountants shall
additionally cover such other financial matters (including information as to
the period ending not more than five (5) Business Days prior to the date of
such letter) with respect to the registration in respect of which such letter
is being given as Agent may reasonably request; and
(vi) Otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable but not later than 18
months
7
<PAGE> 8
after the effective date of the registration statement, an earnings
statement covering the period of at least 12 months beginning with the
first full month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act.
(d) All expenses incurred in complying with Section 8(c) hereof,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities
Dealers, Inc.), printing expenses, fees and disbursements of counsel for the
registrant, the fees and expenses of counsel for Agent, expenses of the
independent certified public accountants (including any special audits incident
to or required by any such registration) and expenses of complying with the
securities or blue sky laws or any jurisdictions, shall be paid by Pledgor.
(e) If, at any time when Agent shall determine to exercise its
right to sell the whole or any part of the Pledged Collateral hereunder, such
Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as
amended (or any similar statute then in effect) (the "Act"), Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event, Agent in its discretion (x)
may, in accordance with applicable securities laws, proceed to make such
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under said Act (or similar statute), (y) may approach and negotiate with
a single possible purchaser to effect such sale, and (z) may restrict such sale
to a purchaser who is an accredited investor under the Act and who will
represent and agree that such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of such Pledged
Collateral or any part thereof. In addition to a private sale as provided
above in this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act (or similar
statute) at the time of any proposed sale pursuant to this Section 8, then
Agent shall not be required to effect such registration or cause the same to be
effected but, in its discretion (subject only to applicable requirements of
law), may require that any sale hereunder (including a sale at auction) be
conducted subject to restrictions:
(i) as to the financial sophistication and ability of any
Person permitted to bid or purchase at any such sale;
(ii) as to the content of legends to be placed upon any
certificates representing the Pledged Collateral sold in such sale,
including restrictions on future transfer thereof;
8
<PAGE> 9
(iii) as to the representations required to be made by each
Person bidding or purchasing at such sale relating to that
Person's access to financial information about Pledgor and such
Person's intentions as to the holding of the Pledged Collateral so sold
for investment for its own account and not with a view to the
distribution thereof; and
(iv) as to such other matters as Agent may, in its
discretion, deem necessary or appropriate in order that such sale
(notwithstanding any failure so to register) may be effected in
compliance with the Bankruptcy Code and other laws affecting the
enforcement of creditors' rights and the Act and all applicable state
securities laws.
(f) Pledgor recognizes that Agent may be unable to effect
a public sale of any or all the Pledged Collateral and may be compelled to
resort to one or more private sales thereof in accordance with clause (e)
above. Pledgor also acknowledges that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private. Agent shall
be under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the Pledged Entity to register such
securities for public sale under the Act, or under applicable state securities
laws, even if Pledgor and the Pledged Entity would agree to do so.
(g) Pledgor agrees to the maximum extent permitted by
applicable law that following the occurrence and during the continuance of an
Event of Default it will not at any time plead, claim or take the benefit of
any appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder,
and Pledgor waives the benefit of all such laws to the extent it lawfully may
do so. Pledgor agrees that it will not interfere with any right, power and
remedy of Agent provided for in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise, or the exercise or beginning of
the exercise by Agent of any one or more of such rights, powers or remedies.
No failure or delay on the part of Agent to exercise any such right, power or
remedy and no notice or demand which may be given to or made upon Pledgor by
Agent with respect to any such remedies shall operate as a waiver thereof, or
limit or impair Agent's right to take any action or to exercise any power or
remedy hereunder, without notice or demand, or prejudice its rights as against
Pledgor in any respect.
(h) Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to Agent,
that Agent shall have no adequate remedy at law in respect of such breach and,
as a consequence, agrees that each and every covenant contained in this Section
8 shall be specifically enforceable against Pledgor, and
9
<PAGE> 10
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that the
Secured Obligations are not then due and payable in accordance with the
agreements and instruments governing and evidencing such obligations.
9. Waiver. No delay on Agent's part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Pledgor by Agent with respect to any power
of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair Agent's right to take any action or to exercise any
power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice Agent's rights as against Pledgor in any respect.
10. Assignment. Agent may assign, indorse or transfer
any instrument evidencing all or any part of the Secured Obligations as
provided in, and in accordance with, the Credit Agreement, and the holder of
such instrument shall be entitled to the benefits of this Agreement.
11. Termination. Immediately following the Termination
Date, Agent shall deliver to Pledgor the Pledged Collateral pledged by Pledgor
at the time subject to this Agreement and all instruments of assignment
executed in connection therewith, free and clear of the Liens hereof and,
except as otherwise provided herein, all of Pledgor's obligations hereunder
shall at such time terminate.
12. Lien Absolute. All rights of Agent hereunder, and
all obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any part of the Secured
Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any
other agreement or instrument governing or evidencing any Secured
Obligations;
(c) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Secured
Obligations;
(d) the insolvency of any Credit Party; or
(e) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor.
10
<PAGE> 11
13. Release. Pledgor consents and agrees that Agent may
at any time, or from time to time, in its discretion:
(a) renew, extend or change the time of payment, and/or
the manner, place or terms of payment of all or any part of the
Secured Obligations; and
(b) exchange, release and/or surrender all or any of the
Collateral (including the Pledged Collateral), or any part
thereof, by whomsoever deposited, which is now or may hereafter be held
by Agent in connection with all or any of the Secured Obligations; all
in such manner and upon such terms as Agent may deem proper, and
without notice to or further assent from Pledgor, it being hereby
agreed that Pledgor shall be and remain bound upon this Agreement,
irrespective of the value or condition of any of the Collateral, and
notwithstanding any such change, exchange, settlement, compromise,
surrender, release, renewal or extension, and notwithstanding also that
the Secured Obligations may, at any time, exceed the aggregate
principal amount thereof set forth in the Credit Agreement, or any
other agreement governing any Secured Obligations. Pledgor hereby
waives notice of acceptance of this Agreement, and also presentment,
demand, protest and notice of dishonor of any and all of the Secured
Obligations, and promptness in commencing suit against any party hereto
or liable hereon, and in giving any notice to or of making any claim or
demand hereunder upon Pledgor. No act or omission of any kind on
Agent's part shall in any event affect or impair this Agreement.
14. Reinstatement. Notwithstanding anything contained
herein to the contrary, this Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Pledgor
or any Pledged Entity for liquidation or reorganization, should Pledgor or any
Pledged Entity become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of Pledgor's or a Pledged Entity'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 Secured 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 Secured Obligations, whether as a
"voidable preference", "fraudulent transfers", "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 Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, avoided, reduced, restored or
returned.
15. Miscellaneous.
(a) Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
11
<PAGE> 12
(b) Pledgor agrees to promptly reimburse Agent for actual
out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred by Agent in connection with the
administration and enforcement of this Agreement as provided in the
Credit Agreement.
(c) Neither Agent, nor any of its respective officers,
directors, employees, agents or counsel shall be liable for any
action lawfully taken or omitted to be taken by it or them hereunder or
in connection herewith, except for its or their own gross negligence or
willful misconduct as finally determined by a court of competent
jurisdiction.
(d) THIS AGREEMENT SHALL BE BINDING UPON PLEDGOR AND ITS
SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR-IN-POSSESSION ON
BEHALF OF PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE
ENFORCEABLE BY, AGENT AND ITS SUCCESSORS AND ASSIGNS, AND 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 NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY
BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED
FOR AND ON BEHALF OF AGENT AND PLEDGOR.
16. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or effect those
portions of this Agreement which are valid.
17. 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 or serve upon any other a communication with respect to this
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.
18. Section Titles. The Section titles contained in this
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.
19. Counterparts. This Agreement may be executed in any
number of counterparts, which shall, collectively and separately, constitute
one agreement.
20. Benefit of Lenders. All security interests granted
or contemplated hereby shall be for the benefit of Agent and Lenders, and all
proceeds or payments realized from the Pledged Collateral in accordance
herewith shall be applied to the Secured Obligations in accordance with the
terms of the Credit Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
--------------------------------
Name: Rand Mueller
--------------------------
Title: President
--------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
---------------------------------
Name: Timothy S. Van Kirk
-----------------------------
Its Duly Authorized Signatory
<PAGE> 14
SCHEDULE I
PLEDGED SHARES
<TABLE>
<CAPTION>
Class Stock Certificate Number Percentage of
Pledged Entity of Stock Number(s) of Shares Outstanding Shares
-------------- -------- ----------------- --------- ------------------
<S> <C> <C> <C> <C>
Tessco Group, Inc. Common 001 1000 100%
Anes, Inc. Common 1001 1000 100%
Chapman Security Common 1001 1000 100%
Systems, Inc.
Intercept Systems, Common 1001 1000 100%
Inc.
</TABLE>
<PAGE> 15
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated October 24, 1997 is delivered pursuant
to Section 6(d) of the Pledge Agreement referred to below. All defined terms
herein shall have the meanings ascribed thereto or incorporated by reference in
the Pledge Agreement. The undersigned hereby certifies that the
representations and warranties in Section 5 of the Pledge Agreement are and
continue to be true and correct, both as to the shares pledged prior to this
Pledge Amendment and as to the shares pledged pursuant to this Pledge
Amendment. The undersigned further agrees that this Pledge Amendment may be
attached to that certain Pledge Agreement, dated October 24, 1997, between
undersigned, as Pledgor, and General Electric Capital Corporation, as Agent,
(the "Pledge Agreement") and that the Pledged Shares listed on this Pledge
Amendment shall be and become a part of the Pledged Collateral referred to in
said Pledge Agreement and shall secure all Secured Obligations referred to in
said Pledge Agreement. The undersigned acknowledges that any shares not
included in the Pledged Collateral at the discretion of Agent may not otherwise
be pledged by Pledgor to any other Person or otherwise used as security for any
obligations other than the Secured Obligations and the other Obligations (as
defined in that certain Credit Agreement dated as of October 24, 1997 among
Code-Alarm, Inc., the Persons named therein as Credit Parties, the Persons
signatory thereto from time to time as Lenders and General Electric Capital
Corporation, as Agent).
CODE-ALARM, INC.
By:_______________________________________
Name:__________________________________
Title:_________________________________
<TABLE>
<CAPTION>
Name and Class Certificate Number
Address of Pledgor Pledged Entity of Stock Number(s) of Shares
- ------------------ -------------- ---------- -------- ----------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 16
EXHIBIT
to
PLEDGE AGREEMENT
dated as of October 24, 1997
Form of Stock Power
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to ________________________________________ _____ Shares of Capital
Stock of Tessco Group, Inc., a Michigan corporation, represented by Certificate
No. __________ ________________ (the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint ________________________________________________________
as the undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the Stock, and for that
purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with
like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated:________________________________________
CODE-ALARM, INC.
By:_________________________
Title:
<PAGE> 17
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to ________________________________________ _____ Shares of Capital
Stock of Tessco Group, Inc., a Michigan corporation, represented by Certificate
No. __________ ________________ (the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint ________________________________________________________
as the undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the Stock, and for that
purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with
like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated:________________________________________
CODE-ALARM, INC.
By: /s/ Rand Mueller
-------------------------
Title: President
<PAGE> 18
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to ________________________________________ _____ Shares of Capital
Stock of Anes, Inc., a Michigan corporation, represented by Certificate No.
________________________ __ (the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint ________________________________________________________
as the undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the Stock, and for that
purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with
like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated:________________________________________
CODE-ALARM, INC.
By: /s/ Rand Mueller
----------------------
Title: President
<PAGE> 19
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to ________________________________________ _____ Shares of Capital
Stock of Chapman Security Systems, Inc., a Michigan corporation, represented by
Certificate No. ___________________________ (the "Stock"), standing in the name
of the undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint _____________as the undersigned's true and lawful
attorney, for it and in its name and stead, to sell, assign and transfer all or
any of the Stock, and for that purpose to make and execute all necessary
endorsements or other acts of assignment and transfer thereof; and to
substitute one or more persons with like full power, hereby ratifying and
confirming all that said attorney or substitute or substitutes shall lawfully
do by virtue hereof.
Dated:________________________________________
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------
Title: President
<PAGE> 20
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to ________________________________________ _____ Shares of Capital
Stock of Intercept Systems, Inc., a Michigan corporation, represented by
Certificate No. _____ _____________________ (the "Stock"), standing in the name
of the undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint ________________________________________________________
as the undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the Stock, and for that
purpose to make and execute all necessary endorsements or other acts of
assignment and transfer thereof; and to substitute one or more persons with
like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated:________________________________________
CODE-ALARM, INC.
By: /s/ Rand Mueller
-----------------------
Title: President
<PAGE> 1
EXHIBIT 10.53
[LITIGATION]
EXECUTION COPY
(Craig Camalo)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of October 24, 1997 (together
with all amendments, if any, from time to time hereto, this "Agreement")
between Craig S. Camalo (the "Pledgor"), Code-Alarm, Inc., a Michigan
corporation (the "Borrower") and GENERAL ELECTRIC CAPITAL CORPORATION in its
capacity as Agent for "Lenders", as defined below ("Agent").
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 Borrower, Agent and the
Persons signatory thereto from time to time as Term Lenders (including all
annexes, exhibits and schedules thereto, and 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 Borrower;
WHEREAS, Pledgor is the record and beneficial owner of the
shares of stock listed in Schedule I hereto;
WHEREAS, in order to induce Agent and Lenders to incur the
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, Pledgor has agreed to pledge the Pledged
Collateral to Agent in accordance herewith;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained and to induce Lenders to incur Obligations
under the Credit Agreement, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined, and the
following shall have (unless otherwise provided elsewhere in this Agreement)
the following respective meanings (such meanings being equally applicable to
both the singular and plural form of the terms defined):
"Bankruptcy Code" means title 11, United States Code, as
amended from time to time, and any successor statute thereto.
"Pledged Collateral" has the meaning assigned to such term in
Section 2 hereof.
"Pledged Entity" means Borrower.
"Pledged Shares" means those shares listed in Schedule I
hereto.
<PAGE> 2
"Secured Obligations" has the meaning assigned to such term
in Section 3 hereof.
2. Pledge. Pledgor hereby pledges to Agent, and grants
to Agent for itself and the benefit of Lenders, a continuing security interest
in all of the following, other than Permitted Encumbrances (collectively, the
"Pledged Collateral"):
(i) the Pledged Shares and the certificates
representing the Pledged Shares; and
(ii) such portion, as determined by Agent as
provided in Section 6(d) below, of any additional shares of
the same series of stock as the Pledged Shares from time to
time acquired by Pledgor in any manner (which shares shall be
deemed to be part of the Pledged Shares), and the certificates
representing such additional shares.
3. Security for Obligations. This Agreement secures,
and the Pledged Collateral is security for, the prompt payment in full when
due, whether at stated maturity, by acceleration or otherwise, and performance
of all Obligations of any kind under or in connection with the Credit Agreement
and the other Litigation Collateral Documents (hereinafter, the "Loan
Documents") and all obligations of Pledgor now or hereafter existing under this
Agreement including, without limitation, all fees, costs and expenses whether
in connection with collection actions hereunder or otherwise (collectively, the
"Secured Obligations").
4. Delivery of Pledged Collateral. All certificates
evidencing the Pledged Collateral shall be delivered to and held by or on
behalf of Agent, for itself and the benefit of Lenders, pursuant hereto. All
Pledged Shares shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Agent.
5. Representations and Warranties.
(a) Pledgor represents and warrants to Agent that on the
Closing Date:
(i) Pledgor is, and at the time of delivery of the
Pledged Shares to Agent will be, the sole holder of record and the
sole beneficial owner of such Pledged Collateral pledged by Pledgor
free and clear of any Lien thereon or affecting the title thereto,
except for Permitted Encumbrances or for any Lien created by this
Agreement;
(ii) Pledgor has the right to pledge, assign, transfer,
deliver, deposit and set over the Pledged Collateral pledged by
Pledgor to Agent as provided herein;
2
<PAGE> 3
(b) Borrower represents and warrants to the Agent
that on the Closing Date and, unless otherwise specified below, as of each time
Borrower requests or accepts the proceeds of an Advance or Loan under the Credit
Agreement:
(i) All Pledged Shares have been duly authorized, validly
issued and are fully paid and non-assessable;
(ii) None of the Pledged Shares has been issued in
violation of applicable federal and state securities laws;
(iii) The Pledged Shares are currently owned of record by
Pledgor, and are currently represented by the certificates listed in
Schedule I hereto. As of the date hereof, there are no existing
options, warrants, calls or commitments issued by the Borrower of any
character whatsoever relating to the Pledged Shares;
(iv) No consent, approval, authorization or other order or
other action by, and no notice to or filing with, any Governmental
Authority is required (i) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution, delivery
or performance of this Agreement by Pledgor, or (ii) for the exercise
by Agent of the voting or other rights provided for in this Agreement
or the remedies in respect of the Pledged Collateral pursuant to this
Agreement, except as may be required in connection with such
disposition by applicable securities and except as may be required by
a change in control of Borrower;
(v) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid Lien on and
perfected security interest in favor of the Agent for the benefit of
Agent and Lenders in the Pledged Collateral, securing the payment of
the Secured Obligations;
(vi) This Agreement has been duly authorized, executed and
delivered by Borrower and constitutes a legal, valid and binding
obligation of Borrower enforceable against Borrower in accordance with
its terms; and
(vii) The Pledged Shares constitute 100% of the issued and
outstanding shares of Series B Preferred Stock of Borrower.
(c) The representations and warranties set forth in this
Section 5 shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor or Borrower, as applicable,
covenants and agrees that until the Termination Date:
(a) Without the prior written consent of Agent, Pledgor
will not sell, assign, transfer, pledge, or otherwise encumber any of
its rights in or to the Pledged Collateral, or
3
<PAGE> 4
grant a Lien in the Pledged Collateral, unless otherwise expressly
permitted by the Agent or the Credit Agreement;
(b) Pledgor will, at Borrower's expense, promptly
execute, acknowledge and deliver all such instruments and take all
such actions as Agent from time to time may request in order to ensure
to Agent and Lenders the benefits of the Liens in and to the Pledged
Collateral intended to be created by this Agreement, including the
filing of any necessary Code financing statements, which may be filed
by Agent with or (to the extent permitted by law) without the
signature of Pledgor, and will cooperate with Agent, at Borrower's
expense, in maintaining and preserving Agent's Lien in the Pledged
Collateral and in obtaining all necessary approvals and making all
necessary filings under federal, state, local or foreign law in
connection with such Liens or any sale or transfer of the Pledged
Collateral;
(c) Borrower will defend Pledgor's title to the Pledged
Collateral and the Liens of Agent in the Pledged Collateral against
the claim of any Person; and
(d) Pledgor will, upon obtaining ownership of any
additional shares of the same series of stock as the Pledged Shares as
is being pledged hereby on the date hereof, which stock is not already
Pledged Collateral.
7. Pledgor's Rights. As long as no Default or Event of
Default shall have occurred and be continuing and until written notice shall be
given to Pledgor in accordance with Section 8(a) hereof:
(a) Pledgor shall have the right, from time to time, to
vote and give consents with respect to the Pledged Collateral, or any
part thereof for all purposes not inconsistent with the provisions of
this Agreement, the Credit Agreement or any other Loan Document;
provided, however, that no vote shall be cast, and no consent shall be
given or action taken, which would have the effect of impairing the
position or interest of Agent in respect of the Pledged Collateral or
which would authorize, effect or consent to (unless and to the extent
expressly permitted by the Credit Agreement):
(i) the dissolution or liquidation, in whole or
in part, of a Pledged Entity;
(ii) the consolidation or merger of a Pledged
Entity with any other Person;
(iii) the sale, disposition or encumbrance of all
or substantially all of the assets of a Pledged Entity, except
for Liens in favor of Agent;
(iv) any change in the authorized number of
shares of the Borrower's Series B Preferred Stock; or
4
<PAGE> 5
(v) the alteration of the voting rights with
respect to the Pledged Shares; and
(b) (i) Pledgor shall be entitled, from time to time,
to collect and receive for its own use all cash dividends paid
in respect of the Pledged Shares to the extent not in
violation of the Credit Agreement; and
(ii) all dividends (other than such cash dividends
as are permitted to be paid to Pledgor in accordance with
clause (i) above) and all other distributions in respect of
any of the Pledged Shares, whenever paid or made, shall be
delivered to Agent to hold as Pledged Collateral and shall, if
received by Pledgor, be received in trust for the benefit of
Agent, be segregated from the other property or funds of
Pledgor, and be forthwith delivered to Agent as Pledged
Collateral in the same form as so received (with any necessary
indorsement).
8. Defaults and Remedies.
(a) Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and concurrently with written
notice to Pledgor, Agent (personally or through an agent) is hereby
authorized and empowered to transfer and register in its name or in
the name of its nominee the whole or any part of the Pledged
Collateral, to exchange certificates representing or evidencing
Pledged Collateral for certificates of smaller or larger
denominations, to exercise the voting rights with respect thereto, to
collect and receive all cash dividends and other distributions made
thereon, to sell in one or more sales after ten (10) days' notice to
Pledgor and to Borrower of the time and place of any public sale or of
the time at which a private sale is to take place (which notice
Pledgor agrees is commercially reasonable) the whole or any part of
the Pledged Collateral and to otherwise act with respect to the
Pledged Collateral as though Agent was the outright owner thereof,
Pledgor hereby irrevocably constituting and appointing Agent as the
proxy and attorney-in-fact of Pledgor, with full power of substitution
to do so, and which appointment shall remain in effect until the
Termination Date; provided, however, Agent shall not have any duty to
exercise any such right or to preserve the same and shall not be liable
for any failure to do so or for any delay in doing so. Any sale shall
be made at a public or private sale at Agent's place of business, or at
any place to be named in the notice of sale, either for cash or upon
credit or for future delivery at such price as Agent may deem fair, and
Agent may be the purchaser of the whole or any part of the Pledged
Collateral so sold and hold the same thereafter in its own right free
from any claim of Pledgor or any right of redemption. Each sale shall
be made to the highest bidder, but Agent reserves the right to reject
any and all bids at such sale which, in its discretion, it shall deem
inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the
presence of property at sale are hereby waived and any sale hereunder
may be conducted by an auctioneer or any officer or agent of Agent.
5
<PAGE> 6
(b) If, at the original time or times appointed for the
sale of the whole or any part of the Pledged Collateral, the highest
bid, if there be but one sale, shall be inadequate to discharge in full
all the Secured Obligations, or if the Pledged Collateral be offered
for sale in lots, if at any of such sales, the highest bid for the lot
offered for sale would indicate to Agent, in its discretion, that the
proceeds of the sales of the whole of the Pledged Collateral would be
unlikely to be sufficient to discharge all the Secured Obligations,
Agent may, on one or more occasions and in its discretion, postpone any
of said sales by public announcement at the time of sale or the time of
previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby
waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to Pledgor.
(c) If, at any time when Agent shall determine to
exercise its right to sell the whole or any part of the Pledged
Collateral hereunder, such Pledged Collateral or the part thereof to
be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act of 1933, as amended (or any
similar statute then in effect) (the "Act"), Agent may, in its
discretion (subject only to applicable requirements of law), sell such
Pledged Collateral or part thereof by private sale in such manner and
under such circumstances as Agent may deem necessary or advisable, but
subject to the other requirements of this Section 8, and shall not be
required to effect such registration or to cause the same to be
effected. Without limiting the generality of the foregoing, in any
such event, Agent in its discretion (x) may, in accordance with
applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall
have been filed under said Act (or similar statute), (y) may approach
and negotiate with a single possible purchaser to effect such sale,
and (z) may restrict such sale to a purchaser who is an accredited
investor under the Act and who will represent and agree that such
purchaser is purchasing for its own account, for investment and not
with a view to the distribution or sale of such Pledged Collateral or
any part thereof. In addition to a private sale as provided above in
this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act (or
similar statute) at the time of any proposed sale pursuant to this
Section 8, then Agent shall not be required to effect such registration
or cause the same to be effected but, in its discretion (subject only
to applicable requirements of law), may require that any sale hereunder
(including a sale at auction) be conducted subject to restrictions:
(i) as to the financial sophistication and ability
of any Person permitted to bid or purchase at any such sale;
(ii) as to the content of legends to be placed
upon any certificates representing the Pledged Collateral sold
in such sale, including restrictions on future transfer
thereof;
6
<PAGE> 7
(iii) as to the representations required to be made
by each Person bidding or purchasing at such sale relating to
that Person's access to financial information about Pledgor and
such Person's intentions as to the holding of the Pledged
Collateral so sold for investment for its own account and not
with a view to the distribution thereof; and
(iv) as to such other matters as Agent may, in its
discretion, deem necessary or appropriate in order that such
sale (notwithstanding any failure so to register) may be
effected in compliance with the Bankruptcy Code and other laws
affecting the enforcement of creditors' rights and the Act and
all applicable state securities laws.
(d) Pledgor recognizes that Agent may be unable to effect
a public sale of any or all the Pledged Collateral and may be
compelled to resort to one or more private sales thereof in accordance
with clause (e) above. Pledgor also acknowledges that any such
private sale may result in prices and other terms less favorable to
the seller than if such sale were a public sale and, notwithstanding
such circumstances, agrees that any such private sale shall not be
deemed to have been made in a commercially unreasonable manner solely
by virtue of such sale being private. Agent shall be under no
obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the Pledged Entity to register such
securities for public sale under the Act, or under applicable state
securities laws, even if Pledgor and the Pledged Entity would agree to
do so.
(e) Pledgor agrees to the maximum extent permitted by
applicable law that following the occurrence and during the
continuance of an Event of Default it will not at any time plead,
claim or take the benefit of any appraisal, valuation, stay,
extension, moratorium or redemption law now or hereafter in force in
order to prevent or delay the enforcement of this Agreement, or the
absolute sale of the whole or any part of the Pledged Collateral or
the possession thereof by any purchaser at any sale hereunder, and
Pledgor waives the benefit of all such laws to the extent it lawfully
may do so. Pledgor agrees that it will not interfere with any right,
power and remedy of Agent provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or
the exercise or beginning of the exercise by Agent of any one or more
of such rights, powers or remedies. No failure or delay on the part
of Agent to exercise any such right, power or remedy and no notice or
demand which may be given to or made upon Pledgor by Agent with
respect to any such remedies shall operate as a waiver thereof, or
limit or impair Agent's right to take any action or to exercise any
power or remedy hereunder, without notice or demand, or prejudice its
rights as against Pledgor in any respect.
(f) Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
Agent, that Agent shall have no adequate remedy at law in respect of
such breach and, as a consequence, agrees that each and every covenant
contained in this Section 8 shall be specifically enforceable against
Pledgor, and
7
<PAGE> 8
Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that the Secured Obligations are not then due and payable in
accordance with the agreements and instruments governing and
evidencing such obligations.
9. Waiver. No delay on Agent's part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Pledgor by Agent with respect to any power
of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair Agent's right to take any action or to exercise any
power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice Agent's rights as against Pledgor in any respect.
10. Assignment. Agent may assign, indorse or transfer
any instrument evidencing all or any part of the Secured Obligations as
provided in, and in accordance with, the Credit Agreement, and the holder of
such instrument shall be entitled to the benefits of this Agreement.
11. Termination. Immediately following the Termination
Date, Agent shall deliver to Pledgor the Pledged Collateral pledged by Pledgor
at the time subject to this Agreement and all instruments of assignment
executed in connection therewith, free and clear of the Liens hereof and,
except as otherwise provided herein, all of Pledgor's obligations hereunder
shall at such time terminate.
12. Lien Absolute. All rights of Agent hereunder, and
all obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document or any other agreement or
instrument governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any part of the Secured
Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any
other agreement or instrument governing or evidencing any Secured
Obligations;
(c) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured
Obligations;
(d) the insolvency of any Credit Party; or
(e) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor.
8
<PAGE> 9
13. Release. Pledgor consents and agrees that Agent may
at any time, or from time to time, in its discretion:
(a) renew, extend or change the time of payment, and/or
the manner, place or terms of payment of all or any part of the
Secured Obligations; and
(b) exchange, release and/or surrender all or any of the
Collateral (including the Pledged Collateral), or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by Agent
in connection with all or any of the Secured Obligations; all in such
manner and upon such terms as Agent may deem proper, and without
notice to or further assent from Pledgor, it being hereby agreed that
Pledgor shall be and remain bound upon this Agreement, irrespective of
the value or condition of any of the Collateral, and notwithstanding
any such change, exchange, settlement, compromise, surrender, release,
renewal or extension, and notwithstanding also that the Secured
Obligations may, at any time, exceed the aggregate principal amount
thereof set forth in the Credit Agreement, or any other agreement
governing any Secured Obligations. Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest
and notice of dishonor of any and all of the Secured Obligations, and
promptness in commencing suit against any party hereto or liable
hereon, and in giving any notice to or of making any claim or demand
hereunder upon Pledgor. No act or omission of any kind on Agent's
part shall in any event affect or impair this Agreement.
14. Reinstatement. Notwithstanding anything contained
herein to the contrary, this Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Pledgor
or any Pledged Entity for liquidation or reorganization, should Pledgor or any
Pledged Entity become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of Pledgor's or a Pledged Entity'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 Secured 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 Secured 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 Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, avoided, reduced, restored or
returned.
15. Miscellaneous.
(a) Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder.
9
<PAGE> 10
(b) Borrower agrees to promptly reimburse Agent for
actual out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred by Agent in connection with the
administration and enforcement of this Agreement as provided in the
Credit Agreement.
(c) The Pledgor shall have no personal liability for
payment of the Secured Obligations, and in any action or suit to
collect the Secured Obligations Agent shall not seek any
in personam judgment against the Pledgor or any judgment for a
deficiency but shall look solely to the security interests hereunder
and the Pledged Collateral described herein for payment of the Secured
Obligations. Nothing contained in this Section shall be construed to
impair the validity of the Secured Obligations or this Agreement or
affect or impair in any way the right of Agent to exercise its rights
and remedies under the Credit Agreement in accordance with its terms.
(d) Neither Agent, nor any of its respective officers,
directors, employees, agents or counsel shall be liable for any action
lawfully taken or omitted to be taken by it or them hereunder or in
connection herewith, except for its or their own gross negligence or
willful misconduct as finally determined by a court of competent
jurisdiction.
(e) THIS AGREEMENT SHALL BE BINDING UPON PLEDGOR AND ITS
SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF OF
PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY,
AGENT AND ITS SUCCESSORS AND ASSIGNS, AND 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
NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED,
ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON
BEHALF OF AGENT AND PLEDGOR.
16. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or effect those
portions of this Agreement which are valid.
17. 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 or serve upon any other a communication with respect to this
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.
10
<PAGE> 11
18. Section Titles. The Section titles contained in this
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.
19. Counterparts. This Agreement may be executed in any
number of counterparts, which shall, collectively and separately, constitute
one agreement.
20. Benefit of Lenders. All security interests granted
or contemplated hereby shall be for the benefit of Agent and Lenders, and all
proceeds or payments realized from the Pledged Collateral in accordance
herewith shall be applied to the Secured Obligations in accordance with the
terms of the Credit Agreement.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
CRAIG S. CAMALO
/s/ Craig S. Camalo
-------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Timothy S. Van Kirk
---------------------------------
Name: /s/ Timothy S. Van Kirk
------------------------------
Its Duly Authorized Signatory
CODE-ALARM, INC.,
as Borrower
By: /s/ Rand Mueller
---------------------------------
Name: Rand Mueller
------------------------------
Its Duly Authorized Signatory
<PAGE> 13
SCHEDULE I
PLEDGED SHARES
<TABLE>
<CAPTION>
Class Stock Certificate Number Percentage of
Pledged Entity of Stock Number(s) of Shares Outstanding Shares
-------------- -------- ----------------- --------- ------------------
<S> <C> <C> <C> <C>
Code-Alarm, Inc. Series B B-1 1 100%
Preferred
Stock
</TABLE>
<PAGE> 14
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated October 24, 1997 is delivered
pursuant to Section 6(d) of the Pledge Agreement referred to below. All
defined terms herein shall have the meanings ascribed thereto or incorporated
by reference in the Pledge Agreement. The undersigned hereby certifies that
the representations and warranties in Section 5 of the Pledge Agreement are and
continue to be true and correct, both as to the shares pledged prior to this
Pledge Amendment and as to the shares pledged pursuant to this Pledge
Amendment. The undersigned further agrees that this Pledge Amendment may be
attached to that certain Pledge Agreement, dated October 24, 1997, between
undersigned, as Pledgor, and General Electric Capital Corporation, as Agent,
(the "Pledge Agreement") and that the Pledged Shares listed on this Pledge
Amendment shall be and become a part of the Pledged Collateral referred to in
said Pledge Agreement and shall secure all Secured Obligations referred to in
said Pledge Agreement. The undersigned acknowledges that any shares not
included in the Pledged Collateral at the discretion of Agent may not otherwise
be pledged by Pledgor to any other Person or otherwise used as security for any
obligations other than the Secured Obligations and the other Obligations (as
defined in that certain Credit Agreement dated as of October 24, 1997 among
Code-Alarm, Inc., the Persons named therein as Credit Parties, the Persons
signatory thereto from time to time as Lenders and General Electric Capital
Corporation, as Agent).
CODE-ALARM, INC.
By:_____________________________________
Name:________________________________
Title:_______________________________
<TABLE>
<CAPTION>
Name and Class Certificate Number
Address of Pledgor Pledged Entity of Stock Number(s) of Shares
------------------ -------------- -------- ---------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 15
EXHIBIT
to
PLEDGE AGREEMENT
dated as of October 24, 1997
Form of Stock Power
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Share of
Series B Preferred Capital Stock of Code-Alarm, Inc., a Michigan corporation,
represented by Certificate No. ______________________ (the "Stock"), standing
in the name of the undersigned on the books of said corporation and does hereby
irrevocably constitute and appoint _______________________________________as the
undersigned's true and lawful attorney, for it and in its name and stead, to
sell, assign and transfer all or any of the Stock, and for that purpose to make
and execute all necessary endorsements or other acts of assignment and transfer
thereof; and to substitute one or more persons with like full power, hereby
ratifying and confirming all that said attorney or substitute or substitutes
shall lawfully do by virtue hereof.
Dated:_________________
CRAIG S. CAMALO
_________________________
<PAGE> 16
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ________________________________________ _____ Share of
Series B Preferred Capital Stock of Code-Alarm, Inc., a Michigan corporation,
represented by Certificate No. _______________________ (the "Stock"), standing
in the name of the undersigned on the books of said corporation and does hereby
irrevocably constitute and appoint ______________________________________as the
undersigned's true and lawful attorney, for it and in its name and stead, to
sell, assign and transfer all or any of the Stock, and for that purpose to make
and execute all necessary endorsements or other acts of assignment and transfer
thereof; and to substitute one or more persons with like full power, hereby
ratifying and confirming all that said attorney or substitute or substitutes
shall lawfully do by virtue hereof.
Dated:_____________________
CRAIG S. CAMALO
/s/ Craig S. camalo
---------------------------
<PAGE> 1
EXHIBIT 10.54
[LITIGATION]
EXECUTION COPY
PATENT SECURITY AGREEMENT
PATENT SECURITY AGREEMENT, dated as of October 24, 1997, by CODE-ALARM,
INC., a Michigan corporation ("Grantor"), in favor of 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 Grantor, Agent and the Persons
signatory thereto from time to time as Term Lenders (including all annexes,
exhibits or 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 Grantor;
WHEREAS, Agent and Lenders are willing 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") 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 Security
Agreement 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 "Security Agreement");
WHEREAS, pursuant to the Security Agreement, Grantor is required to
execute and deliver to Agent, for itself and the ratable benefit of Lenders,
this Patent Security Agreement;
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, Grantor hereby agrees as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in Annex A thereto to the Credit
Agreement.
2. GRANT OF SECURITY INTEREST IN PATENT COLLATERAL. Grantor hereby grants
to Agent, on behalf of itself and Lenders, as security for all of Grantor's
Obligations a continuing security interest in all of Grantor's right, title and
interest in, to and under the following, other than Permitted Encumbrances,
whether presently existing or hereafter created or acquired (collectively, the
"Patent Collateral"):
<PAGE> 2
(a) all of its Patents and Patent Licenses to which it is a
party, including, without limitation, those referred to on
Schedule I hereto;
(b) all reissues, continuations or extensions of the
foregoing;
(c) all products and proceeds of the foregoing,
including, without limitation, any claim by Grantor against
third parties for past, present or future (i) infringement or
dilution of any Patent or Patent licensed under any Patent
License.
3. SECURITY AGREEMENT. The security interests granted pursuant to this
Patent Security Agreement are granted in conjunction with the security
interests granted to Agent, on behalf of itself and Lenders, pursuant to the
Security Agreement. Grantor hereby acknowledges and affirms that the rights
and remedies of Agent with respect to the security interest in the Patent
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
* * * *
-2-
<PAGE> 3
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to
be executed and delivered by its duly authorized officer as of the date first
set forth above.
CODE-ALARM, INC.
By: /s/ Rand Mueller
--------------------------
Name: Rand Mueller
-------------------
Title: President
------------------
ACCEPTED AND ACKNOWLEDGED BY:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
By: /s/ Timothy S. Van Kirk
-----------------------------
Name: Timothy S. Van Kirk
----------------------
Title: Duly Authorized Signatory
--------------------------
ACKNOWLEDGMENT OF GRANTOR
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 24th day of October, 1997 before me personally appeared Rand, proved to
me on the basis of satisfactory evidence to be the person who executed the
foregoing instrument on behalf of Code-Alarm, Inc., who being by me duly sworn
did depose and say that he is an authorized officer of said corporation, that
the said instrument was signed on behalf of said corporation as authorized by
its Board of Directors and that he acknowledged said instrument to be the free
act and deed of said corporation.
/s/ Monique Wilson
-------------------------
{seal} Notary Public
Monique Wilson
Notary Public, State of New York
No. 01W15054453
Qualified in Queens County
Commission Expires: 1-16-98
<PAGE> 4
SCHEDULE I
----------
to
PATENT SECURITY AGREEMENT
PATENT REGISTRATIONS
---------------------
<TABLE>
<CAPTION>
Mark Patent No. Issue Date
<S> <C> <C>
AUTOMOBILE BURGLAR 4,740,775 4/26/88
ALARM
SECURITY SYSTEM 5,543,778 8/6/96
VEHICLE ANTITHEFT 4,107,543 8/15/78
SYSTEM
SECURITY SYSTEM 4,333,074 6/1/82
</TABLE>
PATENT APPLICATIONS
-------------------
<TABLE>
<CAPTION>
Serial No. Filing Date
---------- -----------
<S> <C> <C>
08/624,146 5/28/93
08/774,954 4/19/93
08/842,374 4/23/97
08/838,684 4/9/97
</TABLE>
<PAGE> 5
PATENT LICENSES
---------------
<TABLE>
<CAPTION>
Name of Agreement Parties/Purpose Date of Agreement
----------------- --------------- -----------------
<S> <C> <C>
MAGNADYNE/NUTEK: Code-Alarm licensed April 1996
Cross License "Price" patent to
Agreement Magnadyne/Nutek;
Magnadyne/Nutek
licensed "Chen"
patent to
Code-Alarm
BULLDOG Code-Alarm, Inc. Septmeber 1994
licensed "Price"
patent use to
Bulldog
AUDIOVOX Code-Alarm, Inc. August 1994
licensed "Stouffer"
patent to Audiovox
AUDIOVOX: Cross Code-Alarm licensed August 1994
License Agreement use of "Price"
patent to Audiovox;
Audiovox licensed
use of "Posse"
patent to Code-Alarm
SHERWOOD Code-Alarm licensed January 1997
use of "Price"
patent to Sherwood
</TABLE>
-5-
<PAGE> 1
EXHIBIT 10.55
[EXECUTION COPY]
=================================================================
WARRANT PURCHASE AGREEMENT
dated as of
October 24, 1997
between
CODE-ALARM, INC.
and
GENERAL ELECTRIC CAPITAL CORPORATION
=================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. ISSUE AND SALE OF WARRANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.01. Sale of Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02. Allocated Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.01. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.02. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.03. Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.01. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.02. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.03. Valid Issuance of Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.05. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.06. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.07. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.08. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.09. Securities Law Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.10. Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.11. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.01. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.03. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.05. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.07. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.09. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
Schedule A -- Schedule of Capital Stock
Schedule B -- Schedule of Persons Owning More Than 5% of Any
Schedule C -- Schedule of Outstanding Convertible
-i-
<PAGE> 3
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") dated as of
October 24, 1997, by and between CODE-ALARM, INC., a Michigan corporation (the
"Company"), and GENERAL ELECTRIC CAPITAL CORPORATION (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement of even
date herewith among the Company, the Purchaser as Agent and Lender and the
other Credit Parties and Lenders named therein (the "Credit Agreement"), the
Purchaser is extending certain credit facilities to the Company;
WHEREAS, in order to induce the Purchaser to enter into the
Credit Agreement, the Company has agreed to issue and sell to the Purchaser a
Warrant initially exercisable for 131,718 shares of the Common Stock of the
Company;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which is hereby acknowledged, the parties mutually agree as
follows:
SECTION 1. DEFINITIONS.
The terms hereinafter set forth when used herein shall have
the following meanings, and any terms not otherwise defined herein that are
defined in the Credit Agreement shall have the respective meanings specified in
the Credit Agreement:
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Common Stock" shall mean the common stock, without par value,
of the Company.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act.
"Contractual Obligation" shall mean, with respect to any
person, any provision of any mortgage or security issued by such person or of
any lease, franchise, agreement, guaranty, instrument or undertaking to which
such person is a party or by which it or any of its properties is bound.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and
<PAGE> 4
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Pegasus Warrants" means the warrants to purchase shares of
Common Stock issued pursuant to the Unit Purchase Agreement of even date
herewith among the Company, Pegasus Partners, L.P. and Pegasus Related
Partners, L.P. or the Certificate of Designation referred to therein.
"Requirement of Law" shall mean any applicable law, statute,
treaty, rule, regulation, arbitration award, judgment, decree, order or other
determination of any Governmental Authority.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.
"Warrant" shall have the meaning assigned in Section 2.01
hereof.
SECTION 2. ISSUE AND SALE OF WARRANT.
2.01. Sale of Warrant. Concurrently with the execution and
delivery hereof, the Company is issuing and selling to the Purchaser, and the
Purchaser is purchasing from the Company, Warrant No. A-1 (the "Warrant")
initially exercisable for the purchase of 131,718 shares of Common Stock.
2.02. Allocated Purchase Price. The Company and the
Purchaser hereby acknowledge that for the purposes of Section 1273(c)(2) of the
Code, the Warrant is a part of an investment unit with the loans being made by
the Purchaser to the Company under the Credit Agreement, and that the allocated
purchase price of the Warrant for such purposes is $1,317. The Company and the
Purchaser agree to use the foregoing allocated purchase price as the purchase
price of the Warrant for all income tax purposes.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby respectively represents and warrants to
the Company as follows:
3.01. Authority. The Purchaser has full legal right, power
and authority to enter into and perform this Agreement, and the execution and
delivery of this Agreement by it and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action. This Agreement constitutes the legal, valid and binding obligation of
the
-2-
<PAGE> 5
Purchaser, enforceable against it in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and subject to general principles of equity.
3.02. Brokers and Finders. No brokerage or finder's
commissions or fees are payable in connection with the transactions
contemplated by this Agreement on account of any action taken by the Purchaser
or its representatives, and the Purchaser will indemnify the Company against
and hold the Company harmless from any liability, loss or expense (including,
without limitation, reasonable attorneys' fees) arising in connection with any
claim for any such commissions or fees.
3.03. Securities Laws. The Purchaser is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act.
The Warrant is being acquired for the Purchaser's own account for the purpose
of investment and not with a present view to, or for sale in connection with,
any distribution thereof; provided that the disposition of Purchaser's property
shall at all times remain within its control. The Purchaser understands that
the Warrant and the shares of Common Stock for which the Warrant is exercisable
(collectively, the "Securities") have not been registered under the Securities
Act, that the Securities must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or an exemption from
registration is available under applicable securities laws then in effect and
the Securities will bear a restrictive legend in the form prescribed in Section
8.2 of the Warrant.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
4.01. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan, with all requisite power to own its properties and assets and to
conduct its business as now conducted, and is duly qualified as a foreign
corporation and is in good standing in all other jurisdictions in which such
qualification is required.
4.02. Capitalization. (a) Schedule A hereto sets forth as of
the day hereof the Company's authorized capital stock, indicating the number of
shares issued, outstanding and reserved for issuance. All of the outstanding
shares of capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, free of preemptive rights and have
been offered and issued without violation of the Securities Act or any
applicable state securities or blue sky law
-3-
<PAGE> 6
or any preemptive rights of any person. Schedule B hereto accurately sets
forth, as of the date hereof, the number of issued and outstanding shares of
Common Stock held by each person known by the Company to own beneficially or of
record more than 5% of any class of the Company's outstanding capital stock.
(b) Except for the Pegasus Warrants and except as disclosed
on Schedule C hereto: (i) there are no issued or outstanding securities that
are convertible into or exchangeable for shares of the Company's capital stock
("Convertible Securities"); (ii) there are no issued or outstanding
subscriptions, options, warrants or other rights to purchase or acquire any
shares of the capital stock of the Company or any Convertible Securities
("Option Rights") other than the Warrant; (iii) the Company is not a party to
any agreement or understanding pursuant to which it is obligated to purchase or
redeem any shares of its capital stock or any Convertible Securities or Option
Rights and is not otherwise under any obligation to repurchase, redeem or
otherwise acquire any shares of its capital stock or any Convertible Securities
or Option Rights; (iv) the Company is not a party to any agreement or
understanding pursuant to which it is obligated to register any shares of its
capital stock or other securities under the Securities Act or any state
securities laws; (v) to the best knowledge of the Company, no securities holder
of the Company is a party to any voting agreement, voting trust, irrevocable
proxy or other agreement affecting the voting rights of any shares of the
Company's capital stock or any agreement providing for any call or put option,
right of first refusal or offer or other right to acquire or dispose of any
shares of the Company's capital stock or any Convertible Securities or Option
Rights; (vi) there are not outstanding debt securities of the Company that
provide the holders thereof with voting rights; and (vii) no shares of Common
Stock are issuable upon the exercise of any outstanding Convertible Securities
or Option Rights of the Company and no additional shares of Common Stock will
become issuable upon exercise of such Convertible Securities or Option Rights
on account of the issuance of the Warrants.
4.03. Valid Issuance of Warrant. (a) The Warrant has been
duly executed and delivered by the Company, has been duly authorized and
validly issued free and clear of all liens, encumbrances, equities and claims,
is fully paid and non-assessable, and constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and subject to general principles of
equity and except that only 131, 718 shares of Common Stock have been have been
reserved for issuance upon exercise of the Warrant.
(b) The 131,718 shares of Common Stock initially issuable
upon exercise of the Warrant have been duly authorized
-4-
<PAGE> 7
and reserved for issuance and, when issued in accordance with the terms of the
Warrant, will be validly issued, fully paid and non-assessable, free and clear
of all liens, encumbrances, equities and claims and without violation of any
preemptive rights.
4.04. Authority. The Company has full legal right, power and
authority (i) to enter into and perform this Agreement and (ii) to issue the
Warrant and to perform all its obligations relating thereto; provided that only
131,718 shares of Common Stock have been reserved for issuance upon exercise of
the Warrant, and to the extent that any additional shares become issuable upon
exercise of the Warrant, there may not be sufficient authorized and unreserved
shares of Common Stock for such issuance. The execution and delivery of this
Agreement, the issuance of the Warrant by the Company and the consummation of
the transactions contemplated hereby and thereby have all been duly authorized
by the Board of Directors of the Company and, where required, the shareholders
of the Company; provided that to the extent that the Warrant becomes
exercisable for more than 131,718 shares of Common Stock, the shareholders may
be required to approve an amendment to the Articles of Incorporation of the
Company increasing the number of shares of authorized Common Stock. No
consent, waiver or authorization of, or filing with any other Person (including
without limitation, any Governmental Authority) is required by the Company in
connection with any of the foregoing or with the validity or enforceability
against the Company of this Agreement or the Warrants, except for the filing of
the amendment to the Company's Articles of Incorporation referred to above, any
securities laws filings required in connection with any transfer of the Warrant
or of shares of Common Stock issued upon exercise thereof, the reporting
obligations of the Company under the Securities Exchange Act of 1934, as
amended. This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and subject to general principles of equity.
4.05. No Conflict. The execution, delivery and performance
of this Agreement and the Warrants and the consummation of the transactions
contemplated hereby and thereby do not and will not, with or without the
passage of time or the giving of notice or both, (i) conflict with or violate
any provision of the Company's Articles of Incorporation (except to the extent
that more than 131,718 shares of Common Stock become issuable upon exercise of
the Warrant, in which case an amendment to the Articles of Incorporation may be
required to increase the number of authorized shares of Common Stock) or
By-laws, (ii) conflict with or violate any Requirement of Law or Contractual
Obligation applicable to the Company, (iii) result in, or require, the creation
or imposition of any Lien on any of its properties or revenues pursuant to any
Requirement of Law or
-5-
<PAGE> 8
Contractual Obligation or (iv) require any action by or in respect of, or
filing with, any governmental body, agency or official other than as described
in the third sentence of Section 4.04 above.
4.06. Litigation. No action, suit, claim, litigation,
investigation or proceeding (formal or informal) of or before any arbitrator or
Governmental Authority is pending or (to the best of the Company's knowledge)
threatened by or against the Company or against any of its properties or
revenues with respect to this Agreement or the Warrant or any of the
transactions contemplated hereby or thereby.
4.07. Compliance With Laws. The Company is in compliance, in
all material respects, with all laws, ordinances, governmental rules and
regulations to which it is subject, where the failure to so comply would have
an adverse effect on the enforceability against the Company of this Agreement
or the Warrant or the ability of the Company to perform its obligations
hereunder and thereunder.
4.08. Brokers and Finders. Except as disclosed in the Credit
Agreement and the schedules thereto, no brokerage or finder's commissions or
fees are payable in connection with the transactions contemplated by this
Agreement on account of any action taken by the Company, its affiliates or
their representatives, and the Company will indemnify the Purchaser against and
hold the Purchaser harmless from any liability, loss or expense (including,
without limitation, reasonable attorneys' fees) arising in connection with any
claim for any such commissions or fees.
4.09. Securities Law Compliance. The offer and sale of the
Warrants hereunder is exempt from the registration and prospectus delivery
requirements of the Securities Act, and the rules and regulations thereunder,
and all applicable state securities laws. The Company has not offered the
Warrant to anyone other than the Purchaser.
4.10. Transfer Taxes. Except as have been paid by the
Company prior to the date hereof, no fees, taxes, charges or other amounts
imposed by any federal, state or local taxing or other Governmental Authority
are or will become payable by the Company or the Purchaser as a consequence of
the offer, sale or issuance of the Warrant.
4.11. Full Disclosure. This Agreement, together with the
Credit Agreement and the exhibits, schedules, attachments, documents,
certificates and other written items and materials prepared and supplied to the
Purchaser by or on behalf of the Company with respect to the transactions
contemplated hereby and thereby, taken as a whole, do not and will not, as the
case may be, contain any untrue statement of a material fact or omit to
-6-
<PAGE> 9
state any material fact necessary to make the statements contained therein not
misleading in the context made. There is no fact known to the Company which
the Company has not disclosed to the Purchaser in writing and which is
reasonably likely to have a material adverse effect on the business,
operations, property, prospects or condition (financial or otherwise) of the
Company or would have an adverse effect on the enforceability against the
Company of this Agreement or the Warrant or the ability of the Company to
perform its obligations hereunder or thereunder.
SECTION 5. MISCELLANEOUS.
5.01. Expenses. The Company agrees to pay, and save the
Purchaser harmless against liability for the payment of, all reasonable
out-of-pocket expenses arising in connection with the transactions contemplated
by this Agreement or by the Warrant, including, without limitation, any stamp
or similar taxes (including interest and penalties, if any) which may be
determined to be payable in respect of the execution, delivery, issue and sale
of the Warrant, the reasonable fees and expenses of counsel to the Purchaser in
connection with the preparation of this Agreement and the issuance of the
Warrant, including any modifications, amendments or consents to such
agreements, the expense of preparing and issuing the Warrant, the cost of
delivering the Warrant to such place as the Purchaser shall determine, insured
to their satisfaction, and the costs and expenses incurred in the preparation
of all certificates and letters on behalf of the Company and of the performance
by the Company of and compliance with all agreements and conditions contained
herein to be performed or complied with.
5.02. Notices.
(a) All communications under this Agreement shall be in
writing and shall be given by delivery in person (including delivery by
courier), by telecopy or by registered or certified or first class mail,
postage prepaid, addressed as follows:
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(1) if to the Purchaser, to:
General Electric Capital Corporation
10 South La Salle Street - Suite 2800
Chicago, Illinois 60603
Attention: Account Manager
Telecopier No.: (312) 419-5957
Telephone No.: (312) 419-0985
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois, 60603
Attention: H. Bruce Bernstein
Telecopier No.: (312) 853-7000
Telephone No.: (312) 853-7036
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
or at such other address as such Purchaser may have furnished the Company in
writing, or
(2) if to the Company, to:
Code-Alarm, Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: President and Chief Financial Officer
Telecopier No.: (248) 585-4799
Telephone No.: (248) 583-9620
with a copy to:
Pepper, Hamilton & Scheetz LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: Dennis S. Kayes
Telecopier No.: (313) 259-7926
Telephone No.: (313) 393-7458
or at such other address as the Company may have furnished to the Purchaser in
writing.
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<PAGE> 11
(b) Any notice so addressed and delivered by registered
or certified mail shall be deemed to have been given five business days after
being deposited in the mail, if mailed; when delivered by hand, if personally
delivered; or upon receipt, if sent by telecopier (followed by confirmation
copy sent by overnight or two-day courier).
5.03. Survival. All warranties, representations, and
covenants made herein or in any certificate or other instrument delivered by
the parties hereto or on their behalf under this Agreement shall be considered
to have been relied upon and shall survive the delivery of the Warrant and
payment therefor, regardless of any investigation made by any such party or on
their behalf. All statements in any such certificate or other instrument shall
constitute warranties and representations by such party hereunder.
5.04. Amendment. This Agreement may be amended only by a
written instrument signed by the Purchaser and the Company.
5.05. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Any transfer of any Warrant shall be deemed
to constitute an automatic assignment of the rights of the transferor hereunder
to the transferee.
5.06. Severability. Should any part of this Agreement for
any reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in full force and
effect as if this Agreement had been executed with the invalid portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part or parts which may, for any reason, be
hereafter declared invalid.
5.07. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
5.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES THEREOF.
5.09. Waiver of Jury Trial. The Company and the Purchaser
each hereby expressly acknowledges that any dispute arising out of, connected
with, or incidental to the relationships established between them in connection
with, this Agreement, will be a highly complex commercial matter inappropriate
for resolution by a jury. The Company and the Purchaser each hereby waives any
right to have a jury participate in resolving any such dispute, whether
sounding in contract, tort or other-
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wise. Instead, any disputes resolved in court will be resolved in a bench trial
without a jury.
5.10. Entire Agreement. This Agreement, together with the
Credit Agreement, the Warrant and the Registration Rights Agreement of even
date herewith among the Company, the Purchaser, Pegasus Partners, L.P. and
Pegasus Related Partners, L.P. are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein and therein. This Agreement, together
with the Credit Agreement, the Warrant and such Registration Rights Agreement,
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
5.11. Attorneys' Fees. In any action or proceeding brought
to enforce any provision of this Agreement or the Warrant, or where any
provision hereof or thereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
5.12. Counterparts. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CODE-ALARM, INC.
By: /s/ Rand Mueller
------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Timothy S. Van Kirk
-------------------------------
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<PAGE> 1
EXHIBIT 10.56
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY
EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION, TOGETHER WITH COMPARABLE LETTERS FROM ANY APPLICABLE
STATE SECURITIES AUTHORITIES, OR AN OPINION OF COUNSEL (WHO MAY BE
AN EMPLOYEE OF SUCH HOLDER) EXPERIENCED IN SECURITIES MATTERS TO THE
EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
(C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT
AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE
SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED
TRANSFER.
- --------------------------------------------------------------------------------
WARRANT
to Purchase Common Stock of
CODE-ALARM, INC.
- --------------------------------------------------------------------------------
Warrant No. A-1
Original Issue
Date: October 24, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. DEFINITIONS 1
2. EXERCISE OF WARRANT
2.1. Manner of Exercise 8
2.2 Payment of Taxes 9
2.3. Fractional Shares 9
2.4. Continued Validity and Application. 10
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer 10
3.2. Division and Combination 10
3.3. Expenses 11
3.4. Maintenance of Books 11
4. ANTIDILUTION PROVISIONS 11
4.1. Stock Dividends, Subdivisions and Combinations 11
4.2. Issuance of Additional Shares of Common Stock 11
4.3. Issuances of Stock Purchase Rights and Convertible Securities 12
4.4. Certain Other Distributions 14
4.5. Adjustment of Number of Shares Purchasable 15
4.6. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets 15
4.7. Determination of Consideration 16
4.8. Other Dilutive Events 17
4.9. Other Provisions Applicable to Adjustments Under this Section 18
4.10. Challenge to Good Faith Determination 20
5. NO IMPAIRMENT 20
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 21
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 21
7.1. Notices of Corporate Actions 21
7.2. Taking of Record 22
7.3 Closing of Transfer Books 22
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<PAGE> 3
8. TRANSFER 22
8.1. Restrictions on Transfer 23
8.2. Restrictive Legends 23
8.3. Termination of Securities Law Restrictions 25
8.4. Listing on Securities Exchange 25
9. REGISTRATION RIGHTS AGREEMENT 25
10. LOSS OR MUTILATION 26
11. OFFICE OF THE COMPANY 26
12. FINANCIAL AND BUSINESS INFORMATION 26
13. MISCELLANEOUS 28
13.1. Nonwaiver 28
13.2. Notice Generally 28
13.3. Indemnification 28
13.4. Limitation of Liability 29
13.5. Remedies 29
13.6. Successors and Assigns 29
13.7. Amendment 29
13.8. Severability 29
13.9. Headings 30
13.10. Governing Law; Jurisdiction 30
ANNEXES:
ANNEX A - Subscription Form
ANNEX B - Assignment Form
ii
<PAGE> 4
Warrant No. A-1
Original Issue
Date: October 24, 1997
WARRANT
CODE-ALARM, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC CAPITAL CORPORATION, or
registered assigns, is entitled, at any time prior to the Expiration Date (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from CODE-ALARM, INC., a Michigan corporation (the
"Company"), One Hundred Thirty-One Thousand Seven Hundred Eighteen (131,718)
shares of the Common Stock of the Company (subject to adjustment as provided
herein), at a purchase price of $1.8759559 per share (the initial "Exercise
Price", subject to adjustment as provided herein), all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Affiliate" of any Person means a Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with such Person, (b) which beneficially owns or holds more than
five percent (5.0%) of the outstanding shares of any class of voting stock of
such Person or (c) more than five percent (5.0%) of the outstanding shares of
any class of voting stock (or, in the case of a Person which is not a
corporation, more than five percent (5.0%) of the equity interest) of which is
beneficially owned or held by such Person. The term "control" 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 securities, by contract or
otherwise.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total
amount, is equal to the target amount.
"Agreed Rate" shall mean the Index Rate (as defined in the Credit
Agreement dated as of the Original Issue Date among the Company, General
Electric Capital Corporation, as agent, and
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<PAGE> 5
the other Credit Parties and Lenders named therein, as may be amended from time
to time) plus three and one-half percent (3.5%) per annum.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the fair market value of such a share as of such date as determined
by an investment banking firm of nationally recognized standing selected by the
Majority Warrant Holders and reasonably acceptable to the Company. If the
investment banking firm selected by the Majority Warrant Holders is not
reasonably acceptable to the Company, and the Company and the Majority Warrant
Holders cannot agree on a mutually acceptable investment banking firm, then the
Company and the Majority Warrant Holders shall each choose one such investment
banking firm and the respective chosen firms shall jointly select a third
investment banking firm, which shall make the determination. The Company shall
pay the costs and fees of each such investment banking firm (including any such
investment banking firm selected by the Majority Warrant Holders), if the
Appraised Value is greater than the fair market value per share of Common Stock
as determined in good faith by the Board of Directors of the Company (as
contemplated in clause (B)(1) of "Fair Value" as set forth in Section 1
hereof), and the Majority Warrant Holders shall pay the costs and fees of each
such investment banking firm (including any such investment banking firm
selected by the Company), if the Appraised Value is less than such fair market
value per share of Common Stock as determined in good faith by the Board of
Directors of the Company. The decision of the investment banking firm making
such determination of Appraised Value shall be final and binding on the Company
and all affected holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company taken as
a whole, based on the higher of (A) the value of the entire Company as a going
concern and (B) the liquidation value of the entire Company.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of
Michigan.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, without par value, of the Company, as constituted on the
Original Issue Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of any Common Stock upon any reclassification thereof which is also not
preferred as to dividends or liquidation over any other class of stock of the
Company and
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<PAGE> 6
which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.6 hereof) received
by or distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 4.6 hereof.
"Company" means CODE-ALARM, INC., a Michigan corporation, and any
successor corporation.
"Company Default" means (a) the material breach of any warranty or the
material inaccuracy at the time when made of any representation made by the
Company herein or (b) the material failure by the Company to comply with any
covenant of the Company contained herein.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities that are convertible into or exchangeable for, with
or without payment of additional consideration in cash or property, shares of
Common Stock, either immediately or upon the occurrence of a specified date or
a specified event.
"Current Market Price" shall mean as of any specified date the average of
the daily market prices of the Common Stock of the Company for the shorter of
(x) the twenty (20) consecutive Business Days immediately preceding such date
or (y) the period commencing on the Business Day next following the first
public announcement of any event giving rise to an adjustment of the Exercise
Price pursuant to Section 4 below and ending on such date. The "daily market
price" for each such Business Day shall be: (i) if the Common Stock is then
listed on a national securities exchange or is listed on NASDAQ and is
designated as a National Market System security, the last sale price, regular
way, on such day on the principal stock exchange or market system on which such
Common Stock is then listed or admitted to trading, or, if no such sale takes
place on such day, the average of the closing bid and asked prices for the
Common Stock on such day as reported on such stock exchange or market system or
(ii) if the Common Stock is not then listed or admitted to trading on any
national securities exchange or designated as a National Market System security
on NASDAQ but is traded over-the-counter, the average of the closing bid and
asked prices for the Common Stock as reported on NASDAQ or the Electronic
Bulletin Board or in the National Daily Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 11 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
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<PAGE> 7
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant as adjusted from time to time pursuant to Section 4 hereof.
"Expiration Date" shall mean the seventh anniversary of the Original Issue
Date.
"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such date,
(1) the fair market value per share of Common Stock as determined in good faith
by the Board of Directors of the Company and set forth in a written notice to
each Holder or (2) if the Majority Warrant Holders object in writing to such
price as determined by the Board of Directors within thirty (30) days after
receiving notice of same, the Appraised Value per share as of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding on such date and all shares
of Common Stock issuable in respect of (x) the Warrants outstanding on such
date, (y) any Convertible Securities outstanding on such date and (z) any other
Stock Purchase Rights outstanding on such date, in each case regardless of
whether or not the conversion, exchange, subscription or purchase rights
associated with such Convertible Securities or Stock Purchase Rights are
presently exercisable.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant set forth herein
is registered on the books of the Company maintained for such purpose.
4
<PAGE> 8
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Majority Warrant Holders" shall mean the holders of Warrants exercisable
for the purchase of more than fifty percent (50%) of the aggregate number of
shares of Warrant Stock then purchasable upon exercise of all Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASD quotation system, or any successor reporting
system.
"Opinion of Counsel" means a written opinion of counsel (who may be an
employee of a Holder) experienced in Securities Act matters chosen by the
holder of this Warrant or Warrant Stock issued upon the exercise hereof and
reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original Warrants
were issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on the Original Issue Date to General Electric Capital Corporation.
"Other Property" shall have the meaning set forth in Section 4.6 hereof.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Pegasus Purchase Agreement" shall mean the Unit Purchase Agreement dated
as of the Original Issue Date among the Company, Pegasus Partners, L.P. and
Pegasus Related Partners, L.P.
5
<PAGE> 9
"Pegasus Warrants" shall mean, collectively, the Attached Warrants,
the Shortfall Warrants and any Litigation Warrants issued pursuant to the
Pegasus Purchase Agreement and the agreements, documents and instruments
referred to therein.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of the Original Issue Date among the Company, Pegasus
Partners, L.P., Pegasus Related Partners, L.P. and General Electric Capital
Corporation, as amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Share Withholding Option" has the meaning set forth in Section 2.1
hereof.
"Stock Purchase Rights" shall mean any options, warrants or other
securities or rights to subscribe to or exercisable for the purchase of shares
of Common Stock or Convertible Securities, whether or not immediately
exercisable.
"Subsequent Issuance" shall mean any sale or issuance by the Company
of Common Stock, Convertible Securities or Stock Purchase Rights after the
Original Issue Date other than:
(i) Any issuance of Warrant Stock upon exercise of the Warrants;
(ii) Any issuance of Pegasus Warrants other than Litigation
Warrants(including, without limitation, the issuance of additional
Attached Warrants in connection with the payment of any payment - in kind
dividend on the Company's Series A Preferred Stock) other than Litigation
Warrants and any issuance of Common Stock pursuant to the exercise of any
of the Pegasus Warrants (it being agreed that any Litigation Warrants
issued pursuant to the Pegasus Purchase Agreement will be deemed to
constitute a Subsequent
6
<PAGE> 10
Issuance, and will be deemed to have been issued without consideration for
the purposes of Section 4.3 hereof);
(iii) The issuance of up to 280,000 options to purchase shares of
Common Stock under the Company's 1987 Stock Option Plan, as amended prior
to the Original Issue Date (as such number shall be reduced by the number
of options issued under such plan prior to the Original Issue Date and
increased by any options issued under such plan that expire or become
unexercisable without being exercised and that become available for
reissuance under such plan), but only to the extent that any such option
is granted with an exercise price that is not less than the Exercise Price
in effect under this Warrant as of the date of issuance of such option;
(iv) The issuance of up to 1,317,178 options to purchase shares of
Common Stock under the Company's 1997 Stock Option Plan (as such number
shall be reduced by the number of any options issued under such plan prior
to the Original Issue Date and increased by any options issued under such
plan that expire or become unexercisable without being exercised and that
become available for reissuance under such plan), but only to the extent
that any such option is granted with an exercise price that is not less
than the Exercise Price in effect under this Warrant as of the date of
issuance of such option; and
(v) Any other issuance of Common Stock, Convertible Securities or
Stock Purchase Rights with respect to which the Majority Warrant Holders
shall have waived application of the provisions of Section 4 below.
"Subsidiary" means any corporation or association (a) more than 50%
(by number of votes) of the voting stock of which is at the time owned by the
Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries, or any other business entity in which the Company or one or more
Subsidiaries or the Company and one or more Subsidiaries own more than a 50%
interest either in the profits or capital of such business entity or (b) whose
net earnings, or portions thereof, are consolidated with the net earnings of
the Company and are recorded on the books of the Company for financial
reporting purposes in accordance with GAAP.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a "sale" thereof
within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of
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<PAGE> 11
this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise
Price as of the date of such exercise.
"Warrants" shall mean the Original Warrants and all warrants issued upon
transfer, division or combination of, or in substitution for, such Original
Warrants or any other such Warrant. All Warrants shall at all times be
identical as to terms and conditions and date, except as to the number of
shares of Common Stock for which they may be exercised.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants
until such time as such shares of Common Stock have either been (i) Transferred
in a public offering pursuant to a registration statement filed under the
Securities Act or (ii) Transferred in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof with all transfer restrictions and restrictive legends
with respect to such Common Stock being removed in connection with such
transaction.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date
and until 5:00 P.M., Detroit time, on the Expiration Date, the Holder may from
time to time exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder (as determined
pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or
in part, the Holder shall (i) deliver to the Company at the Designated Office a
written notice of the Holder's election to exercise this Warrant (an "Exercise
Notice"), which Exercise Notice shall be irrevocable and specify the number of
shares of Common Stock to be purchased, together with this Warrant and (ii) pay
to the Company the Warrant Price (the date on which both such delivery and
payment shall have first taken place being hereinafter sometimes referred to as
the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly
executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt of such Exercise Notice, Warrant and payment, the
Company shall, as promptly as practicable, and in any event within five (5)
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to the Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall
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<PAGE> 12
reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice (subject to compliance with the applicable provisions of Section 8).
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price, (ii) by instructing
the Company to withhold a number of shares of Warrant Stock then issuable upon
exercise of this Warrant with an aggregate Fair Value equal to such Warrant
Price (the "Share Withholding Option") or (iii) by surrendering to the Company
shares of Common Stock previously acquired by the Holder with an aggregate Fair
Value equal to such Warrant Price. In connection with any such surrender of
Common Stock, Holder shall deliver to Company duly executed stock power
endorsed in blank. In the event of any withholding of Warrant Stock or
surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Fair Value is equal to the Warrant Price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder based on the incremental fraction of a share being so withheld by
or surrendered to the Company in an amount determined in accordance with
Section 2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical with this Warrant.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, issued without violation of any preemptive rights
and free and clear of all Liens (other than any created by actions of the
Holder). The Company shall pay all taxes and other governmental charges that
may be imposed with respect to, the issue or delivery thereof, unless such tax
or charge is imposed by law upon the Holder, in which case such taxes or
charges shall be paid by the Holder and the Company shall reimburse the Holder
therefor (other than for any taxes on net income or capital gains or any
transfer taxes required to be paid by such Holder) on an After-Tax Basis.
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2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of (i) the
Current Market Price of one share of Common Stock on the Exercise Date, if the
Common Stock is then publicly traded or (ii) the fair market value per share of
Common Stock as determined in good faith by the Board of Directors of the
Company, if the Common Stock is not then publicly traded.
2.4 Continued Validity and Application. (a) A holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee in whose hands
such shares no longer constitute Warrant Stock as defined herein), shall
continue, with respect to such shares, (i) to be entitled to all rights to
which it would have been entitled as the Holder under Sections 2.2 and 12, and
(ii) to be subject to all obligations that are applicable to such holder by the
terms of this Warrant. The Company shall, at the time of any exercise of this
Warrant or any transfer of Warrant Stock, upon the request of the holder of the
shares of Warrant Stock issued in connection with such exercise or transfer,
acknowledge in writing, in a form reasonably satisfactory to such holder, its
continuing obligation to afford to such holder such rights referred to in this
Section 2.4; provided, however, that if such holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer
of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
Holder or its agent or attorney. Upon such surrender and delivery, the Company
shall, subject to Section 8, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with
Section 8, may be exercised by the new Holder for the purchase of shares of
Common Stock without having a new Warrant issued.
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3.2 Division and Combination. Subject to compliance with the
applicable provisions of this Warrant, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the Designated Office, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the applicable provisions of this Warrant as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
3.3 Expense. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants required to be issued under this Section 3.
3.5 Maintenance of Books. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is
exercisable and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 4.
4.1 Stock DividendsIf at any time the Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of such Common Stock, pursuant to a stock split or
otherwise, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of such Common Stock, pursuant to a reverse stock split
or otherwise,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to
the number of shares of Common Stock Outstanding immediately after such
adjustment.
4.2 Issuance of Additional Shares of Common Stock. If at any time
the Company shall issue or sell any shares of
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Common Stock in a Subsequent Issuance for a consideration per share that is
less than either (i) the Fair Value in effect immediately prior to such
issuance or sale and (ii) the Exercise Price in effect immediately prior to
such issuance or sale, then, forthwith upon such issuance or sale, the Exercise
Price shall be reduced to the lower of the prices calculated by:
(1) dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock Outstanding immediately prior to such Subsequent
Issuance multiplied by the then existing Exercise Price, plus (y) the
aggregate consideration (determined in accordance with the provisions of
Section 4.7 hereof), if any, received by the Company in connection with
such Subsequent Issuance, by (B) the total number of shares of Common
Stock Outstanding immediately after such Subsequent Issuance; and
(2) multiplying the then existing Exercise Price by a fraction, the
numerator of which shall be the quotient obtained by dividing (A) the sum
of (x) the number of shares of Common Stock Outstanding immediately prior
to such Subsequent Issuance multiplied by the Fair Value per share of
Common Stock immediately prior to such Subsequent Issuance plus (y) the
aggregate consideration (determined in accordance with the provisions of
Section 4.7 hereof), if any, received by the Company in connection with
such Subsequent Issuance divided by (B) the total number of shares of
Common Stock Outstanding immediately after such Subsequent Issuance, and
the denominator of which shall be the Fair Value per share of Common Stock
immediately prior to such Subsequent Issuance.
(b) The provisions of this Section 4.2 shall not apply to (i) any
issuance of Common Stock for which an adjustment is provided for under Section
4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of
any Stock Purchase Rights or Convertible Securities to the extent that an
adjustment shall have been previously made hereunder in connection with the
issuance of such Stock Purchase Rights or Convertible Securities pursuant to
the provisions of Section 4.3 hereof.
4.3 Issuances of Stock Purchase Rights and Convertible Securities.
(a) In the event that the Company shall at any time issue, sell or grant
any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the
purpose of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon exercise of such
Stock Purchase Rights (or upon exercise of any Convertible Securities issuable
upon exercise of such Stock Purchase Rights) for a consideration per share
equal to (i) the aggregate consideration per share (determined in accordance
with the provisions of Section 4.7 hereof) received by the Company in
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connection with the issuance, sale or grant of such Stock Purchase Rights plus
(ii) the minimum amount of such consideration per share receivable by the
Company in connection with the exercise of such Stock Purchase Rights (and the
exercise of any Convertible Securities issuable upon exercise of such Stock
Purchase Rights).
(b) In the event that the Company shall at any time issue or sell any
Convertible Securities to any Person in a Subsequent Issuance, then, for the
purposes of Section 4.2 above, the Company shall be deemed to have issued at
that time a number of shares of Common Stock equal to the maximum number of
shares of Common Stock that are or may become issuable upon the exercise of the
conversion or exchange rights associated with such Convertible Securities for a
consideration per share equal to (i) the aggregate consideration per share
(determined in accordance with the provisions of Section 4.7 hereof) received
by the Company in connection with the issuance or sale of such Convertible
Securities plus (ii) the minimum amount of such consideration per share
receivable by the Company in connection with the exercise of such conversion or
exchange rights.
(c) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or Convertible Securities, the maximum number of shares
issuable upon exercise of such Stock Purchase Rights or of the rights of
conversion or exchange associated with such Convertible Securities shall
increase, or the minimum amount of consideration per share receivable in
connection with such exercise shall decrease, whether by operation of any
antidilution rights pertaining to such Stock Purchase Rights or Convertible
Securities, by agreement of the parties or otherwise, the Exercise Price then
in effect shall first be readjusted to eliminate the effects of the original
issuance, sale or grant of such Stock Purchase Rights or Convertible Securities
on such Exercise Price and then readjusted as if such Stock Purchase Rights or
Convertible Securities had been issued on the effective date of such increase
in number of shares or decrease in consideration, but only if the effect of
such two-step readjustment is to reduce the Exercise Price below the Exercise
Price in effect immediately prior to such increase or decrease.
(d) If, at any time after any adjustment of the Exercise Price shall
have been made hereunder as the result of any issuance, sale or grant of any
Stock Purchase Rights or Convertible Securities, any of such Stock Purchase
Rights or the rights of conversion or exchange associated with such Convertible
Securities shall expire by their terms or any of such Stock Purchase Rights or
Convertible Securities shall be repurchased by the Company or a Subsidiary
thereof for a consideration per underlying share of Common Stock not exceeding
the amount of such consideration received by the Company in connection with the
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issuance, sale or grant of such Stock Purchase Rights or Convertible
Securities, the Exercise Price then in effect shall forthwith be increased to
the Exercise Price that would have been in effect if such expiring Stock
Purchase Rights or rights of conversion or exchange or such repurchased Stock
Purchase Rights or Convertible Securities had never been issued. Similarly, if
at any time after any such adjustment of the Exercise Price shall have been
made pursuant to Section 4.2 (i) any additional consideration is received or
becomes receivable by the Company in connection with the issuance or exercise
of such Stock Purchase Rights or Convertible Securities or (ii) there is a
reduction in the conversion ratio applicable to such Convertible Securities so
that fewer shares of Common Stock will be issuable upon the conversion or
exchange thereof or there is a decrease in the number of shares of Common Stock
issuable upon exercise of such Stock Purchase Rights, the Exercise Price then
in effect shall be forthwith readjusted to the Exercise Price that would have
been in effect had such changes taken place at the time that such Stock
Purchase Rights or Convertible Securities were initially issued, granted or
sold. In no event shall any readjustment under this Section 4.3(d) affect the
validity of any shares of Warrant Stock issued upon any exercise of this
Warrant prior to such readjustment, nor shall any such readjustment have the
effect of increasing the Exercise Price above the Exercise Price that would
have been in effect if the related Stock Purchase Rights or Convertible
Securities had never been issued.
4.4 Certain Other Distributions. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of its capital
stock or any other securities or property of any nature whatsoever (other
than cash, shares of Common Stock, Convertible Securities or Stock
Purchase Rights); or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its capital stock or any
other securities or property of any nature whatsoever (other than cash,
shares of Common Stock, Convertible Securities or Stock Purchase Rights);
then the Exercise Price shall be adjusted to be equal to the Exercise Price in
effect immediately prior to such event multiplied by a fraction (A) the
numerator of which shall be the Current Market Price per share of Common Stock
per share of Common Stock as of the date of taking such record, minus the
amount allocable to one share of Common Stock of (x) any such cash so
distributable and (y) the fair value (as determined in good faith by the Board
of Directors of the Company, subject to
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the right of the Holders to object to such determination pursuant to Section
4.10 below) of any and all such evidences of indebtedness, shares of stock,
other securities or property or warrants or other subscription or purchase
rights so distributable and (B) the denominator of which shall be such Current
Market Price per share of Common Stock. A reclassification of the Common Stock
(other than a change in par value, or from par value to no par value, or from
no par value to par value) into shares of Common Stock and shares of any other
class of stock shall be deemed a distribution by the Company to the holders of
its Common Stock of such shares of such other class of stock within the meaning
of this Section 4.4 and, if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common Stock as a part of
such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.5 Adjustment of Number of Shares Purchaseable. Upon any adjustment of
the Exercise Price as provided in Section 4.1, 4.2, 4.3 or 4.4 hereof, the
Holder hereof shall thereafter be entitled to purchase upon the exercise of
this Warrant, at the Exercise Price resulting from such adjustment, the number
of shares of Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.6 Reorgranization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to such
transaction, then the Holder of this Warrant shall have the right thereafter to
receive, upon exercise of this Warrant, the number of shares of common stock of
the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or
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as a result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In such
event, the aggregate Exercise Price otherwise payable for the shares of Common
Stock issuable upon exercise of this Warrant shall be allocated among the
shares of common stock and Other Property receivable as a result of such
reorganization, reclassification, merger, consolidation or disposition of
assets in proportion to the respective fair market values of such shares of
common stock and Other Property as determined in good faith by the Board of
Directors of the Company. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be reasonably deemed appropriate (as determined by resolution of the Board of
Directors of the Company) in order to provide for adjustments of any shares of
the common stock of such successor or acquiring corporation for which this
Warrant thus becomes exercisable, which modifications shall be as equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.6, "common stock of the successor or acquiring corporation"
shall include stock of such corporation of any class that is not preferred as
to dividends or assets over any other class of stock of such corporation and
that is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities that are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions
of this Section 4.6 shall similarly apply to successive reorganizations,
reclassification, mergers, consolidations or disposition of assets.
4.7 Determination of Consideration. For purposes of Sections 4.2 and 4.3
hereof, the consideration received and/or receivable by the Company in
connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount received by the
Company after deduction of any accrued interest or dividends, but including any
underwriting commissions or concessions paid or allowed by the Company.
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(2) Securities or Other Property. In the case of securities or
other property, the fair market value thereof as of the date
immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
(3) Allocation Related to Common Stock. In the event shares of
Common Stock are issued or sold together with other securities or
other assets of the Company for a consideration which covers both,
the consideration received (computed as provided in (1) and (2)
above) shall be allocable to such shares of Common Stock as
determined in good faith by the Board of Directors of the Company.
(4) Allocation Related to Stock Purchase Rights and Convertible
Securities. In case any Stock Purchase Rights or Convertible
Securities shall be issued or sold together with other securities or
other assets of the Company, together comprising one integral
transaction in which no specific consideration is allocated to the
Stock Purchase Rights or Convertible Securities, the consideration
allocable to such Stock Purchase Rights or Convertible Securities
shall be determined in good faith by the Board of Directors of the
Company.
(5) Dividends in Securities. In case the Company shall declare
a dividend or make any other distribution upon any stock of the
Company payable in either case in Common Stock or Convertible
Securities, such Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
(6) Merger, Consolidation or Sale of Assets. In case any
shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair
value of such portion of the assets and business of the
non-surviving corporation attributable to such Common Stock, Stock
Purchase Rights or Convertible Securities, as is determined in good
faith by the Company's Board of Directors.
4.8 Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4 are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent
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and principles hereof (including, without limitation, the issuance of
securities other than Common Stock which have the right to participate in
distributions to the holders of Common Stock, the granting of "phantom stock"
rights or "stock appreciation rights" or the repurchase of outstanding shares
of Common Stock, Convertible Securities or Stock Purchase Rights for a
purchase price exceeding the fair market value thereof), then, in each such
case, the Company shall make such adjustment, if any, as the Board of Directors
determines to be required to be made on a basis consistent with the essential
intent and principles established herein as a result of such event in order to
preserve the purchase rights represented by the Warrants and shall promptly
give each Holder of a Warrant written notice of such adjustment. If the
Majority Warrant Holders disagree with such adjustment and give the Company
written notice of such disagreement within thirty (30) days after receiving
notice of such adjustment, then such adjustment shall instead be determined by
an independent investment banking firm of nationally recognized standing
selected by the Majority Warrant Holders and reasonably acceptable to the
Company. If the investment banking firm selected by the Majority Warrant
Holders is not reasonably acceptable to the Company, and the Company and the
Majority Warrant Holders cannot agree on a mutually acceptable investment
banking firm, then the Company and the Majority Warrant Holders shall each
choose one such investment banking firm and the respective chosen firms shall
jointly select a third investment banking firm, which shall make the
determination. The decision of the investment banking firm making such
determination shall be final and binding on the Company and all affected
holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of
such investment banking firm as to any such required adjustments, the Company
shall take any actions necessary to implement same. The Company shall pay the
costs and fees of each such investment banking firm (including any such
investment banking firm selected by the Majority Warrant Holders) in the event
that the investment banking firm making the determination determines that an
adjustment is required that is greater than the adjustment proposed by the
Board of Directors, and the Majority Warrant Holders shall pay such fees if
such investment banking firm determines that no such adjustment greater than
that proposed by the Board of Directors is required.
4.9 Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
(a) When Adjustments To Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring such an adjustment shall occur. For the purpose of
any such adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
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(b) Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Convertible Securities or Stock Purchase Rights or (ii) to subscribe for
or purchase Common Stock, Convertible Securities or Stock Purchase Rights,
then all references in this Section 4 to the date of the issuance or sale
of such shares of Common Stock, Convertible Securities or Stock Purchase
Rights shall be deemed to be references to such record date.
(c) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 4.1 would apply, but shall, thereafter and
before the distribution to stockholders thereof, legally abandon its
plan to pay or deliver such dividend or distribution, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(e) Maximum Exercise Price. Except as provided in Section 4.1 above,
at no time shall the Exercise Price per share of Common Stock exceed the
amount set forth in the first paragraph of the preamble of this Warrant.
(f) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by
reason of any adjustment under Section 4.1, 4.2, 4.3 or 4.4 above, would
cause the Exercise Price to be less than the par value of the Common
Stock, if any, unless the Company first reduces the par value of the
Common Stock to be less than the Exercise Price that would result from
such transaction.
(g) Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 4, the Company
shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such
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adjustment was made pursuant to Section 4.6) describing the number
and kind of any other shares of stock or Other Property for which
this Warrant is exercisable, and any related change in the Exercise
Price, after giving effect to such adjustment or change. The
Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder in accordance with Section 13.2. The
Company shall keep at its principal office or at the Designated
Office, if different, copies of all such certificates and cause the
same to be available for inspection at said office during normal
business hours by any Holder or any prospective transferee of a
Warrant designated by a Holder thereof.
(h) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an event
occurs that requires the application of more than one subsection,
all applicable subsections shall be given independent effect without
duplication.
4.10 Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination
may be challenged in good faith by the Majority Warrant Holders within thirty
(30) days after receipt of written notice of such determination, and any
dispute shall be resolved by an investment banking firm of nationally
recognized standing selected by the Majority Warrant Holders and reasonably
acceptable to the Company (the fair value of the item as resolved by the
investment banking firm referred to herein as the "Determined Value"). If the
investment banking firm selected by the Majority Warrant Holders is not
reasonably acceptable to the Company, and the Company and the Majority Warrant
Holders cannot agree on a mutually acceptable investment banking firm, then the
Company and the Majority Warrant Holders shall each choose one such investment
banking firm and the respective chosen firms shall jointly select a third
investment banking firm, which shall make the Determined Value. The Company
shall pay the costs and fees of each such investment banking firm (including
any such investment banking firm selected by the Majority Warrant Holders), if
the Determined Value leads to a greater reduction in the Exercise Price than
the fair value as determined in good faith by the Board of Directors of the
Company, and the Majority Warrant Holders shall pay the costs and fees of each
such investment banking firm, if the Determined Value leads to an increase or
no change in such Exercise Price.
5. NO IMPAIRMENT
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The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant,
free and clear of all Liens, and shall use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction over it as may be necessary to enable the Company to perform its
obligations under this Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK, REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants
131,718 shares of Common Stock. In addition, from and after the earlier of (i)
May 31, 1998 and (ii) the filing of an amendment to the Articles of
Incorporation of the Company increasing the Company's authorized Common Stock
to 20,000,000 shares, the Company shall reserve and keep available for issuance
upon the exercise of the Warrants such additional number of its authorized but
unissued shares of Common Stock as may be required from time to time to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
issuable pursuant to the terms hereof, when issued upon exercise of this
Warrant with payment therefor in accordance with the terms hereof, shall be
duly and validly issued and fully paid and nonassessable, not subject to
preemptive rights and shall be free and clear of all Liens. Before taking any
action that would result in an adjustment in the number of shares of Common
Stock for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction over such action. If any shares of Common Stock required to be
reserved for issuance upon exercise of Warrants require registration or
qualification with any governmental authority under any federal or state law
(other than under the Securities Act or any state securities law) before such
shares may be so issued, the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly
registered.
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7. NOTICE OF CORPORATE ACTIONS, TAKING OR RECORD, TRANSFER BOOKS
7.1 Notices of Corporate Actions. In the event of: (a) any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of capital stock of any class or any other securities, (b)
any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger involving the Company and any other Person or any transfer or other
disposition of all or substantially all the assets of the Company to another
Person or (c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company or (d) any amendment of the Certificate of
Incorporation of the Company, the Company shall mail to each Holder of a
Warrant in accordance with the provisions of Section 13.2 hereof a notice
specifying (i) the date or expected date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right and (ii) the date or
expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, disposition, dissolution,
liquidation or winding-up is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, disposition, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed to the extent practicable at least thirty (30), but not
more than ninety (90) days prior to the date therein specified. In the event
that the Company at any time sends any other notice to the holders of its
Common Stock, it shall concurrently send a copy of such notice to each Holder
of a Warrant.
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of any
Section hereof refers to the taking of a record of such holders, the Company
will in each such case take such a record and will take such record as of the
close of business on a Business Day.
The Company shall not at any time, except upon dissolution, liquidation
or winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
8. TRANSFER
22
<PAGE> 26
The Holder, by acceptance of this Warrant or any Restricted Common Stock
issued upon exercise hereof, agrees to be bound by the provisions of this
Section 8.
8.1 Restrictions on Transfer. (a) Neither this Warrant nor any
shares of Restricted Common Stock issued upon the exercise hereof shall be
Transferred other than pursuant to an effective registration statement under
the Securities Act or an exemption from the registration provisions thereof.
No Transfer of this Warrant or any such shares of Restricted Stock other than
pursuant to such an effective registration statement shall be valid or
effective unless (i) the holder of the securities proposed to be transferred
shall have delivered to the Company either a no-action letter from the
Commission, together with comparable letters from any applicable state
securities authorities, or an Opinion of Counsel to the effect that such
proposed Transfer is exempt from the registration requirements of the
Securities Act and any applicable state securities laws or (ii) such Transfer
is being made pursuant to Rule 144 or Rule 144A under the Securities Act and
such holder shall have delivered to the Company a certificate, in a form
reasonably acceptable to Company, setting forth the basis for applying such
Rule to the proposed Transfer. Each certificate, if any, evidencing such
shares of Restricted Common Stock issued upon any such Transfer, other than in
a public offering pursuant to an effective registration statement shall bear
the restrictive legend set forth in Section 8.2(a), and each Warrant issued
upon such Transfer shall bear the restrictive legend set forth in Section
8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the
effect that such legend is not required for the purposes of compliance with the
Securities Act. Holders of the Warrants or the Restricted Common Stock, as the
case may be, shall not be entitled to Transfer such Warrants or such Restricted
Common Stock except in accordance with this Section 8.1(a).
(b) Except with the prior written consent of the Company, neither this
Warrant nor any shares of Warrant Stock issuable upon exercise hereof may be
Transferred at any time to: (i) Directed Electronics, Inc. or any Affiliate or
successor thereof, (ii) Darrell Issa or (iii) any Person that to the knowledge
of the transferring Holder is a member of the immediate family of Darrell Issa.
8.2 Restrictive Legends. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with two legends in substantially the following forms:
23
<PAGE> 27
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR (B)
THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE
DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION, TOGETHER WITH COMPARABLE LETTERS
FROM ANY APPLICABLE STATE SECURITIES AUTHORITIES, OR AN OPINION OF
COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) EXPERIENCED IN
SECURITIES MATTERS TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS PURSUANT TO
RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE
DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR
APPLYING SUCH RULE TO THE PROPOSED TRANSFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED.
AS WELL AS A REGISTRATION RIGHTS AGREEMENT AMONG THE COMPANY,
PEGASUS PARTNERS, L.P., PEGASUS RELATED PARTNERS, L.P. AND GENERAL
ELECTRIC CAPITAL CORPORATION DATED AS OF THE ORIGINAL ISSUE DATE.
COPIES OF SUCH WARRANT AND REGISTRATION RIGHTS AGREEMENT ARE
AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
(b) Except as otherwise provided in this Section 8, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
24
<PAGE> 28
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER OF THE SECURITIES
PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY
EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION, TOGETHER WITH COMPARABLE LETTERS FROM ANY APPLICABLE
STATE SECURITIES AUTHORITIES, OR AN OPINION OF COUNSEL (WHO MAY BE
AN EMPLOYEE OF SUCH HOLDER) EXPERIENCED IN SECURITIES MATTERS TO THE
EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
(C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT
AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE
SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED
TRANSFER."
8.3 Termination of Securities Law Restrictions. Notwithstanding
the foregoing provisions of Section 8, the restrictions imposed by Section 8.1
upon the transferability of the Warrants and the Restricted Common Stock and
the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1 and 8.2 shall terminate as to
this Warrant, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant bearing
the following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 8.1 AND 8.2 HEREOF TERMINATED ON
______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.2(a).
25
<PAGE> 29
8.4. Listing on Securities Exchange. If the Company shall list any
shares of Common Stock on any securities exchange or on NASDAQ, it shall at its
expense, to the extent permitted by the rules of such securities exchange or
NASDAQ, list thereon, maintain and, when necessary, increase such listing of,
all shares of Warrant Stock issued or, to the extent permissible under the
applicable securities exchange rules, issuable upon the exercise of this
Warrant.
9. REGISTRATION RIGHTS AGREEMENT
The Holder of this Warrant and holders of Warrant Stock are entitled to
the benefits of and are subject to certain obligations under the Registration
Rights Agreement. The Company shall keep a copy of the Registration Rights
Agreement at the Designated Office and shall furnish a copy thereof to the
Holder of this Warrant or any such holder of Warrant Stock upon request.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement or affidavit of
loss of General Electric Capital Corporation shall be a sufficient indemnity)
and, in case of mutilation, upon surrender and cancellation hereof, the Company
will execute and deliver in lieu hereof a new Warrant of like tenor to such
Holder; provided, however, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
11. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company
at 950 Whitcomb, Madison Heights, Michigan 48071, Attn: President. The Company
may from time to time change the Designated Office to another office of the
Company or its agent within the United States by notice given to all registered
holders of Warrants at least ten (10) Business Days prior to the effective date
of such change.
12. FINANCIAL AND BUSINESS INFORMATION
26
<PAGE> 30
Until the Expiration Date, the Company shall deliver to each holder of
Warrants or of Warrant Stock one copy of each of the following items:
(i) as soon as available, and in any event within forty-five
(45) days after the end of each of the first three quarters of each
fiscal year, unaudited interim consolidated balance sheets of the
Company and its Subsidiaries as at the end of such quarter and the
related consolidated statements of income, cash flow, stockholders
equity and changes in financial position of the Company and its
Subsidiaries as at the end of and for such quarter, setting forth in
each case in comparative form the corresponding figures for and as
at the end of the corresponding quarter of the preceding fiscal
year, all in reasonable detail and certified by a principal
financial officer of the Company, as prepared in accordance with
GAAP consistently applied (subject to year end adjustments and the
absence of footnotes), and fairly presenting the consolidated
financial position and results of operations of the Company and its
Subsidiaries for such periods (it being agreed that the Company will
be deemed to have complied with its obligations under this
subsection (i) if the Company delivers to Holders the Company's
quarterly report on Form 10-Q promptly after filing thereof with the
Commission);
(ii) within ninety (90) days after the end of each fiscal year
of the Company, consolidated balance sheets of the Company and its
Subsidiaries as at the end of such year and the related consolidated
statements of income, stockholders' equity and changes in financial
position of the Company and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form the consolidated
figures for the previous fiscal year, all in reasonable detail and
accompanied by a report thereon of independent public accountants of
recognized national standing selected by the Company, which report
shall state that such consolidated financial statements present
fairly the financial position of the Company and its Subsidiaries as
at the dates indicated and the results of their operations and
changes in their financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except as otherwise specified in such report) and that the audit by
such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted
auditing standards (it being agreed that the Company will be deemed
to have complied with its obligations of this subsection
27
<PAGE> 31
(ii) if the Company delivers to Holders the Company's annual report on
Form 10-K promptly after filing thereof with the Commission);
(iii) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available by the Company to the holders of any class of its
securities generally or by any Subsidiary of the Company to the
holders of any class of its securities that are publicly traded; and
(iv) with reasonable promptness, such other information relating to
the Company and its Subsidiaries as the Holder may, from time to time,
reasonably request, provided that in the event the Company determines in
good faith that any such information is confidential or proprietary, such
Holder shall first execute an appropriate confidentiality agreement.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
13.2 Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or communication hereunder to be made pursuant
to the provisions of this Warrant shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or holder of Warrant Stock
issued upon the exercise hereof, at its last known address appearing on
the books of the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail, or one (1) Business Day
after the same shall
28
<PAGE> 32
have been delivered to Federal Express or another overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any
payments provided for in this Warrant, the Company shall pay to the holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
holder and (b) such further amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees and
expenses incurred by such holder in collecting any amounts due hereunder. The
Company shall indemnify, save and hold harmless the Holder hereof and the
holders of any Warrant Stock issued upon the exercise hereof from and against
any and all liability, loss, cost, damage, reasonable attorneys' and
accountants' fees and expenses, court costs and all other out-of-pocket
expenses incurred in connection with or arising from a Company Default. This
indemnification provision shall be in addition to the rights of such Holder or
holders to bring an action against the Company for breach of contract based on
such Company Default.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
13.5 Remedies. Each holder of Warrants and/or Warrant Stock, in addition
to being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided under
this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1,
8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and to the extent applicable, all holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with
29
<PAGE> 33
the written consent of the Company and the Majority Warrant Holders, provided
that no such Warrant may be modified or amended to reduce the number of shares
of Common Stock for which such Warrant is exercisable or to increase the price
at which such shares may be purchased upon exercise of such Warrant (before
giving effect to any adjustment as provided therein) without the written
consent of the holder thereof.
13.8 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant 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 Warrant.
13.9 Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
13.10 GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MICHIGAN. THE COMPANY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW
YORK, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS
WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING
TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW
YORK.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
CODE-ALARM, INC.
By: /s/ Rand Mueller
------------------------
Name: Rand Mueller
Title: President
30
<PAGE> 34
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____________ shares (the "Purchased Shares")
of Common Stock of CODE-ALARM, INC. (the "Company") and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Common Stock hereby
purchased (and any securities or other property issuable upon such exercise) be
issued in the name of and delivered to _________________________ whose address
is _______________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
[IF THE WARRANT PRICE IS BEING PAID IN CASH, PLEASE ADD THE FOLLOWING:
In payment of the Warrant Price for the Purchased Shares, the
undersigned is enclosing herewith a certified or official bank check payable to
the order of the Company in the amount of $____________.]
[IF THE SHARE WITHHOLDING OPTION IS BEING EXERCISED, PLEASE ADD THE
FOLLOWING:
In payment of the Warrant Price for the Purchased Shares, pursuant to
Section 2.1(c) of this Warrant the undersigned hereby instructs the Company to
withhold a number of Purchased Shares with an aggregate Fair Value equal to
such Warrant Price.]
[IF THE WARRANT PRICE IS BEING PAID THROUGH THE DELIVERY OF PREVIOUSLY
OWNED SHARES, PLEASE ADD THE FOLLOWING:
In payment of the Warrant Price for the Purchased Shares, pursuant to
Section 2.1(c) of this Warrant, the undersigned is herewith surrendering to the
Company ___________ shares of Common Stock.]
31
<PAGE> 35
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
32
<PAGE> 36
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- ---------------------------- ----------------
and does hereby irrevocably constitute and appoint ______________ _____________
attorney-in-fact to register such transfer onto the books of CODE-ALARM, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
33
<PAGE> 1
EXHIBIT 10.57
UNIT PURCHASE AGREEMENT
AMONG
CODE ALARM INC.,
PEGASUS PARTNERS, L.P.
AND
PEGASUS RELATED PARTNERS, L.P.
DATED AS OF OCTOBER 27, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I AUTHORIZATION, PURCHASE AND SALE OF UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Authorization of the Preferred Shares, the Units and the Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Purchase and Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PREFERRED SHARE CERTIFICATES; CERTAIN TERMS OF THE PREFERRED SHARES . . . . . . . . . . . . . . . . . . . . . . . 2
2.01 Form of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Replacement of Preferred Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.03 Registration; Transfer; Registration of Transfer and Exchange
of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.04 PPN Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.05 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.01 Conditions to Purchasers' Obligations , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Necessary Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Payment of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) No Injunctions, Restraining Order or Adverse Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(i) Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(j) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(k) Exemption from Chapter 7A of Michigan Business Corporation Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) Amendment to Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) Amendment to Restated Articles of Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(n) Employee Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(o) Mueller Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(p) Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(q) Debt Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(r) [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(s) Shortfall Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(t) Series A-2 Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(u) Documentation at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.02 Conditions to the Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(b) Purchasers' Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Litigation Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.01 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.02 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.03 Authorization; Validity of Agreement; Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.04 Consents and Approvals; No Violations; Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.05 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.06 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.07 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.08 Employee Benefit Plans; ERISA; Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.09 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 No Default; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.14 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.15 Patents and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.16 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.01 Financial and Business Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.02 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.03 Shareholder Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.04 Issuance of Litigation Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.06 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.07 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.08 Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.09 Hart-Scott-Rodino, Voting Rights, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10 Prohibition on Realization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.11 Expiration of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.01 Representations by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.02 Transfer of Units; Surrender of Preferred Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.03 No Transfer of Units to Directed Electronics, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII CERTAIN SECURITIES LAW MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.01 Representations by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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7.02 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Termination of Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.03 Additional Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII CALL RIGHT; PUT RIGHT; RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.01 Company's Right to Repurchase Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Repurchase During Year One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Repurchase After Year Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Notice of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Cessation of Dividends on Preferred Shares Redeemed; Shares No Longer Outstanding . . . . . . . . . . . . . . . . . 32
(e) Status of Redeemed Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Limitation on Company's Right to Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.02 Purchasers' Right to Put Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Obligation to Redeem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Payment of Repurchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.03 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Company's Right to Acquire Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Non-Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Termination or Suspension of Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.01 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.02 No Waiver: Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.03 Amendments; Waiver and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.05 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.06 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.07 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.08 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.09 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.10 Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.11 Governing Law; Consent to Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12 Mutual Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.13 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.16 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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EXHIBITS
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Exhibit A Certificate of Designation
Exhibit B-1 Form of Attached Warrant
Exhibit B-2 Form of Shortfall Warrant
Exhibit B-3 Form of Litigation Warrant
Exhibit C-1 Form of Series A-1 Preferred Share Certificate
Exhibit D Opinion of Pepper, Hamilton & Scheetz LLP
Exhibit E Stock Option Plan
Exhibit F Mueller Agreement
Exhibit G Registration Rights Agreement
<CAPTION>
SCHEDULES
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Schedule 1.02 Investment Proportions
Schedule 3.01(f) Material Adverse Effect
Schedule 4.01 Subsidiaries
Schedule 4.02(a) Capitalization
Schedule 4.02(b) Capitalization of Subsidiaries
Schedule 4.04(a) Governmental Consents and Approvals
Schedule 4.04(b) Licenses
Schedule 4.06 Liabilities
Schedule 4.07 Certain Changes
Schedule 4.08 ERISA
Schedule 4.09 Litigation
Schedule 4.11 Taxes
Schedule 4.14 Transactions with Affiliates
Schedule 4.15 Intellectual Property
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Index of Defined Terms
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1997 Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Additional Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Attached Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Certificate of Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Charter Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Current Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
D&O Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
DEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
DOJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Employee Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Fully Diluted Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
GECC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Indemnitees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
intellectual property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Interim Dividend Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Inventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Key Man Life Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Litigation Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Litigation Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Materials of Environmental Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
multiemployer pension plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
New Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Non-Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Offer Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
parachute payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Permitted Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Preferred Share Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Preferred Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Preferred Share Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Put Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Realization Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Restriction Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Seller Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Series A Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Series A-1 Preferred Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Series A-1 Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Series A-2 Preferred Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Series A-2 Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shortfall Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
single employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
vi
<PAGE> 8
<TABLE>
Page
----
<S> <C>
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Triggering Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Warrant Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
welfare plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
vii
<PAGE> 9
UNIT PURCHASE AGREEMENT
THIS UNIT PURCHASE AGREEMENT (the "Agreement") is made as of October 27, 1997
among CODE ALARM INC., a Michigan corporation (the "Company"), PEGASUS
PARTNERS, L.P., a Delaware limited partnership, and PEGASUS RELATED PARTNERS,
L.P., a Delaware limited partnership (together with their respective successors
and assigns, each a "Purchaser" and together, the "Purchasers").
ARTICLE I
AUTHORIZATION, PURCHASE AND SALE OF UNITS
1.01 Authorization of the Preferred Shares, the Units and the Warrants.
Pursuant to its Restated Articles of Incorporation, as amended, the Company has
established a series of preferred stock designated as "Series A Preferred
Stock", which will be issuable in two sub-series, "Series A-1 Preferred Stock"
and "Series A-2 Preferred Stock", and authorized the issuance of up to 200,000
shares of Series A-1 Preferred Stock (each such share, a "Series A-1 Preferred
Share" and together with the Series A-2 Preferred Shares (as defined in Section
3.01(t)), the "Preferred Shares") in accordance with the terms of the
Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Rights of Series A Preferred Stock, attached
as Exhibit A hereto (the "Certificate of Designation"). The Company has
authorized the issuance and sale to the Purchasers of 55,000 units (the
"Units"), each Unit consisting of one Series A-1 Preferred Share and one
warrant (collectively, with other such warrants, the "Attached Warrants") to
purchase 72.2525247 shares of the Company's common stock, no par value (the
"Common Stock"), which may be aggregated with other Attached Warrants. A
portion of each Attached Warrant entitling the holder to purchase 6.1033% of
the Common Stock for which the entire Attached Warrant is exercisable (an
"Interim Dividend Warrant") has been allocated to provide for future accrued
and unpaid dividends on the Preferred Shares. The Company has also authorized
the issuance and sale to Pegasus Partners, L.P. and Pegasus Related Partners,
L.P. of one or more warrants to purchase an aggregate of 1,000,000 shares of
Common Stock (the "Shortfall Warrants" and together with the Attached Warrants
and the Litigation Warrants (as defined in Section 5.04), the "Warrants"). The
terms of the Attached Warrants are set forth in the form of Warrant attached as
Exhibit B-1 hereto. The terms of the Shortfall Warrants are set forth in the
form of Warrant attached as Exhibit B-2 hereto. The terms of the Litigation
Warrants are set forth in the form of Warrant attached as Exhibit B-3 hereto.
The shares of Common Stock issuable upon exercise of the Warrants are referred
to as the "Warrant Shares." The Preferred Shares, the Warrants and the Warrant
Shares are sometimes referred to herein as the "Securities." This Agreement,
the Certificate of Designation and the Registration Rights Agreement (as
hereinafter defined), including the schedules and exhibits attached hereto and
thereto, are referred to herein as the "Basic Documents."
<PAGE> 10
1.02 Purchase and Sale of Units.
(a) The Closing. The Company agrees to issue and sell to the
Purchasers, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchasers agree to
purchase, 55,000 Units for an aggregate purchase price of $6,999,850.00, or
$127.27 per Unit (the "Purchase Price"), in the proportions set forth on
Schedule 1.02. Such purchase and sale shall take place at a closing (the
"Closing") to be held on October 27, 1997 (the "Closing Date") at 10:00 a.m.
Eastern Time, at the offices of Sidley & Austin in New York, NY. At the
Closing, the Company will issue to each Purchaser a certificate or certificates
representing the number of Preferred Shares purchased by such Purchaser and a
certificate or certificates representing the number of Warrants purchased by
such Purchaser. At the Closing, each Purchaser will deliver to the Company, by
wire transfer of immediately available funds to an account designated by the
Company by written notice to the Purchasers, the aggregate Purchase Price for
the Preferred Shares and Warrants to be purchased by such Purchaser.
(b) Use of Proceeds. The Company agrees to use the proceeds from the
sale of the Units to refinance a portion of the current bank financing with NBD
Bank and for working capital purposes.
ARTICLE II
PREFERRED SHARE CERTIFICATES; CERTAIN TERMS OF THE PREFERRED SHARES
2.01 Form of Preferred Shares. The certificates representing the Series
A-1 Preferred Shares shall be substantially in the form of Exhibit C- 1 hereto
and the certificates representing the Series A-2 Preferred Shares shall be in
substantially similar form thereto (collectively, the "Preferred Share
Certificates"), and may have such letters, numbers or other marks of
identification and such legends printed, lithographed or engraved upon them as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement or the Certificate of Designation.
2.02 Replacement of Preferred Share Certificates. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Share Certificate, and, if requested in the case
of any such loss, theft or destruction, upon delivery of an indemnity bond or
other agreement or security reasonably satisfactory to the Company, or, in the
case of any such mutilation, upon surrender and cancellation of any such
Preferred Share Certificate, the Company will issue a new Preferred Share
Certificate, of like tenor and amount, in lieu of such lost, stolen, destroyed
or mutilated Preferred Share Certificate; provided, however, if any Preferred
Share Certificate of which any Purchaser, its nominee, or any of its officers or
principals is the registered holder is lost, stolen or destroyed, the affidavit
of such principal or officer of such holder setting forth the circumstances with
respect to such loss, theft or destruction, together with an agreement to
indemnify the Company with respect thereto,
2
<PAGE> 11
shall be accepted as satisfactory evidence thereof, and no bond or other
security shall be required as a condition to the execution and delivery by the
Company of a new Preferred Share Certificate in replacement of such lost,
stolen or destroyed Preferred Share Certificate.
2.03 Registration; Transfer; Registration of Transfer and Exchange of
Preferred Shares. The Preferred Shares shall be issued in registered form
only. The Company, or a transfer agent appointed by the Company (the Company
or such designated agent, in such capacity, the "Preferred Share Agent"), shall
number and list each Preferred Share Certificate, as it is issued, in a
register (the "Preferred Share Register") which the Company or such agent shall
maintain at the principal executive offices of the Company or at such office
specified in a notice to the registered holders (the "Holders") of the
Preferred Shares pursuant to Section 9.04 of this Agreement (the "Office").
At the option of any Holder of Preferred Shares, any Preferred Share
Certificate may be exchanged at the Office for a new Preferred Share Certificate
(or new Preferred Share Certificates, in the same or different denominations),
upon payment of the charges (if any) hereinafter provided. Whenever any
Preferred Share Certificates are so surrendered for exchange the Company shall
execute, and, if applicable, the Preferred Share Agent shall countersign and
deliver, the Preferred Share Certificates that the Holder making the exchange is
entitled to receive.
Subject to compliance with the restrictions set forth in this Agreement
(including, without limitation, Section 7.02 hereof), the Preferred Share
Certificates shall be transferable only on the Preferred Share Register, upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or a copy thereof, duly certified, shall be
deposited and remain with the Company or the Preferred Share Agent. In case of
transfer by executors, administrators, guardians or other legal representatives,
duly authenticated evidence of their authority shall be produced, and may be
required to be deposited and to remain with the Preferred Share Agent in its
discretion. Upon any registration of transfer, the Company shall execute and,
if applicable, the Preferred Share Agent shall countersign and deliver, a new
Preferred Share Certificate(s) to the Persons entitled thereto. As used in this
Agreement, "Person" means any natural person, corporation, partnership, joint
venture, limited liability company, firm, association, joint-stock company,
trust, unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.
All Preferred Share Certificates issued upon any registration of
transfer or exchange of Preferred Share Certificates shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to the
same benefits under this Agreement, as the Preferred Share Certificates
surrendered for such registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Preferred Share Certificates. The Company may require
payment of a sum
3
<PAGE> 12
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Preferred Share
Certificates.
Any Preferred Share Certificate when duly endorsed in blank shall be
deemed negotiable, and when a Preferred Share Certificate shall have been so
endorsed, the Holder thereof may be treated by the Company, the Preferred Share
Agent and all other Persons dealing therewith as the absolute owner thereof for
any purpose and as the Person entitled to exercise the rights represented
thereby, or the transfer thereof on the Preferred Share Register, any notice to
the contrary notwithstanding, but until such transfer on the Preferred Share
Register, the Company and the Preferred Share Agent may treat the registered
Holder thereof as the owner for all purposes.
2.04 PPN Application. The Company acknowledges that filing an
application with Standard & Poor's Corporation CUSIP Service Bureau is necessary
for the assignment of a Private Placement Number with respect to each of the
Preferred Shares and the Company consents to the filing with such Bureau of all
documents and materials required to be submitted with such application.
2.05 Taxes. The Company will pay all taxes (including interest and
penalties), other than taxes imposed on the income of the Purchasers, which may
be payable in respect of the execution and delivery of this Agreement or of the
issuance and delivery (but not the transfer) of any of the Securities.
ARTICLE III
CONDITIONS TO CLOSING
3.01 Conditions to Purchasers' Obligations. The obligation of the
Purchasers to purchase and pay for the Units at the Closing is subject to the
fulfillment by the Company or waiver by the Purchasers of each of the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article IV hereof and in the Basic
Documents shall be true and correct in all material respects on the Closing
Date.
(b) Performance. The Company shall have performed and complied in all
material respects with all covenants and agreements contained herein and
received any and all consents, approvals or waivers necessary in order to
complete the transactions required to be performed or complied with by it prior
to or at the Closing.
(c) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the
4
<PAGE> 13
Purchasers, including, without limitation, the filing of the duly adopted
Certificate of Designation with the Department of Consumer & Industry Services
of the State of Michigan. The Purchasers shall have received all such
counterpart originals or certified or other copies of such documents as they
may reasonably request.
(d) Legal Opinion. The Purchasers shall have received an originally
executed copy of an opinion of Pepper Hamilton & Scheetz LLP, special counsel
for the Company, dated as of the Closing Date and substantially in the form
attached as Exhibit D hereto.
(e) Necessary Consents. Except for shareholder approval of the Charter
Amendment, on or before the Closing Date, the Company shall have obtained any
required governmental authorizations with respect to the Basic Documents and
the Warrants and shall have obtained all material consents to the transactions
contemplated under the Basic Documents and the Warrants, of any Person required
under any contractual obligation or any other obligations (including any
obligations imposed by law) of the Company or any of its Subsidiaries. As used
in this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such party
or by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries.
(f) No Material Adverse Effect. Except as disclosed in Schedule 3.01(f),
since December 31, 1996, no Material Adverse Effect shall have occurred. As
used in this Agreement, any reference to "Material Adverse Effect" means any
event, change or effect that is materially adverse to the consolidated
financial condition, businesses, results of operations, cash flows or prospects
of the Company and its Subsidiaries, taken as a whole, or that materially
impairs the ability of the Company to perform or the Purchasers to enforce the
obligations of the Company under the Basic Documents or the Warrants.
(g) Payment of Fees and Expenses. Without limiting the provisions of
Section 9.05 hereof, the Company shall have paid on or before the Closing, the
reasonable fees, charges and disbursements of the Purchasers, including the
fees and expenses of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to
the Purchasers.
(h) No Injunctions, Restraining Order or Adverse Litigation. No order,
judgment or decree of any Governmental Entity (as hereinafter defined) shall
purport to enjoin or restrain the Purchasers from acquiring Units or Shortfall
Warrants on the Closing Date. As of the Closing Date, there shall not be
pending or, to the knowledge of Company, threatened, any action, suit,
proceeding, governmental investigation or arbitration against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries that has not been disclosed by the Company in writing pursuant to
Section 4.09, and there shall have occurred no development not so disclosed in
any such action, suit, proceeding,
5
<PAGE> 14
governmental investigation or arbitration so disclosed, that, in either event,
could reasonably be expected to have a Material Adverse Effect; and no
injunction or other restraining order shall have been issued and no hearing to
cause an injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement, the
other Basic Documents or the Warrants.
(i) Employment Agreements. The Company shall have entered into an
employment agreement with Mr. Craig Camalo and shall have amended its
employment agreement with Mr. Rand Mueller, each in form and substance
satisfactory to the Purchasers. The foregoing employment agreements and the
Company's employment agreements with each of Messrs. Peter Stouffer and Michael
Schroder shall be in full force and effect, and the Purchasers shall have
received evidence satisfactory to them thereof.
(j) Insurance. The Company shall have secured a directors' and officers'
liability insurance policy (the "D&O Policy") with an insurance carrier
approved by and on terms reasonably satisfactory to the Purchasers, covering
each of the Company's existing and future officers and directors, with coverage
of not less than $5,000,000. The Purchasers shall have received evidence
satisfactory to them of the D&O Policy.
(k) Exemption from Chapter 7A of Michigan Business Corporation Act. Prior
to the execution of this Agreement, the Company's Board of Directors shall have
adopted an irrevocable resolution pursuant to Section 782 of the Michigan
Business Corporation Act (the "MBCA"), exempting from the requirements of
Section 780 of the MBCA all business combinations (as such term is defined in
Section 776(5) of the MBCA) involving transactions with Pegasus Partners, L.P.
and Pegasus Related Partners, L.P. and their affiliates (as such term is
defined in Section 776(1) of the MBCA), including, without limitation, the
transactions contemplated by this Agreement and the other Basic Documents and
the Warrants. Prior to or at the Closing, the Company shall have delivered to
the Purchasers a complete and correct copy of such resolution certified by the
Secretary or an Assistant Secretary of the Company.
(l) Amendment to Bylaws. Prior to the execution of this Agreement, the
Company's Board of Directors shall have adopted a resolution amending the
Company's Bylaws to (i) increase the number of directors comprising the
Company's Board of Directors to nine and (ii) provide that the provisions of
Chapter 7B of the MBCA do not apply to control share acquisitions (as defined
therein) of shares of the Company. Prior to or at the Closing, the Company
shall have delivered to the Purchasers a complete and correct copy of such
resolution certified by the Secretary or an Assistant Secretary of the Company.
(m) Amendment to Restated Articles of Incorporation. Prior to the execution
of this Agreement, the Company's Board of Directors shall have adopted a
resolution approving an amendment to the Company's Restated Articles of
Incorporation to increase the number of authorized shares of Common Stock from
5,000,000 shares to 20,000,000 shares (the "Charter Amendment"), directing that
the Charter Amendment be presented to the holders of
6
<PAGE> 15
Common Stock at the next meeting of shareholders of the Company in accordance
with applicable Michigan law and recommending that the holders of Common Stock
approve the Charter Amendment. Prior to or at the Closing, the Company shall
have delivered to the Purchasers a complete and correct copy of such resolution
certified by the Secretary or an Assistant Secretary of the Company, as well as
copies of executed agreements by holders of at least 28% of the outstanding
Common Stock, pursuant to which such holders agree to vote all of their shares
of Common Stock in favor of approving the Charter Amendment.
(n) Employee Stock Option Plan. The Company's Board of Directors shall have
adopted a resolution (i) approving the implementation of an employee Stock
Option Plan, which plan shall be substantially in the form attached as Exhibit
E hereto (the "1997 Stock Option Plan"), (ii) allocating the options issuable
under the 1997 Stock Option Plan in a manner acceptable to the Purchasers,
(iii) directing that the 1997 Stock Option Plan be presented to the holders of
Common Stock for a vote at the next meeting of shareholders of the Company in
accordance with applicable Michigan law and (iv) recommending that the holders
of Common Stock approve the 1997 Stock Option Plan. Prior to or at the
Closing, the Company shall have delivered to the Purchasers a complete and
correct copy of such resolution certified by the Secretary or an Assistant
Secretary of the Company.
(o) Mueller Agreement. The Robyn L. Mueller Trust, the Kenneth M. Mueller
Charitable Remainder Unitrust and Mr. Rand Mueller (collectively, the
"Stockholders") shall have entered into an agreement with the Company and the
Purchasers, substantially in the form attached as Exhibit F hereto, pursuant to
which the Stockholders have agreed to certain restrictions on the
transferability of the Common Stock beneficially owned by them.
(p) Due Diligence Review. The Purchasers shall be reasonably satisfied with
their due diligence review of the Company's assets, liabilities, business,
contracts, financial statements, information, cash flow and prospects.
(q) Debt Refinancing. The Company shall have completed a refinancing of its
bank indebtedness on terms satisfactory to the Purchasers, or all conditions
precedent to such completion, other than the consummation of the purchase of
Units pursuant to this Agreement, shall have been satisfied.
(r) [Intentionally Omitted].
(s) Shortfall Warrants. The Company shall have issued to Pegasus Partners,
L.P. and Pegasus Related Partners, L.P. Shortfall Warrants to purchase 277,727
and 722,273 shares of Common Stock, respectively, in exchange for financial
accommodations being provided by the Purchasers to General Electric Capital
Corporation ("GECC") in connection with its refinancing of the Company's
indebtedness to NBD Bank.
(t) Series A-2 Preferred Stock. The Company shall have established a
sub-series of preferred stock designated as "Series A-2 Preferred Stock" and
shall have
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<PAGE> 16
authorized the issuance of up to 200,000 shares of such preferred stock (each
such share, a "Series A-2 Preferred Share") in accordance with the terms of the
Certificate of Designation. The Series A-2 Preferred Shares shall be issued in
replacement of the Series A-1 Preferred Shares, upon the transfer thereof by
Pegasus Partners, L.P., Pegasus Related Partners, L.P. or any of their
affiliates to a party other than an affiliate of Pegasus Partners, L.P. or
Pegasus Related Partners, L.P.
(u) Documentation at Closing. The Purchasers shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Purchasers:
(i) A Registration Rights Agreement executed by the Company, substantially
in the form attached as Exhibit G hereto (the "Registration Rights Agreement");
(ii) The Certificate of Designation, adopted by the Board of Directors of
the Company, as attested by the Secretary or an Assistant Secretary of the
Company and filed with the Department of Consumer & Industry Services of the
State of Michigan;
(iii) A certified copy of the Company's Restated Articles of
Incorporation, as amended and the Company's Bylaws; a certified copy of the
resolutions of the Board of Directors evidencing approval of the Basic
Documents, the Units, the Preferred Shares, the Warrants and other matters
contemplated hereby; and certified copies of all documents evidencing other
necessary corporate, shareholder or other action and governmental approvals, if
any, with respect to the execution, delivery and performance of the Basic
Documents, the Units, the Preferred Shares and the Warrants;
(iv) A certificate of the Secretary or an Assistant Secretary of the
Company which shall certify the names of the officers authorized to sign this
Agreement and the other Basic Documents and issue the Units, the Shortfall
Warrants and the Litigation Warrants on behalf of the Company, together with
the true signatures of such officers. The Purchasers may rely conclusively on
such certificates until they shall receive a further certificate of the
Secretary or an Assistant Secretary of the Company canceling or amending the
prior certificate and submitting the signatures of the officers named in such
further certificate;
(v) A certificate from a duly authorized officer of the Company stating
that (a) the representations and warranties contained in Article IV hereof and
the other Basic Documents and the Warrants or otherwise made by the Company in
writing in connection with the transactions contemplated hereby are true and
correct in all material respects on the date of the Closing; (b) the Company
has performed and complied with all covenants and agreements contained herein
in all material respects and has received any and all consents, approvals or
waivers necessary in order to complete the transactions required to be
performed or complied with by it prior to or on the date of the Closing; (c) no
event shall have occurred and be continuing as of the Closing, or would result
from the consummation of the purchase of the Units
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<PAGE> 17
or the other transactions contemplated by the Basic Documents or Warrants, that
would constitute a "Triggering Event" under the Certificate of Designation or a
breach or violation of any Basic Document or Warrant; and (d) the Company has
delivered to the Purchasers all documents and satisfied all conditions referred
to in Sections 3.01(e) and (h) hereof except to the extent the Purchasers have
waived such conditions;
(vi) Fully executed copies of the Company's employment agreements with
each of Messrs. Rand Mueller, Craig Camalo, Michael Schroder and Peter
Stouffer.
(vii) Other evidence reasonably requested by the Purchasers of the
satisfaction of the conditions set forth in this Article III.
3.02 Conditions to the Company's Obligations. The obligation of
the Company to issue and deliver the Units on the Closing Date is subject to
the performance by the Purchasers of their agreements theretofore to be
performed hereunder and to the fulfillment, prior thereto or concurrently
therewith, of the following further conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct in all material respects on the Closing Date, except as otherwise
affected by the transactions contemplated hereby.
(b) Purchasers' Certificates. The Company shall have received a certificate
from each Purchaser, dated the Closing Date, signed by a duly authorized
representative of such Purchaser, certifying that the conditions specified in
the foregoing Section 3.02(a) hereof have been fulfilled.
(c) Injunction. There shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction directing that the transactions provided for herein not be
consummated as herein provided.
(d) Litigation Guarantee. Pegasus Partners, L.P. and Pegasus Related
Partners, L.P. shall have executed and delivered a guarantee to GECC pursuant
to the requirements of the Litigation L/C Agreement among GECC as Agent and
Term Lender, the other Term Lenders identified therein and the Company, which
guarantee shall be in form and substance satisfactory to the Company.
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<PAGE> 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Purchasers to enter into this Agreement and purchase
the Units, the Company represents, warrants and covenants to the Purchasers as
follows:
4.01 Organization. (a) Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to have such governmental approvals could not
reasonably be expected to have a Material Adverse Effect. The Company and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or prevent the Company
from consummating any of the transactions contemplated hereby.
(b) The Company has heretofore made available to the Purchasers a complete
and correct copy of its Restated Articles of Incorporation, as amended as of
the date hereof, and its By-Laws and the organizational documents of each of
its Subsidiaries, as currently in effect. Each such document is in full force
and effect and no other organizational documents are applicable to or binding
upon the Company or any Subsidiary.
(c) Schedule 4.01 identifies all Subsidiaries of the Company.
4.02 Capitalization. (a) The authorized capital stock of the Company
consists of 5,000,000 shares of Common Stock and 500,000 shares of preferred
stock, no par value. Schedule 4.02(a) sets forth the (i) the number of issued
and outstanding shares of Common Stock as of the date hereof; (ii) a
description of all unexpired options to purchase Common Stock ("Company
Options"), including number of shares, exercise price, date of vesting and
exercise date as well as a statement describing outstanding Company options;
and (iii) all other shares of Common Stock issuable to any person pursuant to
any existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character. As of the date hereof and immediately prior to the Closing, no
shares of preferred stock are issued and outstanding or held in the treasury of
the Company, except one share of Series B Preferred Stock issued to Craig
Camalo, and no shares of Common Stock are held in the treasury of the Company.
The Company has taken all necessary corporate, shareholder and other action
(except as contemplated by Section 5.03) to authorize and reserve and to permit
it to issue shares of Common Stock which may be issued pursuant to Company
Options and the transactions contemplated hereby. There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights)
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("Voting Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth in Schedule 4.02(a) and except for the
Preferred Shares and the Warrants, as of the date hereof, (i) there are no
shares of capital stock of the Company authorized, issued or outstanding, (ii)
there are no existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its Subsidiaries, obligating the Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or Voting Debt of, or other equity interest in, the Company or
any of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interest or obligations of the Company or any of its
Subsidiaries, and (iii) except for the Registration Rights Agreement, there are
no outstanding contractual obligations of the Company or any of its
Subsidiaries to register under the Securities Act of 1933, as amended (the
"Securities Act") or to repurchase, redeem or otherwise acquire any shares or
Common Stock, or capital stock of the Company or any Subsidiary or affiliate of
the Company.
(b) Except as set forth on Schedule 4.02(b), all of the outstanding shares
of capital stock of each of the Company's Subsidiaries are beneficially owned
by the Company, directly or indirectly, free and clear of all security
interests, liens, claims, pledges, agreements, limitations on voting rights,
charges or other encumbrances of any nature whatsoever.
(c) There are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its Subsidiaries. None of
the Company or its Subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its Subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement,
except as provided in the Certificate of Designation or the Warrants.
(d) As of the Closing, the Preferred Shares constituting part of Units sold
at the Closing, the Attached Warrants constituting part of Units sold at the
Closing and the Shortfall Warrants will be validly issued, fully paid and
non-assessable and not subject to preemptive (or similar) rights. The rights,
privileges and preferences of the Preferred Shares will be as set forth in the
Certificate of Designation. If issued in accordance with the terms of Section
5.04, the Litigation Warrants will be validly issued, fully paid and
non-assessable and not subject to pre-emptive (or similar) rights. If issued
in accordance with the terms of the Certificate of Designation, the Preferred
Shares and the Attached Warrants constituting part of Additional Units will be
validly issued, fully paid and non-assessable and not subject to pre-emptive
(or similar) rights.
(e) The Company has authorized and reserved 2,267,421 shares of Common Stock
for issuance upon exercise of the Attached Warrants and the Shortfall Warrants,
including any Attached Warrants issued to the Purchasers as part of Units in
payment of dividends on Preferred Shares ("Additional Units"). The Company has
authorized and reserved 145,000 Series A-1 Preferred Shares for issuance as
part of Additional Units.
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<PAGE> 20
4.03 Authorization; Validity of Agreement; Company Action. The Company has
full corporate power and authority to execute and deliver each Basic Document
and the Warrants, to issue the Units, the Shortfall Warrants and the Litigation
Warrants and to consummate the transactions contemplated hereby and thereby,
except if more than 2,267,421 shares of Common Stock are required to be issued
upon exercise of Warrants, additional shares must be authorized. The
Certificate of Designation has been duly approved by the Company and filed with
the Department of Consumer & Industry Services of the State of Michigan. The
execution, delivery and performance by the Company of each Basic Document and
the Warrants and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of the Company
and, other than shareholder approval of the Charter Amendment, no other
corporate or shareholder action on the part of the Company is necessary to
authorize the execution, delivery or performance by the Company of any Basic
Document or Warrant, the issuance of any Units, Shortfall Warrants or
Litigation Warrants or the consummation by it of the transactions contemplated
hereby and thereby, except if more than 2,267,421 shares of Common Stock are
required to be issued upon exercise of Warrants, additional shares must be
authorized and if more than 200,000 shares of Series A-1 Preferred Stock or
Series A-2 Preferred are required to be issued by reason of the payment of
dividends in-kind on such sub-series, additional shares of such sub-series must
be authorized. This Agreement, the Registration Rights Agreement, the Attached
Warrants and the Shortfall Warrants have been duly executed and delivered by
the Company and (assuming due and valid authorization, execution and delivery
hereof and thereof by the other parties hereto and thereto) this Agreement, the
other Basic Documents, the Attached Warrants and the Shortfall Warrants are
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. If issued in
accordance with the terms of Section 5.04 hereof, the Litigation Warrants will
be valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except that (i) such enforcement may be subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
4.04 Consents and Approvals; No Violations; Licenses. (a) None of the
execution, delivery or performance of any Basic Document or Warrant by the
Company, the issuance of any Units, Shortfall Warrants or Litigation Warrants
or the consummation by the Company of the transactions contemplated hereby or
thereby, nor compliance by the Company with any of the provisions hereof or
thereof will (i) conflict with or result in any breach of any provision of the
Restated Articles of Incorporation, as amended or the By-Laws or other
organizational documents of the Company or of any of its Subsidiaries, except
if more than 2,267,421 shares of Common Stock are required to be issued upon
exercise of Warrants,
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<PAGE> 21
additional shares must be authorized and if more than 200,000 shares of Series
A-1 Preferred Stock or Series A-2 Preferred are required to be issued by reason
of the payment of dividends in-kind on such sub-series, additional shares of
such sub-series must be authorized, (ii) require on the part of the Company any
filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or other governmental or regulatory
authority or agency (a "Governmental Entity"), including, without limitation,
any consent or approval of any federal, state, local or foreign insurance
industry agency, commission or other governing body, except for in the case of
clause (ii) (A) filings, permits, authorizations, consents and approvals as may
be required under federal and state securities laws, and the laws of other
states in which the Company is qualified to do or is doing business, (B) those
contemplated by the Basic Documents and Warrants, (C) those set forth on
Schedule 4.04 (a), and (D) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect or prevent the Company from consummating the transactions contemplated
hereby, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound (the "Material Agreements") or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its Subsidiaries or any of their properties
or assets.
(b) Schedule 4.04(b) hereto accurately and completely lists all licenses,
permits, certificates, franchises, ordinances, registrations, or other rights,
applications, consents, approvals and authorizations (collectively, "the
Licenses") granted, issued or entered by the Federal Communications Commission
(the "FCC") or any foreign Governmental Entity performing functions similar to
those performed by the FCC, and held by the Company or one of its Subsidiaries.
Except as set forth in Schedule 4.04(b), the Company or one of its Subsidiaries
holds all Licenses filed with, granted or issued by, or entered by any
Governmental Entity, including, without limitation, the FCC, or any federal,
state, local or foreign regulatory authorities or any federal, state, local or
foreign public service commission, public utility commission or industry agency
or commission that are required for the conduct of the Company's and its
Subsidiaries' businesses as now being conducted, except for those the absence
of which could not, individually or in the aggregate reasonably be expected to
have a Material Adverse Effect. Except as set forth in Schedule 4.04(b), the
Licenses are valid, in full force and effect, and the terms of said Licenses
are not subject to any restrictions or conditions that materially limit or
would materially limit the operations of the business of the Company or any of
its Subsidiaries as presently conducted, other than restrictions or conditions
generally applicable to licenses of that type. The Licenses granted, issued or
entered by the FCC are subject to the Communications Act of 1934, as amended.
There are no proceedings pending or, to the best knowledge of the Company,
complaints or petitions by others, or threatened proceedings, before the FCC or
any other Governmental Entity relating to the business or operations of the
Company or any of its Subsidiaries or the Licenses, and there are no facts or
conditions that reasonably could be expected to constitute grounds for the FCC
or any other
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Governmental Entity to revoke, terminate, suspend, deny, annul, or impose
conditions on any renewal of any the Licenses, that individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect or
prevent the Company from consummating the transactions contemplated hereby or
to impose any fines, forfeitures or other penalties on the Company or its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
4.05 SEC Reports and Financial Statements. (a) The Company and its
Subsidiaries have filed with the Securities and Exchange Commission ("SEC") all
forms, reports, schedules, statements, and other documents required to be filed
by them with the SEC (as such documents have been amended since the time of
their filing, collectively, the "SEC Documents"), and have filed all exhibits
required to be filed with the SEC Documents. As of their respective dates or,
if amended, as of the date of the last such amendment, the SEC Documents,
including, without limitation, any financial statements or schedules included
therein, complied in all material respects with the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934 (the "Exchange
Act"), and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the Company's Subsidiaries is required to
file any forms, reports or other documents with the SEC pursuant to Section 12
or 15 of the Exchange Act. The financial statements of the Company included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (including the related notes thereto) and in the Company's Quarterly
Report on Form 10-Q for the six months ended June 30, 1997, copies of which
have been furnished to the Purchasers (together, the "Financial Statements"),
have been prepared from, and are in accordance with, the books and records of
the Company and its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto and subject, in the case of unaudited interim financial statements, to
normal year-end adjustments), and fairly present the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein. The Company and its Subsidiaries have maintained a
system of accounting established in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP.
(b) No representation or warranty of the Company contained in any Basic
Document or Warrant or in any other document, certificate or written statement
furnished to the Purchasers by or on behalf of the Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein when made not misleading in light of the circumstances in which the
same were made.
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4.06 No Undisclosed Liabilities. Except (i) as disclosed in the SEC Documents
that have been delivered to the Purchasers prior to the date hereof, (ii) as
set forth in Schedule 4.06, and (iii) for liabilities not in excess of $150,000
individually or $300,000 in the aggregate, each incurred in the ordinary course
of business and consistent with past practice, and liabilities incurred in
connection with the consummation of the transactions contemplated hereby (none
of which, individually or in the aggregate, could reasonably have a Material
Adverse Effect) since December 31, 1996, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would be required by GAAP to
be reflected on a consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto), or which individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
4.07 Absence of Certain Changes. Except as contemplated by this Agreement and
the other Basic Documents, or as disclosed in the SEC Documents that have been
delivered to the Purchasers prior to the date hereof or in Schedule 4.07, since
December 31, 1996, (i) the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course of business and consistent
with past practice, (ii) there has not been any change in the business,
properties, assets, liabilities, financial condition, cash flows, operations,
licenses, franchises, results of operations or prospects of the Company or its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, (iii) the Company has not (A) declared, set aside or paid any dividend
or other distribution payable in cash, stock or property with respect to its
capital stock; (B) directly or indirectly, split, combined or reclassified the
outstanding shares of Common Stock; or (C) adopted a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries.
4.08 Employee Benefit Plans; ERISA; Labor. (a) Schedule 4.08 hereto sets
forth (i) a list of all employee benefit plans (including but not limited to
plans described in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), maintained by the Company, any of its
Subsidiaries or any trade or business, whether or not incorporated (an "ERISA
Affiliate"), which together with the Company would be deemed a "single
employer" within the meaning of Section 4001 (b)(1) of ERISA ("Benefit Plans")
and (ii) all employment, consulting, retention, option and severance agreements
with employees and consultants of the Company and its Subsidiaries ("Employee
Agreements"). True and complete copies of all current Benefit Plans and
Employee Agreements have been made available to the Purchasers.
(b) With respect to each Benefit Plan: (i) if intended to qualify under
Section 401(a) or 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"), such plan has received a determination letter from the Internal
Revenue Service (the "IRS") stating that it so qualifies and that its trust is
exempt from taxation under Section 501(a) of the Code, no such determination
letter has been revoked and no such revocation has been threatened, and nothing
has occurred that could reasonably be expected to cause the relevant Benefit
Plan to lose such qualification or exemption; (ii) such plan has been
administered in all material respects in
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<PAGE> 24
accordance with its terms and applicable law, including state and federal
securities laws; (iii) no breaches of fiduciary duty by the Company, or, to the
Company's knowledge, by any other person have occurred that might reasonably be
expected to give rise to material liability on the part of the Company or any
ERISA Affiliate; (iv) no disputes are pending, or, to the knowledge of the
Company, threatened that might reasonably be expected to give rise to material
liability on the part of the Company or any ERISA Affiliate; (v) except as
disclosed on Schedule 4.08, no prohibited transaction (within the meaning of
Section 406 of ERISA) has occurred that might reasonably be expected to give
rise to material liability on the part of the Company or any ERISA Affiliate;
(vi) all contributions required to be made to such plan as of the date hereof
(taking into account any extensions for the making of such contributions) have
been made in full; (vii) to the Company's knowledge, no Benefit Plans are
presently under audit or examination (nor has notice been received of a
potential audit or examination) by the IRS, Department of Labor, or any
other governmental agency or entity, and no matters are pending with respect to
any Benefit Plan under the IRS's Voluntary Compliance Resolution program, its
Closing Agreement Program, or other similar programs; and (viii) all monies
withheld with respect to Benefit Plans have been transferred to the appropriate
plan in accordance with the terms of such plan.
(c) No Benefit Plan is a "multiemployer pension plan," as defined in Section
3(37) of ERISA, nor is any Benefit Plan a plan described in Section 4063(a) of
ERISA. No Benefit Plan is or has been subject to Title IV of ERISA.
(d) No liability under Title IV of ERISA has been incurred by the Company or
any ERISA Affiliate (whether direct, indirect, actual, or contingent, and
including, without limitation, withdrawal liability to a multiemployer plan),
and no condition exists that presents a material risk to the Company or any
ERISA Affiliate of incurring a material liability under such Title. No Benefit
Plan has incurred an accumulated funding deficiency, as defined in Section 302
of ERISA or Section 312 of the Code, whether or not waived.
(e) With respect to each Benefit Plan that is a "welfare plan" (as defined
in Section 3(1) of ERISA), no such plan provides medical or death benefits with
respect to current or former employees of the Company or any of its
Subsidiaries beyond their termination of employment (other than to the extent
required by applicable law). Except as set forth in Schedule 4.08, all group
health plans of the Company and the ERISA Affiliates have been operated in
material compliance with the requirements of Sections 4980B (and its
predecessor) and 5000 of the Code, and the Company and ERISA Affiliates have
provided, or will have provided prior to May 15, 1997, to individuals entitled
thereto all required notices and coverage pursuant to Section 4980B, except to
the extent that failure to provide such notice or coverage is not reasonably
likely to result, individually or in the aggregate, in a Material Adverse
Effect.
(f) No Benefit Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees
of the Company or its Subsidiaries by its terms prohibits the amendment or
termination of any such Benefit Plan.
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<PAGE> 25
(g) As of the date hereof, except for Employee Agreements or as described in
the SEC Documents that have been delivered to the Purchasers prior to the date
hereof, the Company and its Subsidiaries are not parties to any (i) agreement
with any director, executive officer or other key employee of the Company or
its Subsidiaries (A) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
the Company or its Subsidiaries of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may
receive payments from the Company or its Subsidiaries that may be subject to
the tax imposed by Section 4999 of the Code or included in the determination of
such person's "parachute payment" under Section 280G of the Code; and (iii)
agreement or plan binding the Company or its Subsidiaries, including, without
limitation, any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan or employee benefit
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(h) As of the date hereof, no collective bargaining agreement is binding and
in force against the Company or its Subsidiaries or is currently under
negotiation, and no current employees of the Company or its Subsidiaries are
represented by any labor union. As of the date hereof, to the Company's
knowledge, no labor representation effort exists with respect to the Company or
its Subsidiaries.
4.09 Litigation. Schedule 4.09 hereto sets forth each suit, action or
proceeding (including, without limitation, any proceeding or investigation by
any Governmental Entity) pending (as to which the Company has received notice),
or, to the knowledge of the Company, threatened against the Company, any of its
Subsidiaries, or their properties or assets on the date hereof, or to which the
Company or any of its Subsidiaries is a party. Except as set forth on Schedule
4.09 hereto, none of the foregoing, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect if resolved adversely
to the Company or its Subsidiaries. Except as set forth on Schedule 4.09
hereto, as of the date hereof, neither the Company nor any of its Subsidiaries,
nor any of their respective properties, is subject to any order, writ,
judgment, injunction, decree, determination or award having, or which would
have, a Material Adverse Effect, or which would prevent the Company from
consummating the transactions contemplated hereby.
4.10 No Default; Compliance with Applicable Laws. Neither the Company nor
any of its Subsidiaries is in default or violation in any material respect of
any term, condition or provision of (i) its respective Articles of
Incorporation or By-laws or other organizational documents, (ii) any Material
Agreement or (iii) any federal, state, local or foreign statute, law,
ordinance, rule, regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to the Company or any of its
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Subsidiaries or by which they or their respective assets may be bound (other
than matters addressed in Sections 4.04, 4.08, 4.11, and 4.12), excluding from
the foregoing clause (iii), defaults or violations which could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect, or prevent the Company from consummating the transactions contemplated
hereby.
4.11 Taxes. Except as set forth on Schedule 4.11:
(a) The Company and its Subsidiaries have (i) duly and timely filed (or
there has been filed on their behalf) with the appropriate governmental
authorities all Tax Returns (as hereinafter defined) required to be filed by
them on or prior to the date hereof, other than those Tax Returns for which
extensions for filing have been obtained in a timely manner, and such Tax
Returns are true, correct and complete in all material respects, and (ii) duly
paid in full all Taxes (as hereinafter defined) shown to be due on such Tax
Returns or have provided adequate reserves in their financial statements for
any Taxes that have not been paid. There are no liens on any of the assets of
the Company or any of its Subsidiaries that arose in connection with any
delinquency in paying any Tax.
(b) As of the date hereof, there are no ongoing federal, state, local or
foreign audits or examinations of any Tax Return of the Company or its
Subsidiaries.
(c) As of the date hereof, there are no outstanding requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries (excluding extensions for filings that have been timely obtained),
and no power of attorney granted by either the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.
(d) Neither the Company nor any of its Subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes.
(e) "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise,
real or personal property, sales, withholding, social security, occupation,
use, service, service use, license, net worth, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the Internal Revenue Service or
any taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any subdivision
or taxing agency thereof (including a United States possession)), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received, fines, penalties
or additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean
any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes.
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4.12 Environmental Matters. (a) The Company and its Subsidiaries have
complied in all material respects with all applicable Environmental Laws (as
defined below). There is no pending or, to the knowledge of the Company,
threatened, civil or criminal litigation, written notice or violation, formal
administrative proceeding or investigation, inquiry or information request by
any Governmental Entity relating to any Environmental Law involving the Company
or any of its Subsidiaries or any of their properties. For purposes of this
Agreement, "Environmental Law" means any foreign, federal, state or local law,
statute, rule or regulation or the common law relating to the environment or
occupational health and safety, including, without limitation, any statute,
regulation or order pertaining to (i) treatment, storage, disposal, generation
or transportation of industrial, toxic or hazardous substances or solid or
hazardous waste; (ii) air and water pollution; (iii) groundwater and soil
contamination; (iv) the release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including, without
limitation, emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (v) the protection of wildlife, marine
sanctuaries and wetlands, including, without limitation, all endangered and
threatened species; (vi) storage tanks, vessels and containers; (vii)
underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or oil or petroleum products or solid or hazardous waste. As used
above, the terms "release" and "environment" shall have the meaning set forth
in the federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of Environmental Concern
(as defined below) into the environment by the Company or any of its
Subsidiaries which could reasonably be expected to result in liability to the
Company in excess of $50,000, or, to the knowledge of the Company, by any other
party at any parcel of real property or any facility formerly or currently
owned, operated or controlled by the Company or any of its Subsidiaries. For
purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the federal Resource Conservation and Recovery Act), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
4.13 Insurance. There is in full force and effect one or more policies of
insurance issued by insurers of recognized responsibility, insuring the Company
and its Subsidiaries and their properties and businesses against such losses
and risks, and in such amounts, as are customary in the case of corporations of
established reputation engaged in the same or similar businesses and similarly
situated. None of the Company or any of its Subsidiaries has been refused any
insurance coverage sought or applied for, and the Company and its Subsidiaries
have no reason to believe that they will be unable to renew their existing
insurance coverage as and when the same shall expire upon terms at least as
favorable as those
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presently in effect, other than possible increases in premiums that do not
result from any act or omission of the Company or any of its Subsidiaries.
4.14 Transactions with Affiliates. Except as set forth in the SEC Documents
that have been delivered to the Purchasers prior to the date hereof or on
Schedule 4.14, since December 31, 1996, neither the Company nor any of its
Subsidiaries has entered into any transaction with any current director or
officer of the Company or any Subsidiary or any transaction which would be
subject to disclosure under the Exchange Act pursuant to the requirements of
Item 404 of Regulation S-K.
4.15 Patents and Other Intangible Assets. (a) Except as set forth on
Schedule 4.15, the Company and its Subsidiaries (i) own or have the right to
use, free and clear of any lien, pledge, mortgage, security interest,
encumbrance or charge of any kind (collectively, "Encumbrances"), and any other
claim or restriction, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing, used in or
necessary for the conduct of their businesses as now conducted or proposed to
be conducted (all of which are set forth on Schedule 4.15), (ii) are not
infringing upon or otherwise acting adversely to the right or claimed right of
any Person under or with respect to any patent, trademark, service mark, trade
name, copyright or license with respect thereto, and (iii) are not obligated or
under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of their
businesses or otherwise, except in each case where it could not reasonably be
expected to have a Material Adverse Effect.
(b) The Company and/or one or more of its Subsidiaries owns and has the
unrestricted right to use all material product rights, manufacturing rights,
trade secrets, including know-how, negative know-how, formulas, patterns,
compilations, programs, devices, methods, techniques, processes, inventions,
designs, computer programs and technical data and all information that derives
independent economic value, actual or potential, from not being generally known
or known by competitors and which the Company and its Subsidiaries have taken
reasonable steps to maintain in secret (all of the foregoing of which are
collectively referred to herein as "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products
and services sold or proposed to be sold by the Company or any of its
Subsidiaries, free and clear of any right, Encumbrance or claim of others,
including without limitation former employers of its employees; provided,
however, that the possibility exists that other Persons, completely
independently of the Company and its Subsidiaries or their employees or agents,
could have developed trade secrets or items of technical information similar or
identical to those of the Company and its Subsidiaries. The Company and its
Subsidiaries are not aware of any such development of similar or identical
trade secrets or technical information by others.
(c) Since their organization, the Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all
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intellectual property and all Inventions. As used herein, "Inventions" means
all inventions, developments and discoveries which during the period of an
employee's or other Person's service to the Company and/or any of its
Subsidiaries, he or she makes or conceives of, either solely or jointly with
others, that relate to any subject matter with which his or her work for the
Company and/or any of its Subsidiaries may be concerned, or relate to or are
connected with the businesses, products, services or projects of the Company
and its Subsidiaries, or relate to the actual or demonstrably anticipated
research or development of the Company and its Subsidiaries or involve the use
of the Company's and its Subsidiaries' time, materials, facilities or trade
secret information.
(d) Except as set forth on Schedule 4.15, none of the Company or any of its
Subsidiaries has sold, transferred, assigned, licensed or subjected to any
Encumbrance, any intellectual property, trade secret, know-how, invention,
design, process, computer program or technical data, or any interest therein,
necessary or useful for the development, manufacture, use, operation or sale of
any product or service presently under development or manufactured, sold or
rendered by the Company or any of its Subsidiaries.
(e) No director, officer, employee, agent or stockholder of the Company or
any of its Subsidiaries owns or has any right in the intellectual property of
the Company and its Subsidiaries, or any patents, trademarks, service marks,
trade names, copyrights, licenses or rights with respect to the foregoing, or
any inventions, developments or discoveries used in or necessary for the
conduct of the Company's and its Subsidiaries' businesses as now conducted or
as proposed to be conducted.
(f) Except as set forth on Schedule 4.15, none of the Company or any of its
Subsidiaries has received any communication alleging or stating that the
Company or any of its Subsidiaries or any employee or agent has violated or
infringed, or by conducting business as proposed, would violate or infringe,
any patent, trademark, service mark, trade name, copyright, trade secret,
proprietary right, process or other intellectual property of any other Person.
4.16 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission from the Company in connection
with the issuance and sale of securities pursuant to this Agreement and the
Company hereby indemnifies each Purchaser against, and agrees that it will hold
each Purchaser harmless from, any claim, demand or liability for any such
broker's or finder's fees alleged to have been incurred in connection therewith
and any expenses (including reasonable fees, expenses and disbursements of
counsel) arising in connection with any such claim, demand or liability.
ARTICLE V
COVENANTS OF THE COMPANY
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5.01 Financial and Business Information. The Company will maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established in
accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP. The Company during the term of this
Agreement will, and will cause its Subsidiaries to, deliver to the Purchasers
(provided that the Company shall not deliver to any Purchaser any such
information to the extent that such Purchaser has requested in writing to the
Company that such information not be delivered to such Purchaser):
(a) As soon as practicable and in any event within 90 days after the close
of each fiscal year of the Company, beginning with the current fiscal year, a
consolidated balance sheet of the Company and its Subsidiaries as of the close
of such fiscal year and consolidated statements of operations, shareholders'
equity and cash flows for the Company and its Subsidiaries for the fiscal year
then added, certified by the chief executive officer or chief financial officer
of the Company to be true and accurate in all material respects (it being
understood by the parties hereto that the delivery to the Purchasers of the
Company's annual report on Form 10-K will satisfy the requirements of this
Section 5.01(a));
(b) As soon as practicable and in any event within 45 days after the end of
each of the first three fiscal quarters of each fiscal year, the consolidated
and consolidating balance sheet of Company and its Subsidiaries as at the end
of such fiscal quarter and the related consolidated and consolidating
statements of operations, shareholders' equity and cash flows of Company and
its Subsidiaries for such fiscal quarter and for the period from the beginning
of the current fiscal year to the end of such fiscal quarter, all in reasonable
detail and certified by the chief financial officer of Company that they fairly
present the financial condition of Company and its Subsidiaries as at the dates
indicated and the results of its operations and its cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments (it being understood by the parties hereto that the delivery to the
Purchasers of the Company's quarterly report on Form 10-Q will satisfy the
requirements of this Section 5.01(b));
(c) Prompt notice of any event having a Material Adverse Effect;
(d) Promptly upon their becoming available, copies of (a) all financial
statements, reports, notices and proxy statements sent or made available
generally by Company to its security holders, (b) all regular and periodic
reports, if any, filed by Company or any of its Subsidiaries with any
securities exchange or with the SEC or any governmental or private regulatory
authority, and (c) all press releases and other statements made available
generally by Company or any of its Subsidiaries to the public concerning
material developments in the business of Company or any of its Subsidiaries;
(e) Promptly upon any officer of Company or any of its Subsidiaries
obtaining knowledge of any condition or event that constitutes a Triggering
Event (as defined in the Certificate of Designation) or a violation or default
of any material term of any Basic Document or Warrant or an event of default or
potential event of default under any indebtedness of Company or any of its
Subsidiaries, or becoming aware that any person has given any notice
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or taken any other action with respect to a claimed event of default or
potential event of default, notice of any such event; and
(f) Within a reasonable time, such other information about the property,
financial condition and operations of the Company and its Subsidiaries as the
Purchasers may from time to time reasonably request.
5.02 Notice of Certain Events. Unless any Purchaser shall otherwise request
in writing, the Company during the term of this Agreement will, and will cause
its Subsidiaries to, promptly give notice in writing to such Purchaser of any
litigation or proceeding before any court or administrative body involving the
Company or any Subsidiary which, if determined adversely to the Company or such
Subsidiary, would be reasonably likely to have a Material Adverse Effect.
5.03 Shareholder Approvals. The Company will take all action reasonably
necessary or appropriate to solicit and obtain proxies and votes in favor of
the Charter Amendment and the 1997 Stock Option Plan from the holders of the
requisite percentage of the Common Stock at the Company's 1998 annual meeting
of shareholders (which shall in no event be held later than May 31, 1998), or
if sooner, at the next meeting of the Company's shareholders. Notwithstanding
the foregoing, upon the occurrence hereafter of any event (other than the
issuance of Litigation Warrants) which results in there being an insufficient
number of shares of Common Stock available for all outstanding Warrants
(including those issued as part of Additional Units) to be exercised for shares
of Common Stock in accordance with the terms thereof, as soon as practicable
following the occurrence of such event, the Company will call a special meeting
of the shareholders of the Company in order to obtain shareholder approval of
the Charter Amendment, and the Company will take all action reasonably
necessary or appropriate to solicit and obtain proxies and votes in favor of
the Charter Amendment from the holders of the requisite percentage of Common
Stock. As soon as is practicable after the approval of the Charter Amendment,
the Company will reserve the number of shares of Common Stock required for
issuance upon exercise in full of all of the Warrants.
5.04 Issuance of Litigation Warrants. In the event that Pegasus Partners,
L.P. and Pegasus Related Partners, L.P. provide the Company with financing
(including, without limitation, by way of an effective guarantee of the
Company's obligations) for a judgment, appeal bond or settlement in connection
with the litigation pending with the United States District Court for the
Eastern District of Michigan known as Code Alarm, Inc. v. Electromotive
Technology Corporation, case number 87-CV-74022-DT, as contemplated in the
guarantee dated as of October 24, 1997 given by Pegasus Partners, L.P. and
Pegasus Related Partners, L.P. to GECC (the "Litigation Guarantee"), the
Company shall issue to Pegasus Partners, L.P. and Pegasus Related Partners,
L.P., in proportions consistent with their relative investments in the Company,
warrants (the "Litigation Warrants") to purchase such number of outstanding
shares of Common Stock which, at the time of issuance will increase the
aggregate ownership interest of Pegasus Partners, L.P. and Pegasus Related
Partners, L.P. in the Company, on a fully-diluted basis (taking into account
all issuances and adjustments to other outstanding warrants as a consequence of
the
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issuance of the Litigation Warrants), by 2% for each $1,000,000 of financing
provided for an aggregate exercise price of $164,731 for each 1% interest
(i.e., if Pegasus Partners, L.P. and Pegasus Related Partners, L.P. provide
$5,000,000 of financing, the Litigation Warrants will give Pegasus Partners,
L.P. and Pegasus Related Partners, L.P. the right to purchase such additional
shares of Common Stock as will permit Pegasus Partners, L.P. and Pegasus
Related Partners, L.P. to own in the aggregate an additional 10% of the Common
Stock of the Company on a fully- diluted basis for an aggregate exercise price
of $1,647,310). In the event the Litigation Warrants are issued in accordance
with the terms of this Section 5.04, the Company will have authorized and
reserved a sufficient number of shares of Common Stock for issuance upon
exercise of all of the Litigation Warrants, subject to shareholder approval of
the Charter Amendment in accordance with Section 5.03.
5.05 Insurance. The Company shall use reasonable best efforts to, as promptly
as practicable, secure a key man life insurance policy (the "Key Man Life
Policy") with an insurance carrier approved by and on terms reasonably
satisfactory to the Purchasers, covering Mr. Rand Mueller, in an amount of not
less than $5,000,000, which policy shall name the Company as beneficiary
thereunder. The Company shall use reasonable best efforts to, as promptly as
practicable, increase the amount of coverage under the D&O Policy to, an amount
not less than $10,000,000. The Company shall at all times maintain the Key Man
Life Policy and the D&O Policy in accordance with the terms (including, without
limitation, the minimum amounts) set forth in Section 3.01(j) and in the
foregoing sentences. The Company shall promptly deliver to the Purchasers
copies of any notices, communications or other correspondence received from the
applicable insurance companies in connection with the Key Man Life Policy and
the D&O Policy and shall notify the Purchasers in writing in the event it
becomes aware of any potential modification or cancellation of, or inability to
renew the Key Man Life Policy or the D&O Policy.
5.06 Preemptive Rights. (a) In the event (and on each occasion) that, after
the date hereof, the Company shall decide to undertake an issuance of
additional shares of Common Stock or any rights, warrants or options to
purchase Common Stock or any securities convertible into Common Stock ("New
Securities") which would not result in an adjustment pursuant to Section 4 of
the Attached Warrants, other than a Permitted Issuance (as defined below), the
Company shall give each Purchaser written notice (an "Offer Notice") of the
Company's decision, describing the type and amount of New Securities to be
issued, the price per share at which the New Securities are to be issued, and
the general terms upon which the Company has decided to issue the New
Securities. Each Purchaser shall have thirty (30) days from the date on which
the Company shall give the written Offer Notice to agree to purchase such New
Securities for the price per share and upon the general terms specified in the
Offer Notice, and in compliance with paragraph (c) of this Section 5.06, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased by such Purchaser. If, in connection with such a
proposed issuance of New Securities, such Purchaser shall for any reason fail
or refuse to give such written notice to the Company within such period of
thirty (30) days, such Purchaser shall, for all purposes of this Section 5.06,
be deemed to have refused (in that particular instance only) to purchase any of
such New Securities and to have waived (in that
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particular instance only) all rights of such Purchaser under this Section 5.06
to purchase any of such New Securities.
"Permitted Issuance" shall mean (i) the issuance of shares of Common Stock
pursuant to an underwritten public offering, (ii) the issuance of shares of
Common Stock upon exercise of the Warrants, (iii) the issuance of up to 280,000
shares of Common Stock upon the exercise of options issued to management
employees of the Company or its Subsidiaries pursuant to the Company's 1987
Stock Option Plan, (iv) provided that the Charter Amendment has (1) been
approved and adopted by the Company's stockholders, (2) been filed with the
Department of Consumer & Industry Services of the State of Michigan and (3)
become effective, the issuance of up to 1,317,178 shares of Common Stock or
options to acquire such shares to management employees of the Company or its
Subsidiaries pursuant to the Company's 1997 Stock Option Plan, (v) the issuance
to GECC on October 24, 1997 of warrants to purchase up to 131,718 shares of
Common Stock (subject to adjustment as provided therein) and the issuance of
Common Stock upon the exercise thereof, (vi) the issuance of the Securities and
(vii) the issuance of New Securities, the proceeds of which are intended to be
and are used for the redemption of all (but not less than all) of the Preferred
Shares and the repurchase of one-half of the Attached Warrants.
(b) In the event that any Purchaser shall fail or refuse to exercise in full
its preemptive rights within said thirty (30) day period, the Company shall
have forty-five (45) days thereafter to sell the quantity of New Securities
which such Purchaser did not agree to purchase pursuant to paragraph (c) of
this Section 5.06, at a price per share and upon general terms no more
favorable to the purchasers thereof than specified in the Company's Offer
Notice to the Purchasers. In the event the Company has not sold the New
Securities within said period of forty-five (45) days, the Company will not
thereafter issue or sell any New Securities without first offering such
securities to the Purchasers in the manner provided by the foregoing provisions
of this Section 5.06.
(c) Each Purchaser shall be entitled to purchase a number of shares of New
Securities equal to the product obtained by multiplying the total number of New
Securities proposed to be issued by a fraction, the numerator of which is the
sum of (i) the number of shares of Common Stock for which the Attached Warrants
held by such Purchaser may be exercised and (ii) the number of shares of Common
Stock held by such Purchaser pursuant to the exercise of Attached Warrants and
the denominator of which is the total number of Fully Diluted Outstanding (as
defined below) shares of Common Stock immediately prior to the issuance of the
New Securities.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock outstanding at such date and all shares
of Common Stock issuable in respect of options or warrants to purchase, or
securities convertible into, shares of Common Stock outstanding on such date,
whether or not such options, warrants or other securities are presently
convertible or exercisable.
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(d) Notwithstanding the foregoing, preemptive rights may not be assigned to
any transferee if the exercise of such right by the transferee would, in the
reasonable judgment of the Board of Directors of the Company after consultation
with counsel to the Company, make an exemption from the registration
requirements of the Securities Act, or applicable state securities laws, with
respect to the offer and sale of the New Securities, unavailable.
(e) The Company will not, at any time after the effective date of this
Agreement, enter into any agreement or contract (whether written or oral) which
is inconsistent in any respect with the preemptive rights granted by the
Company to the Purchasers pursuant to this Section 5.06.
5.07 Public Announcement. Neither the Company, on the one hand, nor the
Purchasers, on the other hand, shall issue any press release or make any public
announcement regarding the transactions contemplated hereby without prior
written consent of the other party or parties, except where a public
announcement is required by law. In the event such an announcement is so
required, the party or parties making such an announcement shall give the other
party or parties reasonable advance notice of the fact that such announcement
is to be made, shall permit it or them to review the language of such
announcement prior to its release and shall consult with the other party or
parties and use its or their best efforts to agree with the other party or
parties on a mutually satisfactory text.
5.08 Stock Option Plan. Any grant of options by the Company pursuant to the
1997 Stock Option Plan shall be to Persons and in amounts satisfactory to the
Purchasers.
5.09 Hart-Scott-Rodino, Voting Rights, Etc. (a) Upon the request of any
Purchaser, the Company shall, as promptly as practicable, file with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "DOJ") such notifications and other information required to be
filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder (and, if requested by any Purchaser,
request early termination of any applicable waiting period), to permit the
acquisition by such Purchaser of any direct or indirect interest in the
Company, including, but not limited to, through the exercise of Warrants or the
exercise by such Purchaser of any rights under the Securities. The Company
shall make available to such Purchaser such information in its possession as
may be necessary for the completion of the notifications and other information
to be filed by or on behalf of such Purchaser (or its ultimate parent entity).
The Company shall respond as promptly as practicable to any inquiries received
from the FTC and the DOJ for additional information or documentation in
connection with any filings therewith, and shall respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
(b) The Company will promptly take all such actions as may from time to time
be required by applicable law in connection with the exercise by the Purchasers
of voting
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rights under the Certificate of Designation, whether by written consent or at a
meeting, including, without limitation, the preparation, filing and
distribution of information statements under Section 14(c) of the Exchange Act,
and the regulations promulgated thereunder, and the calling of, and causing to
be held as soon as reasonably practicable a special meeting of shareholders for
purposes specified by the Purchasers and permitted by law.
5.10 Prohibition on Realization Events. During the period beginning on
the Closing Date and continuing until the earlier of (i) the date which is six
months and one day following the most recent issuance to Pegasus Partners, L.P.
and Pegasus Related Partners, L.P. of the Litigation Warrants in accordance with
Section 5.04, provided that on or before such date, Pegasus Partners, L.P. and
Pegasus Related Partners, L.P. are unconditionally released in full from any
unused portion of the Litigation Guarantee or (ii) such time as Pegasus
Partners, L.P. and Pegasus Related Partners, L.P. are unconditionally released
in full from the Litigation Guarantee, provided that no Litigation Warrants have
been issued prior to such release, the Company shall not authorize or effect, in
a single transaction or through a series of related transactions, a liquidation,
winding up or dissolution of the Company or adoption of any plan for the same,
any reorganization of the capital of the Company, reclassification of the
capital stock of the Company, consolidation or merger with or into another
corporation or other entity (where the Company is not the surviving corporation
or where there is a change in or distribution with respect to the Common Stock),
or sale, transfer or other disposal of all or substantially all of the property,
assets or business of the Company (each, a "Realization Event").
5.11 Expiration of Covenants. The Company's obligations under Sections
5.01, 5.02, 5.03, 5.05, 5.06, 5.08 and 5.09 shall terminate at such time as the
Purchasers no longer hold any Preferred Shares, Warrants or Warrant Shares.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
6.01 Representations by Purchasers. Each Purchaser represents and
warrants to the Company that:
(a) It has full power and authority to execute and deliver this Agreement
and the other Basic Documents to which it is a party and to perform its
obligations hereunder and thereunder.
(b) It has taken all action necessary for the authorization, execution,
delivery, and performance of this Agreement and the other Basic Documents to
which it is a party, and its obligations hereunder and thereunder, and, upon
execution and delivery by the Company, this Agreement and other Basic Documents
to which it is a party shall constitute the valid and binding obligation of
such Purchaser, enforceable against it in accordance with their respective
terms, except that (i) such enforcement may be subject to applicable
bankruptcy,
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insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the issuance and sale of Units pursuant
to this Agreement based on any arrangement made by or on behalf of such
Purchaser and such Purchaser agrees to indemnify and hold the Company harmless
against any costs or damages incurred as a result of any such claim.
6.02 Transfer of Units; Surrender of Preferred Share Certificates. Unless and
until the Company shall have exercised its right to repurchase Units pursuant
to Section 8.01(a), no Purchaser shall transfer Preferred Shares or Attached
Warrants, except as part of Units. Upon a transfer of Units by Pegasus
Partners, L.P. or Pegasus Related Partners, L.P. or any of their affiliates to
a party other than an affiliate of Pegasus Partners, L.P. or Pegasus Related
Partners, L.P., the transferor shall, as promptly as practicable, surrender its
Preferred Share Certificates representing the Series A-1 Preferred Shares being
transferred as part of such Units for cancellation and reissuance as Series A-2
Preferred Shares.
6.03 No Transfer of Units to Directed Electronics, Inc. No Purchaser shall
sell or otherwise transfer any Units or Warrants to Directed Electronics, Inc.,
a California corporation ("DEI"), any affiliate of DEI, Mr. Darrell Issa, the
president of DEI, any entity which, to the knowledge of such Purchaser, is
controlled by Mr. Issa, or any person who, to the knowledge of such Purchaser,
is a member of the immediate family (as such term is defined in Rule 16a-1
promulgated under the Exchange Act) of Mr. Issa.
ARTICLE VII
CERTAIN SECURITIES LAW MATTERS
7.01 Representations by Purchasers. Each Purchaser represents and warrants to
the Company that:
(a) Such Purchaser is an "Accredited Investor" within the meaning of Rule
501 under the Securities Act.
(b) The Units and the Shortfall Warrants are being acquired for such
Purchaser's own account for the purpose of investment and not with a present
view to or for sale in connection with any distribution thereof; provided, that
the disposition of such Purchaser's property shall at all times be and remain
within its control.
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(c) Such Purchaser understands that (i) none of the Securities have been
registered under the Securities Act, (ii) the Securities must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or an exemption from registration is available under applicable
securities laws then in effect, and (iii) the Securities will bear a legend to
such effect and the Company will make a notation on its transfer books to such
effect.
(d) Such Purchaser understands that no public market now exists for the
Preferred Shares or the Warrants issued by the Company.
7.02 Restrictions on Transfer. The Securities (collectively, the "Restricted
Securities") shall be transferable only if sold pursuant to a registration
statement under the Securities Act (as hereinafter defined), or pursuant to an
exemption from the registration requirements of the Securities Act and
applicable state securities laws.
(a) Restrictive Legend. Each certificate representing the Restricted
Securities shall bear a legend in substantially the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities or blue
sky laws of any state, and may not be sold, or otherwise transferred, in the
absence of such registration or an exemption therefrom under such Act and
under any such applicable state laws."
Each certificate representing such Restricted Securities shall bear the
restrictive legend set forth above, in each case unless the restrictions on
transfer provided for in this Section 7.02 shall have ceased and terminated as
to such Restricted Securities.
(b) Termination of Restriction. The restrictions imposed by this Section
7.02 upon the transferability of the Restricted Securities shall cease and
terminate as to any particular Restricted Securities and any securities issued
in exchange therefor or upon transfer thereof when, in the opinion of counsel
reasonably acceptable to the Company, such restrictions are no longer required
in order to assure compliance with the Securities Act, or when such Restricted
Securities have been registered under the Securities Act. Whenever any of such
restrictions shall cease and terminate as to any Restricted Securities, the
holder thereof shall be entitled to receive from the Company, without expense,
new certificates not bearing the legend set forth in Section 7.02(a).
7.03 Additional Legend. (a) Unless and until the Company shall have
exercised its right to repurchase Units pursuant to Section 8.01(a), each
certificate representing Preferred Shares and each Attached Warrant shall bear a
legend in substantially the following form:
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"The securities represented hereby may not be transferred except as part of
Units containing shares of Series A Preferred Stock and warrants to purchase
Common Stock of Code Alarm, Inc. and are subject to repurchase by Code Alarm,
Inc. in accordance with the terms of a Unit Purchase Agreement dated as of
October 27, 1997 among Code Alarm, Inc., Pegasus Partners, L.P. and Pegasus
Related Partners, L.P."
(b) In the event the Company shall have repurchased Units pursuant to
Section 8.01(a), any holder of Attached Warrants shall be entitled to receive
from the Company, without expense, new Attached Warrants representing the
Attached Warrants not repurchased and not bearing the legend set forth in
Section 7.03(a).
ARTICLE VIII
CALL RIGHT; PUT RIGHT; RIGHT OF FIRST REFUSAL
8.01 Company's Right to Repurchase Units.
(a) Repurchase During Year One. At any time prior to October 19, 1998, but
not thereafter, provided that the Charter Amendment has (1) been approved and
adopted by the Company's stockholders, (2) been filed with the Department of
Consumer and Industry Services of the State of Michigan and (3) become
effective, and subject to Section 8.01(f), the Company, at its sole option, may
redeem all, but not less than all, of the outstanding Preferred Shares and,
concurrently therewith, repurchase all of the outstanding Interim Dividend
Warrants, one-half of the outstanding Attached Warrants which are not Interim
Dividend Warrants and a number of shares of Common Stock equivalent to one-half
of the number of shares of Common Stock for which Attached Warrants have
theretofore been exercised, for an aggregate redemption price consisting of
cash in an amount equal to one hundred seventeen and one-half percent (117.5%)
of the aggregate stated value of such Preferred Shares less any cash dividends
previously paid thereon.
(b) Repurchase After Year Two. At any time after the second anniversary of
the Closing Date, provided that the Company has not theretofore exercised its
rights pursuant to Section 8.01(a), and subject to Section 8.01(f), the
Company, at its sole option, may repurchase all, but not less than all, of the
outstanding Units and the Common Stock for which Attached Warrants have
theretofore been exercised (other than shares of Common Stock which have been
registered and sold under an effective registration statement pursuant to the
Securities Act, or sold pursuant to Rule 144 promulgated thereunder
("Non-Repurchasable Stock")), for an aggregate repurchase price equal to the
greater of (i) an amount determined by multiplying (x) the sum of (1) the
number of shares of Common Stock for which the Attached Warrants are then
exercisable and (2) the number of shares for which the Attached Warrants have
theretofore been exercised (other than shares of Non-Repurchasable Stock) by
(y) the Current
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Market Price per share of Common Stock determined as of the date of repurchase
and (ii) an amount sufficient to yield each Unit (other than Units which have
been transformed into Non-Repurchasable Stock) a 35% annual rate of return from
the date of its original issuance through the date of repurchase, after giving
effect to any cash dividends actually paid to the holder or any prior holder of
such Unit.
For purposes hereof, "Current Market Price" shall mean, in respect of any
share of Common Stock on any date herein specified, the average of the daily
market prices for the 20 consecutive Trading Days (as hereinafter defined)
immediately preceding such date. The daily market price for each such Trading
Day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the last reported sale
price as officially quoted on any such exchange, (iii) if the Common Stock is
not then listed or admitted to trading on any stock exchange but is traded on
the Nasdaq Stock Market, the last reported sale price as officially quoted on
the Nasdaq Stock Market, (iv) if the Common Stock is not then traded on the
Nasdaq Stock Market, the last reported sale price on the over-the-counter
market, as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of reporting
prices), or if such sale price is not available on such date, the average of
the closing bid and asked prices on such date as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices), or (v) if there is no such organization
or agency, as furnished by any member of the National Association of Securities
Dealers, Inc., or any successor corporation thereto (the "NASD") selected
mutually by the holders of a majority of the Units and the Company or, if they
cannot agree upon such selection, by a member selected by two such members of
the NASD, one of which shall be selected by such holders and one of which shall
be selected by the Company.
For purposes hereof, "Trading Day" shall mean (i) any day on which stock is
traded on the principal stock exchange on which the Common Stock is listed or
admitted to trading, (ii) if the Common Stock is not then listed or admitted to
trading on any stock exchange but is traded on the Nasdaq Stock Market, any day
on which stock is traded on the Nasdaq Stock Market, or (iii) if the Common
Stock is not then traded on the Nasdaq Stock Market, any day on which stock is
traded in the over-the counter market, as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices).
(c) Notice of Repurchase. Notice of repurchase pursuant to Section 8.01(a)
or (b) shall be given by first class mail, postage prepaid, mailed not less
than 30 nor more than 60 days prior to the repurchase date to such holder's
address as the same appears on the books of the Company. Each such notice
shall state: (i) the repurchase date; (ii) the number of Units and shares of
Common Stock to be repurchased; (iii) the formula for determination of the
repurchase price; (iv) the place or places where certificates for Preferred
Shares and Attached Warrants comprising such Units, and/or for such shares of
Common Stock are to be surrendered
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for payment of the repurchase price; and (v) that dividends on the Preferred
Shares to be redeemed as part of the repurchase of Units will cease to accrue
on the repurchase date.
(d) Cessation of Dividends on Preferred Shares Redeemed; Shares No Longer
Outstanding. Notice having been mailed as stated in subsection (c) above, from
and after the close of business on the repurchase date (unless default shall be
made by the Company in providing money for the payment of the repurchase price
of the Units and shares called for repurchase), dividends on the Preferred
Shares redeemed as part of the repurchase of Units shall cease to accrue, and
the Units , Preferred Shares, Attached Warrants and shares of Common Stock
repurchased shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Company (except the right to receive
from the Company the repurchase price) shall cease. Upon surrender in
accordance with said notice of the certificates for any Preferred Shares and
Attached Warrants comprising Units, and/or shares of Common Stock so
repurchased (properly endorsed or assigned for transfer, if the Board of
Directors of the Company shall so require and the notice shall so state), such
Units, Preferred Shares, Attached Warrants and/or shares shall be repurchased
by the Company at the repurchase price aforesaid.
(e) Status of Redeemed Preferred Shares. Upon repurchase of Units, any
Preferred Shares which have been redeemed in connection therewith shall be
retired and thereafter have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors or a
duly authorized committee thereof.
(f) Limitation on Company's Right to Repurchase. Notwithstanding anything
to the contrary contained herein, the Company shall not be entitled to
repurchase Units and/or shares of Common Stock until the earlier of (i) the
date which is six months and one day following the most recent issuance to
Pegasus Partners, L.P. and Pegasus Related Partners, L.P. of the Litigation
Warrants in accordance with Section 5.04, provided that on or before such date,
Pegasus Partners, L.P. and Pegasus Related Partners, L.P. are unconditionally
released in full from any unused portion of the Litigation Guarantee or (ii)
such time as Pegasus Partners, L.P. and Pegasus Related Partners, L.P. are
unconditionally released in full from the Litigation Guarantee, provided that
no Litigation Warrants have been issued prior to such release.
8.02 Purchasers' Right to Put Units.
(a) Obligation to Redeem. (i) At any time after the date which is three
years and six months after the Closing Date, any holder of Units, at its
election, may, by notice to the Company (the "Put Notice"), demand repurchase
of all, but not less than all, of such holder's Units. Subject to the
provisions of Section 8.02(b), the Company shall, on the date (not less than 30
days after the date of the Put Notice) designated in such Put Notice,
repurchase from the holder all (or such lesser portion permitted to be
repurchased in accordance with Section 8.02(a)(iii)), of such holder's Units
for an amount determined by multiplying (x) the number of shares of Common
Stock for which the Attached Warrants which are part of such Units are
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then exercisable by (y) the Current Market Price per share of Common Stock
determined as of the date of the Put Notice.
(ii) Notwithstanding the provisions of Section 8.02(a)(i), if, at any time
during the period between the date on which a holder of Units shall have
delivered a Put Notice and the date of repurchase by the Company pursuant
thereto, a Realization Event shall occur and the consideration received or
receivable by stockholders in connection with such Realization Event shall
consist solely of cash, then such holder shall (whether or not such holder
shall have previously surrendered its Units for repurchase by the Company
pursuant to this Section 8.02) be entitled to receive, on the date of such
repurchase, the higher of (x) the amount payable to such holder as determined
pursuant to Section 8.02(a)(i) and (y) an amount equal to the amount of cash
such holder would have received upon the occurrence of such Realization Event
had such holder's Attached Warrants been exercised for Common Stock immediately
prior thereto.
(iii) The Company shall not be obligated under Section 8.02(a)(i) to
repurchase Units if the Company is prohibited from doing so under any agreement
or instrument evidencing the Company's or any of its subsidiaries' indebtedness
for borrowed money, and such prohibition has not been waived, or if and to the
extent such a repurchase (x) would cause an event of default to exist by reason
of such repurchase, which event of default has not been waived, with respect to
any such agreement or instrument or would violate any provision of any such
agreement or instrument, or (y) would be in violation of applicable law
("Restrictions"), in any such case as determined by an opinion of counsel to
the Company, reasonably acceptable to the holder; provided, however, that the
Company shall use its reasonable best efforts to have any such Restriction
either waived or terminated (including, without limitation, by obtaining
refinancing for any such indebtedness on reasonable terms). In the event that,
following receipt of a Put Notice, the Company will not repurchase Units
requested to be repurchased in accordance with Section 8.02(a)(i) because of
the existence of any Restriction, the Company shall, within twenty (20) days
after receipt of the Put Notice, so notify the holder in writing (the
"Restriction Notice"), setting forth the number of Units which will not be
repurchased and the Restrictions which apply, and deliver to the holder a copy
of the opinion referred to in the prior sentence. In addition, in such event,
the Company shall, upon the request of the holder, use its best efforts to
register the shares of Common Stock for which the Attached Warrants which will
not be repurchased may be exercised, in accordance with the terms of the
Registration Rights Agreement. In addition, if, in such event, the Company
will be redeeming a number of Series A-1 Preferred Shares as part of the
repurchase of Units which will result in the holders of Series A-1 Preferred
Shares losing their voting and other rights pursuant to Sections 4(a) and (b)
of the Certificate of Designation, the holder may, by written notice to the
Company within five (5) days after receipt of the Restriction Notice, require
that the Company purchase such lesser number of Units (and thereby redeem such
lesser number of Series A-1 Preferred Shares) which will result in such holders
retaining such rights.
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(b) Payment of Repurchase Price. The repurchase price for any repurchase
pursuant to this Section 8.02 shall be determined pursuant to Section 8.02(a)
and shall be payable in cash.
On the date of any repurchase of Units pursuant to this Section 8.02, the
holder thereof shall surrender for repurchase a certificate for the number of
Preferred Shares and a warrant for the number of Attached Warrants comprising
the Units being repurchased, without any representation or warranty (other than
that the holder has good and marketable title thereto, free and clear of liens,
encumbrances and restrictions of any kind), together with an instrument of
transfer reasonably acceptable to the Company, against payment therefor of the
repurchase price by, at the option of the holder, (i) wire transfer to an
account in a bank located in the United States designated by the holder for
such purpose or (ii) a certified or official bank check payable to the order of
the holder. If less than all of the holder's Preferred Shares or Attached
Warrants represented by a single certificate or warrant are being redeemed or
repurchased, the Company shall cancel such certificate or warrant, as the case
may be, and issue in the name of, and deliver to, the holder a new certificate
or warrant, as the case may be, for the portion not being redeemed or
repurchased.
8.03 Right of First Refusal.
(a) Company's Right to Acquire Units. So long as the Company has not
exercised its rights pursuant to Section 8.01(a), if any holder of Units shall
desire to transfer for value all or a portion of such Units to a third party
that is not an affiliate or an associate (as such term is defined in Rule 405
promulgated under the Securities Act) of such holder, then such holder (the
"Seller Holder") shall give notice to the Company of its intent to sell,
setting forth the identity of such third party, the sale price (including the
type of consideration), the proposed closing date of such sale (which shall not
be prior to the date which is 10 days following the date of such notice) and
the terms and conditions upon which the third party is willing to purchase the
Units being offered for sale, and offer to sell such Units to the Company on
such terms and conditions, including price. The Company shall then have 10
days (the "Notice Period") within which to give the notice to the Selling
Holder that it or its designee wishes to acquire the Units offered for sale on
such terms and conditions. Such notice from the Company shall state a closing
date not later than the closing date specified in the notice from the Selling
Holder or 10 days after the date of the Company's notice, whichever is later.
If the Company shall not give notice within the Notice Period that it or its
designee wishes to acquire the Units, the Selling Holder may sell such Units to
such third party or to any other third party, at any time during the period of
90 days following the end of the Notice Period, on terms and conditions no less
favorable to the Selling Holder than those set forth in the original notice.
(b) Non-Cash Consideration. In the event all or a portion of the purchase
price to be paid by the third party for the Units consists of consideration
other than cash ("Non-Cash Consideration"), the Company shall, at its option,
be entitled to pay to the Selling Holder, in lieu of the Non-Cash
Consideration, the fair market value of such Non-Cash Consideration, as agreed
upon between the Selling Holder and the Company. If the Selling
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Holder and the Company are unable to agree on such fair market value within 10
days following delivery by the Selling Holder of the initial notice to the
Company, they shall jointly select an investment banking firm of nationally
recognized standing, and such investment banking firm shall, within 20 days
after selection thereof, determine the fair market value of the Non-Cash
Consideration. The fees and expenses of such investment banking firm shall be
borne equally by the Selling Holder and the Company. In the event the parties
are unable to agree on an investment banking firm within 15 days following
delivery by the Selling Holder of the initial notice to the Company, each of
them shall, within 5 business days thereafter, select an investment banking
firm of nationally recognized standing and the two investment banking firms
shall select a third investment banking firm of nationally recognized standing,
which firm shall, within 20 days after the selection thereof, determine such
fair market value. The fees and expenses of each party's own investment
banking firm shall be borne by such party and the fees and expenses of the
third investment banking firm shall be borne equally by the parties. In the
event a determination of fair market value is required to be made in connection
with any offer under this Section 8.03 and such determination is not made prior
to the expiration of the Notice Period, the Notice Period shall be extended
until the date which is two days following the date on which such fair market
value determination is made.
(c) Termination or Suspension of Right of First Refusal. If the Company or
its designee fails to fulfill its obligation to purchase the Units on the same
terms and conditions, subject to the provisions of Section 8.03(b), as those
contained in the original offer after the Corporation gives notice that such
purchase will be made, then, in addition to any available remedies, the Selling
Holder may sell all or any portion of the Units offered for sale at any time
thereafter, at any price and upon any terms, without regard to the provisions
of this Section 8.03. Upon the occurrence and during the continuance of any
Triggering Event (as defined in the Certificate of Designation), in addition to
any available remedies, the Selling Holder may sell all or any portion of the
Selling Holder's Units, at any price and upon any terms, without regard to the
provisions of this Section 8.03.
ARTICLE IX
MISCELLANEOUS
9.01 Indemnification. In addition to the payment of expenses pursuant to
Section 9.05, whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to defend, indemnify, pay and hold harmless,
the Purchasers, and the officers, directors, employees, agents and affiliates
of the Purchasers (collectively, the "Indemnitees") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party
or a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including, without
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limitation, securities and commercial laws, statutes, rules or regulations), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement, the other Basic Documents, the
Warrants or the transactions contemplated hereby or thereby (including, without
limitation, the Purchasers' agreement to purchase the Units or the use or
intended use of the proceeds of such purchase) or the statements contained in
any commitment letter delivered by the Purchasers to the Company with respect
thereto (collectively called the "Indemnified Liabilities"); provided that the
Company shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Liabilities to the extent such Indemnified Liabilities arise
from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court or competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, the Company shall contribute the maximum portion that
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
9.02 No Waiver: Cumulative Remedies. No failure or delay on the part of the
Purchasers, or any other holder of any Security in exercising any right, power
or remedy hereunder or thereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder or thereunder. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
9.03 Amendments; Waiver and Consents. This Agreement may be amended or
modified, and the obligations of the Company and the rights of the holders of
Securities under this Agreement may be waived only by the written consent of
holders of a majority of the Securities, determined on the basis of shares of
Common Stock "held", including Warrant Shares for which Warrants held are
exercisable. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
9.04 Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier), or
facsimile transmission, addressed as follows:
(a) If to the Company:
Code Alarm Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: Rand Mueller and Craig Camalo
Facsimile: (248) 585-4799
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with a copy to:
Pepper, Hamilton & Scheetz LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: Dennis S. Kayes
Facsimile: (313) 259-7926
(b) If to either Purchaser:
99 River Road
Cos Cob, Connecticut 06807
Attention: Richard M. Cion
Facsimile: (203) 869-6940
with a copy to:
Kaye, Scholer, Fierman, Hays
& Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Nancy E. Fuchs, Esq.
Facsimile: (212) 836-8689
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication shall be deemed to have
been duly given five business days after being deposited in the mail, postage
prepaid, if mailed; when delivered by hand, if personally delivered; or upon
receipt, if sent by facsimile (followed by a confirmation copy sent by either
overnight or two (2) day courier).
9.05 Expenses. Whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to pay promptly (a) the fees, expenses and
disbursements of counsel to the Purchasers in connection with the negotiation,
preparation, execution and administration of the Basic Documents or the
Warrants, which fees and expenses shall not exceed $300,000, and any consents,
amendments, waivers or other modifications hereto or thereto and any other
documents or matters requested by the Company; (b) all other actual costs and
expenses incurred by the Purchasers in connection with the investigation and
completion of the transactions contemplated hereby and by the other Basic
Documents and the Warrants; and (c) all costs and expenses, including
reasonable attorneys' fees and costs of settlement, incurred by the Purchasers
in enforcing any obligations of or in collecting any payments due from the
Company hereunder or under the other Basic Documents or the Warrants by reason
of any breach or default by the Company or in connection with any refinancing
or restructuring of the
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arrangements provided under the Basic Documents or the Warrants in the nature
of a "work-out" or pursuant to any insolvency or bankruptcy proceedings.
9.06 Specific Performance. The Company acknowledges that the subject matter
of this Agreement is unique and that no adequate remedy of law would be
available for breach of this Agreement. Accordingly, the Company agrees that
the Purchasers will be entitled to an appropriate decree of specific
performance, injunctive relief or other equitable remedies to enforce this
Agreement (without any bond or other security being required), and the Company
waives the defense in any action or proceeding brought to enforce this
Agreement that there exists an adequate remedy at law.
9.07 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and the Purchasers and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Purchasers.
9.08 Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other Basic Document or Warrant shall
survive the execution and delivery hereof and thereof and the issuance of the
Units, the Shortfall Warrants and the Litigation Warrants. Notwithstanding
anything in this Agreement or implied by law to the contrary, the agreements of
the Company set forth in Sections 2.05, 4.16, 9.01 and 9.05 and of the
Purchasers set forth in Section 6.01(c) shall survive the payment or redemption
of any Securities.
9.09 Severability. In case any provision in or obligation under this
Agreement or the Securities shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
9.10 Prior Agreements. This Agreement, together with the exhibits and
schedules hereto, constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements concerning the subject matter
hereof.
9.11 Governing Law; Consent to Jurisdiction and Venue. In all respects,
including all matters of construction, validity and performance, this Agreement
and the obligations arising hereunder shall be governed by, and construed and
enforced in accordance with, the laws of the State of Michigan applicable to
contracts made and performed in such state, without regard to the principles
thereof regarding conflict of laws, and any applicable laws of the United
States of America. EACH OF THE COMPANY AND EACH PURCHASER CONSENTS TO PERSONAL
JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE CITY OF
NEW YORK, STATE OF NEW YORK. Service of process on the Company or any
Purchaser in any action arising out of or relating to this Agreement shall be
effective if mailed to such party in accordance with the procedures and
requirements set forth in Section 9.04. Nothing herein shall preclude any
38
<PAGE> 47
Purchaser or the Company from bringing suit or taking other legal action in any
other jurisdiction.
9.12 Mutual 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
THEIR DISPUTES 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 ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS AGREEMENT.
9.13 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose.
9.14 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by
signing any such counterpart.
9.15 Further Assurances. From and after the date of this Agreement, upon the
request of any Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Preferred Shares, the Warrants, the
Registration Rights Agreement and the other agreements and instruments
contemplated hereby.
9.16 Allocation of Purchase Price. Under both generally accepted accounting
principles and the regulations promulgated under the Code, the purchase of
Preferred Shares and Attached Warrants as part of Units for an aggregate
Purchase Price may require an allocation of the Purchase Price between the
Preferred Shares and the Attached Warrants. Accordingly, the Company and the
Purchasers agree that the aggregate value of the Preferred Shares and the
Attached Warrants shall be allocated in a manner reasonably requested by
Purchasers (which values shall be used by the Company and the Purchasers for
all purposes, including the preparation of tax returns and the preparation of
financial statements of the Company and its Subsidiaries).
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<PAGE> 48
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date first above written.
CODE ALARM INC.
By: /s/ Rand Mueller
------------------------------------
Name: Rand Mueller
Title: President
PEGASUS PARTNERS, L.P.
By: Pegasus Investors, L.P.,
its general partner
By: Pegasus Investors GP, Inc.,
its general partner
By: /s/ Richard Cion
-------------------------------
Name: Richard Cion
Title: Vice President
PEGASUS RELATED PARTNERS, L.P.
By: Pegasus Investors, L.P.,
its general partner
By: Pegasus Investors GP, Inc.,
its general partner
By: /s/ Richard Cion
-------------------------------
Name: Richard Cion
Title: Vice President
<PAGE> 1
EXHIBIT 10.58
GENERAL ELECTRIC CAPITAL CORPORATION
10 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
October 27, 1997
Pegasus Partners, L.P.
and
Pegasus Related Partners, L.P.
99 River Road
Cos Cob, Connecticut 06807
Gentlemen:
Reference is made to the Credit Agreement dated as of October 24, 1997 (as
amended, restated, supplemented or otherwise modified, the "Credit Agreement")
among Code-Alarm, Inc., certain specified affiliates of Code-Alarm, Inc.
signatory thereto, the lenders from time to time signatory thereto and General
Electric Capital Corporation as agent for the lenders thereunder. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Credit Agreement.
We hereby agree to furnish to each of you prompt written notice (an
"Acceleration Notice") in the event that all or any portion of the Obligations
are accelerated.
Further, we hereby agree that upon and at any time following an acceleration
of any Obligations (irrespective of whether an Acceleration Notice is furnished
in connection therewith) we shall upon your request sell, assign, transfer and
convey to you (or your designee(s)), or to the extent applicable shall cause to
be sold, assigned, transferred and conveyed to you (or your designee(s)), all
rights, title, interests, remedies, powers and duties of the Agent and the
Lenders in, under and to the Loan Documents (other than the GECC Warrant
Documents), Collateral, Loans, Obligations (other than Obligations relating
exclusively to the GECC Warrant Documents) and Commitments, provided, that (i)
our obligations under this letter agreement shall expire on the sixty-first day
following the date we furnish
<PAGE> 2
Pegasus Partners, L.P. 2 October 27, 1997
and
Pegasus Related Partners, L.P.
to you an Acceleration Notice, (ii) the purchase price payable in connection
with such conveyance shall be 100% of the then outstanding Obligations (other
than Obligations relating exclusively to the GECC Warrant Documents) and your
assumption of 100% of the then outstanding Commitments, if any, and (iii) such
conveyance shall be made pursuant to an Assignment Agreement substantially in
the form of Exhibit 9.1(a) to the Credit Agreement as in effect on the date
hereof and such other documentation as you or we shall reasonably deem
appropriate to effect such conveyance.
Nothing herein shall be deemed to modify any term, provision or condition set
forth in the Limited Supplemental Guaranty or the Limited Litigation Guaranty,
each dated as of October 24, 1997 among GECC, Pegasus Partners, L.P. and
Pegasus Related Partners, L.P., or operate as a defense to any obligation of
any guarantor under either such guarantee.
This letter agreement shall be governed by and construed and enforced in
accordance with the Laws of the State of New York applicable to contracts made
and performed in such state.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Timothy S. Van Kirk
---------------------------
Name: Timothy S. Van Kirk
Title: Duly Authorized Signatory
Acknowledged and Agreed:
CODE-ALARM, INC.
By: /s/ Craig S. Camalo
---------------------
Name: Craig S. Camalo
Title: VP Finance & CFO
<PAGE> 1
EXHIBIT 10.59
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of October 27, 1997, by and among CODE ALARM INC, a Michigan
corporation (the "Company"), Pegasus Partners, L.P., Pegasus Related Partners,
L.P. (together with Pegasus Partners, L.P., "Pegasus") and General Electric
Capital Corporation ("GECC").
RECITALS
WHEREAS, the Company and Pegasus have entered into that
certain Unit Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), pursuant to which, among other things, Pegasus is purchasing units
("Units"), each Unit consisting of one share of the Company's Series A
Preferred Stock (collectively, with other such shares, the "Preferred Shares")
and one Warrant (as hereinafter defined) to purchase 72.2525247 shares of the
Company's common stock, no par value (the "Common Stock"); and
WHEREAS, the Company has issued, and may in the future issue,
additional Warrants (as hereinafter defined) to Pegasus in consideration for
certain financial accommodations provided and to be provided by Pegasus to GECC
as contemplated by the Purchase Agreement and the Company or as part of Units
issued in payment of dividends on Preferred Shares;
WHEREAS, the Company has issued Warrants to GECC in
consideration for GECC making loans to the Company pursuant to the Credit
Agreement dated as of October 24, 1997 among the Company, GECC and the other
lenders and credit parties signatory thereto (the "Credit Agreement");
WHEREAS, in connection with the purchase and sale of the
Units, the making of loans pursuant to the Credit Agreement and the issuance of
the Warrants, the Company has agreed, on the terms and conditions set forth
herein, to register shares of Common Stock as set forth below.
NOW THEREFORE, in consideration of the foregoing recitals and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control" when used with respect to any specified person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
<PAGE> 2
"Business Day" means any day that is not a Saturday, a Sunday
or a legal holiday on which banking institutions in the State of New York are
not required to be open.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
corporate stock issued by such person, including each class of common stock and
preferred stock of such person.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Recitals.
"Credit Agreement" shall have the meaning set forth in the Recitals.
"Delay Period" shall have the meaning set forth in Section 2(d) hereof.
"Demand Notice" shall have the meaning set forth in Section 2(a)
hereof.
"Demand Registration" shall have the meaning set forth in Section 2(b)
hereof.
"Demanding Holders" means the Holders delivering the Demand Notice
pursuant to Section 2(a) hereof.
"Effectiveness Period" shall have the meaning set forth in Section 2(d) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"GECC Holders" means GECC and its Affiliates (to the extent that they
hold Registrable Shares or securities exercisable for Registrable Shares) and
any other holder of Registrable Shares, or securities exercisable for
Registrable Shares initially held by or issuable to GECC or an Affiliate of
GECC.
"Hold Back Period" shall have the meaning set forth in Section 4
hereof.
"Holder" means Pegasus Partners, L.P., Pegasus Related Partners, L.P.,
GECC or such other person or persons who owns Registrable Shares or securities
exercisable for Registrable Shares.
"Interruption Period" shall have the meaning set forth in Section 5
hereof.
"Majority-in-Interest" of any group of Holders means holders of more
than 50% of the Registrable Shares held by such Holders or obtainable by such
Holders upon exercise of Warrants.
2
<PAGE> 3
"Pegasus Holders" means Pegasus and their Affiliates (to the extent
that they hold Registrable Shares or securities exercisable for Registrable
Shares) and any other holder of Registrable Shares, or securities exercisable
for Registrable Shares, initially held by or issuable to Pegasus or an
Affiliate of Pegasus.
"person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Piggyback Registration" shall have the meaning set forth in Section 3
hereof.
"Preferred Shares" shall have the meaning set forth in the Recitals.
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Registrable Shares" means (i) shares of Common Stock issuable or
issued upon exercise of the Warrants and (ii) any shares of Common Stock issued
or issuable with respect to the shares of Common Stock referred to in clause
(i) above upon any stock split, stock dividend, recapitalization or similar
event; provided, however, that shares of Common Stock shall only be registrable
pursuant to this Agreement if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (ii) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect to such shares of Common Stock are removed upon the consummation
of such sale and the Company and the seller and purchaser of such shares of
Common Stock shall have received an opinion of counsel for the seller, which
shall be in form and content reasonably satisfactory to the Company and the
seller and purchaser and their respective counsel, to the effect that such
shares of Common Stock in the hands of the purchaser are freely transferable
without restriction or registration under the Securities Act in any public or
private transaction; provided, further, however, that shares of Common stock
issuable upon exercise of Warrants issued as part of Units shall not be deemed
"Registrable Shares" until the first anniversary of the date hereof.
"Registration" means registration under the Securities Act of an
offering of Registrable Shares pursuant to a Demand Registration or a Piggyback
Registration.
3
<PAGE> 4
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Shares
pursuant to the provisions of this Agreement, including the related Prospectus,
all amendments and supplements to such registration statement, including pre-
and post-effective amendments, all exhibits thereto and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"underwritten registration or underwritten offering" means a
registration under the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
"Units" shall have the meaning set forth in the Recitals.
"Warrants" mean (i) warrants to purchase Common Stock issued as part of
Units purchased by Pegasus pursuant to the Purchase Agreement or issued to
holders of Preferred Shares as part of Units issued in payment of dividends on
such Preferred Shares, (ii) warrants to purchase Common Stock issued to Pegasus
pursuant to Section 3.01(s) or 5.04 of the Purchase Agreement and (iii)
warrants to purchase Common Stock issued to GECC pursuant to the Warrant
Purchase Agreement dated as of October 24, 1997 between the Company and GECC.
SECTION 2. Demand Registration. (a) At any time and from time to
time, a Majority-in-Interest of the Pegasus Holders or a Majority-in-Interest
of the GECC Holders shall have the right, by written notice (the "Demand
Notice") given to the Company, to request the Company to register under and in
accordance with the provisions of the Securities Act all or any portion of the
Registrable Shares held by such Holders and/or the Registrable Shares for which
Warrants held by such Holders are exercisable, as designated by such Holders;
provided, however, that the aggregate number of Registrable Shares requested to
be registered pursuant to any Demand Notice shall be at least 50,000. Upon
receipt of any such Demand Notice, the Company shall promptly, but in no event
more than five days after receipt thereof, notify all other Holders of the
receipt of such Demand Notice and, subject to the limitations set forth below,
shall include in the proposed registration all Registrable Shares with respect
to which the Company has received written requests for inclusion therein within
20 days after delivery of the Company's notice. In connection with any Demand
Registration in which more than one holder of securities participates, in the
event that such Demand Registration involves an underwritten offering and the
managing underwriter or underwriters participating in such offering advise in
writing the Holders of Registrable Shares and the holders of other securities
to be included in such offering that the total number of Registrable Shares and
other securities to be included in such offering exceeds the amount that can be
sold in (or during the time of) such offering without delaying or jeopardizing
the success of such offering (including the price per share of the
4
<PAGE> 5
Registrable Shares and other securities to be sold), then the amount of
Registrable Shares and other securities to be offered for the account of such
Holders shall be reduced as follows: first, pro rata on the basis of the number
of securities other than Registrable Shares requested to be registered by the
holders of such securities; second, pro rata on the basis of the number of
Registrable Shares requested to be registered by Holders other than the
Demanding Holders; and third, pro rata on the basis of the number of
Registrable Shares requested to be registered by the Demanding Holders. The
Pegasus Holders as a group shall be entitled to five Demand Registrations and
the GECC Holders as a group shall be entitled to one Demand Registration
pursuant to this Section 2; provided, that any Demand Registration that does
not become effective or is not maintained for the time period required in
accordance with Section 2(c) shall not count as one of such Demand
Registrations, except as set forth in Section 2(f). Anything herein to the
contrary notwithstanding, the Company shall not be required to effect a Demand
Registration pursuant to this Section 2 within a period of six (6) months after
the effective date of any other Demand Registration.
(b) The Company, within 45 days of the date on which the Company
receives a Demand Notice given by Holders in accordance with Section 2(a)
hereof, shall file with the SEC, and the Company shall thereafter use its best
efforts to cause to be declared effective within 90 days following the date the
Company receives such Demand Notice, a Registration Statement on the
appropriate form for the registration and sale, in accordance with the intended
method or methods of distribution, of the total number of Registrable Shares
specified by the Holders in such Demand Notice (a "Demand Registration").
(c) The Company shall use commercially reasonable efforts to keep
each Registration Statement filed pursuant to this Section 2 continuously
effective and usable for the resale of the Registrable Shares covered thereby
for a period of 270 days from the date on which the SEC declares such
Registration Statement effective, as such period may be extended pursuant to
this Section 2, or if shorter, until all the Registrable Shares covered by such
Registration Statement have been sold pursuant to such Registration Statement.
(d) The Company shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 2, or suspend the use of any effective
Registration Statement under this Section 2, for a reasonable period of time
which shall be as short as practicable, but in any event not in excess of 60
days (a "Delay Period"), if the Company determines in good faith that the
registration and distribution of the Registrable Shares covered or to be
covered by such Registration Statement would materially interfere with any
pending material financing, acquisition or corporate reorganization or other
material corporate development involving the Company or any of its subsidiaries
or would require premature disclosure thereof and promptly gives the Holders
written notice of such determination, containing a statement of the reasons for
such postponement and an approximation of the period of the anticipated delay;
provided, however, that (i) the aggregate number of days included in all Delay
Periods during any consecutive 12 months shall not exceed the aggregate of (x)
180 days minus (y) the number of days occurring during all Hold Back Periods
and Interruption Periods during such consecutive 12 months and (ii) a period of
at least
5
<PAGE> 6
60 days shall elapse between the termination of any Delay Period, Hold Back
Period or Interruption Period and the commencement of the immediately
succeeding Delay Period. If the Company shall so postpone the filing of a
Registration Statement, the Holders of Registrable Shares to be registered
shall have the right to withdraw the request for registration by giving written
notice from the Holders of a majority of the Registrable Shares that were to be
registered to the Company within 45 days after receipt of the notice of
postponement or, if earlier, the termination of such Delay Period. The time
period for which the Company is required to maintain the effectiveness of any
Registration Statement shall be extended by the aggregate number of days of all
Delay Periods, all Hold Back Periods and all Interruption Periods occurring
during such Registration and such period and any extension thereof is
hereinafter referred to as the "Effectiveness Period". The Company shall not
be entitled to initiate a Delay Period unless it shall (A) to the extent
permitted by agreements with other security holders of the Company,
concurrently prohibit sales by such other security holders under registration
statements covering securities held by such other security holders and (B) in
accordance with the Company's policies from time to time in effect, forbid
purchases and sales in the open market by senior executives of the Company.
(e) The Company shall not include any securities that are
not Registrable Shares in any Registration Statement filed pursuant to this
Section 2 without the prior written consent of the Holders of a majority in
number of the Registrable Shares covered by such Registration Statement.
(f) The Demanding Holders may, at any time prior to the
effective date of the Registration Statement relating to a Demand Registration,
revoke such request by providing a written notice to the Company revoking such
request. In the event of such revocation, the Demanding Holders shall
reimburse the Company for all of its out-of-pocket expenses incurred in
connection with the preparation, filing and processing of the Registration
Statement, unless (i) there has been a material adverse change in the business,
assets, properties, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, since the time of the Demand
Notice, (ii) such revocation was based on the Company's failure to comply in
any material respect with its obligations hereunder or (iii) the Demanding
Holders choose to count the Demand Registration as one of the Demand
Registrations to which the Demanding Holders are entitled pursuant to the
second-to-last sentence of Section 2(a).
SECTION 3. Piggyback Registration. () Right to Piggyback.
If at any time the Company proposes to file a registration statement under the
Securities Act with respect to a public offering of securities of the same type
as the Registrable Shares for its own account (other than a registration
statement (i) on Form S-8 or any successor form thereto, (ii) filed solely in
connection with a dividend reinvestment plan or employee benefit plan covering
officers or directors of the Company or its Affiliates or (iii) on Form S-4 or
any successor form thereto, in connection with a merger, acquisition or similar
corporate transaction) or for the account of any holder of securities of the
same type as the Registrable Shares, then the Company shall give written notice
of such proposed filing to the Holders at least 30 days before the anticipated
filing date. Such notice shall offer the Holders the opportunity to register
such amount of Registrable Shares as they may request (a "Piggyback
Registration"). Subject to Section 3(b) hereof, the Company shall include in
each such Piggyback Registration all Registrable Shares with respect to which
the Company has received written requests for inclusion therein within 20 days
after notice has been given to the Holders. Each Holder shall be permitted to
withdraw all or any portion of the Registrable
6
<PAGE> 7
Shares of such Holder from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration.
(b) Priority on Piggyback Registrations. The Company
shall permit the Holders to include all such Registrable Shares on the same
terms and conditions as any similar securities, if any, of the Company included
therein. Notwithstanding the foregoing, if the Company or the managing
underwriter or underwriters participating in such offering advise the Holders
in writing that the total amount of securities requested to be included in such
Piggyback Registration exceeds the amount which can be sold in (or during the
time of) such offering without delaying or jeopardizing the success of the
offering (including the price per share of the securities to be sold), then the
amount of securities to be offered for the account of the Holders and other
holders of securities who have piggyback registration rights with respect
thereto shall be reduced (to zero if necessary) pro rata on the basis of the
number or amount of Common Stock (or the equivalent) requested to be registered
by each such Holder or holder participating in such offering.
(c) Right To Abandon. Nothing in this Section 3 shall
create any liability on the part of the Company to the Holders if the Company
in its sole discretion should decide not to file a registration statement
proposed to be filed pursuant to Section 3(a) hereof or to withdraw such
registration statement subsequent to its filing, regardless of any action
whatsoever that a Holder may have taken, whether as a result of the issuance by
the Company of any notice hereunder or otherwise.
SECTION 4. Holdback Agreement. If (i) the Company shall file
a registration statement (other than in connection with the registration of
securities issuable pursuant to an employee stock option, stock purchase or
similar plan or pursuant to a merger, exchange offer or a transaction of the
type specified in Rule 145(a) under the Securities Act) with respect to the
Common Stock or similar securities or securities convertible into, or
exchangeable or exercisable for, such securities and (ii) with reasonable prior
notice, the Company (in the case of a nonunderwritten public offering by the
Company pursuant to such registration statement) advises the Holders in writing
that a public sale or distribution of such Registrable Shares would materially
adversely affect such offering or the managing underwriter or underwriters (in
the case of an underwritten public offering by the Company pursuant to such
registration statement) advises the Company in writing (in which case the
Company shall notify the Holders with a copy of such underwriter's notice) that
a public sale or distribution of Registrable Shares would materially adversely
impact such offering, then each Holder shall, to the extent not inconsistent
with applicable law, refrain from effecting any public sale or distribution of
Registrable Shares during the ten (10) days prior to the effective date of such
registration statement and until the earliest of (A) the abandonment of such
offering, (B) 180 days after the effective date of such registration statement
and (C) if such offering is an underwritten offering, the termination in
7
<PAGE> 8
whole or in part of any "hold back" period obtained by the underwriter or
underwriters in such offering from the Company in connection therewith (each
such period, a "Hold Back Period"), provided, that the Holder shall be under no
such obligation unless each other beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of at least 5% of the Company's Common Stock and each
director and executive officer of the Company also agrees to refrain from
effecting any such public sale or distribution.
SECTION 5. Registration Procedures. In connection with the
registration obligations of the Company pursuant to and in accordance with
Sections 2 and 3 hereof (and subject to Sections 2 and 3 hereof), the Company
shall use commercially reasonable efforts to effect such registration to permit
the sale of such Registrable Shares in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company shall as
expeditiously as possible (but subject to Sections 2 and 3 hereof):
(a) prepare and file with the SEC a Registration
Statement for the sale of the Registrable Shares on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate
in accordance with such Holders' intended method or methods of distribution
thereof, subject to Section 2(b) hereof, and use commercially reasonable
efforts to cause such Registration Statement to become effective and remain
effective as provided herein;
(b) prepare and file with the SEC such amendments
(including post-effective amendments) to such Registration Statement, and such
supplements to the related Prospectus, as may be required by the applicable
rules, regulations or instructions under the Securities Act during the
applicable period in accordance with the intended methods of disposition
specified by the Holders of the Registrable Shares covered by such Registration
Statement, make generally available earnings statements satisfying the
provisions of Section 11(a) of the Securities Act (provided that the Company
shall be deemed to have complied with this clause if it has complied with Rule
158 under the Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities Act;
provided, however, that before filing a Registration Statement or Prospectus,
or any amendments or supplements thereto (other than reports required to be
filed by it under the Exchange Act), the Company shall furnish to the Holders
of Registrable Shares covered by such Registration Statement and their counsel
for review and comment, copies of all documents required to be filed;
(c) notify the Holders of any Registrable Shares covered
by such Registration Statement promptly and (if requested) confirm such notice
in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to such Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC for amendments or supplements to such
Registration Statement or the related Prospectus or for additional information
regarding such Holders, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such Registration Statement or the initiation
of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any
8
<PAGE> 9
proceeding for such purpose, and (v) of the happening of any event that
requires the making of any changes in such Registration Statement, Prospectus
or documents incorporated or deemed to be incorporated therein by reference so
that they will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(d) use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such Registration
Statement, or the lifting of any suspension of the qualification or exemption
from qualification of any Registrable Shares for sale in any jurisdiction in
the United States;
(e) furnish to the Holder of any Registrable Shares
covered by such Registration Statement, each counsel for such Holders and each
managing underwriter, if any, without charge, one conformed copy of such
Registration Statement, as declared effective by the SEC, and of each
post-effective amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed to be
incorporated therein by reference; and deliver, without charge, such number of
copies of the preliminary prospectus, any amended preliminary prospectus, each
final Prospectus and any post- effective amendment or supplement thereto, as
such Holder may reasonably request in order to facilitate the disposition of
the Registrable Shares of such Holder covered by such Registration Statement in
conformity with the requirements of the Securities Act;
(f) prior to any public offering of Registrable Shares
covered by such Registration Statement, use commercially reasonable efforts to
register or qualify such Registrable Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Holders of such
Registrable Shares shall reasonably request in writing; provided, however, that
the Company shall in no event be required to qualify generally to do business
as a foreign corporation or as a dealer in any jurisdiction where it is not at
the time so qualified or to execute or file a general consent to service of
process in any such jurisdiction where it has not theretofore done so or to
take any action that would subject it to general service of process or taxation
in any such jurisdiction where it is not then subject;
(g) upon the occurrence of any event contemplated by
paragraph 5(c)(v) above, prepare a supplement or post-effective amendment to
such Registration Statement or the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference and file any
other required document so that, as thereafter delivered to the purchaser of
the Registrable Shares being sold thereunder (including upon the termination of
any Delay Period), such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(h) use its best efforts to cause all Registrable Shares
covered by such Registration Statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed or quoted and, if no such securities are so listed,
9
<PAGE> 10
to be listed on the Nasdaq Stock Market and, if listed on the Nasdaq Stock
Market, use its best efforts to secure designation of all such Registrable
Shares covered by such registration statement as "NASDAQ Securities" within the
meaning of Rule 11Aa2-1 promulgated under the Exchange Act or, failing that, to
secure Nasdaq Stock Market authorization for such Registrable Shares and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Shares with
the National Association of Securities Dealers, Inc. (the "NASD");
(i) on or before the effective date of such Registration
Statement, provide the transfer agent of the Company for the Registrable Shares
with printed certificates for the Registrable Shares covered by such
Registration Statement, which are in a form eligible for deposit with The
Depository Trust Company;
(j) make available for inspection by any Holder of
Registrable Shares included in such Registration Statement, any underwriter
participating in any offering pursuant to such Registration Statement, and any
attorney, accountant or other agent retained by any such Holder or underwriter
(collectively, the "Inspectors"), all financial and other records and other
information, pertinent corporate documents and properties of any of the Company
and its subsidiaries and affiliates (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibilities; provided, however, that the Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed to any Inspector
unless such Inspector signs a confidentiality agreement reasonably satisfactory
to the Company (which shall permit the disclosure of such Records in such
Registration Statement or the related Prospectus if necessary to avoid or
correct a material misstatement in or material omission from such Registration
Statement or Prospectus) or either (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction; provided further,
however, that (A) any decision regarding the disclosure of information pursuant
to subclause (i) shall be made only after consultation with counsel for the
applicable Inspectors and the Company and (B) with respect to any release of
Records pursuant to subclause (ii), each Holder of Registrable Shares agrees
that it shall, promptly after learning that disclosure of such Records is
sought in a court having jurisdiction, give notice to the Company so that the
Company, at the Company's expense, may undertake appropriate action to prevent
disclosure of such Records; and
(k) if such offering is an underwritten offering, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such other
appropriate and reasonable actions requested by the Holders of a majority of
the Registrable Shares being sold in connection therewith (including those
reasonably requested by the managing
10
<PAGE> 11
underwriters) in order to expedite or facilitate the disposition of such
Registrable Shares, and in such connection, (i) use commercially reasonable
efforts to obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters and counsel to the Holders of the
Registrable Shares being sold), addressed to each selling Holder of Registrable
Shares covered by such Registration Statement and each of the underwriters as
to the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such counsel
and underwriters, (ii) use commercially reasonable efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
selling holder of Registrable Shares covered by the Registration Statement
(unless such accountants shall be prohibited from so addressing such letters by
applicable standards of the accounting profession) and each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings, (iii) if requested and if an underwriting agreement is
entered into, provide indemnification provisions and procedures reasonably
requested by such underwriters. The above shall be done at each closing under
such underwriting or similar agreement, or as and to the extent required
thereunder. The Company may require each Holder of Registrable Shares covered
by a Registration Statement to furnish such information regarding such Holder
and such Holder's intended method of disposition of such Registrable Shares as
it may from time to time reasonably request in writing. If any such
information is not furnished within a reasonable period of time after receipt
of such request, the Company may exclude such Holder's Registrable Shares from
such Registration Statement. Each Holder of Registrable Shares covered by a
Registration Statement agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5(c)(ii),
5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, that such Holder shall forthwith
discontinue disposition of any Registrable Shares covered by such Registration
Statement or the related Prospectus until receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(g) hereof, or
until such Holder is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amended or
supplemented Prospectus or any additional or supplemental filings which are
incorporated, or deemed to be incorporated, by reference in such Prospectus
(such period during which disposition is discontinued being an "Interruption
Period") and, if requested by the Company, the Holder shall deliver to the
Company (at the expense of the Company) all copies then in its possession,
other than permanent file copies then in such holder's possession, of the
Prospectus covering such Registrable Shares at the time of receipt of such
request. Each Holder of Registrable Shares covered by a Registration Statement
further agrees not to utilize any material other than the applicable current
preliminary prospectus or Prospectus in connection with the offering of such
Registrable Shares.
SECTION 6. Registration Expenses. Whether or not any
Registration Statement is filed or becomes effective but subject to Section
2(f), the Company shall pay all costs, fees and expenses incident to the
Company's performance of or compliance with this Agreement, including (i) all
registration and filing fees, including NASD filing fees, (ii) all fees and
expenses of compliance with securities or Blue Sky laws, including reasonable
fees and disbursements of counsel in connection therewith, (iii) printing
expenses (including expenses of printing
11
<PAGE> 12
certificates for Registrable Shares and of printing prospectuses if the
printing of prospectuses is requested by the Holders or the managing
underwriter, if any), (iv) messenger, telephone and delivery expenses, (v) fees
and disbursements of counsel for the Company, (vi) fees and disbursements of
all independent certified public accountants of the Company (including expenses
of any "cold comfort" letters required in connection with this Agreement) and
all other persons retained by the Company in connection with such Registration
Statement, (vii) fees and disbursements of one counsel, other than the
Company's counsel, representing all of the Holders of Registrable Shares being
registered, selected by a Majority-in-Interest of Holders of the Registrable
Shares being registered, or in the event of a Demand Registration, selected by
the Demanding Holders and reasonably satisfactory to a Majority-in-Interest of
Holders of the Registrable Shares being registered other than the Demanding
Holders, (viii) fees and disbursements of underwriters customarily paid by the
issuers or sellers of securities and (ix) all other costs, fees and expenses
incident to the Company's performance or compliance with this Agreement.
Notwithstanding the foregoing, any discounts, commissions or brokers' fees or
fees of similar securities industry professionals and any transfer taxes
relating to the disposition of the Registrable Shares by a Holder, will be
payable by such Holder and the Company will have no obligation to pay any such
amounts.
SECTION 7. Underwriting Requirements. (a) Subject to
Section 7(b) hereof, the Demanding Holders shall have the right, by written
notice, to require that any Demand Registration provide for an underwritten
offering.
(b) In the case of any underwritten offering pursuant to
a Demand Registration, the Demanding Holders shall select the institution or
institutions that shall manage or lead such offering, which institution or
institutions shall be reasonably satisfactory to the Company and to a
Majority-in-Interest of the Holders participating in such offering, other than
the Demanding Holders. In the case of any underwritten offering pursuant to a
Piggyback Registration, the Company shall select the institution or
institutions that shall manage or lead such offering. No Holder shall be
entitled to participate in an underwritten offering unless and until such
Holder has entered into an underwriting or other agreement with such
institution or institutions for such offering in such form as the Company and
such institution or institutions shall determine.
(c) Each Holder participating in a Registration shall
promptly supply in writing such information as the Demanding Holders, the
Company or the underwriters reasonably request.
SECTION 8. Indemnification. () Indemnification by the
Company. The Company shall, without limitation as to time, indemnify and hold
harmless, to the full extent permitted by law, each Holder of Registrable
Shares whose Registrable Shares are covered by a Registration Statement or
Prospectus, the officers, directors and agents and employees of each of them,
each Person who controls each such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent lawful, from and against any and
12
<PAGE> 13
all losses, claims, damages, liabilities, judgment, costs (including, without
limitation, costs of investigation, preparation and reasonable attorneys' fees)
and expenses (collectively, "Losses"), as incurred, arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in
such Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are based upon information furnished in writing to the Company by or
on behalf of such Holder expressly for use therein.
(b) Indemnification by Holder of Registrable Shares. In
connection with any Registration Statement in which a Holder is participating,
such Holder shall indemnify and hold harmless, to the full extent permitted by
law, the Company, its directors, officers, agents or employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act) and the directors, officers, agents or
employees of such controlling Persons, from and against all Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in such Registration Statement or the related Prospectus or any
amendment or supplement thereto, or any preliminary prospectus, or arising out
of or based upon any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission or alleged omission is based upon any information
furnished in writing by or on behalf of such Holder to the Company expressly
for use in such Registration Statement or Prospectus. Each Holder's indemnity
obligations under this Section 8 shall be limited to the total sales proceeds
(net of all underwriting discounts and commissions) actually received by such
Holder in connection with the applicable offering.
(c) Conduct of Indemnification Proceedings. If any
Person shall be entitled to indemnity hereunder (an "indemnified party"), such
indemnified party shall give prompt notice to the party from which such
indemnity is sought (the "indemnifying party") of any claim or of the
commencement of any proceeding with respect to which such indemnified party
seeks indemnification or contribution pursuant hereto; provided, however, that
the delay or failure to so notify the indemnifying party shall not relieve the
indemnifying party from any obligation or liability except to the extent that
the indemnifying party has been prejudiced by such delay or failure. The
indemnifying party shall have the right, exercisable by giving written notice
to an indemnified party promptly after the receipt of written notice from such
indemnified party of such claim or proceeding, to assume, at the indemnifying
party's expense, the defense of any such claim or proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that (i)
an indemnified party shall have the right to employ separate counsel in any
such claim or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless: (1) the indemnifying party agrees to pay such fees and expenses;
(2) the indemnifying party fails promptly to assume the defense of such claim
or proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and the indemnifying
party,
13
<PAGE> 14
and such indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it that are inconsistent with those
available to the indemnifying party or that a conflict of interest is likely to
exist among such indemnified party and any other indemnified parties (in which
case the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party); and (ii) subject to clause
(3) above, the indemnifying party shall not, in connection with any one such
claim or proceeding or separate but substantially similar or related claims or
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one firm of attorneys (together with appropriate local counsel) at any time for
all of the indemnified parties, or for fees and expenses that are not
reasonable. Whether or not such defense is assumed by the indemnifying party,
such indemnified party shall not be subject to any liability for any settlement
made without its consent. The indemnifying party shall not consent to entry of
any judgment or enter into any settlement unless (i) there is no finding or
admission of any violation of any rights of any person and no effect on any
other claims that may be made against the indemnified party, (ii) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party and (iii) such judgment or settlement includes as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release, in form and substance reasonably satisfactory to the indemnified
party, from all liability in respect of such claim or litigation for which such
indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in
this Section 8 is unavailable to an indemnified party in respect of any Losses
(other than in accordance with its terms), then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue statement of a
material fact or omission or alleged omission to state a material fact, has
been taken by, or relates to information supplied by, such indemnifying party
or indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The amount paid or payable by a party as a result of any Losses
shall be deemed to include any legal or other fees or expenses incurred by such
party in connection with any investigation or proceeding. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 8(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. Notwithstanding the provisions of
this Section 8(d), an indemnifying party that is a Holder shall not be required
to contribute any amount which is in excess of the amount by which the total
proceeds (net of all underwriting discounts and commissions) received by such
Holder from the sale of the Registrable Shares sold by such Holder in the
applicable offering exceeds the amount of any damages that such indemnifying
14
<PAGE> 15
party has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
SECTION 9. Granting of Registration Rights. The Company
shall not grant any registration rights inconsistent with those granted
hereunder or that give any securityholder a position with respect to cut-backs
that are superior to the Holders' position as granted herein, without the
consent of a Majority-in-Interest of the Holders of the Registrable Shares
(voting together as a single class).
SECTION 10. Miscellaneous. (a) Rules 144 and 144A. The
Company covenants that it will file any reports required to be filed by it
under the Securities Act and the Exchange Act so as to enable Holders holding
Registrable Shares to sell such Registrable Shares without registration under
the Securities Act within the limitation of the exemptions provided by (a)
Rules 144 and 144A under the Securities Act, as each such Rule may be amended
from time to time, or (b) any similar rule or rules hereafter adopted by the
SEC. Upon the request of any such Holder, the Company will forthwith deliver
to such Holder a written statement as to whether it has complied with such
requirements.
(b) Termination. This Agreement and the obligations of
the Company and the Holders hereunder (other than Section 8 hereof) shall
terminate on the first date on which no Registrable Shares remain outstanding.
(c) Notices. All notices, demands, requests, or other
communications which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in writing and
shall be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery (including delivery
by courier), or facsimile transmission, addressed as follows:
(i) If to the Company:
Code Alarm Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: Rand Mueller and Craig Camalo
Facsimile: (248) 585-4799
15
<PAGE> 16
with a copy to:
Pepper Hamilton & Scheetz LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: Dennis S. Kayes, Esq.
Facsimile: (313) 259-7926
(ii) If to any Holder, at its last known address
appearing on the books of the Company maintained for such purpose.
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication shall be deemed to have
been duly given five business days after being deposited in the mail, postage
prepaid, if mailed; when delivered by hand, if personally delivered; or upon
receipt, if sent by facsimile (followed by a confirmation copy sent by either
overnight or two (2) day courier).
(d) Separability. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect.
(e) Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
devisees, legatees, legal representatives, successors and assigns.
(f) Entire Agreement. This Agreement represents the
entire agreement of the parties and shall supersede any and all previous
contracts, arrangements or understandings between the parties hereto with
respect to the subject matter hereof.
(g) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of a
Majority-in-Interest of the Holders. Notwithstanding the foregoing, this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions thereof may not be given, (i) in a manner
which adversely affects the rights of the GECC Holders, unless the Company has
obtained the written consent of a Majority-in-Interest of the GECC Holders or
(ii) in a manner which adversely affects the rights of the Pegasus Holders,
unless the Company has obtained the written consent of a Majority-in-Interest
of the Pegasus Holders.
(h) Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
16
<PAGE> 17
(i) Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be one and the same agreement, and
shall become effective when counterparts have been signed by each of the
parties and delivered to each other party.
(j) Governing Law; Consent to Jurisdiction and Venue. In
all respects, including all matters of construction, validity and performance,
this Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. EACH OF THE COMPANY, PEGASUS AND GECC CONSENTS TO
PERSONAL JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND
AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE
CITY OF NEW YORK, STATE OF NEW YORK. Service of process on the Company or any
Holder in any action arising out of or relating to this Agreement shall be
effective if mailed to such party in accordance with the procedures and
requirements set forth in Section 10(c). Nothing herein shall preclude any
Holder or the Company from bringing suit or taking other legal action in any
other jurisdiction.
(k) Mutual 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 THEIR DISPUTES 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 ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
(l) Calculation of Time Periods. Except as otherwise
indicated, all periods of time referred to herein shall include all Saturdays,
Sundays and holidays; provided, however, that if the date to perform the act or
give any notice with respect to this Agreement shall fall on a day other than a
Business Day, such act or notice may be timely performed or given if performed
or given on the next succeeding Business Day.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
CODE ALARM INC.
By: /s/ Rand Mueller
--------------------------
Name: Rand Mueller
Title: President
PEGASUS PARTNERS, L.P.
By: Pegasus Investors, L.P., its general partner
By: Pegasus Investors GP, Inc., its general partner
By: /s/ Richard Cion
--------------------------
Name: Richard Cion
Title: Vice President
PEGASUS RELATED PARTNERS, L.P.
By: Pegasus Investors, L.P., its general partner
By: Pegasus Investors GP, Inc., its general partner
By: /s/ Richard Cion
--------------------------
Name: Richard Cion
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Timothy S. Van Kirk
--------------------------
Name: Timothy S. Van Kirk
Title: Duly Authorized Signatory
18
<PAGE> 1
EXHIBIT 10.60
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 27, 1997.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED
EXCEPT AS PART OF UNITS WITH SHARES OF SERIES A PREFERRED STOCK OF CODE ALARM,
INC. AND ARE SUBJECT TO REPURCHASE BY CODE ALARM, INC. IN ACCORDANCE WITH THE
TERMS OF A UNIT PURCHASE AGREEMENT DATED AS OF OCTOBER 27, 1997 AMONG CODE
ALARM, INC., PEGASUS PARTNERS, L.P. AND PEGASUS RELATED PARTNERS, L.P.
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
Issuance Date: October 27, 1997
Issued To: [Pegasus Partners, L.P.] [Pegasus Related Partners, L.P.]
No. of Shares of Common Stock: _________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1. Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3. Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4. Continued Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2. Division and Combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4. Maintenance of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1. Stock Dividends, Subdivisions and Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2. Certain Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3. Issuance of Additional Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4. Issuance of Warrants or Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5. Issuance of Convertible Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6. Superseding Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7. Other Provisions Applicable to Adjustments Under This Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.8. Reorganization, Reclassification, Liquidation, Dissolution, Merger, Consolidation or Disposition of Assets . . . . . . 16
4.9. Other Action Affecting Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10. Certain Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANTHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Notice of Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2. Notice of Certain Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY . . . . . . . . 18
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9. RESTRICTIONS ON TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
9.1. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Notice of Proposed Transfers; Requests for Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. No Transfer to Directed Electronics, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4. Termination of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. SUPPLYING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
13. REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
13.1. Obligation to Repurchase Warrant and Warrant Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.2. Payment of Repurchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.3. Obligation to Repurchase When Preferred Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16. DIVIDENDS ON UNDERLYING COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.1. Nonwaiver and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.2. Notice Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.5. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.8. Governing Law; Consent to Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.9. Mutual Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
ii
<PAGE> 4
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 27, 1997.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED
EXCEPT AS PART OF UNITS WITH SHARES OF SERIES A PREFERRED STOCK OF CODE ALARM,
INC. AND ARE SUBJECT TO REPURCHASE BY CODE ALARM, INC. IN ACCORDANCE WITH THE
TERMS OF A UNIT PURCHASE AGREEMENT DATED AS OF OCTOBER 27, 1997 AMONG CODE
ALARM, INC., PEGASUS PARTNERS, L.P. AND PEGASUS RELATED PARTNERS, L.P.
Warrant Number: ___________ Date of Issuance: ________
No. of Shares of Common Stock: ________
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
THIS IS TO CERTIFY THAT [Pegasus Partners, L.P.] [Pegasus Related Partners,
L.P.] or its registered assigns, is entitled, at any time during the Exercise
Period (as hereinafter defined), to purchase from Code Alarm Inc., a Michigan
corporation (the "Company"), _______________________ (______) shares of Common
Stock (as hereinafter defined and subject to adjustment as provided herein), in
whole or in part, including fractional parts, at a purchase price of $1.8759559
per share (subject to adjustment as set forth herein), all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings set
forth below:
<PAGE> 5
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Closing Date, other than Warrant Stock,
whether now authorized or not.
"Affiliate" of any Person shall mean a Person that directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with, such Person.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Closing Date" shall mean October 27, 1997.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates) the
Common Stock, no par value, of the Company as constituted on the Closing Date,
and any capital stock into which such Common Stock may thereafter be changed,
and shall also include (i) capital stock of the Company of any other class
(regardless of how denominated) issued to the holders of shares of Common Stock
upon any reclassification thereof which is also not preferred as to dividends
or assets over any other class of stock of the Company and which is not subject
to redemption and (ii) shares of common stock of any successor or acquiring
corporation (as defined in Section 4.8) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a
specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common Stock on
any date herein specified, the average of the daily market prices for the 20
consecutive Trading Days immediately preceding such date. The daily market
price for each such Trading Day shall be (i) the last sale price on such day on
the principal stock exchange on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any such
exchange, the last reported sale price as officially quoted on any such
exchange, (iii) if the Common Stock is not then listed or admitted to trading
on any stock exchange but is traded on the Nasdaq Stock Market, the last
reported sale price as officially quoted on the Nasdaq Stock Market, (iv) if
the Common Stock is not then traded on the Nasdaq Stock Market, the last
reported sale price on the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices), or if such sale price is not available
on such date, the average of the closing bid and
2
<PAGE> 6
asked prices on such date as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices), or (v) if there is no such organization or agency, as
furnished by any member of the NASD selected mutually by the Majority Holders
and the Company or, if they cannot agree upon such selection, by a member
selected by two such members of the NASD, one of which shall be selected by the
Majority Holders and one of which shall be selected by the Company.
"Current Warrant Price" shall mean, in respect of a share of Common Stock at
any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date. On the Closing Date, the
Current Warrant Price is $1.8759559 per share of Common Stock, and is subject
to adjustment pursuant to Section 4.
"DEI" shall mean Directed Electronics, Inc., a California corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean an infinite period beginning on the Closing
Date; provided, however, that if the Company shall have exercised its rights to
redeem the Preferred Shares pursuant to Section 8.01(a) of the Unit Purchase
Agreement, the Exercise Period shall end at 5:00 P.M., Michigan time, on the
seventh anniversary of the Closing Date.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant outstanding on such date
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date, whether or not such options,
warrants or other securities are presently convertible or exercisable.
"Holder" shall mean, as the context requires, the Person in whose name this
Warrant or one of the other Warrants is registered on the books of the Company
maintained for such purpose and/or the Person holding any Warrant Stock.
"Independent Counsel" shall mean counsel to the Holder reasonably acceptable
to the Company.
"Majority Holders" shall mean, at any given time, holders of Warrants and
Other Warrants then outstanding who would hold a majority of the Common Stock
purchasable upon exercise of all Warrants and Other Warrants in the event all
Warrants and Other Warrants were so exercised at such time.
3
<PAGE> 7
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"New Securities" shall mean any Additional Shares of Common Stock, and any
rights or options to purchase any Additional Shares of Common Stock, and any
Convertible Securities.
"Other Property" shall have the meaning set forth in Section 4.8.
"Other Warrants" shall mean warrants issued to Pegasus Partners, L.P. or
Pegasus Related Partners, L.P. pursuant to Section 3.01(s) or 5.04 of the Unit
Purchase Agreement, and all warrants issued upon transfer, division or
combination of, or in substitution or exchange for, any thereof.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Payment Shares" shall have the meaning set forth in Section 2.1.
"Permitted Issuances" shall mean (i) the issuance of shares of Common Stock
pursuant to an underwritten public offering, (ii) the issuance of Other
Warrants, (iii) the issuance of shares of Common Stock upon exercise of the
Warrants or the Other Warrants, (iv) the issuance of up to 280,000 shares of
Common Stock upon the exercise of options issued to management employees of the
Company or its Subsidiaries pursuant to the Company's 1987 Stock Option Plan,
(v) provided that the Charter Amendment (as defined in the Unit Purchase
Agreement) has (1) been approved and adopted by the Company's stockholders, (2)
been filed with the Department of Consumer and Industry Services of the State
of Michigan and (3) become effective, the issuance of up to 1,317,178 shares of
Common Stock or options to acquire such shares to management employees of the
Company or its Subsidiaries pursuant to the Company's 1997 Stock Option Plan,
(vi) the issuance of Preferred Shares and (vii) the issuance to General
Electric Capital Corporation on October 24, 1997 of warrants to purchase up to
131,718 shares of Common Stock (subject to adjustment as provided therein) and
the issuance of Common Stock upon the exercise thereof.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Preferred Shares" shall mean shares of Series A Preferred Stock of the
Company.
4
<PAGE> 8
"Registration Rights Agreement" shall mean the Registration Rights Agreement
dated as of the Closing Date among the Company, Pegasus Partners, L.P., Pegasus
Related Partners, L.P. and General Electric Capital Corporation.
"Reorganization" shall have the meaning set forth in Section 4.8.
"Repurchase Price" shall have the meaning set forth in Section 13.2.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Restrictions" shall have the meaning set forth in Section 13.1(c).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean any corporation of which an aggregate of more than
50% of the outstanding stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether, at the
time, 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) is at
the time, directly or indirectly, owned legally or beneficially by the Company
and/or one or more Subsidiaries of the Company.
"Trading Day" shall mean (i) any day on which stock is traded on the
principal stock exchange on which the Common Stock is listed or admitted to
trading, (ii) if the Common Stock is not then listed or admitted to trading on
any stock exchange but is traded on the Nasdaq Stock Market, any day on which
stock is traded on the Nasdaq Stock Market, or (iii) if the Common Stock is not
then traded on the Nasdaq Stock Market, any day on which stock is traded in the
over-the counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices).
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within
the meaning of the Securities Act.
"Unit Purchase Agreement" shall mean the Unit Purchase Agreement dated as of
the Closing Date, by and among the Company, Pegasus Partners, L.P. and Pegasus
Related Partners, L.P.
"Units" shall mean units consisting of one Preferred Share and one warrant to
purchase 72.2525247 shares of Common Stock, as adjusted from time to time.
5
<PAGE> 9
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by
Holders of the Warrants upon the exercise thereof.
"Warrants" shall mean the warrants, dated October 27, 1997 issued by the
Company to Pegasus Partners, L.P. and Pegasus Related Partners, L.P. as part of
Units and all warrants issued as part of Units issued as dividends on the
Preferred Shares, and all warrants issued upon transfer, division or combination
of, or in substitution or exchange for, any thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. At any time during the Exercise Period, the
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder provided, however,
that the Company shall only be required to issue shares to the extent such
shares are required to be available for issuance pursuant to Section 7; and
provided, further, however, that for all purposes hereunder other than its
direct exercise for shares of Common Stock (including but not limited to for
purposes of Section 4.8 and 16), this Warrant shall be deemed to be exercisable
for the full amount of shares of Common Stock represented by this Warrant,
without regard to the number of shares of Common Stock available or set aside
for issuance upon such exercise..
In order to exercise this Warrant, in whole or in part, the Holder shall
deliver to the Company at its office at 950 East Whitcomb, Madison Heights,
Michigan 48071, or at the office or agency designated by the Company pursuant
to Section 12, (i) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price in the manner provided below, and
(iii) this Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by the Holder or its duly appointed agent or attorney. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute or cause to be executed and deliver
or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the Holder
shall request in the notice and shall be registered in the name of the Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the notice,
together with payment of the Warrant Price by the certificates representing
6
<PAGE> 10
Preferred Shares (together with instruments of transfer reasonably acceptable
to the Company) or the cash or check or checks, as applicable, and this
Warrant, are received by the Company as described above and all taxes required
to be paid by the Holder, if any, pursuant to Section 2.2 prior to the issuance
of such shares have been paid. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, subject to the following paragraph,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired this Warrant (or part hereof) or any
Warrant Stock otherwise than in accordance with this Warrant.
So long as the Company has not exercised its rights to redeem the
Preferred Shares pursuant to Section 8.01(a) of the Unit Purchase Agreement,
payment of the Warrant Price shall be made by delivery of Preferred Shares with
an aggregate stated value, plus accrued and unpaid dividends thereon, equal to
the Warrant Price. So long as the Company has not exercised its rights to redeem
the Preferred Shares pursuant to Section 8.01(a) of the Unit Purchase Agreement,
if, following exercise of any portion of this Warrant, the Holder no longer
holds any Preferred Shares, then the remainder of this Warrant shall be
cancelled and no new Warrant shall be issued in place thereof.
At any time after the Company has exercised its rights to redeem the
Preferred Shares pursuant to Section 8.01(a) of the Unit Purchase Agreement,
payment of the Warrant Price shall be made at the option of the Holder by (i)
cash, (ii) wire transfer to an account in a bank located in the United States
designated for such purpose by the Company, (iii) certified or official bank
check, or (iv) any combination of the foregoing; provided, however, that the
Holder shall have the right, at its election, in lieu of delivering the Warrant
Price in cash, to instruct the Company in the form of Subscription Notice to
retain, in payment of the Warrant Price, a number of shares of Common Stock (the
"Payment Shares") equal to the quotient of the aggregate Warrant Price of the
shares as to which this Warrant is then being exercised divided by the Current
Market Price.
2.2. Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of the
Holder, and in such case the Company shall not be
7
<PAGE> 11
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the satisfaction of the
Company that no such tax or other charge is due.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. Continued Validity. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as the Holder under Sections 6, 10,
13, 14, 15 and 17 of this Warrant, subject to the obligations thereunder. The
Company will, at the time of each exercise of this Warrant, in whole or in part,
upon the request of the holder of the shares of Common Stock issued upon such
exercise hereof, acknowledge in writing, in form reasonably satisfactory to such
holder, its continuing obligation to afford to such holder all such rights;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. So long as the Company has not exercised its rights to
redeem the Preferred Shares pursuant to Section 8.01(a) of the Unit Purchase
Agreement, this Warrant may only be transferred together with Preferred Shares
issued as part of Units containing all or a portion of this Warrant. Subject to
compliance with the foregoing sentence and with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by the Holder or its agent or attorney and if
such transfer is not to be made pursuant to Section 13, funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to the
first sentence of this Section 3.1 and to Section 9, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees and in the
denomination(s) specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly
assigned in compliance with the first sentence of this Section 3.1 and with
Section 9, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued. If requested by the Company, a new
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Holder shall acknowledge in writing, in form reasonably satisfactory to the
Company, such Holder's continuing obligation under Section 9.
3.2. Division and Combination. Subject to Section 9, this Warrant may
be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1. Stock Dividends, Subdivisions and Combinations.If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, by a reverse stock split or otherwise,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would
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own or be entitled to receive after the happening of such event, and (ii) the
Current Warrant Price shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other
than cash, Convertible Securities or Additional Shares of Common
Stock);
and the Holder of this Warrant has not received a payment on behalf of such
dividend or distribution pursuant to Section 16 hereof, then (i) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product obtained by multiplying the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
adjustment by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock, minus the amount allocable to one share of Common Stock of (x) any such
cash so distributable and (y) the fair value (as determined in good faith by
the Board of Directors of the Company and, if requested by the Holder,
supported by an opinion from an investment banking firm of recognized national
standing reasonably acceptable to the Majority Holders) of any and all such
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so distributable, and (ii)
the Current Warrant Price shall be adjusted to equal (A) the Current Warrant
Price multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
A reclassification of the Common Stock (other than a change in par value, or
from par value to no par value or from no par value to par value) into shares
of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares
of such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such
change shall be deemed a subdivision or
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combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) In the event
the Company shall issue or sell any Additional Shares of Common Stock, other
than Permitted Issuances, for a consideration per Additional Share of Common
Stock less than the greater of the Current Warrant Price and the Current Market
Price, then the Current Warrant Price shall be reduced to the lower of the
prices calculated as follows:
(1) by dividing (A) an amount equal to the sum of (x) the number of
Fully Diluted Outstanding shares of Common Stock immediately prior to such issue
or sale multiplied by the then existing Current Warrant Price plus (y) the
aggregate consideration, if any, received by the Company upon such issue or
sale, by (B) the total number of Fully Diluted Outstanding shares of Common
Stock outstanding immediately after such issue or sale; and
(2) by multiplying the then existing Current Warrant Price by a fraction
the numerator of which shall be the sum of (x) the number of Fully Diluted
Outstanding shares of Common Stock immediately prior to such issue or sale
multiplied by the Current Market Price per share of Common Stock immediately
prior to such issue or sale plus (y) the consideration received by the Company
upon such issue or sale, and the denominator of which shall be the total number
of Fully Diluted Outstanding shares of Common Stock immediately after such issue
or sale multiplied by the Current Market Price per share of Common Stock
immediately prior to such issue or sale.
For purposes of this subsection (a), the date as of which the Current
Market Price per share of Common Stock shall be computed shall be the earlier of
the date upon which the Company shall (i) enter into a firm contract for the
issuance of such shares or (ii) issue such shares.
Upon any adjustment of the Current Warrant Price as provided in this
Section 4.3(a), the Holder shall thereafter be entitled to purchase, at the
Current Warrant Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Current Warrant Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable hereunder
immediately prior to such adjustment and dividing the product thereof by the
Current Warrant Price resulting from such adjustment.
(b) The provisions of this Section 4.3 shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is provided under
Section 4.1 or 4.2. No adjustment shall be made under this Section 4.3 upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
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issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. Except with respect to
Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants (other than the Warrants) or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
greater of the Current Warrant Price and the Current Market Price in effect
immediately prior to the time of such distribution, issue or sale, then the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3(a) on the
basis that (i) the maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding, (ii) the price per share for such Additional
Shares of Common Stock shall be deemed to be the lowest price per share at which
such Additional Shares of Common Stock are issuable to such holders, and (iii)
the Company shall have received all of the consideration, if any, payable for
such warrants or other rights as of the date of the actual issuance thereof. No
further adjustments of the number of shares of Common Stock for which this
Warrant is exercisable or of the Current Warrant Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
4.5. Issuance of Convertible Securities. Except with respect to
Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the greater of the Current Warrant Price and the
Current Market Price in effect immediately prior to the time of such issue or
sale, then the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3(a) on the basis that (i) the maximum number of Additional Shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding, (ii) the price
per share of such Additional Shares of Common Stock shall be deemed to be the
lowest possible price in any range of prices at which such Additional Shares of
Common Stock
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are available to such holders, and (iii) the Company shall have received all of
the consideration payable therefor, if any, as of the date of actual issuance
of such Convertible Securities. No further adjustment of the number of shares
of Common Stock for which this Warrant is exercisable or of the Current Warrant
Price shall be made under this Section 4.5 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable or of the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase or any warrant or other right to purchase any such
Convertible Securities for which adjustments thereof have been or are to be
made pursuant to other provisions of this Section 4, no further adjustments
shall be made by reason of such issue or sale.
4.6. Superseding Adjustment. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable shall
have been made pursuant to Section 4.4 or Section 4.5 as the result of any
issuance of warrants, rights or Convertible Securities, and either
(a) such warrants or rights, or the right of conversion or exchange in such
other Convertible Securities, shall expire, and all or a portion of such
warrants or rights, or the right of conversion or exchange with respect to
all or a portion of such other Convertible Securities, as the case may be,
shall not have been exercised, or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to such warrants or rights, or such other Convertible
Securities, shall be increased or decreased by virtue of provisions therein
contained,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
rights or options or other Convertible Securities on the then outstanding
Warrants, but not on any then outstanding Warrant Stock, on the basis of
(c) treating the number of Additional Shares of Common Stock or other
property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and receivable
therefor, and
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(d) treating any such warrants or rights or any such other Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase or decrease of the consideration
per share for which shares of Common Stock or other property are issuable
under such warrants or rights or other Convertible Securities.
4.7. Other Provisions Applicable to Adjustments Under This Section. The
following provisions shall be applicable to the making of adjustments provided
for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional Shares
of Common Stock or any Convertible Securities or any warrants or other rights
to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the
cash received by the Company therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the public offering price
(in any such case subtracting any amounts paid or receivable for accrued
interest or accrued dividends, but not subtracting any compensation,
discounts or expenses paid or incurred by the Company for and in the
underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors of the Company. In case any Additional Shares of Common Stock or
any Convertible Securities or any warrants or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the
fair value, as determined in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be attributable to
such Additional Shares of Common Stock, Convertible Securities, warrants or
other rights, as the case may be. The consideration for any Additional
Shares of Common Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received by the
Company for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration, if any, received by the Company for issuing warrants or
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other rights to subscribe for or purchase such Convertible Securities, plus
the consideration paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Company upon the exercise of the right of
conversion or exchange in such Convertible Securities. In case of the issuance
at any time of any Additional Shares of Common Stock or Convertible Securities
in payment or satisfaction of any dividends upon any class of stock other than
Common Stock, the Company shall be deemed to have received for such Additional
Shares of Common Stock or Convertible Securities a consideration equal to the
amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number
of shares of Common Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of the Common Stock, as provided for in Section 4.1) up
to, but not beyond the date of exercise if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than 1% of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment representing a change
of less than such minimum amount (except as aforesaid) which is postponed shall
be carried forward and made upon the earlier of (i) the date upon which such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment, and (ii) the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest
1/10th of a share
(d) When Adjustment Not Required. If the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes distributable
pursuant to this Section 4 by reason of the taking of any record of the
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holders of Common Stock, but prior to the occurrence of the event for which
such record is taken, the Holder exercises this Warrant, any Additional Shares
of Common Stock issuable and other property distributable upon exercise by
reason of such adjustment shall be held in escrow for the Holder by the
Company to be issued to the Holder upon and to the extent that the event
actually takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board of Directors
of the Company shall be required to make a determination in good faith of the
fair value of any item under this Section 4, such determination may be
challenged in good faith by the Majority Holders, and any dispute shall be
resolved by an investment banking firm of recognized national standing
selected by the Company and acceptable to the Majority Holders.
4.8. Reorganization, Reclassification, Liquidation, Dissolution, Merger,
Consolidation or Disposition of Assets. In case the Company shall reorganize
its capital, reclassify its capital stock, liquidate its assets, dissolve,
consolidate or merge with or into another corporation (where the Company is not
the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation or other entity (hereinafter, a "Reorganization") and, pursuant to
the terms of such Reorganization, shares of common stock of the successor or
acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Company, then the Holder shall have the
right following the effectiveness of such Reorganization to receive, upon
exercise of such Warrant, or, in the case of a liquidation of assets or a
dissolution to receive, upon such liquidation or dissolution, without taking
any further action, the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such Reorganization by a
holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event (without regard to the number of
shares of Common Stock available or set aside for issuance upon such exercise).
In case of any such Reorganization, the successor or acquiring corporation (if
other than the Company) shall expressly assume the due and punctual observance
and performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such appropriate modifications as are satisfactory to the
Holder in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8 "common stock of the successor
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or acquiring corporation" shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.8 shall similarly
apply to successive Reorganizations.
4.9. Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock,
other than any action described in this Section 4 for which a specific
adjustment is provided, then, unless such action will not have a materially
adverse effect upon the rights of the Holder, the number of shares of Common
Stock or other stock for which this Warrant is exercisable and/or the purchase
price thereof shall be adjusted in such manner as may be equitable in the
circumstances.
4.10. Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
5. NOTICES TO WARRANTHOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of Common
Stock or the class or type of stock or other property for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of this Warrant, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.2 or 4.7(a)), specifying the number of
shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.8 or 4.9) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 17.2. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by the
Holder or any prospective purchaser of a Warrant designated by the Holder.
5.2. Notice of Certain Corporate Action. The Holder shall be entitled
to the same rights to receive notice of corporate action as any holder of Common
Stock.
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6. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Current Warrant Price
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of the Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to the Holder, the continuing validity of this Warrant and the obligations of
the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, subject to the limitation set forth in
the last sentence of this paragraph, the Company shall at all times reserve and
keep available for issue upon the exercise of warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
the exercise in full of all outstanding Warrants and Other Warrants, the Company
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose, including, without
limitation, taking appropriate board action, recommending such an increase to
the holders of Common Stock, holding shareholders meetings, soliciting votes and
proxies in favor of such increase to obtain the requisite shareholder approval
and upon such approval, the Company shall reserve and keep available such
additional shares solely for the purpose of permitting the exercise of Warrants
or Other Warrants. Prior to the earlier of (i) May 31, 1998 or (ii) the
approval by the shareholders of the Company of an increase in the number of
authorized shares of Common Stock as contemplated in the Unit Purchase
Agreement, the Company shall be in compliance with this Section 7 to the extent
that it reserves and keeps available out of its authorized but unissued shares
of Common stock, solely for the purpose of
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permitting the exercise of Warrants and Shortfall Warrants (as defined in the
Unit Purchase Agreement), 2,267,421 shares of Common Stock.
All shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant and payment therefor in accordance with the terms of
such Warrant, shall be duly and validly issued, fully paid and nonassessable and
free and clear of any liens, claims and restrictions (other than as provided
herein). Except as provided in this Warrant, no stockholder of the Company has
or shall have any preemptive rights to subscribe for such shares of Common
Stock.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock or the type of consideration for which this
Warrant is exercisable or in the Current Warrant Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority under any federal or state law (otherwise than as provided in Section
9) before such shares may be so issued, the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be
duly registered.
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9. The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 9.
9.1. Restrictive Legends. (a) Except as otherwise provided in this
Section 9, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
legends in substantially the following form:
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"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or under the securities or blue sky
laws of any state and are subject to the conditions specified in a certain
Warrant dated October 27, 1997, originally issued by Code Alarm Inc. The
shares represented by this certificate may not be sold, or otherwise
transferred, in the absence of such registration or an exemption therefrom
under such Act and under any such applicable state laws, or in violation of
the provisions of the Warrant. A copy of the form of said Warrant is on file
with the Secretary of Code Alarm Inc. The holder of this certificate, by
acceptance of this certificate, agrees to be bound by the provisions of such
Warrant."
"The shares represented by this certificate are subject to the terms and
conditions of a Registration Rights Agreement, dated as of October 27, 1997."
(b) Except as otherwise provided in this Section 9, each Warrant shall be
stamped or otherwise imprinted with legends in substantially the following
form:
"This Warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended, or under the
securities or blue sky laws of any state and may not be sold, or otherwise
transferred, in the absence of such registration or an exemption therefrom
under such Act and under any such applicable state laws, or in violation of
the provisions of this Warrant."
"This Warrant and the securities represented hereby are subject to the
terms and conditions of a Registration Rights Agreement, dated as of October
27, 1997."
(c) (i) Unless and until the Company shall have exercised its right to
repurchase Units pursuant to Section 8.01(a) of the Unit Purchase Agreement,
each Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby may not be transferred
except as part of Units with shares of Series A Preferred Stock of Code
Alarm, Inc. and are subject to repurchase by Code Alarm, Inc. in accordance
with the terms of a Unit Purchase Agreement dated as of October 27, 1997
among Code Alarm, Inc., Pegasus Partners, L.P. and Pegasus Related Partners,
L.P."
20
<PAGE> 24
(ii) In the event the Company shall have repurchased Units pursuant to
Section 8.01(a) of the Unit Purchase Agreement, the Holder hereof shall be
entitled to receive from the Company, at the expense of the Company, a new
Warrant bearing the following legend in place of the third restrictive legend
set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
SECTION 9.1(c) HEREOF TERMINATED ON ____________, 199_, AND ARE OF NO
FURTHER FORCE AND EFFECT."
9.2. Notice of Proposed Transfers; Requests for Registration. Prior to
any Transfer or attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the Holder of such Warrants or Restricted Common Stock shall
deliver to the Company either a written opinion reasonably acceptable to the
Company of Independent Counsel addressed to the Company or a no-action letter
from the Commission to the effect that the proposed Transfer of such Warrants or
such Restricted Common Stock may be effected without registration under the
Securities Act and applicable state securities or blue sky laws. After delivery
of the written opinion or the no-action letter to the Company, such Holder
shall thereupon be entitled to Transfer such Warrants or such Restricted Common
Stock. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer shall bear the restrictive legend set forth in
Section 9.1(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(b), unless in the written opinion
of Independent Counsel addressed to the Company such legend is not required in
order to ensure compliance with the Securities Act.
9.3. No Transfer to Directed Electronics, Inc. The Holder shall not
sell or otherwise transfer any Warrants to DEI, any affiliate of DEI, Mr.
Darrell Issa, the president of DEI, any entity which, to the knowledge of the
Holder, is controlled by Mr. Issa, or any person who, to the knowledge of the
Holder, is a member of the immediate family (as such term is defined in Rule
16a-1 promulgated under the Exchange Act) of Mr. Issa.
9.4. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1(a) and (b) shall terminate as to any
particular Warrant or share of Warrant Stock or Restricted Common Stock (or
Common Stock issuable upon the exercise of the Warrants) (i) when and so long as
such security shall have been effectively registered under the Securities Act
and disposed of pursuant thereto, or (ii) when the Company shall have delivered
to the Holder or Holders of Warrants, Warrant Stock or Restricted Common Stock
the written opinion of Independent Counsel stating that such legend is not
required in order to ensure compliance with the Securities Act. Whenever the
restrictions imposed by Section 9.1(b), 9.2 and 9.3 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company, at the expense of the
21
<PAGE> 25
Company, a new Warrant bearing the following legend in place of the first
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTIONS 9.1(b), 9.2 AND 9.3 HEREOF TERMINATED ON
____________, 199_, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants entitled to bear
such legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as hereinabove provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 9.1(a).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
Holder of Restricted Common Stock in supplying such information as may be
reasonably requested by such Holder or reasonably necessary for such Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written indemnity agreement of Pegasus Partners, L.P. or
Pegasus Related Partners, L.P. shall be sufficient indemnity) and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, in
the case of mutilation, no indemnity shall be required if this warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK
22
<PAGE> 26
13.1. Obligation to Repurchase Warrant and Warrant Stock. (a) In the
event the Company has exercised its rights to redeem all of the Preferred Shares
pursuant to Section 8.01(a) of the Unit Purchase Agreement, at any time and from
time to time, at the election of the Holder, after the date which is three years
and six months after the Closing Date, the Holder may, by notice to the Company
(the "Put Notice"), demand repurchase of this Warrant, in whole or in part,
and/or all or part of the Holder's shares of Warrant Stock which are Restricted
Common Stock. Subject to the provisions of Section 13.2, the Company shall, on
the date (not less than 30 days after the date of the Put Notice) designated in
such Put Notice, repurchase from the Holder all or the portion of this Warrant
and/or the number of shares of such Holder's Warrant Stock designated in the Put
Notice for an amount determined by multiplying (x) the number of shares of
Warrant Stock and/or the Common Stock subject to this Warrant or portion thereof
being repurchased by (y) the Current Market Price per share of Common Stock
determined as of the date of the repurchase demand and, in the event of
repurchase of all or a portion of this Warrant, deducting from the product
thereby obtained the Current Warrant Price times the number of shares of Common
Stock subject to this Warrant (or portion thereof) being repurchased.
(b) Notwithstanding the provisions of Section 13.1(a), if, at any time
during the period between the date on which the Holder shall have delivered a
Put Notice and the date of repurchase by the Company pursuant thereto, a
Reorganization shall occur and the consideration received or receivable by
stockholders in connection with such Reorganization shall consist solely of
cash, then the Holder shall (whether or not the Holder shall have previously
surrendered its Warrant and/or Warrant Stock for repurchase by the Company
pursuant to this Section 13) be entitled to receive, on the date of such
repurchase, the higher of (i) the amount payable to the Holder as determined
pursuant to Section 13.1(a) and (ii) an amount equal to the amount of cash the
Holder would have received upon the occurrence of such Reorganization had the
Holder's Warrant (or the portion thereof being repurchased) been fully exercised
immediately prior thereto less, in the event of a repurchase of all or a portion
of this Warrant, the purchase price payable at such time for the purchase of the
shares of Common Stock then subject to the Holder's Warrant (or the portion
thereof being repurchased).
(c) The Company shall not be obligated under this Section 13.1 to
repurchase any Warrant or portion thereof and/or issued Warrant Stock if the
Company is in default under any agreement or instrument evidencing the Company's
or any of its Subsidiaries' indebtedness for borrowed money, and such default
has not been waived, or if and to the extent such a repurchase (i) would cause
an event of default to exist by reason of such repurchase, which event of
default has not been waived, with respect to any such agreement or would violate
any provision of any such agreement or instrument, or (ii) would be in violation
of applicable law ("Restrictions"), in any such case as determined by an opinion
of counsel to the Company reasonably acceptable to the Holder; provided,
however, that the Company shall use its reasonable best efforts to have any such
Restriction either waived or terminated (including, without limitation, by
obtaining refinancing for any such indebtedness). In the event that, following
receipt of a Put Notice, the Company will not repurchase all or any portion of
such Warrant and/or Warrant Stock because of the existence of any Restriction,
the Company shall,
23
<PAGE> 27
within twenty (20) days of receipt of the Put Notice, so notify the Holder in
writing, setting forth the portion of the Warrant and/or Warrant Stock which
will not be repurchased and the Restrictions which apply, and deliver to the
Holder a copy of the opinion referred to in the prior sentence. In addition,
in such event, the Company shall thereafter, upon the request of the Holder,
use its best efforts to register the Warrant Stock and/or the Common Stock
subject to this Warrant, in accordance with the terms of the Registration
Rights Agreement.
13.2. Payment of Repurchase Price. The purchase price for any
repurchase pursuant to Section 13.1 (the "Repurchase Price") shall be determined
pursuant to Section 13.1 and shall be payable in cash.
On the date of any repurchase of Warrants and/or Warrant Stock pursuant
to this Section 13, the Holder shall assign to the Company its Warrant or
portion thereof being repurchased and a certificate for the number of shares of
Warrant Stock being repurchased, as the case may be, without any representation
or warranty (other than that the Holder has good and marketable title thereto,
free and clear of liens, encumbrances and restrictions of any kind), by the
surrender of the Holder's Warrant and certificate for Warrant Stock together
with, in the case of Warrant Stock, instruments of transfer reasonably
acceptable to the Company, at the principal office of the Company referred to in
Section 2.1 against payment therefor of the Repurchase Price by, at the option
of the Holder, (i) wire transfer to an account in a bank located in the United
States designated by the Holder for such purpose or (ii) a certified or official
bank check payable to the order of the Holder. If less than all of the Holder's
Warrant is being repurchased, the Company shall, pursuant to Section 3, cancel
such Warrant and issue in the name of, and deliver to, the Holder a new Warrant
for the portion not being repurchased. If less than all of the shares
represented by a certificate for Warrant Stock are being repurchased, the
Company shall cancel such certificate and issue in the name of, and deliver to,
the Holder a new certificate for the number of shares of Warrant Stock not being
repurchased.
13.3. Obligation to Repurchase When Preferred Shares Outstanding. So
long as the Company has not exercised its rights to redeem all of the Preferred
Shares pursuant to Section 8.01(a) of the Unit Purchase Agreement, the rights of
the Holder to demand repurchase of this Warrant shall be governed by Section
8.02 of the Unit Purchase Agreement.
14. REGISTRATION RIGHTS
This Warrant is entitled to the benefits of the registration rights
provisions contained in the Registration Rights Agreement. The Company shall
keep a copy of the Registration Rights Agreement, and any amendments thereto, at
the office or agency designated by the Company pursuant to Section 12 and shall
furnish copies thereof to the Holder upon request.
24
<PAGE> 28
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
16. DIVIDENDS ON UNDERLYING COMMON STOCK
In the event that, at any time before the Charter Amendment (as defined
in the Unit Purchase Agreement) shall have (a) been approved and adopted by the
Company's stockholders, (b) been filed with the Department of Consumer and
Industry Services of the State of Michigan and (c) become effective, or at any
time after the Company shall have failed for any reason to issue Common Stock to
the Holder upon exercise of this Warrant or shall have failed to comply with
Section 7 hereof, the Company shall pay a dividend or make any other
distribution with respect to its Common Stock whether in the form of cash,
evidences of indebtedness, securities or other property (other than a Common
Stock dividend subject to the provisions of Section 4.1 or a dividend of
warrants or rights to purchase Common Stock subject to the provisions of Section
4.2), then the Company shall pay to the Holder of this Warrant on the date of
payment of such dividend or other distribution, an amount in cash equal to the
number of shares of Common Stock issuable upon exercise of this Warrant in full
on the record date for such dividend or other distribution (without regard to
the number of shares of Common Stock available or set aside for issuance upon
such exercise) multiplied by the sum of (i) the amount of cash and (ii) the
fair value of any evidences of indebtedness, securities or other property
distributed with respect to each share of Common Stock. The "fair value" of any
such evidences of indebtedness, securities or other property shall mean the fair
market value thereof, as determined by the Board of Directors in good faith,
which good faith determination may be challenged by the Holder in accordance
with Section 4.7(f).
17. MISCELLANEOUS
17.1. Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
17.2. Notice Generally. All notices, demands, requests, or other
communications which may be or are required to be given, served, or sent by any
party to any
25
<PAGE> 29
other party pursuant to this Warrant shall be in writing and shall be mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier), or
facsimile transmission, addressed as follows:
(a) If to the Company:
Code Alarm Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: Rand Mueller and Craig Camalo
Facsimile: (248) 585-4799
with a copy to:
Pepper Hamilton & Scheetz LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: Dennis S. Kayes, Esq.
Facsimile: (313) 259-7926
(b) If to the Holder, at its last known address appearing on the
books of the Company maintained for such purpose.
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication shall be deemed to have
been duly given five business days after being deposited in the mail, postage
prepaid, if mailed; when delivered by hand, if personally delivered; or upon
receipt, if sent by facsimile (followed by a confirmation copy sent by either
overnight or two (2) day courier).
17.3. Indemnification. The Company agrees to indemnify and hold
harmless the Holder, its officers, directors, employees, agents, and attorneys
from and against any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind which may be imposed upon, incurred by or asserted
against the Holder relating to or arising out of any litigation to which the
Holder is made a party in its capacity as a stockholder or warrantholder of the
Company; provided, however, that the Company will not be liable hereunder to the
extent that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a judgment by a court to have resulted from (i) the Holder's gross
negligence or willful misconduct, (ii) actions or omissions taken or not taken
by the Holder in any capacity other than as a stockholder or warrantholder of
the Company or (iii) actions or omissions taken or not taken by the Holder
solely as a stockholder or warrantholder of the Company and for which
stockholders or warrantholders may be held liable under Michigan law.
26
<PAGE> 30
17.4. Successors and Assigns. Subject to the provisions of Sections
3.1 and 9, (i) this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of the Holder, and (ii) the provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant, and
shall be enforceable by any such Holder.
17.5. Amendment. The Warrants may be modified or amended or the
provisions thereof waived with the written consent of the Company and the
Holder.
17.6. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant 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 Warrant.
17.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
17.8. Governing Law; Consent to Jurisdiction and Venue. In all
respects, including all matters of construction, validity and performance, this
Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. EACH OF THE COMPANY AND HOLDER CONSENTS TO PERSONAL
JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE CITY OF NEW
YORK, STATE OF NEW YORK. Service of process on the Company or the Holder in any
action arising out of or relating to this Agreement shall be effective if mailed
to such party in accordance with the procedures and requirements set forth in
Section 17.2. Nothing herein shall preclude the Holder or the Company from
bringing suit or taking other legal action in any other jurisdiction.
17.9. Mutual 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 THEIR DISPUTES 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 ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS WARRANT.
27
<PAGE> 31
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its duly authorized officer and its corporate seal to be
impressed hereon and attested by its Secretary or Assistant Secretary.
Dated: October __, 1997
CODE ALARM INC.
By:_______________________
Name:
Title:
Attest:
By:_______________________
Name:
Title:
<PAGE> 32
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _______ shares of Common Stock of
CODE ALARM INC. and herewith makes payment therefor, all at the price and on
the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to __________________ whose address is
___________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable hereunder be delivered to the undersigned.
_____________________________ (Name of Registered Owner)
_____________________________ (Signature of Registered Owner)
_____________________________ (Street Address)
_____________________________ (City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 33
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the number
of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of Code Alarm Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: ____________________________
Name: ____________________________
Signature: ________________________
Witness: __________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 1
EXHIBIT 10.61
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 27, 1997.
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
Issuance Date: October 27, 1997
Issued To: [Pegasus Partners, L.P.] [Pegasus Related Partners, L.P.]
No. of Shares of Common Stock: _________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C> <C>
1. DEFINITIONS............................................................. 1
2. EXERCISE OF WARRANT..................................................... 6
2.1. Manner of Exercise................................................ 6
2.2. Payment of Taxes.................................................. 7
2.3. Fractional Shares................................................. 7
2.4. Continued Validity................................................ 8
3. TRANSFER, DIVISION AND COMBINATION...................................... 8
3.1. Transfer.......................................................... 8
3.2. Division and Combination.......................................... 8
3.3. Expenses.......................................................... 9
3.4. Maintenance of Books.............................................. 9
4. ADJUSTMENTS............................................................. 9
4.1. Stock Dividends, Subdivisions and Combinations.................... 9
4.2. Certain Other Distributions....................................... 9
4.3. Issuance of Additional Shares of Common Stock..................... 10
4.4. Issuance of Warrants or Other Rights.............................. 11
4.5. Issuance of Convertible Securities................................ 12
4.6. Superseding Adjustment............................................ 13
4.7. Other Provisions Applicable to Adjustments Under This Section..... 13
4.8. Reorganization, Reclassification, Liquidation, Dissolution,
Merger, Consolidation or Disposition of Assets.................... 16
4.9. Other Action Affecting Common Stock............................... 16
4.10. Certain Limitations............................................... 17
5. NOTICES TO WARRANTHOLDERS............................................... 17
5.1. Notice of Adjustments............................................. 17
5.2. Notice of Certain Corporate Action................................ 17
6. NO IMPAIRMENT........................................................... 17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY.................................................. 18
8. TAKING OF A RECORD; STOCK AND WARRANT
TRANSFER BOOKS.......................................................... 19
9. RESTRICTIONS ON TRANSFERABILITY......................................... 19
</TABLE>
<PAGE> 3
<TABLE>
Page
----
<S> <C> <C>
9.1. Restrictive Legends............................................... 19
9.2. Notice of Proposed Transfers; Requests for Registration........... 20
9.3. No Transfer to Directed Electronics, Inc.......................... 20
9.4. Termination of Restrictions....................................... 21
10. SUPPLYING INFORMATION................................................... 21
11. LOSS OR MUTILATION...................................................... 21
12. OFFICE OF THE COMPANY................................................... 22
13. REPURCHASE BY THE COMPANY OF WARRANT AND
WARRANT STOCK........................................................... 22
13.1. Obligation to Repurchase Warrant and Warrant Stock................ 22
13.2. Payment of Repurchase Price....................................... 23
13.3. Right to Repurchase Portion of Warrant and Warrant Stock.......... 23
14. REGISTRATION RIGHTS.................................................... 25
15. LIMITATION OF LIABILITY................................................ 25
16. DIVIDENDS ON UNDERLYING COMMON STOCK................................... 25
17. MISCELLANEOUS.......................................................... 26
17.1. Nonwaiver and Expenses........................................... 26
17.2. Notice Generally................................................. 26
17.3. Indemnification.................................................. 27
17.4. Successors and Assigns........................................... 27
17.5. Amendment........................................................ 27
17.6. Severability..................................................... 27
17.7. Headings......................................................... 27
17.8. Governing Law; Consent to Jury Trial............................. 27
17.9. Mutual Waiver of Jury Trial............................................ 28
</TABLE>
<PAGE> 4
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 27, 1997.
Warrant Number: ___________ Date of Issuance: ________
No. of Shares of Common Stock: ________
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
THIS IS TO CERTIFY THAT [Pegasus Partners, L.P.] [Pegasus Related
Partners, L.P.] or its registered assigns, is entitled, at any time during the
Exercise Period (as hereinafter defined), to purchase from Code Alarm Inc., a
Michigan corporation (the "Company"), _______________________ (______) shares
of Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price
of $1.8759559 per share (subject to adjustment as set forth herein), all on the
terms and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Closing Date, other than Warrant Stock, whether
now authorized or not.
"Affiliate" of any Person shall mean a Person that directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with, such Person.
<PAGE> 5
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Closing Date" shall mean October 27, 1997.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, no par value, of the Company as constituted on the Closing
Date, and any capital stock into which such Common Stock may thereafter be
changed, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common
Stock upon any reclassification thereof which is also not preferred as to
dividends or assets over any other class of stock of the Company and which is
not subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a
specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common Stock
on any date herein specified, the average of the daily market prices for the 20
consecutive Trading Days immediately preceding such date. The daily market
price for each such Trading Day shall be (i) the last sale price on such day on
the principal stock exchange on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any such
exchange, the last reported sale price as officially quoted on any such
exchange, (iii) if the Common Stock is not then listed or admitted to trading
on any stock exchange but is traded on the Nasdaq Stock Market, the last
reported sale price as officially quoted on the Nasdaq Stock Market, (iv) if
the Common Stock is not then traded on the Nasdaq Stock Market, the last
reported sale price on the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices), or if such sale price is not available
on such date, the average of the closing bid and asked prices on such date as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices), or (v)
if there is no such organization or agency, as furnished by any member of the
NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, by a member selected by two such members of
the NASD, one of which shall be selected by the Majority Holders and one of
which shall be selected by the Company.
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"Current Warrant Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date. On the Closing Date, the
Current Warrant Price is $1.8759559 per share of Common Stock, and is subject
to adjustment pursuant to Section 4.
"DEI shall mean Directed Electronics, Inc., a California corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period beginning on the Closing Date and
ending at 5:00 P.M., Michigan time, on the seventh anniversary of the Closing
Date.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant outstanding on such date
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date, whether or not such options,
warrants or other securities are presently convertible or exercisable.
"GECC" shall mean General Electric Capital Corporation, a New York
corporation.
"Holder" shall mean, as the context requires, the Person in whose name
this Warrant or one of the other Warrants is registered on the books of the
Company maintained for such purpose and/or the Person holding any Warrant
Stock.
"Independent Counsel" shall mean counsel to the Holder reasonably
acceptable to the Company.
"Litigation Guarantee" shall mean the guarantee dated as of October 24,
1997 Date given by Pegasus to GECC, pursuant to which Pegasus has agreed to
provide the Company with financing for a judgment, appeal bond or settlement in
connection with the litigation pending with the United States District Court for
the Eastern District of Michigan known as Code Alarm, Inc. v. Electromotive
Technology Corporation, case number 87-CV-74022-DT.
"Litigation Warrants" shall mean warrants to purchase Common Stock issued
to Pegasus pursuant to Section 5.04 of the Unit Purchase Agreement, and all
warrants issued upon transfer, division or combination of, or in substitution
or exchange for, any thereof.
"Majority Holders" shall mean, at any given time, holders of Warrants and
Other Warrants then outstanding who would hold a majority of the Common Stock
purchasable upon
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exercise of all Warrants and Other Warrants in the event all Warrants and Other
Warrants were so exercised at such time.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"New Securities" shall mean any Additional Shares of Common Stock, and any
rights or options to purchase any Additional Shares of Common Stock, and any
Convertible Securities.
"Other Property" shall have the meaning set forth in Section 4.8.
"Other Warrants" shall mean (i) warrants to purchase Common Stock issued
as part of Units purchased by Pegasus pursuant to the Unit Purchase Agreement
or issued to Pegasus or their successors or assigns as part of Units issued in
payment of dividends on Preferred Shares, (ii) Litigation Warrants and (iii)
all warrants issued upon transfer, division or combination of, or in
substitution or exchange for, any thereof.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Payment Shares" shall have the meaning set forth in Section 2.1.
"Pegasus" shall mean collectively, Pegasus Partners, L.P., a Delaware
limited partnership and Pegasus Related Partners, L.P., a Delaware limited
partnership.
"Permitted Issuances" shall mean (i) the issuance of shares of Common
Stock pursuant to an underwritten public offering, (ii) the issuance of Other
Warrants, (iii) the issuance of shares of Common Stock upon exercise of the
Warrants or the Other Warrants, (iv) the issuance of up to 280,000 shares of
Common Stock upon the exercise of options issued to management employees of the
Company or its Subsidiaries pursuant to the Company's 1987 Stock Option Plan,
(v) provided that the Charter Amendment (as defined in the Unit Purchase
Agreement) has (1) been approved and adopted by the Company's stockholders, (2)
been filed with the Department of Consumer and Industry Services of the State
of Michigan and (3) become effective, the issuance of up to 1,317,178 shares of
Common Stock or options to acquire such shares to management employees of the
Company or its Subsidiaries pursuant to the Company's 1997 Stock Option Plan,
(vi) the issuance of Preferred Shares and (vii) the issuance to GECC on October
24, 1997 of warrants to purchase up to 131,718 shares of Common Stock (subject
to adjustment as provided therein) and the issuance of Common Stock upon the
exercise thereof.
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<PAGE> 8
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Preferred Shares" shall mean shares of Series A Preferred Stock of the
Company.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of the Closing Date among the Company, Pegasus and GECC.
"Reorganization" shall have the meaning set forth in Section 4.8.
"Repurchase Price" shall have the meaning set forth in Section 13.2.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Restrictions" shall have the meaning set forth in Section 13.1(c).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Shortfall Guarantee" shall mean the guarantee dated as of October 24, 1997
given by Pegasus to GECC, pursuant to which Pegasus has guaranteed up to
$4,000,000 of the Company's obligations to GECC.
"Subsidiary" shall mean any corporation of which an aggregate of more than
50% of the outstanding stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether, at the
time, 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) is at
the time, directly or indirectly, owned legally or beneficially by the Company
and/or one or more Subsidiaries of the Company.
"Trading Day" shall mean (i) any day on which stock is traded on the
principal stock exchange on which the Common Stock is listed or admitted to
trading, (ii) if the Common Stock is not then listed or admitted to trading on
any stock exchange but is traded on the Nasdaq Stock Market, any day on which
stock is traded on the Nasdaq Stock Market, or (iii) if the Common Stock is not
then traded on the Nasdaq Stock Market, any day on which stock is traded in the
over-the counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices).
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<PAGE> 9
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or
of any interest in either thereof, which would constitute a sale thereof within
the meaning of the Securities Act.
"Unit Purchase Agreement" shall mean the Unit Purchase Agreement dated as
of the Closing Date, by and among the Company and Pegasus.
"Units" shall mean units consisting of one Preferred Share and one warrant
to purchase 72.2525247 shares of Common Stock, as adjusted from time to time.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by Holders
of the Warrants upon the exercise thereof.
"Warrants" shall mean this warrant and the other warrants issued to
Pegasus pursuant to Section 3.01(s) of the Unit Purchase Agreement, and all
warrants issued upon transfer, division or combination of, or in substitution
or exchange for, any thereof.
2. EXERCISE OF WARRANT
2.1.. Manner of Exercise. At any time during the Exercise Period, the
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder provided, however,
that the Company shall only be required to issue shares to the extent such
shares are required to be available for issuance pursuant to Section 7; and
provided, further, however, that for all purposes hereunder other than its
direct exercise for shares of Common Stock (including but not limited to for
purposes of Section 4.8 and 16), this Warrant shall be deemed to be exercisable
for the full amount of shares of Common Stock represented by this Warrant,
without regard to the number of shares of Common Stock available or set aside
for issuance upon such exercise.
In order to exercise this Warrant, in whole or in part, the Holder shall
deliver to the Company at its office at 950 East Whitcomb, Madison Heights,
Michigan 48071, or at the office or agency designated by the Company pursuant
to Section 12, (i) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price in the manner provided below, and
(iii) this Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by the Holder or its duly appointed agent or attorney. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute or cause to be executed and deliver
or cause to be delivered to the Holder a certificate or certificates
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<PAGE> 10
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the Holder
shall request in the notice and shall be registered in the name of the Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the notice,
together with the cash or check or checks, if any, and this Warrant, are
received by the Company as described above and all taxes required to be paid by
the Holder, if any, pursuant to Section 2.2 prior to the issuance of such
shares have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the Holder, appropriate notation may
be made on this Warrant and the same returned to the Holder. Notwithstanding
any provision herein to the contrary, the Company shall not be required to
register shares in the name of any Person who acquired this Warrant (or part
hereof) or any Warrant Stock otherwise than in accordance with this Warrant.
Payment of the Warrant Price shall be made at the option of the Holder by
(i) cash, (ii) wire transfer to an account in a bank located in the United
States designated for such purpose by the Company, (iii) certified or official
bank check, or (iv) any combination of the foregoing; provided, however, that
the Holder shall have the right, at its election, in lieu of delivering the
Warrant Price in cash, to instruct the Company in the form of Subscription
Notice to retain, in payment of the Warrant Price, a number of shares of Common
Stock (the "Payment Shares") equal to the quotient of the aggregate Warrant
Price of the shares as to which this Warrant is then being exercised divided by
the Current Market Price.
2.2. Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for shares of Common
Stock issuable upon exercise of this Warrant in any name other than that of the
Holder, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or other
charge is due.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the
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<PAGE> 11
Holder of one or more Warrants, the rights under which are exercised in the
same transaction, would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Current Market Price per share of
Common Stock on the date of exercise.
2.4. Continued Validity. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as the Holder under Sections 6, 10,
13, 14, 15 and 17 of this Warrant, subject to the obligations thereunder. The
Company will, at the time of each exercise of this Warrant, in whole or in
part, upon the request of the holder of the shares of Common Stock issued upon
such exercise hereof, acknowledge in writing, in form reasonably satisfactory
to such holder, its continuing obligation to afford to such holder all such
rights; provided, however, that if such holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by the Holder or its agent or attorney and if
such transfer is not to be made pursuant to Section 13, funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to Section
9, execute and deliver a new Warrant or Warrants in the name(s) of the assignee
or assignees and in the denomination(s) specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned in compliance with Section 9, may
be exercised by a new Holder for the purchase of shares of Common Stock without
having a new Warrant issued. If requested by the Company, a new Holder shall
acknowledge in writing, in form reasonably satisfactory to the Company, such
Holder's continuing obligation under Section 9.
3.2. Division and Combination. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants
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<PAGE> 12
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give the Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or
other distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, by a reverse stock split
or otherwise,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
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(a) cash;
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other
than cash, Convertible Securities or Additional Shares of Common
Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock);
and the Holder of this Warrant has not received a payment on behalf of such
dividend or distribution pursuant to Section 16 hereof, then (i) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product obtained by multiplying the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
adjustment by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock, minus the amount allocable to one share of Common Stock of (x) any such
cash so distributable and (y) the fair value (as determined in good faith by
the Board of Directors of the Company and, if requested by the Holder,
supported by an opinion from an investment banking firm of recognized national
standing reasonably acceptable to the Majority Holders) of any and all such
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so distributable, and (ii)
the Current Warrant Price shall be adjusted to equal (A) the Current Warrant
Price multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
A reclassification of the Common Stock (other than a change in par value, or
from par value to no par value or from no par value to par value) into shares
of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares
of such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such
change shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) In the event the
Company shall issue or sell any Additional Shares of Common Stock, other than
Permitted Issuances, for a consideration per Additional Share of Common Stock
less than the greater of the Current Warrant Price and the Current Market
Price, then the Current Warrant Price shall be reduced to the lower of the
prices calculated as follows:
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(1) by dividing (A) an amount equal to the sum of (x) the number of Fully
Diluted Outstanding shares of Common Stock immediately prior to such issue or
sale multiplied by the then existing Current Warrant Price plus (y) the
aggregate consideration, if any, received by the Company upon such issue or
sale, by (B) the total number of Fully Diluted Outstanding shares of Common
Stock outstanding immediately after such issue or sale; and
(2) by multiplying the then existing Current Warrant Price by a fraction
the numerator of which shall be the sum of (x) the number of Fully Diluted
Outstanding shares of Common Stock immediately prior to such issue or sale
multiplied by the Current Market Price per share of Common Stock immediately
prior to such issue or sale plus (y) the consideration received by the Company
upon such issue or sale, and the denominator of which shall be the total number
of Fully Diluted Outstanding shares of Common Stock immediately after such
issue or sale multiplied by the Current Market Price per share of Common Stock
immediately prior to such issue or sale.
For purposes of this subsection (a), the date as of which the Current
Market Price per share of Common Stock shall be computed shall be the earlier
of the date upon which the Company shall (i) enter into a firm contract for the
issuance of such shares or (ii) issue such shares.
Upon any adjustment of the Current Warrant Price as provided in this
Section 4.3(a), the Holder shall thereafter be entitled to purchase, at the
Current Warrant Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Current Warrant Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable hereunder
immediately prior to such adjustment and dividing the product thereof by the
Current Warrant Price resulting from such adjustment.
(b) The provisions of this Section 4.3 shall not apply to any issuance of
Additional Shares of Common Stock for which an adjustment is provided under
Section 4.1 or 4.2. No adjustment shall be made under this Section 4.3 upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any
Convertible Securities, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. Except with respect to
Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants (other than the Warrants) or other
rights to subscribe for
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or purchase any Additional Shares of Common Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such warrants or other rights or upon conversion
or exchange of such Convertible Securities shall be less than the greater of
the Current Warrant Price and the Current Market Price in effect immediately
prior to the time of such distribution, issue or sale, then the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price shall be adjusted as provided in Section 4.3(a) on the basis that
(i) the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding, (ii) the price per share for such Additional Shares of Common
Stock shall be deemed to be the lowest price per share at which such Additional
Shares of Common Stock are issuable to such holders, and (iii) the Company
shall have received all of the consideration, if any, payable for such warrants
or other rights as of the date of the actual issuance thereof. No further
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable or of the Current Warrant Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of such
warrants or other rights or upon the actual issue of such Common Stock upon
such conversion or exchange of such Convertible Securities.
4.5. Issuance of Convertible Securities. Except with respect to Permitted
Issuances and distributions on behalf of which a payment is made to the Holder
of this Warrant pursuant to Section 16 hereof, if at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange shall
be less than the greater of the Current Warrant Price and the Current Market
Price in effect immediately prior to the time of such issue or sale, then the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3(a) on the
basis that (i) the maximum number of Additional Shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding, (ii) the price per share of such
Additional Shares of Common Stock shall be deemed to be the lowest possible
price in any range of prices at which such Additional Shares of Common Stock
are available to such holders, and (iii) the Company shall have received all of
the consideration payable therefor, if any, as of the date of actual issuance
of such Convertible Securities. No further adjustment of the number of shares
of Common Stock for which this Warrant is exercisable or of the Current Warrant
Price shall be made under this Section 4.5 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable or of the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon
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<PAGE> 16
conversion or exchange of such Convertible Securities and, if any issue or sale
of such Convertible Securities is made upon exercise of any warrant or other
right to subscribe for or to purchase or any warrant or other right to purchase
any such Convertible Securities for which adjustments thereof have been or are
to be made pursuant to other provisions of this Section 4, no further
adjustments shall be made by reason of such issue or sale.
4.6. Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable shall
have been made pursuant to Section 4.4 or Section 4.5 as the result of any
issuance of warrants, rights or Convertible Securities, and either
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and
all or a portion of such warrants or rights, or the right of
conversion or exchange with respect to all or a portion of such
other Convertible Securities, as the case may be, shall not have
been exercised, or
(b) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or such
other Convertible Securities, shall be increased or decreased by
virtue of provisions therein contained,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
rights or options or other Convertible Securities on the then outstanding
Warrants, but not on any then outstanding Warrant Stock, on the basis of
(c) treating the number of Additional Shares of Common Stock
or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or
any such right of conversion or exchange, as having been issued on
the date or dates of any such exercise and for the consideration
actually received and receivable therefor, and
(d) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase or
decrease of the consideration per share for which shares of Common
Stock or other property are issuable under such warrants or rights
or other Convertible Securities.
4.7. Other Provisions Applicable to Adjustments Under This Section. The
following provisions shall be applicable to the making of adjustments provided
for in this Section 4:
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<PAGE> 17
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or
any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities
shall be issued for cash consideration, the consideration received
by the Company therefor shall be the amount of the cash received by
the Company therefor, or, if such Additional Shares of Common Stock
or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares
of Common Stock or Convertible Securities are sold to underwriters
or dealers for public offering without a subscription offering, the
public offering price (in any such case subtracting any amounts
paid or receivable for accrued interest or accrued dividends, but
not subtracting any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent
that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good
faith by the Board of Directors of the Company. In case any
Additional Shares of Common Stock or any Convertible Securities or
any warrants or other rights to subscribe for or purchase such
Additional Shares of Common Stock or Convertible Securities shall
be issued in connection with any merger in which the Company issues
any securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by the
Board of Directors of the Company, of such portion of the assets
and business of the nonsurviving corporation as such Board in good
faith shall determine to be attributable to such Additional Shares
of Common Stock, Convertible Securities, warrants or other rights,
as the case may be. The consideration for any Additional Shares of
Common Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration
received by the Company for issuing such warrants or other rights
plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for
any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration, if
any, received by the Company for issuing warrants or other rights
to subscribe for or purchase such Convertible Securities, plus the
consideration paid or payable to the Company in respect of the
subscription for or purchase of such Convertible Securities, plus
the additional consideration, if any, payable to the Company upon
the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any
Additional Shares of Common Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
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<PAGE> 18
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this
Warrant is exercisable that would otherwise be required may be
postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to,
but not beyond the date of exercise if such adjustment either by
itself or with other adjustments not previously made adds or
subtracts less than 1% of the shares of Common Stock for which this
Warrant is exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such
minimum amount (except as aforesaid) which is postponed shall be
carried forward and made upon the earlier of (i) the date upon
which such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum
adjustment, and (ii) the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and before
the distribution to stockholders thereof, legally abandon its plan
to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of
any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, the Holder
exercises this Warrant, any Additional Shares of Common Stock
issuable and other property distributable upon exercise by reason
of such adjustment shall be held in escrow for the Holder by the
Company to be issued to the Holder upon and to the extent that the
event actually takes place, upon payment of the then Current
Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur
or is rescinded, then such escrowed shares shall be cancelled by
the Company and escrowed property returned.
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<PAGE> 19
(f) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under
this Section 4, such determination may be challenged in good faith
by the Majority Holders, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by
the Company and acceptable to the Majority Holders.
4.8. Reorganization, Reclassification, Liquidation, Dissolution, Merger,
Consolidation or Disposition of Assets. In case the Company shall reorganize
its capital, reclassify its capital stock, liquidate its assets, dissolve,
consolidate or merge with or into another corporation (where the Company is not
the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation or other entity (hereinafter, a "Reorganization") and, pursuant to
the terms of such Reorganization, shares of common stock of the successor or
acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Company, then the Holder shall have the
right following the effectiveness of such Reorganization to receive, upon
exercise of such Warrant, or, in the case of a liquidation of assets or a
dissolution to receive, upon such liquidation or dissolution, without taking
any further action, the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such Reorganization by a
holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event (without regard to the number of
shares of Common Stock available or set aside for issuance upon such exercise).
In case of any such Reorganization, the successor or acquiring corporation (if
other than the Company) shall expressly assume the due and punctual observance
and performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such appropriate modifications as are satisfactory to the
Holder in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8 "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions
of this Section 4.8 shall similarly apply to successive Reorganizations.
4.9. Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock,
other than any action
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<PAGE> 20
described in this Section 4 for which a specific adjustment is provided, then,
unless such action will not have a materially adverse effect upon the rights of
the Holder, the number of shares of Common Stock or other stock for which this
Warrant is exercisable and/or the purchase price thereof shall be adjusted in
such manner as may be equitable in the circumstances.
4.10. Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
5. NOTICES TO WARRANTHOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of Common Stock
or the class or type of stock or other property for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of this Warrant, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the
chief financial officer of the Company setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in Section 4.2 or 4.7(a)),
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 17.2. The Company shall keep at its office
or agency designated pursuant to Section 12 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by the Holder.
5.2. Notice of Certain Corporate Action. The Holder shall be entitled to
the same rights to receive notice of corporate action as any holder of Common
Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the rights of
the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Current
Warrant
17
<PAGE> 21
Price immediately prior to such increase in par value, (b) take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of the Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to the Holder, the continuing validity of this Warrant and the obligations of
the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, subject to the limitation set forth in
the last sentence of this paragraph, the Company shall at all times reserve and
keep available for issue upon the exercise of warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
permit the exercise in full of all outstanding Warrants and Other Warrants, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, taking appropriate board action, recommending such an
increase to the holders of Common Stock, holding shareholders meetings,
soliciting votes and proxies in favor of such increase to obtain the requisite
shareholder approval and upon such approval, the Company shall reserve and keep
available such additional shares solely for the purpose of permitting the
exercise of Warrants or Other Warrants. Prior to the earlier of (i) May 31,
1998 or (ii) the approval by the shareholders of the Company of an increase in
the number of authorized shares of Common Stock as contemplated in the Unit
Purchase Agreement, the Company shall be in compliance with this Section 7 to
the extent that it reserves and keeps available out of its authorized but
unissued shares of Common stock, solely for the purpose of permitting the
exercise of Warrants and Attached Warrants (as defined in the Unit Purchase
Agreement), 2,267,421 shares of Common Stock.
All shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant and payment therefor in accordance with the terms of
such Warrant, shall be duly and validly issued, fully paid and nonassessable
and free and clear of any liens, claims and restrictions (other than as
provided herein). Except as provided in this Warrant, no stockholder of the
Company has or shall have any preemptive rights to subscribe for such shares of
Common Stock.
18
<PAGE> 22
Before taking any action which would result in an adjustment in the number
of shares of Common Stock or the type of consideration for which this Warrant
is exercisable or in the Current Warrant Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered.
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business
on a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise
or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred, hypothecated
or assigned before satisfaction of the conditions specified in this Section 9.
The Holder, by acceptance of this Warrant, agrees to be bound by the provisions
of this Section 9.
9.1. Restrictive Legends. (a) Except as otherwise provided in this
Section 9, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with legends in substantially the following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or under the securities or blue sky laws of any
state and are subject to the conditions specified in a
certain Warrant dated October 27, 1997, originally issued by
Code Alarm Inc. The shares represented by this certificate
may not be sold, or otherwise transferred, in the absence of
such registration or an exemption therefrom under such Act
and under any such applicable state laws, or in violation of
the provisions of the Warrant. A copy of the form of said
Warrant is on file with the Secretary of Code Alarm Inc.
The holder of
19
<PAGE> 23
this certificate, by acceptance of this certificate, agrees
to be bound by the provisions of such Warrant."
"The shares represented by this certificate are subject
to the terms and conditions of a Registration Rights
Agreement, dated as of October 27, 1997."
(b) Except as otherwise provided in this Section 9, each Warrant shall be
stamped or otherwise imprinted with legends in substantially the following
form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933,
as amended, or under the securities or blue sky laws of any
state and may not be sold, or otherwise transferred, in the
absence of such registration or an exemption therefrom under
such Act and under any such applicable state laws, or in
violation of the provisions of this Warrant."
"This Warrant and the securities represented hereby are
subject to the terms and conditions of a Registration Rights
Agreement, dated as of October 27, 1997."
9.2. Notice of Proposed Transfers; Requests for Registration. Prior to
any Transfer or attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the Holder of such Warrants or Restricted Common Stock shall
deliver to the Company either a written opinion reasonably acceptable to the
Company of Independent Counsel addressed to the Company or a no-action letter
from the Commission to the effect that the proposed Transfer of such Warrants
or such Restricted Common Stock may be effected without registration under the
Securities Act and applicable state securities or blue sky laws. After delivery
of the written opinion or the no-action letter to the Company, such Holder
shall thereupon be entitled to Transfer such Warrants or such Restricted Common
Stock. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer shall bear the restrictive legend set forth in
Section 9.1(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(b), unless in the written opinion
of Independent Counsel addressed to the Company such legend is not required in
order to ensure compliance with the Securities Act.
9.3. No Transfer to Directed Electronics, Inc. The Holder shall not sell
or otherwise transfer any Warrants to DEI, any affiliate of DEI, Mr. Darrell
Issa, the president of DEI, any entity which, to the knowledge of the Holder,
is controlled by Mr. Issa, or any person who, to the knowledge of the Holder,
is a member of the immediate family (as such term is defined in Rule 16a-1
promulgated under the Exchange Act) of Mr. Issa.
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<PAGE> 24
9.4. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto, or (ii) when the Company shall have delivered to the Holder
or Holders of Warrants, Warrant Stock or Restricted Common Stock the written
opinion of Independent Counsel stating that such legend is not required in
order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by Section 9 shall terminate as to this Warrant, as hereinabove
provided, the Holder hereof shall be entitled to receive from the Company, at
the expense of the Company, a new Warrant bearing the following legend in place
of the first restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON ____________,
199_, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant or Warrants entitled to bear such
legend shall have a similar legend endorsed thereon. Whenever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the Holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 9.1(a).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each Holder
of Restricted Common Stock in supplying such information as may be reasonably
requested by such Holder or reasonably necessary for such Holder to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written indemnity agreement of Pegasus Partners, L.P.
or Pegasus Related Partners, L.P. shall be sufficient indemnity) and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, in
the case
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<PAGE> 25
of mutilation, no indemnity shall be required if this warrant in identifiable
form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK
13.1. Obligation to Repurchase Warrant and Warrant Stock. (a) At any time
and from time to time, at the election of the Holder, after the date which is
three years and six months after the Closing Date, the Holder may, by notice to
the Company (the "Put Notice"), demand repurchase of this Warrant, in whole or
in part, and/or all or part of the Holder's shares of Warrant Stock which are
Restricted Common Stock. Subject to the provisions of Section 13.2, the
Company shall, on the date (not less than 30 days after the date of the Put
Notice) designated in such Put Notice, repurchase from the Holder all or the
portion of this Warrant and/or the number of shares of such Holder's Warrant
Stock designated in the Put Notice for an amount determined by multiplying (x)
the number of shares of Warrant Stock and/or the Common Stock subject to this
Warrant or portion thereof being repurchased by (y) the Current Market Price
per share of Common Stock determined as of the date of the repurchase demand
and, in the event of repurchase of all or a portion of this Warrant, deducting
from the product thereby obtained the Current Warrant Price times the number of
shares of Common Stock subject to this Warrant (or portion thereof) being
repurchased.
(b) Notwithstanding the provisions of Section 13.1(a), if, at any time
during the period between the date on which the Holder shall have delivered a
Put Notice and the date of repurchase by the Company pursuant thereto, a
Reorganization shall occur and the consideration received or receivable by
stockholders in connection with such Reorganization shall consist solely of
cash, then the Holder shall (whether or not the Holder shall have previously
surrendered its Warrant and/or Warrant Stock for repurchase by the Company
pursuant to this Section 13) be entitled to receive, on the date of such
repurchase, the higher of (i) the amount payable to the Holder as determined
pursuant to Section 13.1(a) and (ii) an amount equal to the amount of cash the
Holder would have received upon the occurrence of such Reorganization had the
Holder's Warrant (or the portion thereof being repurchased) been fully
exercised immediately prior thereto less, in the event of a repurchase of all
or a portion of this Warrant, the purchase price payable at such time for the
purchase of the shares of Common Stock then subject to the Holder's Warrant (or
the portion thereof being repurchased).
(c) The Company shall not be obligated under this Section 13.1 to
repurchase any Warrant or portion thereof and/or issued Warrant Stock if the
Company is in default under
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<PAGE> 26
any agreement or instrument evidencing the Company's or any of its
Subsidiaries' indebtedness for borrowed money, and such default has not been
waived, or if and to the extent such a repurchase (i) would cause an event of
default to exist by reason of such repurchase, which event of default has not
been waived, with respect to any such agreement or would violate any provision
of any such agreement or instrument, or (ii) would be in violation of
applicable law ("Restrictions"), in any such case as determined by an opinion
of counsel to the Company reasonably acceptable to the Holder; provided,
however, that the Company shall use its reasonable best efforts to have any
such Restriction either waived or terminated (including, without limitation, by
obtaining refinancing for any such indebtedness). In the event that, following
receipt of a Put Notice, the Company will not repurchase all or any portion of
such Warrant and/or Warrant Stock because of the existence of any Restriction,
the Company shall, within twenty (20) days of receipt of the Put Notice, so
notify the Holder in writing, setting forth the portion of the Warrant and/or
Warrant Stock which will not be repurchased and the Restrictions which apply,
and deliver to the Holder a copy of the opinion referred to in the prior
sentence. In addition, in such event, the Company shall thereafter, upon the
request of the Holder, use its best efforts to register the Warrant Stock
and/or the Common Stock subject to this Warrant, in accordance with the terms
of the Registration Rights Agreement.
13.2. Payment of Repurchase Price. The purchase price for any repurchase
pursuant to Section 13.1 (the "Repurchase Price") shall be determined pursuant
to Section 13.1 and shall be payable in cash.
On the date of any repurchase of Warrants and/or Warrant Stock pursuant to
this Section 13, the Holder shall assign to the Company its Warrant or portion
thereof being repurchased and a certificate for the number of shares of Warrant
Stock being repurchased, as the case may be, without any representation or
warranty (other than that the Holder has good and marketable title thereto,
free and clear of liens, encumbrances and restrictions of any kind), by the
surrender of the Holder's Warrant and certificate for Warrant Stock together
with, in the case of Warrant Stock, instruments of transfer reasonably
acceptable to the Company, at the principal office of the Company referred to
in Section 2.1 against payment therefor of the Repurchase Price by, at the
option of the Holder, (i) wire transfer to an account in a bank located in the
United States designated by the Holder for such purpose or (ii) a certified or
official bank check payable to the order of the Holder. If less than all of
the Holder's Warrant is being repurchased, the Company shall, pursuant to
Section 3, cancel such Warrant and issue in the name of, and deliver to, the
Holder a new Warrant for the portion not being repurchased. If less than all
of the shares represented by a certificate for Warrant Stock are being
repurchased, the Company shall cancel such certificate and issue in the name
of, and deliver to, the Holder a new certificate for the number of shares of
Warrant Stock not being repurchased.
13.3. Right to Repurchase Portion of Warrant and Warrant Stock.
(a) In the event the Company shall cause Pegasus to be fully and
unconditionally released from the Shortfall Guarantee (without any payment by
Pegasus pursuant
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<PAGE> 27
thereto) within the time periods specified below, the Company shall have the
right, exercisable at any time during such period, but subject to and as may be
extended by Section 13.3(c), to repurchase from the Holders the percentage of
the Warrants initially issued set forth below:
<TABLE>
<CAPTION>
Date of Release Percentage
--------------- ----------
<S> <C>
Closing Date through April 26, 1998 75%
April 27, 1998 through July 26, 1998 50%
July 27, 1998 through October 26, 1998 25%
</TABLE>
In the event that, at the time the Company exercises its repurchase right,
the Warrants shall have been exercised for a greater percentage than the
difference between (i) 100% and (ii) the applicable percentage set forth above,
the Company shall also have the right to purchase from any Person who shall
have exercised Warrants (and such Person shall be obligated to sell to the
Company) a number of shares of Common Stock equal to the number of shares of
Warrant Stock for which Warrants shall have been exercised by such Person.
(b) The purchase price to be paid by the Company for any Warrants
repurchased pursuant to this Section 13.3 shall be $.0001 per share of Common
Stock underlying the portion of the Warrants repurchased. The purchase price
per share to be paid by the Company for any shares of Common Stock purchased
pursuant to this Section 13.3 shall be the sum of (i) the exercise price paid
for any corresponding share of Warrant Stock and (ii) $.0001. In either case,
the purchase price shall be paid in cash and the aggregate purchase price shall
be rounded to the nearest penny.
(c) Notwithstanding anything to the contrary contained herein, the Company
shall not purchase any portion of the Warrants or any Common Stock pursuant to
this Section 13.3 until the earlier of (i) the date which is six months and one
day following the issuance to Pegasus of the Litigation Warrants or (ii) such
time as Pegasus is fully and unconditionally released from the Litigation
Guarantee, provided that no Litigation Warrants shall have been issued to
Pegasus prior to such release. In the event the Company is precluded from
purchasing Warrants and Common Stock at any time pursuant to the preceding
sentence, the period of time during which the Company may exercise its right to
purchase Warrants and Common Stock shall be extended to a date which is thirty
days following the date on which the restriction set forth in the preceding
sentence terminates.
(d) Notice of repurchase pursuant to this Section 13.3 shall be given by
first class mail, postage prepaid, mailed not less than 10 nor more than 20
days prior to the repurchase date to each Holder's address as the same appears
on the books of the Company. Each such notice shall state: (i) the purchase
date; (ii) the portion of Warrants and the number of shares of Common Stock to
be purchased; (iii) the amount of the purchase price; and (iv) the place or
24
<PAGE> 28
places where such Warrants and certificates for such shares of Common Stock are
to be surrendered for payment of the purchase price.
(e) In the event only a portion of this Warrant is being repurchased
pursuant to this Section 13.3, the Holder shall surrender this Warrant to the
Company for cancellation on the repurchase date at the place specified in the
repurchase notice, and the Company shall thereupon issue to the Holder a new
Warrant evidencing the portion of this Warrant not so repurchased.
14. REGISTRATION RIGHTS
This Warrant is entitled to the benefits of the registration rights
provisions contained in the Registration Rights Agreement. The Company shall
keep a copy of the Registration Rights Agreement, and any amendments thereto,
at the office or agency designated by the Company pursuant to Section 12 and
shall furnish copies thereof to the Holder upon request.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
16. DIVIDENDS ON UNDERLYING COMMON STOCK
In the event that, at any time before the Charter Amendment (as defined in
the Unit Purchase Agreement) shall have (a) been approved and adopted by the
Company's stockholders, (b) been filed with the Department of Consumer and
Industry Services of the State of Michigan and (c) become effective, or at any
time after the Company shall have failed for any reason to issue Common Stock
to the Holder upon exercise of this Warrant or shall have failed to comply with
Section 7 hereof, the Company shall pay a dividend or make any other
distribution with respect to its Common Stock whether in the form of cash,
evidences of indebtedness, securities or other property (other than a Common
Stock dividend subject to the provisions of Section 4.1 or a dividend of
warrants or rights to purchase Common Stock subject to the provisions of
Section 4.2), then the Company shall pay to the Holder of this Warrant on the
date of payment of such dividend or other distribution, an amount in cash equal
to the number of shares of Common Stock issuable upon exercise of this Warrant
in full on the record date for such dividend or other distribution (without
regard to the number of shares of Common Stock available or set aside for
issuance upon such exercise) multiplied by the sum of (i) the amount of cash
and (ii) the fair value of any evidences of indebtedness, securities or other
property distributed with respect to each share of Common Stock. The "fair
value" of any such evidences
25
<PAGE> 29
of indebtedness, securities or other property shall mean the fair market value
thereof, as determined by the Board of Directors in good faith, which good
faith determination may be challenged by the Holder in accordance with Section
4.7(f).
17. MISCELLANEOUS
17.1. Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover
any costs and expenses including, but not limited to, reasonable attorneys'
fees, including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
17.2. Notice Generally. All notices, demands, requests, or other
communications which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Warrant shall be in writing and shall
be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery (including delivery
by courier), or facsimile transmission, addressed as follows:
(a) If to the Company:
Code Alarm Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: Rand Mueller and Craig Camalo
Facsimile: (248) 585-4799
with a copy to:
Pepper Hamilton & Scheetz LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: Dennis S. Kayes, Esq.
Facsimile: (313) 259-7926
(b) If to the Holder, at its last known address appearing on the books of
the Company maintained for such purpose.
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication shall be deemed to have
been duly given five business days after being
26
<PAGE> 30
deposited in the mail, postage prepaid, if mailed; when delivered by hand, if
personally delivered; or upon receipt, if sent by facsimile (followed by a
confirmation copy sent by either overnight or two (2) day courier).
17.3. Indemnification. The Company agrees to indemnify and hold harmless
the Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against the Holder
relating to or arising out of any litigation to which the Holder is made a
party in its capacity as a stockholder or warrantholder of the Company;
provided, however, that the Company will not be liable hereunder to the extent
that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a judgment by a court to have resulted from (i) the Holder's gross
negligence or willful misconduct, (ii) actions or omissions taken or not taken
by the Holder in any capacity other than as a stockholder or warrantholder of
the Company or (iii) actions or omissions taken or not taken by the Holder
solely as a stockholder or warrantholder of the Company and for which
stockholders or warrantholders may be held liable under Michigan law.
17.4. Successors and Assigns. Subject to the provisions of Sections 3.1
and 9, (i) this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of the Holder, and (ii) the provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant, and
shall be enforceable by any such Holder.
17.5. Amendment. The Warrants may be modified or amended or the
provisions thereof waived with the written consent of the Company and the
Holder.
17.6. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant 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 Warrant.
17.7. Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
17.8. Governing Law; Consent to Jurisdiction and Venue. In all respects,
including all matters of construction, validity and performance, this Agreement
and the obligations arising hereunder shall be governed by, and construed and
enforced in accordance with, the laws of the State of Michigan applicable to
contracts made and performed in such state, without regard to the principles
thereof regarding conflict of laws, and any applicable laws of the United
States of America. EACH OF THE COMPANY AND HOLDER CONSENTS TO PERSONAL
JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR
27
<PAGE> 31
VENUE, AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR
VENUE, IN THE CITY OF NEW YORK, STATE OF NEW YORK. Service of process on the
Company or the Holder in any action arising out of or relating to this
Agreement shall be effective if mailed to such party in accordance with the
procedures and requirements set forth in Section 17.2. Nothing herein shall
preclude the Holder or the Company from bringing suit or taking other legal
action in any other jurisdiction.
17.9. Mutual 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
THEIR DISPUTES 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 ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS WARRANT.
28
<PAGE> 32
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its duly authorized officer and its corporate seal to be impressed
hereon and attested by its Secretary or Assistant Secretary.
Dated: October __, 1997
CODE ALARM INC.
By:_______________________
Name:
Title:
Attest:
By:_______________________
Name:
Title:
<PAGE> 33
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _______ shares of Common Stock of CODE ALARM
INC. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
__________________ whose address is ___________________________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered
to the undersigned.
_____________________ (Name of Registered Owner)
_____________________ (Signature of Registered Owner)
_____________________ (Street Address)
_____________________ (City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 34
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of Code Alarm Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:_________________
Name:__________________
Signature:_____________
Witness:_______________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.62
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER __, 1997.
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
Issuance Date: ________ __, 199_
Issued To: [Pegasus Partners, L.P.] [Pegasus Related Partners, L.P.]
No. of Shares of Common Stock: _________
<PAGE> 2
TABLE OF CONTENTS
Page
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1. Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3. Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. Continued Validity . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. TRANSFER, DIVISION AND COMBINATION . . . . . . . . . . . . . . . . . . . 8
3.1. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2. Division and Combination . . . . . . . . . . . . . . . . . . . . . . 8
3.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4. Maintenance of Books . . . . . . . . . . . . . . . . . . . . . . . . 9
4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1. Stock Dividends, Subdivisions and Combinations . . . . . . . . . . . 9
4.2. Certain Other Distributions . . . . . . . . . . . . . . . . . . . . 9
4.3. Issuance of Additional Shares of Common Stock . . . . . . . . . . 10
4.4. Issuance of Warrants or Other Rights . . . . . . . . . . . . . . . 11
4.5. Issuance of Convertible Securities . . . . . . . . . . . . . . . . 12
4.6. Superseding Adjustment . . . . . . . . . . . . . . . . . . . . . . 13
4.7. Other Provisions Applicable to Adjustments Under This Section . . . 13
4.8. Reorganization, Reclassification, Liquidation, Dissolution, Merger,
Consolidation or Disposition of Assets . . . . . . . . . . . . . . 16
4.9. Other Action Affecting Common Stock . . . . . . . . . . . . . . . 16
4.10. Certain Limitations . . . . . . . . . . . . . . . . . . . . . . . 17
5. NOTICES TO WARRANTHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Notice of Adjustments . . . . . . . . . . . . . . . . . . . . . . . 17
5.2. Notice of Certain Corporate Action . . . . . . . . . . . . . . . . 17
6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY . . . . . . . . . . . . . . . . . . . . . 18
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS . . . . . . . . . . 19
9. RESTRICTIONS ON TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . 19
i
<PAGE> 3
Page
9.1. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Notice of Proposed Transfers; Requests for Registration . . . . . . 20
9.3. No Transfer to Directed Electronics, Inc . . . . . . . . . . . . . . 20
9.4. Termination of Restrictions . . . . . . . . . . . . . . . . . . . . 20
10. SUPPLYING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13. REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK . . . . . . . . . 22
13.1. Obligation to Repurchase Warrant and Warrant Stock . . . . . . . . 22
13.2. Payment of Repurchase Price . . . . . . . . . . . . . . . . . . . . 23
13.3. Right to Repurchase Warrant and Warrant Stock . . . . . . . . . . 23
14. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 24
16. DIVIDENDS ON UNDERLYING COMMON STOCK . . . . . . . . . . . . . . . . . . 24
17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.1. Nonwaiver and Expenses . . . . . . . . . . . . . . . . . . . . . . 25
17.2. Notice Generally . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 26
17.5. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.8. Governing Law; Consent to Jurisdiction and Venue. . . . . . . . . 27
17.9. Mutual Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 27
ii
<PAGE> 4
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER __, 1997.
Warrant Number: ___________ Date of Issuance: _______
No. of Shares of Common Stock: ________
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
THIS IS TO CERTIFY THAT [Pegasus Partners, L.P.] [Pegasus Related
Partners, L.P.] or its registered assigns, is entitled, at any time during the
Exercise Period (as hereinafter defined), to purchase from Code Alarm Inc., a
Michigan corporation (the "Company"), _______________________ (______) shares
of Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price of
$___1 per share (subject to adjustment as set forth herein), all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock, whether now authorized or not.
- --------------
(1) $164,731 divided by the number of shares constituting
1% of the outstanding Common Stock of the Company, on a fully-diluted
basis, on the date of issuance of this Warrant.
<PAGE> 5
"Affiliate" of any Person shall mean a Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with, such Person.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Closing Date" shall mean October __, 1997.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on
the Issuance Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.8) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with
or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the daily market prices for
the 20 consecutive Trading Days immediately preceding such date. The daily
market price for each such Trading Day shall be (i) the last sale price on such
day on the principal stock exchange on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any such
exchange, the last reported sale price as officially quoted on any such
exchange, (iii) if the Common Stock is not then listed or admitted to trading on
any stock exchange but is traded on the Nasdaq Stock Market, the last reported
sale price as officially quoted on the Nasdaq Stock Market, (iv) if the Common
Stock is not then traded on the Nasdaq Stock Market, the last reported sale
price on the over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices), or if such sale price is not available on such
date, the average of the closing bid and asked prices on such date as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices), or (v) if there is no
such organization or agency, as furnished by any member of the NASD selected
mutually by the Majority Holders and the Company or, if they cannot agree upon
such selection, by a member
2
<PAGE> 6
selected by two such members of the NASD, one of which shall be selected by the
Majority Holders and one of which shall be selected by the Company.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. On the Issuance Date,
the Current Warrant Price is $___1 per share of Common Stock, and is subject to
adjustment pursuant to Section 4.
"DEI shall mean Directed Electronics, Inc., a California corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period beginning on the Issuance Date
and ending at 5:00 P.M., Michigan time, on the seventh anniversary of the
Closing Date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant outstanding on such date and
other options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date, whether or not such options, warrants or
other securities are presently convertible or exercisable.
"Holder" shall mean, as the context requires, the Person in whose name
this Warrant or one of the other Warrants is registered on the books of the
Company maintained for such purpose and/or the Person holding any Warrant Stock.
"Independent Counsel" shall mean counsel to the Holder reasonably
acceptable to the Company.
"Issuance Date" shall mean ______ __, 199_ [the date of issuance of
this Warrant].
"Majority Holders" shall mean, at any given time, holders of Warrants
and Other Warrants then outstanding who would hold a majority of the Common
Stock purchasable upon exercise of all Warrants and Other Warrants in the
event all Warrants and Other Warrants were so exercised at such time.
- --------------
(1) $164,731 divided by the number of shares constituting 1% of the
outstanding Common Stock of the Company, on a fully-diluted basis, on
the date of issuance of this Warrant.
3
<PAGE> 7
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"New Securities" shall mean any Additional Shares of Common Stock,
and any rights or options to purchase any Additional Shares of Common Stock,
and any Convertible Securities.
"Non-Repurchasable Stock" shall have the meaning set forth in
Section 13.3.
"Other Property" shall have the meaning set forth in Section 4.8.
"Other Warrants" shall mean (i) warrants to purchase Common Stock
issued as part of Units purchased by Pegasus Partners, L.P. or Pegasus
Related Partners, L.P. pursuant to the Unit Purchase Agreement or issued to
Pegasus Partners, L.P., Pegasus Related Partners, L.P. or their successors or
assigns as part of Units issued in payment of dividends on Preferred Shares,
(ii) warrants issued to Pegasus Partners, L.P. or Pegasus Related Partners, L.P.
pursuant to Section 3.01(s) of the Unit Purchase Agreement, and (iii) all
warrants issued upon transfer, division or combination of, or in substitution or
exchange for, any thereof.
"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any Subsidiary, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Payment Shares" shall have the meaning set forth in Section 2.1.
"Permitted Issuances" shall mean (i) the issuance of shares of Common
Stock pursuant to an underwritten public offering, (ii) the issuance of Other
Warrants, (iii) the issuance of shares of Common Stock upon exercise of the
Warrants or the Other Warrants, (iv) the issuance of up to 280,000 shares of
Common Stock upon the exercise of options issued to management employees of the
Company or its Subsidiaries pursuant to the Company's 1987 Stock Option Plan,
(v) provided that the Charter Amendment (as defined in the Unit Purchase
Agreement) has (1) been approved and adopted by the Company's stockholders, (2)
been filed with the Department of Consumer and Industry Services of the State of
Michigan and (3) become effective, the issuance of up to 1,317,178 shares of
Common Stock or options to acquire such shares to management employees of the
Company or its Subsidiaries pursuant to the Company's 1997 Stock Option Plan,
(vi) the issuance of Preferred Shares and (vii) the issuance to General Electric
Capital Corporation on the Closing Date of warrants to purchase up to 131,718
shares of Common Stock (subject to adjustment as provided therein) and the
issuance of Common Stock upon the exercise thereof.
4
<PAGE> 8
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Preferred Shares" shall mean shares of Series A Preferred Stock of the
Company.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of the Closing Date among the Company, Pegasus Partners,
L.P., Pegasus Related Partners, L.P. and General Electric Capital Corporation.
"Reorganization" shall have the meaning set forth in Section 4.8.
"Repurchase Price" shall have the meaning set forth in Section 13.2.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"Restrictions" shall have the meaning set forth in Section 13.1(c).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean any corporation of which an aggregate of more
than 50% of the outstanding stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of
whether, at the time, 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) is at the time, directly or indirectly, owned legally or
beneficially by the Company and/or one or more Subsidiaries of the Company.
"Trading Day" shall mean (i) any day on which stock is traded on the
principal stock exchange on which the Common Stock is listed or admitted to
trading, (ii) if the Common Stock is not then listed or admitted to trading on
any stock exchange but is traded on the Nasdaq Stock Market, any day on which
stock is traded on the Nasdaq Stock Market, or (iii) if the Common Stock is not
then traded on the Nasdaq Stock Market, any day on which stock is traded in the
over-the counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices).
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
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"Unit Purchase Agreement" shall mean the Unit Purchase Agreement dated
as of the Closing Date, by and among the Company, Pegasus Partners, L.P. and
Pegasus Related Partners, L.P.
"Units" shall mean units consisting of one Preferred Share and one
warrant to purchase 72.2525247 shares of Common Stock, as adjusted from time to
time.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by
Holders of the Warrants upon the exercise thereof.
"Warrants" shall mean this warrant and the other warrants issued by the
Company to Pegasus Partners, L.P. or Pegasus Related Partners, L.P. pursuant
to Section 5.04 of the Unit Purchase Agreement, and all warrants issued upon
transfer, division or combination of, or in substitution or exchange for, any
thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. At any time during the Exercise Period, the
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder provided, however,
that the Company shall only be required to issue shares to the extent such
shares are required to be available for issuance pursuant to Section 7; and
provided, further, however, that for all purposes hereunder other than its
direct exercise for shares of Common Stock (including but not limited to for
purposes of Section 4.8 and 16), this Warrant shall be deemed to be exercisable
for the full amount of shares of Common Stock represented by this Warrant,
without regard to the number of shares of Common Stock available or set aside
for issuance upon such exercise..
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at its office at 950 East Whitcomb, Madison
Heights, Michigan 48071, or at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of the Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price in the manner provided
below, and (iii) this Warrant. Such notice shall be substantially in the form
of the subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by the Holder or its duly appointed agent or attorney. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute or cause to be executed and deliver
or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate
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<PAGE> 10
or certificates so delivered shall be, to the extent possible, in such
denomination or denominations as the Holder shall request in the notice and
shall be registered in the name of the Holder or, subject to Section 9, such
other name as shall be designated in the notice. This Warrant shall be deemed
to have been exercised and such certificate or certificates shall be deemed to
have been issued, and the Holder or any other Person so designated to be named
therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date the notice, together with the cash or check or
checks, if any, and this Warrant, are received by the Company as described
above and all taxes required to be paid by the Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Stock, deliver
to the Holder a new Warrant evidencing the rights of the Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares in the name of
any Person who acquired this Warrant (or part hereof) or any Warrant Stock
otherwise than in accordance with this Warrant.
Payment of the Warrant Price shall be made at the option of the Holder
by (i) cash, (ii) wire transfer to an account in a bank located in the United
States designated for such purpose by the Company, (iii) certified or official
bank check, or (iv) any combination of the foregoing; provided, however, that
the Holder shall have the right, at its election, in lieu of delivering the
Warrant Price in cash, to instruct the Company in the form of Subscription
Notice to retain, in payment of the Warrant Price, a number of shares of Common
Stock (the "Payment Shares") equal to the quotient of the aggregate Warrant
Price of the shares as to which this Warrant is then being exercised divided by
the Current Market Price.
2.2. Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon the Holder, in which case such
taxes or charges shall be paid by the Holder. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of the
Holder, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or other
charge is due.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash
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<PAGE> 11
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date of
exercise.
2.4. Continued Validity. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as the Holder under Sections 6, 10,
13, 14, 15 and 17 of this Warrant, subject to the obligations thereunder. The
Company will, at the time of each exercise of this Warrant, in whole or in part,
upon the request of the holder of the shares of Common Stock issued upon such
exercise hereof, acknowledge in writing, in form reasonably satisfactory to such
holder, its continuing obligation to afford to such holder all such rights;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by the Holder or its agent or attorney and if
such transfer is not to be made pursuant to Section 13, funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to Section
9, execute and deliver a new Warrant or Warrants in the name(s) of the assignee
or assignees and in the denomination(s) specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned in compliance with Section 9, may
be exercised by a new Holder for the purchase of shares of Common Stock without
having a new Warrant issued. If requested by the Company, a new Holder shall
acknowledge in writing, in form reasonably satisfactory to the Company, such
Holder's continuing obligation under Section 9.
3.2. Division and Combination. Subject to Section 9, this Warrant may
be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
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3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give the Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. Stock Dividends, Subdivisions and Combinations.If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, by a reverse stock split or
otherwise,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash;
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(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock);
and the Holder of this Warrant has not received a payment on behalf of such
dividend or distribution pursuant to Section 16 hereof, then (i) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product obtained by multiplying the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
adjustment by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock, minus the amount allocable to one share of Common Stock of (x) any such
cash so distributable and (y) the fair value (as determined in good faith by
the Board of Directors of the Company and, if requested by the Holder,
supported by an opinion from an investment banking firm of recognized national
standing reasonably acceptable to the Majority Holders) of any and all such
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so distributable, and (ii)
the Current Warrant Price shall be adjusted to equal (A) the Current Warrant
Price multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
A reclassification of the Common Stock (other than a change in par value, or
from par value to no par value or from no par value to par value) into shares
of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares
of such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such
change shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) In the event
the Company shall issue or sell any Additional Shares of Common Stock, other
than Permitted Issuances, for a consideration per Additional Share of Common
Stock less than the greater of the Current Warrant Price and the Current Market
Price, then the Current Warrant Price shall be reduced to the lower of the
prices calculated as follows:
(1) by dividing (A) an amount equal to the sum of (x) the number of
Fully Diluted Outstanding shares of Common Stock immediately prior to such
issue or sale multiplied by the then existing Current Warrant Price plus (y) the
aggregate consideration, if any, received
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by the Company upon such issue or sale, by (B) the total number of Fully
Diluted Outstanding shares of Common Stock outstanding immediately after such
issue or sale; and
(2) by multiplying the then existing Current Warrant Price by a
fraction the numerator of which shall be the sum of (x) the number of Fully
Diluted Outstanding shares of Common Stock immediately prior to such issue or
sale multiplied by the Current Market Price per share of Common Stock
immediately prior to such issue or sale plus (y) the consideration received by
the Company upon such issue or sale, and the denominator of which shall be the
total number of Fully Diluted Outstanding shares of Common Stock immediately
after such issue or sale multiplied by the Current Market Price per share of
Common Stock immediately prior to such issue or sale.
For purposes of this subsection (a), the date as of which the Current
Market Price per share of Common Stock shall be computed shall be the earlier
of the date upon which the Company shall (i) enter into a firm contract for the
issuance of such shares or (ii) issue such shares.
Upon any adjustment of the Current Warrant Price as provided in this
Section 4.3(a), the Holder shall thereafter be entitled to purchase, at the
Current Warrant Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Current Warrant Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable hereunder
immediately prior to such adjustment and dividing the product thereof by the
Current Warrant Price resulting from such adjustment.
(b) The provisions of this Section 4.3 shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is provided under
Section 4.1 or 4.2. No adjustment shall be made under this Section 4.3 upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. Except with respect to
Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants (other than the Warrants) or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or
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upon conversion or exchange of such Convertible Securities shall be less than
the greater of the Current Warrant Price and the Current Market Price in effect
immediately prior to the time of such distribution, issue or sale, then the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3(a) on the
basis that (i) the maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding, (ii) the price per share for such Additional
Shares of Common Stock shall be deemed to be the lowest price per share at
which such Additional Shares of Common Stock are issuable to such holders, and
(iii) the Company shall have received all of the consideration, if any, payable
for such warrants or other rights as of the date of the actual issuance
thereof. No further adjustments of the number of shares of Common Stock for
which this Warrant is exercisable or of the Current Warrant Price shall be made
upon the actual issue of such Common Stock or of such Convertible Securities
upon exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
4.5. Issuance of Convertible Securities. Except with respect to
Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the greater of the Current Warrant Price and the
Current Market Price in effect immediately prior to the time of such issue or
sale, then the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3(a) on the basis that (i) the maximum number of Additional Shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding, (ii) the price
per share of such Additional Shares of Common Stock shall be deemed to be the
lowest possible price in any range of prices at which such Additional Shares of
Common Stock are available to such holders, and (iii) the Company shall have
received all of the consideration payable therefor, if any, as of the date of
actual issuance of such Convertible Securities. No further adjustment of the
number of shares of Common Stock for which this Warrant is exercisable or of the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the number of
shares of Common Stock for which this Warrant is exercisable or of the Current
Warrant Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and, if any issue or sale
of such Convertible Securities is made upon exercise of any warrant or other
right to subscribe for or to purchase or any warrant or other right to purchase
any such Convertible Securities for which
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adjustments thereof have been or are to be made pursuant to other provisions of
this Section 4, no further adjustments shall be made by reason of such issue or
sale.
4.6. Superseding Adjustment. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable
shall have been made pursuant to Section 4.4 or Section 4.5 as the result of any
issuance of warrants, rights or Convertible Securities, and either
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(b) the consideration per share for which shares of Common Stock
are issuable pursuant to such warrants or rights, or such other
Convertible Securities, shall be increased or decreased by virtue of
provisions therein contained,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
rights or options or other Convertible Securities on the then outstanding
Warrants, but not on any then outstanding Warrant Stock, on the basis of
(c) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or any
such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually
received and receivable therefor, and
(d) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase or
decrease of the consideration per share for which shares of Common
Stock or other property are issuable under such warrants or rights or
other Convertible Securities.
4.7. Other Provisions Applicable to Adjustments Under This Section.
The following provisions shall be applicable to the making of adjustments
provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other
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rights to subscribe for or purchase any Additional Shares of Common Stock or
any Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Company therefor, or, if such Additional Shares of Common
Stock or Convertible Securities are offered by the Company for subscription,
the subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public offering
without a subscription offering, the public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends, but not subtracting any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such issuance
shall be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Company. In case any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of Common Stock or
Convertible Securities shall be issued in connection with any merger in which
the Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The consideration
for any Additional Shares of Common Stock issuable pursuant to any warrants or
other rights to subscribe for or purchase the same shall be the consideration
received by the Company for issuing such warrants or other rights plus the
additional consideration payable to the Company upon exercise of such warrants
or other rights. The consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Convertible Securities shall be the
consideration, if any, received by the Company for issuing warrants or other
rights to subscribe for or purchase such Convertible Securities, plus the
consideration paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Company upon the exercise of the right
of conversion or exchange in such Convertible Securities. In case of the
issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
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(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.1) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made upon
the earlier of (i) the date upon which such adjustment, together with
other adjustments required by this Section 4 and not previously made,
would result in a minimum adjustment, and (ii) the date of exercise.
For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, the Holder exercises this
Warrant, any Additional Shares of Common Stock issuable and other
property distributable upon exercise by reason of such adjustment shall
be held in escrow for the Holder by the Company to be issued to the
Holder upon and to the extent that the event actually takes place, upon
payment of the then Current Warrant Price. Notwithstanding any other
provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares
shall be cancelled by the Company and escrowed property returned.
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(f) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination
in good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Majority Holders,
and any dispute shall be resolved by an investment banking firm of
recognized national standing selected by the Company and acceptable to
the Majority Holders.
4.8. Reorganization, Reclassification, Liquidation, Dissolution,
Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, liquidate its assets,
dissolve, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation or other entity (hereinafter, a
"Reorganization") and, pursuant to the terms of such Reorganization, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("Other Property"), are
to be received by or distributed to the holders of Common Stock of the Company,
then the Holder shall have the right following the effectiveness of such
Reorganization to receive, upon exercise of such Warrant, or, in the case of a
liquidation of assets or a dissolution to receive, upon such liquidation or
dissolution, without taking any further action, the number of shares of common
stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
Reorganization by a holder of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such event (without regard to
the number of shares of Common Stock available or set aside for issuance upon
such exercise). In case of any such Reorganization, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such appropriate modifications as are
satisfactory to the Holder in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.8 "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.8 shall similarly apply to successive
Reorganizations.
4.9. Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock,
other than any action
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described in this Section 4 for which a specific adjustment is provided, then,
unless such action will not have a materially adverse effect upon the rights
of the Holder, the number of shares of Common Stock or other stock for which
this Warrant is exercisable and/or the purchase price thereof shall be
adjusted in such manner as may be equitable in the circumstances.
4.10. Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price to be
less than the par value per share of Common Stock.
5. NOTICES TO WARRANTHOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of Common
Stock or the class or type of stock or other property for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of this Warrant, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.2 or 4.7(a)), specifying the number of
shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.8 or 4.9) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 17.2. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by the
Holder or any prospective purchaser of a Warrant designated by the Holder.
5.2. Notice of Certain Corporate Action. The Holder shall be entitled
to the same rights to receive notice of corporate action as any holder of
Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Current Warrant
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<PAGE> 21
Price immediately prior to such increase in par value, (b) take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of the Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the earlier of (i) May 31, 1998 or (ii) the approval by
the shareholders of the Company of an increase in the number of authorized
shares of Common Stock as contemplated in the Unit Purchase Agreement, the
Company shall at all times reserve and keep available for issue upon the
exercise of warrants such number of its authorized but unissued shares
of Common Stock as will be sufficient to permit the exercise in full of all
outstanding Warrants. If at any time from and after the date referred to above
the number of authorized but unissued shares of Common Stock shall not be
sufficient to permit the exercise in full of all outstanding Warrants and Other
Warrants, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, taking appropriate board action, recommending
such an increase to the holders of Common Stock, holding shareholders meetings,
soliciting votes and proxies in favor of such increase to obtain the requisite
shareholder approval and upon such approval, the Company shall reserve and keep
available such additional shares solely for the purpose of permitting the
exercise of Warrants or Other Warrants.
All shares of Common Stock which shall be so issuable, when issued
upon exercise of any Warrant and payment therefor in accordance with the terms
of such Warrant, shall be duly and validly issued, fully paid and
nonassessable and free and clear of any liens, claims and restrictions (other
than as provided herein). Except as provided in this Warrant, no stockholder of
the Company has or shall have any preemptive rights to subscribe for such shares
of Common Stock.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock or the type of consideration for which this
Warrant is exercisable or in the Current Warrant Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
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If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each
such case take such a record and will take such record as of the close of
business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in
this Section 9. The Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legends. (a) Except as otherwise provided in this
Section 9, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with legends in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the
securities or blue sky laws of any state and are subject to the
conditions specified in a certain Warrant dated _______ __, 199_,
originally issued by Code Alarm Inc. The shares represented by this
certificate may not be sold, or otherwise transferred, in the absence
of such registration or an exemption therefrom under such Act and under
any such applicable state laws, or in violation of the provisions of
the Warrant. A copy of the form of said Warrant is on file with the
Secretary of Code Alarm Inc. The holder of this certificate, by
acceptance of this certificate, agrees to be bound by the provisions of
such Warrant."
"The shares represented by this certificate are subject to the
terms and conditions of a Registration Rights Agreement, dated as of
October __, 1997."
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(b) Except as otherwise provided in this Section 9, each Warrant
shall be stamped or otherwise imprinted with legends in substantially the
following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended, or under
the securities or blue sky laws of any state and may not be sold, or
otherwise transferred, in the absence of such registration or an
exemption therefrom under such Act and under any such applicable state
laws, or in violation of the provisions of this Warrant."
"This Warrant and the securities represented hereby are subject
to the terms and conditions of a Registration Rights Agreement, dated
as of October __, 1997."
9.2. Notice of Proposed Transfers; Requests for Registration. Prior
to any Transfer or attempted Transfer of any Warrants or any shares of
Restricted Common Stock, the Holder of such Warrants or Restricted Common Stock
shall deliver to the Company either a written opinion reasonably acceptable to
the Company of Independent Counsel addressed to the Company or a no-action
letter from the Commission to the effect that the proposed Transfer of such
Warrants or such Restricted Common Stock may be effected without registration
under the Securities Act and applicable state securities or blue sky laws. After
delivery of the written opinion or the no-action letter to the Company, such
Holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock. Each certificate, if any, evidencing such shares of Restricted
Common Stock issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1(a), and each Warrant issued upon such Transfer shall bear
the restrictive legend set forth in Section 9.1(b), unless in the written
opinion of Independent Counsel addressed to the Company such legend is not
required in order to ensure compliance with the Securities Act.
9.3. No Transfer to Directed Electronics, Inc. The Holder shall not
sell or otherwise transfer any Warrants to DEI, any affiliate of DEI, Mr.
Darrell Issa, the president of DEI, any entity which, to the knowledge of the
Holder, is controlled by Mr. Issa, or any person who, to the knowledge of the
Holder, is a member of the immediate family (as such term is defined in Rule
16a-1 promulgated under the Exchange Act) of Mr. Issa.
9.4. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto, or (ii) when the Company shall have delivered to the Holder or
Holders of Warrants, Warrant Stock or Restricted
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<PAGE> 24
Common Stock the written opinion of Independent Counsel stating that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant bearing
the following legend in place of the first restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED
IN SECTION 9 HEREOF TERMINATED ON ____________, 199_, AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants entitled to bear
such legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as hereinabove provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 9.1(a).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
Holder of Restricted Common Stock in supplying such information as may be
reasonably requested by such Holder or reasonably necessary for such Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written indemnity agreement of Pegasus Partners, L.P.
or Pegasus Related Partners, L.P. shall be sufficient indemnity) and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, in
the case of mutilation, no indemnity shall be required if this warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the
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warrants may be presented for exercise, registration of transfer, division or
combination as provided in this Warrant.
13. REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK
13.1. Obligation to Repurchase Warrant and Warrant Stock. (a) At any
time and from time to time, at the election of the Holder, after the date
which is three years and six months after the Closing Date, the Holder may, by
notice to the Company (the "Put Notice"), demand repurchase of this Warrant, in
whole or in part, and/or all or part of the Holder's shares of Warrant Stock
which are Restricted Common Stock. Subject to the provisions of Section 13.2,
the Company shall, on the date (not less than 30 days after the date of the Put
Notice) designated in such Put Notice, repurchase from the Holder all or the
portion of this Warrant and/or the number of shares of such Holder's Warrant
Stock designated in the Put Notice for an amount determined by multiplying (x)
the number of shares of Warrant Stock and/or the Common Stock subject to this
Warrant or portion thereof being repurchased by (y) the Current Market Price per
share of Common Stock determined as of the date of the repurchase demand and, in
the event of repurchase of all or a portion of this Warrant, deducting from the
product thereby obtained the Current Warrant Price times the number of shares of
Common Stock subject to this Warrant (or portion thereof) being repurchased.
(b) Notwithstanding the provisions of Section 13.1(a), if, at any time
during the period between the date on which the Holder shall have delivered a
Put Notice and the date of repurchase by the Company pursuant thereto, a
Reorganization shall occur and the consideration received or receivable by
stockholders in connection with such Reorganization shall consist solely of
cash, then the Holder shall (whether or not the Holder shall have previously
surrendered its Warrant and/or Warrant Stock for repurchase by the Company
pursuant to this Section 13) be entitled to receive, on the date of such
repurchase, the higher of (i) the amount payable to the Holder as determined
pursuant to Section 13.1(a) and (ii) an amount equal to the amount of cash the
Holder would have received upon the occurrence of such Reorganization had the
Holder's Warrant (or the portion thereof being repurchased) been fully exercised
immediately prior thereto less, in the event of a repurchase of all or a portion
of this Warrant, the purchase price payable at such time for the purchase of the
shares of Common Stock then subject to the Holder's Warrant (or the portion
thereof being repurchased).
(c) The Company shall not be obligated under this Section 13.1 to
repurchase any Warrant or portion thereof and/or issued Warrant Stock if the
Company is in default under any agreement or instrument evidencing the Company's
or any of its Subsidiaries' indebtedness for borrowed money, and such default
has not been waived, or if and to the extent such a repurchase (i) would
cause an event of default to exist by reason of such repurchase, which event of
default has not been waived, with respect to any such agreement or would violate
any provision of any such agreement or instrument, or (ii) would be in violation
of applicable law ("Restrictions"), in any such case as determined by an opinion
of counsel to the Company reasonably acceptable to the Holder; provided,
however, that the Company shall use its
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reasonable best efforts to have any such Restriction either waived or
terminated (including, without limitation, by obtaining refinancing for any
such indebtedness). In the event that, following receipt of a Put Notice, the
Company will not repurchase all or any portion of such Warrant and/or Warrant
Stock because of the existence of any Restriction, the Company shall, within
twenty (20) days of receipt of the Put Notice, so notify the Holder in writing,
setting forth the portion of the Warrant and/or Warrant Stock which will not be
repurchased and the Restrictions which apply, and deliver to the Holder a copy
of the opinion referred to in the prior sentence. In addition, in such event,
the Company shall thereafter, upon the request of the Holder, use its best
efforts to register the Warrant Stock and/or the Common Stock subject to this
Warrant, in accordance with the terms of the Registration Rights Agreement.
13.2. Payment of Repurchase Price. The purchase price for any
repurchase pursuant to Section 13.1 (the "Repurchase Price") shall be
determined pursuant to Section 13.1 and shall be payable in cash.
On the date of any repurchase of Warrants and/or Warrant Stock
pursuant to this Section 13, the Holder shall assign to the Company its Warrant
or portion thereof being repurchased and a certificate for the number of shares
of Warrant Stock being repurchased, as the case may be, without any
representation or warranty (other than that the Holder has good and marketable
title thereto, free and clear of liens, encumbrances and restrictions of any
kind), by the surrender of the Holder's Warrant and certificate for Warrant
Stock together with, in the case of Warrant Stock, instruments of transfer
reasonably acceptable to the Company, at the principal office of the Company
referred to in Section 2.1 against payment therefor of the Repurchase Price by,
at the option of the Holder, (i) wire transfer to an account in a bank located
in the United States designated by the Holder for such purpose or (ii) a
certified or official bank check payable to the order of the Holder. If less
than all of the Holder's Warrant is being repurchased, the Company shall,
pursuant to Section 3, cancel such Warrant and issue in the name of, and deliver
to, the Holder a new Warrant for the portion not being repurchased. If less
than all of the shares represented by a certificate for Warrant Stock are being
repurchased, the Company shall cancel such certificate and issue in the name of,
and deliver to, the Holder a new certificate for the number of shares of Warrant
Stock not being repurchased.
13.3. Right to Repurchase Warrant and Warrant Stock. (a) In the event
the Company exercises its rights to repurchase all of the outstanding Units and
the Common Stock for which Attached Warrants (as defined in the Unit Purchase
Agreement) have theretofore been exercised, pursuant to Section 8.01(b) of
the Unit Purchase Agreement, then, simultaneously therewith, the Company, at its
sole option, may repurchase not less than and not more than 95% of the
outstanding Warrants and 95% of the shares of Common Stock for which Warrants
have been exercised (other than shares of Common Stock which have been sold to a
Person that is not an affiliate or associate (as defined in Rule 405 promulgated
under the Securities Act) of the initial Holder ("Non-Repurchasable Stock")),
for an aggregate repurchase price equal to the amount determined by multiplying
(x) the sum of (1) 100% of the number of shares of Common Stock for which the
Warrants are then exercisable and (2) 100% of the number of shares for
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<PAGE> 27
which the Warrants have theretofore been exercised (other than shares of
Non-Repurchasable Stock) by (y) the price per share of Common Stock which the
holders of Units would receive pursuant to Section 8.01(b) of the Unit Purchase
Agreement (assuming exercise of the Attached Warrants which are part of such
Units) and then deducting the aggregate exercise price of the Warrants to be
repurchased.
(b) Notice of repurchase pursuant to this Section 13.3 shall be given
by first class mail, postage prepaid, mailed not less than 10 nor more than 20
days prior to the repurchase date to each Holder's address as the same appears
on the books of the Company. Each such notice shall state: (i) the purchase
date; (ii) the portion of Warrants and the number of shares of Common Stock to
be purchased; (iii) the amount of the purchase price; and (iv) the place or
places where such Warrants and certificates for such shares of Common Stock are
to be surrendered for payment of the purchase price. Upon receipt of
any such notice, the Warrants being repurchased may not be exercised or
transferred and the Common Stock being repurchased may not be transferred,
unless the Company fails to make the repurchases on the terms set forth in its
notice.
(c) In the event only a portion of this Warrant is being repurchased
pursuant to this Section 13.3, the Holder shall surrender this Warrant to
the Company for cancellation on the repurchase date at the place specified in
the repurchase notice, and the Company shall thereupon issue to the Holder a
new Warrant evidencing the portion of this Warrant not so repurchased.
14. REGISTRATION RIGHTS
This Warrant is entitled to the benefits of the registration rights
provisions contained in the Registration Rights Agreement. The Company shall
keep a copy of the Registration Rights Agreement, and any amendments thereto, at
the office or agency designated by the Company pursuant to Section 12 and shall
furnish copies thereof to the Holder upon request.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
the Holder for the purchase price of any Common Stock or as a stockholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company.
16. DIVIDENDS ON UNDERLYING COMMON STOCK
In the event that, at any time before the Charter Amendment (as defined
in the Unit Purchase Agreement) shall have (a) been approved and adopted by the
Company's
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stockholders, (b) been filed with the Department of Consumer and Industry
Services of the State of Michigan and (c) become effective, or at any time
after the Company shall have failed for any reason to issue Common Stock to
the Holder upon exercise of this Warrant or shall have failed to comply with
Section 7 hereof, the Company shall pay a dividend or make any other
distribution with respect to its Common Stock whether in the form of cash,
evidences of indebtedness, securities or other property (other than a Common
Stock dividend subject to the provisions of Section 4.1 or a dividend of
warrants or rights to purchase Common Stock subject to the provisions of
Section 4.2), then the Company shall pay to the Holder of this Warrant on the
date of payment of such dividend or other distribution, an amount in cash
equal to the number of shares of Common Stock issuable upon exercise of this
Warrant in full on the record date for such dividend or other distribution
(without regard to the number of shares of Common Stock available or set aside
for issuance upon such exercise) multiplied by the sum of (i) the amount of
cash and (ii) the fair value of any evidences of indebtedness, securities or
other property distributed with respect to each share of Common Stock. The
"fair value" of any such evidences of indebtedness, securities or other
property shall mean the fair market value thereof, as determined by the Board
of Directors in good faith, which good faith determination may be challenged
by the Holder in accordance with Section 4.7(f).
17. MISCELLANEOUS
17.1. Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers
or remedies. If the Company fails to make, when due, any payments provided
for hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
17.2. Notice Generally. All notices, demands, requests, or other
communications which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Warrant shall be in writing and shall
be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery (including delivery
by courier), or facsimile transmission, addressed as follows:
(a) If to the Company:
Code Alarm Inc.
950 East Whitcomb
Madison Heights, Michigan 48071
Attention: Rand Mueller and Craig Camalo
Facsimile: (248) 585-4799
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with a copy to:
Pepper Hamilton & Scheetz LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: Dennis S. Kayes, Esq.
Facsimile: (313) 259-7926
(b) If to the Holder, at its last known address appearing on the books
of the Company maintained for such purpose.
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication shall be deemed to have
been duly given five business days after being deposited in the mail, postage
prepaid, if mailed; when delivered by hand, if personally delivered; or upon
receipt, if sent by facsimile (followed by a confirmation copy sent by either
overnight or two (2) day courier).
17.3. Indemnification. The Company agrees to indemnify and hold
harmless the Holder, its officers, directors, employees, agents, and attorneys
from and against any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind which may be imposed upon, incurred by or asserted
against the Holder relating to or arising out of any litigation to which the
Holder is made a party in its capacity as a stockholder or warrantholder of the
Company; provided, however, that the Company will not be liable hereunder to the
extent that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a judgment by a court to have resulted from (i) the Holder's gross
negligence or willful misconduct, (ii) actions or omissions taken or not taken
by the Holder in any capacity other than as a stockholder or warrantholder of
the Company or (iii) actions or omissions taken or not taken by the Holder
solely as a stockholder or warrantholder of the Company and for which
stockholders or warrantholders may be held liable under Michigan law.
17.4. Successors and Assigns. Subject to the provisions of Sections
3.1 and 9, (i) this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and assigns of the Holder, and (ii) the provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant, and shall be enforceable by any such Holder.
17.5. Amendment. The Warrants may be modified or amended or the
provisions thereof waived with the written consent of the Company and the
Holder.
17.6. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision
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of this Warrant 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 Warrant.
17.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
17.8. Governing Law; Consent to Jurisdiction and Venue. In all
respects, including all matters of construction, validity and performance,
this Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. EACH OF THE COMPANY AND HOLDER CONSENTS TO PERSONAL
JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE CITY OF NEW
YORK, STATE OF NEW YORK. Service of process on the Company or the Holder in any
action arising out of or relating to this Agreement shall be effective if mailed
to such party in accordance with the procedures and requirements set forth in
Section 17.2. Nothing herein shall preclude the Holder or the Company from
bringing suit or taking other legal action in any other jurisdiction.
17.9. Mutual 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 THEIR DISPUTES 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 ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS WARRANT.
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<PAGE> 31
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its duly authorized officer and its corporate seal to be
impressed hereon and attested by its Secretary or Assistant Secretary.
Dated: October __, 1997
CODE ALARM INC.
By:_______________________
Name:
Title:
Attest:
By:_______________________
Name:
Title:
<PAGE> 32
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _______ shares of Common Stock of
CODE ALARM INC. and herewith makes payment therefor, all at the price and on
the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to __________________ whose address is
___________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable hereunder be delivered to the undersigned.
_____________________________ (Name of Registered Owner)
_____________________________ (Signature of Registered Owner)
_____________________________ (Street Address)
_____________________________ (City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 33
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the number
of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of Code Alarm Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: ____________________________
Name: ____________________________
Signature: ________________________
Witness: __________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 1
EXHIBIT 10.64
EXECUTION COPY
LIMITED SUPPLEMENTAL GUARANTY
This LIMITED SUPPLEMENTAL GUARANTY (this "Guaranty"), dated as
of October 24, 1997, by and among PEGASUS PARTNERS, L.P., a Delaware limited
partnership, and PEGASUS RELATED PARTNERS, L.P., a Delaware limited partnership
(each individually, a "Guarantor" and together, collectively, the
"Guarantors"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, individually and as agent (in such capacity, "Agent") for itself
and the lenders from time to time signatory to the Credit Agreement hereinafter
defined ("Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among Code-Alarm, Inc., a Michigan corporation
("Borrower"), the other Persons signatory thereto as Credit Parties, Agent and
the Persons signatory thereto from time to time as Lenders (including all
annexes, exhibits and schedules thereto, as from time to time amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders
have agreed to make Loans to, and incur Letter of Credit Obligations for the
benefit of, Borrowers.
WHEREAS, each Guarantor is a shareholder of Borrower and will,
accordingly, derive direct and indirect economic benefits from the making of
the Loans and other financial accommodations provided to Borrower pursuant to
the Credit Agreement; and
WHEREAS, in order to induce Agent and Lenders to enter into
the Credit Agreement and other Loan Documents and to induce Lenders to make the
Loans and to incur Letter of Credit Obligations as provided for in the Credit
Agreement, each Guarantor has agreed to severally and not jointly guarantee
payment of the Obligations, subject to the limitations set forth herein;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lenders to provide the Loans and
other financial accommodations under the Credit Agreement, it is agreed as
follows:
1. DEFINITIONS. Capitalized terms used herein shall
have the meanings assigned to them in the Credit Agreement, unless otherwise
defined herein.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any annexes,
exhibits and schedules to any of the foregoing, and shall refer to this
Guaranty as the same may be in effect at the time such reference becomes
operative.
<PAGE> 2
In addition, the following terms, as used herein, shall have
the meanings set forth below:
"Administrative GP" shall have the meaning ascribed to such
term in Section 3(a).
"Capital Demand Date" shall have the meaning ascribed to such
term in the Partnership Agreements as in effect from time to time.
"Capital Demand Notice(s)" shall have the meaning ascribed to
such term in the Partnership Agreements as in effect from time to time.
"Corporate GP" shall have the meaning ascribed to such term in
Section 3.
"Defaulting Limited Partner" shall have the meaning ascribed
to such term in the Partnership Agreements as in effect on the date hereof.
"Event of Dissolution" shall have the meaning ascribed to such
term in the Partnership Agreements as in effect on the date hereof and any
other "Event of Dissolution" as may be hereafter defined in the Partnership
Agreements.
"Guarantor Default" shall mean (i) any failure of either
Guarantor to pay or perform any of its obligations under this Guaranty, (ii)
any breach by either Guarantor of any representation or warranty hereunder in
any material respect, (iii) the occurrence of any insolvency event with respect
to either Guarantor under Sections 8.1(h) or 8.1(i) of the Credit Agreement,
(iv) any revocation or attempted revocation by either Guarantor of its
obligations under this Guaranty, or (v) any "Guarantor Default" shall have
occurred under and as defined in that certain Limited Litigation Guaranty of
even date herewith among the Guarantors and Agent.
"Guaranteed Obligations" shall have the meaning ascribed to
such term in Section 2.1.
"Instruction Certificate" shall mean one or more written
certificates executed by Agent and delivered to the Administrative GP and to
Guarantors stating that (i) Agent is entitled to demand payment under this
Guaranty, (ii) Agent has demanded payment under this Guaranty, (iii) the
Guarantors have failed to timely satisfy all of such payments properly
demanded, (iv) the Administrative GP is instructed to deliver a Capital Demand
Notice to each limited partner of each Guarantor specifying the earliest
possible Capital Demand Date as is permitted under Section 3.1 of the
Partnership Agreements and demanding capital contributions under such section
in amounts sufficient to permit the Guarantors to satisfy such unsatisfied
payment obligations to Agent under this Guaranty and (v) all of the proceeds of
such capital contributions received by the Administrative GP are to be promptly
sent, by wire transfer, to an account specified in such certificate for
application by Agent to such unsatisfied payment obligations.
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<PAGE> 3
"Irrevocable Instruction" shall mean a document, in form and
substance acceptable to Agent, pursuant to which the Managing GP instructs the
Administrative GP, and the Administrative GP agrees, that upon the
Administrative GP's receipt of an Instruction Certificate from Agent, the
Administrative Agent shall (i) deliver a Capital Demand Notice to each limited
partner of each Guarantor, specifying the earliest Capital Demand Date as is
permitted under Section 3.1 of the Partnership Agreements and demanding capital
contributions under such section in amounts sufficient to permit the Guarantors
to satisfy the unpaid Guaranteed Obligations set forth in such Instruction
Certificate and (ii) pay all of the proceeds of such capital contributions
received by the Administrative GP to Agent on behalf of the Guarantors for
application by Agent to such Guaranteed Obligations pursuant to the
instructions specified by Agent in such Instruction Certificate. Such
Irrevocable Instruction may only be amended, terminated or modified with the
written consent of Agent, the Administrative GP and the Managing GP.
"Managing GP" shall have the meaning ascribed to such term in
Section 3.
"Partnership Agreements" shall mean the Agreement of Limited
Partnership of each Guarantor as in effect as of the date hereof and attached
hereto as Exhibit A and B, respectively, as amended or otherwise modified from
time to time hereafter.
"Ratable Share" shall mean 27.7727273% in the case of Pegasus
Partners, L.P., and 72.2272727% in the case of Pegasus Related Partners, L.P.
"Termination Date" shall have the meaning ascribed to such
term in Section 2.1.
"Trigger Event" shall mean (i) any Event of Dissolution, (ii)
the existence of any Defaulting Limited Partner and the failure of the
non-defaulting limited partners of the affected Guarantor to assume the Unpaid
Capital Obligations of such Defaulting Limited Partner within thirty days of
the default giving rise such occurrence, (iii) any Guarantor Default or (iv)
any amendment or other modification with respect to either Partnership
Agreement shall become effective and shall have a material adverse effect upon
the rights or claims of Agent and the Lenders under this Guaranty.
"Unpaid Capital Obligations" shall have the meaning ascribed
to such term in the Partnership Agreements as of the date hereof.
2. THE GUARANTY.
2.1. Guaranty of Guaranteed Obligations of Borrower.
Subject to the provisions of this Guaranty, each Guarantor hereby severally
(based upon their respective Ratable Shares and not jointly), irrevocably and
unconditionally guarantees to Agent and Lenders, and their respective
successors, endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) of the Obligations of Borrower
other than its
3
<PAGE> 4
Litigation Obligations (hereinafter the "Guaranteed Obligations"). Subject to
the provisions of this Guaranty, in the event that either Guarantor shall fail
to timely satisfy any such obligations or any other payment obligations under
this Guaranty, Agent shall be thereafter entitled, in its discretion, to
deliver one or more Instruction Certificates to the Administrative GP
requesting payment thereof pursuant to the Irrevocable Instruction. Each
Guarantor agrees that this Guaranty is a guaranty of payment and not of
collection, and that its obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability
or any future amendment of, or change in, this Guaranty, any other Loan
Document or any other agreement, document or instrument to which any
Credit Party, either Guarantor or other Persons are or may become a party;
(b) the absence of any action to enforce this Guaranty or
any other Loan Document or the waiver or consent by Agent and/or Lenders
with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to
perfect its Lien against, any Collateral for the Guaranteed Obligations or
any action, or the absence of any action, by Agent in respect thereof;
(d) the discharge, avoidance, subordination or other
ineffectiveness of any of the Guaranteed Obligations, whether pursuant to
any insolvency proceeding or otherwise;
(e) the insolvency of any Credit Party, either Guarantor
or other Person; or
(f) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor;
it being agreed by each Guarantor that its obligations under this Guaranty
shall not be discharged until the earliest date on which the Loans have been
repaid in full and all other Guaranteed Obligations under the Credit Agreement
and other Loan Documents (hereinafter, the Loan Documents") have been paid in
full and the Letter of Credit Obligations have been cash collateralized,
canceled or backed by standby letters of credit in accordance with Annex B of
the Credit Agreement, and Borrower shall have no further right to borrow any
monies or obtain additional financial accommodations under the Credit Agreement
(the "Termination Date"); provided, however, that the Termination Date may be
thereafter be deemed to have not occurred upon Guarantors' obligations under
this Guaranty being reinstated pursuant to Section 2.8 and shall be extended
until such time as the payments giving rise to such reinstatement are
thereafter again repaid to Agent and Lenders. Subject to limitations described
in Section 2.2, each Guarantor shall be regarded, and shall be in the same
position, as principal debtor with respect to
4
<PAGE> 5
the Guaranteed Obligations. Each Guarantor agrees that any notice or directive
given at any time to Agent which is inconsistent with this section, or Section
2.5 or 2.7, shall be null and void and may be ignored by Agent and Lenders,
and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless Agent and Lenders have specifically agreed otherwise in writing. It is
agreed among Guarantor, Agent and Lenders that the foregoing provisions, and
those of Sections 2.5 and 2.7, are of the essence of the transaction
contemplated by the Loan Documents and that, but for this Guaranty and such
waivers, Agent and Lenders would decline to enter into the Credit Agreement.
2.2. Limitations. Notwithstanding anything in Section 2.1
or elsewhere in this Guaranty to the contrary, (a) the aggregate liability of
Guarantors under this Guaranty shall, in no event, exceed, $4,000,000, plus
interest on each amount payable hereunder from the date such payment by
Guarantors hereunder is due and payable pursuant to clause (b) of this section
at a per annum rate equal to the Default Rate for Revolving Loans bearing
interest based upon the Index Rate (computed on the basis of 360 days and
actual days elapsed), until such payment is received by Agent, and plus all
costs and expenses (including, without limitation, attorneys' and paralegals'
fees and expenses) incurred by Agent following either Guarantor's failure to
timely satisfy its obligations hereunder, in connection with the enforcement
and collection of the Guarantors' obligations under this Guaranty against the
Guarantors and their respective partners and properties, (b) each payment by
Guarantors hereunder shall be due and payable on the tenth (10th) calendar day
following the date on which demand for such payment is given by Agent to
Guarantors, and (c) Agent shall not be permitted to demand payment hereunder
from Guarantors, and Guarantors shall not be liable hereunder for any such
demanded payment, unless, as of the date of such demand, (x) the Obligations
shall have been accelerated pursuant to Section 8.2 of the Credit Agreement (or
any successor provision thereto) or (y) any Event of Default shall have
occurred under Section 8.1(h) or 8.1(i) of the Credit Agreement (or any
successor provisions thereto).
2.3. Payment by Guarantor. Payment by either Guarantor
shall be made to Agent in immediately available Federal funds to an account
designated by Agent or at the address set forth herein for the giving of notice
to Agent or at any other address that may be specified in writing from time to
time by Agent, and shall be credited and applied to the Guaranteed Obligations.
2.4. Enforcement of Guaranty. In no event shall Agent
have any obligation (although it is entitled, at its option) to proceed against
Borrower, any other Credit Party, one but not the other Guarantor, or other
Person, or any Collateral before seeking satisfaction from either Guarantor.
2.5. Waiver. In addition to the provisions of Section 2.1
hereof, each Guarantor waives, and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage
of, any appraisal, valuation, stay, extension,
5
<PAGE> 6
marshaling of assets or redemption laws, or exemption, whether now or at any
time hereafter in force, which may delay, prevent or otherwise affect the
performance by such Guarantor of its Guaranteed Obligations under, or the
enforcement by Agent or Lenders of, this Guaranty. Each Guarantor hereby waives
diligence, presentment and demand upon Borrower or, other than as provided in
this Guaranty, such Guarantor (whether for non-payment or protest or of
acceptance, maturity, extension of time, change in nature or form of the
Guaranteed Obligations, acceptance of further security, release of further
security, composition or agreement arrived at as to the amount of, or the terms
of, the Guaranteed Obligations, notice of adverse change in Borrower's
financial condition or any other fact which might increase the risk to such
Guarantor) with respect to any of the Guaranteed Obligations or all other
demands whatsoever and waive the benefit of all provisions of law which are or
might be in conflict with the terms of this Guaranty. Each Guarantor
represents, warrants and agrees that, as of the date of this Guaranty, its
obligations under this Guaranty are not subject to any offsets or defenses
against Agent or Lenders or any other Credit Party of any kind. Each Guarantor
further agrees that its obligations under this Guaranty shall not be subject to
any counterclaims (other than compulsory counterclaims), offsets or defenses
against Agent or any Lender or against any other Credit Party of any kind which
may arise in the future.
2.6. Benefit of Guaranty. The provisions of this Guaranty
are for the benefit of Agent and Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between any Credit Party, either Guarantor or other Person and Agent or
Lenders, the obligations of any Credit Party, either Guarantor or other Person
under the Loan Documents. In the event all or any part of the Guaranteed
Obligations are transferred, indorsed or assigned by Agent or any Lender to any
Person or Persons, any reference to "Agent" or "Lender" herein shall be deemed
to refer equally to such Person or Persons.
2.7. Modification of Guaranteed Obligations, Etc. Each
Guarantor hereby acknowledges and agrees that Agent and Lenders may at any time
or from time to time, with or without the consent of, or notice to, such
Guarantor:
(a) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, the Guaranteed
Obligations;
(b) take any action under or in respect of the Loan
Documents in the exercise of any remedy, power or privilege contained
therein or available to it at law, equity or otherwise, or waive or
refrain from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan
Documents;
6
<PAGE> 7
(d) extend or waive the time for any Credit Party's or
other Person's performance of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under the Loan
Documents, or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;
(e) take and hold Collateral for the payment of the
Guaranteed Obligations guaranteed hereby or sell, exchange, release,
dispose of, or otherwise deal with, any property pledged, mortgaged or
conveyed, or in which Agent or Lenders have been granted a Lien, to
secure any Guaranteed Obligations;
(f) release anyone who may be liable in any manner for
the payment of any amounts owed by either Guarantor or any other Credit
Party or other Person to Agent or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
either Guarantor or any other Credit Party or other Person are
subordinated to the claims of Agent and Lenders; and/or
(h) apply any sums by whomever paid or however realized
to any amounts owing by either Guarantor or any other Credit Party or
other Person to Agent or any Lender in such manner as Agent or any
Lender shall determine in its discretion;
and Agent and Lenders shall not incur any liability to Guarantors as a result
thereof, and no such action shall impair or release the Guaranteed Obligations
of Guarantors under this Guaranty.
2.8. Reinstatement. This Guaranty shall remain in full
force and effect and continue to be effective should any petition be filed by
or against any Credit Party, either Guarantor or any other Person for
liquidation or reorganization, should any Credit Party, either Guarantor or any
other Person become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of such Credit Party's, Guarantor's or other Person'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 Guaranteed Obligations or the
obligations of either Guarantor under this Guaranty, or any part of any such
obligations, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by Agent or any Lender pursuant to
applicable law, 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 such payment, or any part thereof, is rescinded, reduced,
restored or returned, the Guaranteed Obligations and obligations of the
Guarantors under this Guaranty shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned. In the
event any such payment is rescinded, reduced, restored or returned after what
otherwise would be the Termination Date pursuant to the provisions of Section
2.1, the Termination Date shall thereupon be deemed to have not occurred and
shall be extended until such time as such payment is thereafter again repaid to
Agent and Lenders.
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<PAGE> 8
2.9. Deferral of Subrogation, Etc. Notwithstanding
anything to the contrary in this Guaranty, or in any other Loan Document, each
Guarantor hereby:
(a) expressly and irrevocably waives, on behalf of itself
and its successors and assigns (including any surety), until the later of the
Termination Date or the "Termination Date" under and as defined in that certain
Limited Litigation Guaranty of even date herewith executed and delivered by the
Guarantors in favor of Agent and Lenders, any and all rights at law or in
equity to subrogation, to reimbursement, to exoneration, to contribution, to
indemnification, to set off or to any other rights that could accrue to a
surety against a principal, to a guarantor against a principal, to a guarantor
against a maker or obligor, to an accommodation party against the party
accommodated, to a holder or transferee against a maker, or to the holder of
any claim against any Person, and which such Guarantor may have or hereafter
acquire against any Credit Party, the other Guarantor or any other Person in
connection with or as a result of such Guarantor's execution, delivery and/or
performance of this Guaranty; and
(b) acknowledges and agrees (i) that this waiver is
intended to benefit Agent and Lenders and shall not limit or otherwise effect
such Guarantor's liability hereunder or the enforceability of this Guaranty,
and (ii) that Agent, Lenders and their respective successors and assigns are
intended third party beneficiaries of the waivers and agreements set forth in
this Section 2.9 and their rights under this Section 2.9 shall survive payment
in full of the Guaranteed Obligations.
2.10. Election of Remedies. If Agent may, under
applicable law, proceed to realize benefits under any of the Loan Documents
giving Agent and Lenders a Lien upon any Collateral owned by any Credit Party
or other Person, either by judicial foreclosure or by non-judicial sale or
enforcement, Agent may, at its sole option, determine which of such remedies or
rights it may pursue without affecting any of such rights and remedies under
this Guaranty. If, in the exercise of any of its rights and remedies, Agent
shall forfeit any of its rights or remedies, including its right to enter a
deficiency judgment against any Credit Party or other Person, whether because
of any applicable laws pertaining to "election of remedies" or the like, each
Guarantor hereby consents to such action by Agent and waives any claim based
upon such action, even if such action by Agent shall result in a full or
partial loss of any rights of subrogation which either Guarantor might
otherwise have had but for such action by Agent. Any election of remedies
which results in the denial or impairment of the right of Agent to seek a
deficiency judgment against any Credit Party or other Person shall not impair
either Guarantor's obligation to pay the Guaranteed Obligations hereunder. In
the event Agent shall bid at any foreclosure or trustee's sale or at any
private sale permitted by law or the Loan Documents, Agent may bid all or less
than the amount of the Guaranteed Obligations and the amount of such bid need
not be paid by Agent but shall be credited against the Guaranteed Obligations.
The amount of the successful bid at any such sale shall be conclusively deemed
to be the fair market value of the collateral and the difference between such
bid amount and the remaining balance of the Guaranteed Obligations shall be
conclusively deemed to be the amount of the Guaranteed Obligations guaranteed
under this Guaranty, notwithstanding that any present or future law or court
decision or ruling may have
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<PAGE> 9
the effect of reducing the amount of any deficiency claim to which Agent and
Lenders might otherwise be entitled but for such bidding at any such sale.
3. DELIVERIES. In a form, scope and substance
satisfactory to Agent, the Guarantors shall deliver or cause to be delivered to
Agent, concurrently with the execution of this Guaranty and the Credit
Agreement, each of the following in connection with this Guaranty:
(a) a certificate of the corporate secretary of Pegasus
Investors GP, Inc., a Delaware corporation ("Corporate GP"), as general
partner of Pegasus Investors, L.P., a Delaware limited partnership and the
managing general partner of each Guarantor (the "Managing GP"), certifying
(i) that attached thereto are true, correct and current copies of the
Partnership Agreements, the agreement of limited partnership of the
Managing GP and the certificate of incorporation and bylaws of the
Corporate GP (in each case, including any and all signatures, exhibits,
schedules, annexes and amendments thereto), as applicable; (ii) that the
execution, delivery and performance of this Guaranty and all other
agreements, documents and instruments executed and delivered in connection
herewith by the Guarantors, the Managing GP or the Corporate GP,
respectively, by or on behalf of the Guarantors (or either one of them)
(A) are within the partnership or corporate power (as applicable) of such
Person, (B) have been duly authorized by all necessary and proper
partnership, corporate, company, partner, shareholder or member action (as
applicable) of such Persons, (C) do not contravene any provision of such
Person's partnership agreement, certificate of incorporation or bylaws, (D)
do not violate any law or regulation, or any order or decree of any court
or Governmental Authority applicable to such Person, (E) do not conflict
with or result in the breach or termination of, constitute a default under
or accelerate or permit the acceleration of any performance required by,
any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any
of its property is bound, (F) do not result in the creation or imposition
of any Lien upon any of the property of such Person other than those in
favor of Agent, on behalf of itself and Lenders, pursuant to this Guaranty,
(G) do not require the consent or approval of any Governmental Authority or
any other Person, except as has been previously obtained and (H) do not
result in an Event of Dissolution or any Trigger Event; (iii) that attached
thereto are true, correct and current copies of all partnership, corporate
and company resolutions and other authorizations of the limited partnership
panel, board of directors, management committee or other managing bodies of
the Guarantors, the Managing GP and the Corporate GP which were adopted and
approved in connection with, and necessary to permit, the execution,
delivery and performance of this Guaranty by of on behalf of either of the
Guarantors and all other agreements, documents and instruments executed and
delivered by or on behalf of either of the Guarantors in connection
herewith; (iv) the incumbency and true or facsimile signatures of all
officers of the Corporate GP on behalf of the Managing GP and the
Guarantors which will or have executed and delivered this Guaranty or any
other agreements, documents or instruments executed and delivered by or in
behalf of either of
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<PAGE> 10
the Guarantors in connection herewith and (v) that no Event of Dissolution
or other Trigger Event has occurred and is continuing;
(b) certificates of limited partnership of each Guarantor and the
Managing GP, and a certificate of incorporation of the Corporate GP, in
each case certified as of a date no earlier than thirty (30) days prior to
the date hereof by the Secretary of State of Delaware together with good
standing certificates of such Person from the Secretary of State of
Delaware; and
(c) an opinion of counsel to the Guarantors, the Managing GP and
the Corporate GP, favorably addressing, as a matter of Delaware partnership
and corporate law and New York law, as applicable, (i) the organization,
existence and good standing in the jurisdiction of organization and
principal place of business, of each of such Persons, (ii) each of the
matters described in clauses (A), (B), (C), (D) and (G) of Section 3(a)(ii)
hereof and (iii) the enforceability of the provisions of this Guaranty
against the Guarantors.
In a form, scope and substance satisfactory to Agent, the
Guarantors shall deliver or cause to be delivered, to Agent (or to the extent
the items described below are to be executed or delivered by the Administrative
GP, its officers, directors or attorneys, the Guarantors shall exert their
reasonable commercial efforts to deliver or cause to be delivered to Agent), as
soon as practicable following the execution of this Guaranty, the Credit
Agreement and the L/C Agreement, each of the following:
(i) the Irrevocable Instruction;
(ii) a certificate of the corporate secretary of the
Corporate GP, as general partner of the Managing GP, addressing each of the
matters set forth in clause (a), to the extent they pertain to the
Irrevocable Instruction;
(iii) a certificate of the company secretary (or other
equivalent) of Pegasus Administration Limited, a Cayman Islands limited
duration company and the administrative general partner of each Guarantor
(the "Administrative GP"), certifying (A) that attached thereto are true,
correct and current copies of the charter and bylaws of the Administrative
GP (including any and all signatures, exhibits, schedules, annexes and
amendments thereto); (B) that the execution, delivery and performance of
the Irrevocable Instruction and all other agreements, documents and
instruments executed and delivered in connection therewith by the
Administrative GP, (1) are within the company power of the Administrative
GP, (2) have been duly authorized by all necessary and proper company
action of the Administrative GP, (3) do not contravene any provisions of
the Administrative GP's charter or bylaws, (4) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority
applicable to the Administrative Agent, and (5) do not require the consent
or approval of any Governmental Authority or
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<PAGE> 11
any other person, except as has been previously obtained, (C) that attached
thereto are true, correct and current copies of all company resolutions and
other authorizations of the board of directors or other managing body of
the Administrative GP which were adopted and approved in connection with,
and necessary to permit, the execution, delivery and performance of the
Irrevocable Instruction on behalf of the Administrative GP and all other
agreements, documents and instruments executed and delivered by the
Administrative GP and (D) the incumbency and true or facsimile signatures
of all officers of the Administrative GP which will or have executed and
delivered the Irrevocable Instruction or any other agreements, documents or
instruments executed and delivered by the Administrative GP in connection
therewith;
(iv) certificates of existence and good standing with respect to
the Administrative GP certified by the Cayman Islands (or appropriate
agency thereof) as of a date no earlier than thirty (30) days prior to the
date on which the Irrevocable Instruction is executed and delivered; and
(v) an opinion of counsel to the Administrative GP, favorably
addressing, as a matter of the laws of the Cayman Islands, (A) the
organization, existence and good standing in the jurisdiction of
organization and principal place of business of the Administrative GP, (B)
each of the matters described in clause (iii)(B) above, (C) the
enforceability of the provisions of the Irrecovable Instruction against the
Administrative GP and (D) the irrevocability of the Irrecovable
Instruction.
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders to
make the Loans and incur Letter of Credit Obligations under the Credit
Agreement, each Guarantor makes the following representations and warranties to
Agent and each Lender, all of which shall survive the execution and delivery of
this Guaranty:
4.1. Corporate Existence; Corporate Power; Compliance with
Law. Each of the statements contained in the certificates described in Section
3(a)(ii) and 3(a)(v) hereof are true, accurate and complete. Each Guarantor is
in compliance with all applicable provisions of law, except where the failure
to comply, individually or in the aggregate, could not reasonably be expected
to have a material adverse effect upon such Guarantor, its properties or its
ability to perform its obligations hereunder.
4.2. Enforceable Guaranteed Obligations. This Guaranty
constitutes the legal, valid and binding obligation of each Guarantor,
enforceable against such Guarantor in accordance with its terms.
4.3. Trigger Event. As of the date hereof, no Trigger
Event has occurred and is continuing.
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<PAGE> 12
5. FURTHER ASSURANCES. Guarantor agrees, upon the
written request of Agent, to execute and deliver to Agent or such Lender, from
time to time, any additional instruments or documents reasonably considered
necessary by Agent to cause this Guaranty to be, become or remain valid and
effective in accordance with its terms.
6. CASH COLLATERAL. Upon the occurrence of one or more
Trigger Events, the Guarantors shall promptly deliver to Agent, $4,000,000 in
cash or other immediately available funds, as cash collateral for the
Guaranteed Obligations and Guarantors' payment and performance obligations
under this Guaranty. Such funds shall be held by Agent in a cash collateral
account (the "Cash Collateral Account") maintained at a bank or financial
institution acceptable to Agent and shall be invested (for the account of the
Guarantors) in short term, highly rated securities or interest bearing
accounts, in a manner acceptable to Agent. The Cash Collateral Account shall
be in the name of Guarantors and shall be pledged to, and subject to the
control of, Agent, for the benefit of Agent and Lenders, in a manner
satisfactory to Agent. Each Guarantor hereby pledges and grants to Agent, on
behalf of Lenders, a security interest in all such funds held in the Cash
Collateral Account from time to time and all proceeds thereof, as security for
the payment of the Guaranteed Obligations and Guarantors' payment and
performance obligations under this Guaranty, whether or not then due. From
time to time after the occurrence and during the continuation of any Guarantor
Default, Agent may apply any and all funds held in the Cash Collateral Account
to the payment of the Guaranteed Obligations and Guarantors' payment and
performance obligations under this Guaranty. Neither Guarantor nor any Person
claiming on behalf of or through either Guarantor shall have any right to
withdraw any of the funds held in the Cash Collateral Account until the
ninety-first (91st) day following the Termination Date.
7. REPORTING. Each Guarantor shall deliver or cause to
be delivered to Agent, the following:
(a) at the same times as are delivered or required to be
delivered to each partner of the Guarantors pursuant to Section 8.2 (or any
successor provision thereto) of the Partnership Agreements, each of the
reports, statements, financial statements, schedules, summaries and other
information described in such section (and without giving effect to any
amendments or modifications thereto), excluding, however, any items delivered
pursuant to Section 8.2(d) thereof and the Schedule K-1's referred to in
Section 8.2(b) thereof; and
(b) promptly, following its occurrence, the existence and
nature of any Trigger Event.
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<PAGE> 13
8. OTHER TERMS.
8.1. Entire Agreement. This Guaranty constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements relating to a guaranty of the loans and
advances under the Loan Documents and/or the Guaranteed Obligations.
8.2. Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.
8.3. Severability. Whenever possible, each provision of
this Guaranty shall be interpreted in such a manner to be effective and valid
under applicable law, but if any provision of this Guaranty 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 Guaranty.
8.4. Notices. 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 or serve upon another any such
communication with respect to this Guaranty, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be addressed to the party to be notified as follows:
(a) If to Agent, at:
General Electric Capital Corporation
10 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
Attention: Account Manager
Telecopier No.: (312) 419-5957
Telephone No.: (312) 419-0985
with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: H. Bruce Bernstein
Telecopy Number: (312) 853-7036
Telephone Number: (312) 853-7000
13
<PAGE> 14
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: General Counsel
Telecopy Number: (203) 316-7889
Telephone Number: (203) 316-7552
(b) If to any Lender, at the address of such Lender
specified in the Credit Agreement.
(c) If to either Guarantor, at the address of Guarantors
specified on Schedule I hereto.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) Business Days after the same shall have been deposited
with the United States mail, registered or certified mail, return receipt
requested, with proper postage prepaid, (ii) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 9.4), (iii) one (1)
Business Day after deposit with a reputable overnight carrier with all charges
prepaid, or (iv) when delivered, if hand-delivered by messenger. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any of the above-listed persons
designated to receive copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration or other
communication.
8.5. Successors and Assigns. This Guaranty and all
obligations of each Guarantor hereunder shall be binding upon the successors
and assigns of such Guarantor (including a debtor-in-possession on behalf of
such Guarantor) and shall, together with the rights and remedies of Agent, for
itself and for the benefit of Lenders, hereunder, inure to the benefit of Agent
and Lenders, all future holders of any instrument evidencing any of the
Guaranteed 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 Guaranteed Obligations or
any portion thereof or interest therein shall in any manner affect the rights
of Agent and Lenders hereunder. Neither Guarantor may assign, sell,
hypothecate or otherwise transfer any interest in or obligation under this
Guaranty.
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<PAGE> 15
8.6. No Waiver; Cumulative Remedies; Amendments. 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, for itself and the ratable benefit of Lenders,
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which Agent would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of
Agent or any Lender, any right, power or privilege hereunder, shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Guaranty may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed by
Agent and Guarantors.
8.7. Termination. This Guaranty is a continuing guaranty
and shall remain in full force and effect until the Termination Date. On or
after the Termination Date, Agent shall deliver to Guarantor such documents as
Guarantor may reasonably request to evidence such termination.
8.8. Counterparts. This Guaranty may be executed in any
number of counterparts, each of which shall collectively and separately
constitute one and the same agreement.
8.9. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. GUARANTOR HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED NEW YORK COUNTY, NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR
AMONG GUARANTORS, AGENT OR ANY LENDER PERTAINING TO THIS GUARANTY OR TO ANY
MATTER ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS, PROVIDED, THAT AGENT AND GUARANTORS ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK
COUNTY, NEW YORK AND, PROVIDED, FURTHER, THAT NOTHING IN THIS GUARANTY SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON PAYMENT CLAIMS OR ANY OTHER
SECURITY FOR THE GUARANTEED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN
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<PAGE> 16
FAVOR OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS. EACH GUARANTOR EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH GUARANTOR 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. EACH GUARANTOR 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
GUARANTOR AT THE ADDRESS SET FORTH ON SCHEDULE I HERETO 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.
8.10. 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),
GUARANTORS AND AGENT 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 OR ARBITRATION,
GUARANTORS AND AGENT WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS GUARANTY AND THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
8.11 Confidentiality. Agent agrees to use commercially
reasonable efforts (equivalent to the efforts Agent applies to maintaining the
confidentiality of its own confidential information) to maintain as
confidential the existence, terms and conditions of this Guaranty, and all
information received by Agent with respect to the Guarantors pursuant to this
Guaranty, except that, subject to the terms and provisions of that certain
letter agreement dated as of October 27, 1997 among GE Capital and the
Guarantors regarding certain information about the limited partners of the
Guarantors, Agent may disclose such information (a) to Persons employed or
engaged by Agent in evaluating, approving, structuring or administering the
Loan Documents and related Obligations and Commitments; (b) to any Lender or
bona fide assignee or participant or potential assignee or participant of a
Lender (or successor Agent or prospective successor Agent) that has agreed in
writing to comply with the covenant contained in this Section 8.11 (and
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<PAGE> 17
any such Lender, bona fide assignee or participant or potential assignee or
participant or Agent or prospective successor Agent may disclose such
information to Persons employed or engaged by them as described in clause (a)
above), which writing has been delivered to the Guarantors; (c) as required or
requested by any Governmental Authority or reasonably believed by Agent to be
compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, in the opinion of Agent's counsel, required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any litigation to which Agent is a party; or (f) which
ceases to be confidential through no fault of Agent; provided, however, that
Agent shall use its best efforts to give Guarantors as much advance notice of
the proposed disclosure as is reasonably possible under the circumstances and;
provided, further, however, that, the failure by Agent, any Lender, any
assignee, participant or prospective participant to comply with the terms of
this Section 8.11 shall not operate as a defense, or give rise to any setoff
claims, with respect to any obligation of either Guarantor under this Guaranty.
8.12 Notification to Limited Partners. The Guarantors
shall notify each of their respective limited partners of the existence and
general terms and conditions of this Guaranty along with the next quarterly
financial report which is delivered to such limited partners after the date
hereof pursuant to Section 8.2 of its Partnership Agreements.
* * * *
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Guaranty as of the date first above written.
PEGASUS PARTNERS, L.P.
By: PEGASUS INVESTORS, L.P.,
as Managing General Partner
By: PEGASUS INVESTORS GP, INC.,
as General Partner
By: /s/ Richard M. Cion
----------------------------
Name: Richard M. Cion
---------------------
Title: Vice President
--------------------
and
PEGASUS RELATED PARTNERS, L.P.
By: PEGASUS INVESTORS, L.P.,
as Managing General Partner
By: PEGASUS INVESTORS GP, INC.,
as General Partner
By: /s/ Richard M. Cion
-----------------------------
Name: Richard M. Cion
---------------------
Title: Vice President
--------------------
Agreed and Accepted as of this
24th day of October, 1997:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Timothy S. Van Kirk
----------------------------
Name: Timothy S. Van Kirk
--------------------
Title: Duly Authorized Signatory
---------------------------
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<PAGE> 19
SCHEDULE I
Addresses for Notices:
Pegasus Partners, L.P. Pegasus Related Partners, L.P.
99 River Road 99 River Road
Cos Cob, Connecticut 06807 Cos Cob, Connecticut 06807
<PAGE> 1
EXHIBIT 10.65
EXECUTION COPY
LIMITED LITIGATION GUARANTY
This LIMITED LITIGATION GUARANTY (this "Guaranty"), dated as of
October 24, 1997, by and among PEGASUS PARTNERS, L.P., a Delaware limited
partnership, and PEGASUS RELATED PARTNERS, L.P., a Delaware limited partnership
(each individually, a "Guarantor" and together, collectively, the
"Guarantors"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, individually and as agent (in such capacity, "Agent") for itself
and the lenders from time to time signatory to the Credit Agreement hereinafter
defined ("Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof by and among Code-Alarm, Inc., a Michigan corporation ("Borrower"), the
other Persons signatory thereto as Credit Parties, Agent and the Persons
signatory thereto from time to time as Lenders (including all annexes, exhibits
and schedules thereto, and, subject to Section 8, as from time to time amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders
have agreed to make Loans to, and incur Letter of Credit Obligations for the
benefit of, Borrowers.
WHEREAS, pursuant to that certain Litigation L/C and Term Loan C
Agreement of even date herewith among Borrower, Agent and certain of the
Lenders (including all exhibits thereto, as may be from time to time amended,
restated, supplemented or otherwise modified, the "L/C Agreement"), such
Lenders have agreed to incur Litigation L/C Obligations for the benefit of, or
under the Term Loan C to, Borrower.
WHEREAS, each Guarantor is a shareholder of Borrower and will,
accordingly, derive direct and indirect economic benefits from the making of
the Loans and other financial accommodations provided to Borrower pursuant to
the Credit Agreement and L/C Agreement; and
WHEREAS, in order to induce Agent and Lenders to enter into the Credit
Agreement, L/C Agreement and other Loan Documents and to induce Lenders to make
the Loans and to incur Letter of Credit Obligations and Litigation Obligations
as provided for in the Credit Agreement and L/C Agreement, each Guarantor has
agreed to severally and not jointly guarantee payment of the Litigation
Obligations, subject to the limitations set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce Lenders to provide the Loans and other
financial accommodations under the Credit Agreement and L/C Agreement, it is
agreed as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement, unless otherwise defined
herein.
<PAGE> 2
References to this "Guaranty" shall mean this Guaranty, including all
amendments, modifications and supplements and any annexes, exhibits and
schedules to any of the foregoing, and shall refer to this Guaranty as the same
may be in effect at the time such reference becomes operative.
In addition, the following terms, as used herein, shall have the
meanings set forth below:
"Administrative GP" shall have the meaning ascribed to such term in
Section 3(a).
"Aggregate Net Capital" shall mean, as of any date of determination,
the sum of (i) the Net Assets of both Guarantors plus (ii) the Unpaid Capital
Obligations of the limited partners of each of the Guarantors.
"Aggregate Portfolio Cash Flow" shall mean, as of the last day of any
fiscal quarter of the Guarantors or as of the last day of any fiscal year of
the Guarantors, the aggregate sum of the EBTDA, as reported to the Guarantors,
of all Portfolio Companies of the Guarantors for the most recently ended period
of four fiscal quarters (taken as a single accounting period) of each such
Portfolio Company which at the time of determination has been reported to the
Guarantors (it being acknowledged that a fiscal quarter of a Portfolio Company
will not necessarily coincide with a fiscal quarter of the Guarantors);
provided that (i) if such period of four fiscal quarters of a Portfolio Company
shall include periods prior to the Guarantors making a Portfolio Investment in
such Portfolio Company, then "Aggregate Portfolio Cash Flow" shall include the
EBTDA of such Portfolio Company only for full fiscal quarters of the Portfolio
Company commenced after such Portfolio Investment is made and (ii) the
calculation of Aggregate Portfolio Cash Flow for any period shall exclude the
EBTDA of each Portfolio Company in which the Guarantors' Portfolio Investments
consist exclusively of non-convertible debt instruments and non-convertible
preferred stock.
"Capital Demand Date" shall have the meaning ascribed to such term in
the Partnership Agreements as in effect to from time to time.
"Capital Demand Notice(s)" shall have the meaning ascribed to such term
in the Partnership Agreements as in effect from time to time.
"Cash Collateral Account" shall have the meaning ascribed to such term
in Section 6.
"Corporate GP" shall have the meaning ascribed to such terms in Section
3(a).
"Current Market Price" shall mean, as of any date of determination, and
for any asset which is a security, the average of the daily market prices of
such security for the twenty consecutive trading days immediately preceding
such date. The "daily market price" for each
2
<PAGE> 3
trading day shall be (i) if such security is then listed on a national
securities exchange or is listed on NASDAQ and is designated as a National
Market System security, the last sale price on such day on the principal stock
exchange or market system on which such security is then listed or admitted for
trading, or (ii) if such security is not then listed or admitted to trading on
any national securities exchange or designated as a National Market System
security on NASDAQ but is traded over-the-counter, the average of the closing
bid and asked prices for such security as reported on NASDAQ or the Electronic
Bulletin Board or in the National Daily Quotation Sheets, as applicable.
"Defaulting Limited Partner" shall have the meaning ascribed to such
term in the Partnership Agreements as in effect on the date hereof.
"EBTDA" shall mean, for any Portfolio Company and for any period, such
Portfolio Company's consolidated earnings before taxes, depreciation and
amortization (excluding, in the case of Borrower, any losses with respect to
the DEI Litigation).
"Effectiveness Conditions" shall mean, subject to Section 3(b) hereof,
(i) the receipt by Agent of each of the items described in Section 3 hereof, in
each case in form, scope and substance satisfactory to Agent and written
confirmation thereof by Agent pursuant to Section 3(b) hereof, (ii) the
execution and delivery by Borrower in favor of the Guarantors of the
"Litigation Warrants" referred to and as defined in the Series A Preferred
Stock Documents and written confirmation thereof and of receipt of the
Litigation Warrant Opinion by Guarantors pursuant to Section 3(b) hereof and
(iii) the issuance of the Litigation L/C.
"Effective Date" shall mean the date on which all of the Effectiveness
Conditions shall have been satisfied.
"Event of Dissolution" shall have the meaning ascribed to such term in
the Partnership Agreements as in effect on the date hereof and any other "Event
of Dissolution" as may be hereafter defined in the Partnership Agreements.
"Fair Market Value" shall mean, as of any date of determination and for
any asset owned by any Guarantor (A) if such asset is a security which is
publicly traded on such date, the Current Market Price of such security or (B)
if such asset is not a publicly traded security as of such date, the fair
market value of such asset as reasonably determined in good faith by the
Managing GP of the applicable Guarantor.
"Guarantor Default" shall mean (i) any failure of either Guarantor to
pay or perform any of its obligations under this Guaranty, (ii) any breach by
either Guarantor of any representation or warranty hereunder in any material
respect, (iii) the occurrence of any insolvency event with respect to either
Guarantor under Sections 8.1(h) or 8.1(i) of the Credit Agreement, (iv) any
revocation or attempted revocation by either Guarantor of its obligations
3
<PAGE> 4
under this Guaranty, or (v) any "Guarantor Default" shall have occurred under
and as defined in that certain Limited Supplemental Guaranty of even date
herewith among the Guarantors and Agent.
"Guaranteed Obligations" shall have the meaning ascribed to such term
in Section 2.1.
"Instruction Certificate(s)" shall mean one or more written
certificates executed by Agent and delivered to the Administrative GP stating
that (i) Agent is entitled to demand payment under this Guaranty, (ii) Agent
has demanded payment under this Guaranty, (iii) the Guarantors have failed to
timely satisfy all of such payments properly demanded, (iv) the Administrative
GP is instructed to deliver a Capital Demand Notice to each limited partner of
each Guarantor specifying the earliest possible Capital Demand Date as is
permitted under Section 3.1 of the Partnership Agreements and demanding capital
contributions under such section in amounts sufficient to permit the Guarantors
to satisfy such unsatisfied payment obligations to Agent under this Guaranty
and (v) all of the proceeds of such capital contributions received by the
Administrative GP are to be promptly sent, by wire transfer, to an account
specified in such certificate for application by Agent to such unsatisfied
payment obligations.
"Irrevocable Instruction" shall mean a document, in form and substance
acceptable to Agent, pursuant to which the Managing GP instructs the
Administrative GP, and the Administrative GP agrees, that upon the
Administrative GP's receipt of an Instruction Certificate from Agent, the
Administrative Agent shall (i) deliver a Capital Demand Notice to each limited
partner of each Guarantor, specifying the earliest Capital Demand Date as is
permitted under section 3.1 of the Partnership Agreements and demanding capital
contributions under such section in amounts sufficient to permit the Guarantors
to satisfy the unpaid Guaranteed Obligations set forth in such Instruction
Certificate and (ii) pay all of the proceeds of such capital contributions
received by the Administrative GP to Agent on behalf of the Guarantors for
application by Agent to such Guaranteed Obligations pursuant to the
instructions specified by Agent in such Instruction Certificate. Such
Irrevocable Instruction may only be amended, terminated or modified with the
written consent of Agent, the Administrative GP and the Managing GP.
"Limitation Amount" shall mean the lesser of $12,000,000 and the
originally stated face amount of the Litigation L/C.
"Litigation Warrant Opinion" shall mean an opinion of counsel to
Borrower addressed to the Guarantors confirming, as of the date of the delivery
thereof, with respect to the "Litigation Warrants" referred to and as defined
in the Series A Preferred Stock Documents, substantially the same opinions as
were given by such counsel to Guarantors as of October 27, 1997 with respect to
the "Attached Warrants" pursuant to and as defined in the Series A Stock
Purchase Agreement as provided in the first and third sentences of paragraph 3,
paragraph 8 and paragraph 11 (and for purposes of such paragraph 11, counsel
may assume that Guarantors' representation remains true), and opining that the
Litigation Warrants have been duly executed
4
<PAGE> 5
and delivered by the Borrower and constitute valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their terms,
provided, that such opinion shall not contain assumptions as to issuance in
accordance with Series A Purchase Agreement of the Litigation Warrants.
"Managing GP" shall have the meaning ascribed to such term in Section
3(a).
"Net Assets" shall mean, with respect to either Guarantor as of any
date of determination, such Guarantor's consolidated total assets, valued at
the lower of cost or Fair Market Value, minus its consolidated total
liabilities as determined in accordance with GAAP consistently applied and
minus the aggregate amount of such Guarantor's consolidated known contingent
liabilities (to the extent not included in its total liabilities).
"Partnership Agreements" shall mean the Agreement of Limited
Partnership of each Guarantor as in effect as of the date hereof and attached
hereto as Exhibit A and B, respectively, as amended or otherwise modified from
time to time hereafter.
"Portfolio Company" shall have the meaning ascribed to such term in the
Partnership Agreements as of the date hereof.
"Portfolio Investment" shall have the meaning ascribed to such term in
the Partnership Agreements as of the date hereof.
"Ratable Share" shall mean 27.7727273% in the case of Pegasus Partners,
L.P., and 72.2272727% in the case of Pegasus Related Partners, L.P.
"Termination Date" shall have the meaning ascribed to such term in
Section 2.1.
"Trigger Event" shall mean (i) any Event of Dissolution, (ii) the
existence of any Defaulting Limited Partner and the failure of the
non-defaulting limited partners of the affected Guarantor to assume the Unpaid
Capital Obligations of such Defaulting Limited Partner within thirty days of
the default giving rise such occurrence, (iii) any Guarantor Default, (iv) the
Aggregate Portfolio Cash Flow is less than $1.00, (v) the Aggregate Net Capital
at any time shall be less than $125,000,000, (vi) the Unpaid Capital
Obligations at any time during the period commencing on the date hereof and
ending on October 24, 1998 shall be less than $50,000,000, (vii) the Unpaid
Capital Obligations at any time after October 24, 1998 shall be less than
$25,000,000, or (viii) any amendment or other modification with respect to
either Partnership Agreement shall become effective and shall have a material
adverse effect upon the rights or claims of Agent and the Lenders under this
Guaranty.
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"Unpaid Capital Obligations" shall mean, with respect to either
Guarantor's limited partners, as of any date of determination, the "Unpaid
Capital Obligations" under and as defined in such Guarantor's Partnership
Agreement as in effect on the date hereof, excluding, however, such obligations
of each Default Limited Partner of such Guarantor unless and until such limited
partner's obligations are assumed by the non-defaulting limited partners of
such Guarantor.
2. THE GUARANTY.
2.1 Guaranty of Guaranteed Obligations of Borrower. Subject to the
provisions of this Guaranty, each Guarantor hereby severally (based upon their
respective Ratable Shares) and not jointly, irrevocably and unconditionally
guarantees to Agent and Lenders, and their respective successors, endorsees,
transferees and assigns, the prompt payment (whether at stated maturity, by
acceleration or otherwise) of the Litigation Obligations of Borrower
(hereinafter the "Guaranteed Obligations"). Subject to the provisions of this
Guaranty, in the event that either Guarantor shall fail to timely satisfy any
such obligations or any other payment obligations under this Guaranty, Agent
shall be thereafter entitled, in its discretion, to deliver one or more
Instruction Certificates to the Administrative GP requesting payment thereof
pursuant to the Irrevocable Instruction. Each Guarantor agrees that this
Guaranty is a guaranty of payment and not of collection, and that its
obligations under this Guaranty shall be primary, absolute and, subject to the
provisions of this Guaranty, unconditional, irrespective of, and unaffected
by:
(a) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in, this Guaranty, any other Loan
Document or any other agreement, document or instrument to which any Credit
Party, either Guarantor or other Persons are or may become a party;
(b) the absence of any action to enforce this Guaranty or any
other Loan Document or the waiver or consent by Agent and/or Lenders with
respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to
perfect its Lien against, any Collateral for the Guaranteed Obligations or
any action, or the absence of any action, by Agent in respect thereof;
(d) the discharge, avoidance, subordination or other
ineffectiveness of any of the Guaranteed Obligations, whether pursuant to
any insolvency proceeding or otherwise;
(e) the insolvency of any Credit Party, either Guarantor or other
Person; or
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(f) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor;
it being agreed by each Guarantor that its obligations under this Guaranty
shall not be discharged until the later of the following dates (hereinafter,
the "Termination Date"): (i) in the event that the Litigation L/C shall have
been issued, the earliest date on which Term Loan C has been repaid in full,
the Litigation L/C has expired, been canceled, or been terminated, all other
Guaranteed Obligations have been paid in full, and the Lenders shall have no
further obligations to incur Litigation L/C Obligations under the Credit
Agreement or L/C Agreement or (ii) in the event that the Litigation L/C shall
not have been issued, the earliest date on which the Litigation L/C have not
been issued and the Lenders have no further obligation to incur Litigation L/C
Obligations under the Credit Agreement or L/C Agreement; provided, however,
that the Termination Date may thereafter be deemed to have not occurred upon
Guarantors' obligations under this Guaranty being reinstated pursuant to
Section 2.8 and shall be extended until such time as the payments giving rise
to such reinstatement are thereafter again repaid to Agent and Lenders.
Subject to limitations described in Section 2.2, each Guarantor shall be
regarded, and shall be in the same position, as principal debtor with respect
to the Guaranteed Obligations. Each Guarantor agrees that any notice or
directive given at any time to Agent which is inconsistent with this section,
or Sections 2.5 or 2.7, shall be null and void and may be ignored by Agent and
Lenders, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless Agent and Lenders have specifically agreed otherwise in writing. It is
agreed among Guarantor, Agent and Lenders that the foregoing provisions, and
those of Sections 2.5 and 2.7, are of the essence of the transaction
contemplated by the Loan Documents and that, but for this Guaranty and such
waivers, Agent and Lenders would decline to enter into the Credit Agreement and
L/C Agreement.
2.2 Limitations. Notwithstanding anything in Section 2.1 or elsewhere
in this Guaranty to the contrary, (a) the aggregate liability of Guarantors
under this Guaranty shall, in no event, exceed, the Limitation Amount, plus
interest on each amount payable hereunder from the date such payment by
Guarantors hereunder is due and payable pursuant to clause (b) of this section
(at a per annum rate equal to the Default Rate for Term Loan C if it were
bearing interest based upon the Index Rate computed on the basis of 360 days
and actual days elapsed), until such payment is received by Agent, and plus all
costs and expenses (including, without limitation, attorneys' and paralegals'
fees and expenses) incurred by Agent following either Guarantor's failure to
timely satisfy its obligations hereunder, in connection with the enforcement
and collection of the Guarantors' obligations under this Guaranty against the
Guarantors and their respective partners and properties, (b) each payment by
Guarantors hereunder shall be due and payable on the tenth (10th) calendar day
following the date on which demand for such payment is given by Agent to
Guarantors, and (c) Agent shall not be permitted to demand payment hereunder
from Guarantors, and Guarantors shall not be liable hereunder for any such
demanded payment, unless the Effectiveness Conditions shall have been
satisfied, there shall have occurred a draw under the Litigation L/C or the
Litigation L/C Obligations shall have been converted to the Term
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Loan C pursuant to the terms of the Loan Documents, and Borrower shall have
failed to pay, when due, all or any portion of the Litigation Obligations.
2.3 Payment by Guarantor. Payment by either Guarantor shall be
made to Agent in immediately available Federal funds to an account designated
by Agent or at the address set forth herein for the giving of notice to Agent
or at any other address that may be specified in writing from time to time by
Agent, and shall be credited and applied to the Guaranteed Obligations.
2.4 Enforcement of Guaranty. In no event shall Agent have any
obligation (although it is entitled, at its option) to proceed against
Borrower, any other Credit Party, one but not the other Guarantor, or other
Person, or any Collateral, before seeking satisfaction from either Guarantor.
2.5 Waiver. In addition to the provisions of Section 2.1 hereof,
each Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshaling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by such Guarantor of its Guaranteed
Obligations under, or the enforcement by Agent or Lenders of, this Guaranty.
Each Guarantor hereby waives diligence, presentment and demand upon Borrower
or, other than as provided in this Guaranty, such Guarantor (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Guaranteed Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of, the Guaranteed Obligations, notice of adverse
change in Borrower's financial condition or any other fact which might increase
the risk to such Guarantor) with respect to any of the Guaranteed Obligations
or all other demands whatsoever and waive the benefit of all provisions of law
which are or might be in conflict with the terms of this Guaranty. Each
Guarantor represents, warrants and agrees that, as of the date of this
Guaranty, its obligations under this Guaranty are not subject to any offsets or
defenses against Agent or Lenders or any other Credit Party of any kind. Each
Guarantor further agrees that its obligations under this Guaranty shall not be
subject to any counterclaims (other than compulsory counterclaims), offsets or
defenses against Agent or any Lender or against any other Credit Party of any
kind which may arise in the future.
2.6 Benefit of Guaranty. The provisions of this Guaranty are for the
benefit of Agent and Lenders and their respective successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
any Credit Party, either Guarantor or other Person and Agent or Lenders, the
obligations of any Credit Party, either Guarantor or other Person under the
Loan Documents. In the event all or any part of the Guaranteed Obligations are
transferred, indorsed or assigned by Agent or any Lender to any Person or
Persons, any reference to "Agent" or "Lender" herein shall be deemed to refer
equally to such Person or Persons.
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2.7 Modification of Guaranteed Obligations, Etc. Subject to Section
8, each Guarator hereby acknowledges and agrees that Agent and Lenders may at
any time or from time to time, with or without the consent of, or notice to,
such Guarantor:
(a) change or extend the manner, place or terms of payment of,
or renew or alter all or any portion of, the Guaranteed Obligations;
(b) take any action under or in respect of the Loan Documents
in the exercise of any remedy, power or privilege contained therein or
available to it at law, equity or otherwise, or waive or refrain from
exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan
Documents;
(d) extend or waive the time for any Credit Party's or other
Person's performance of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under the Loan Documents,
or waive such performance or compliance or consent to a failure of, or
departure from, such performance or compliance;
(e) take and hold Collateral for the payment of the Guaranteed
Obligations guaranteed hereby or sell, exchange, release, dispose of, or
otherwise deal with, any property pledged, mortgaged or conveyed, or in
which Agent or Lenders have been granted a Lien, to secure any Guaranteed
Obligations;
(f) release anyone who may be liable in any manner for the
payment of any amounts owed by either Guarantor or any other Credit Party
or other Person to Agent or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
either Guarantor or any other Credit Party or other Person are subordinated
to the claims of Agent and Lenders; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by either Guarantor or any other Credit Party or other Person
to Agent or any Lender in such manner as Agent or any Lender shall
determine in its discretion;
and Agent and Lenders shall not incur any liability to Guarantors as a result
thereof, and no such action shall impair or release the Guaranteed Obligations
of Guarantors under this Guaranty.
2.8 Reinstatement. This Guaranty shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party, either Guarantor or any other Person for liquidation or
reorganization, should any Credit Party, either Guarantor or any other Person
become insolvent or make an assignment for the benefit of
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creditors or should a receiver or trustee be appointed for all or any
significant part of such Credit Party's, Guarantor's or other Person'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 Guaranteed Obligations or the
obligations of either Guarantor under this Guaranty, or any part of any such
obligations, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by Agent or any Lender pursuant to
applicable law, 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 such payment, or any part thereof, is rescinded, reduced,
restored or returned, the Guaranteed Obligations and obligations of the
Guarantors under this Guaranty shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned. In the
event any such payment is rescinded, reduced, restored or returned after what
otherwise would be the Termination Date pursuant to the provisions of Section
2.1, the Termination Date shall thereupon be deemed to have not occurred and
shall be extended until such time as such payment is thereafter again repaid to
Agent and Lenders. In the event legal action is commenced against Agent
seeking any such rescission, reduction, restoration or return with respect to
any portion of the Guaranteed Obligations or Agent's liens securing such
Guaranteed Obligations, Agent will permit Guarantors to jointly defend such
action to the extent pertaining to such Guaranteed Obligations or liens,
provided, that Agent shall retain exclusive control over all material decisions
(including, without limitation, those pertaining to choice of counsel,
settlement, jurisdiction, venue and strategy) unless and until Guarantors shall
have provided cash collateral pursuant to Section 6 hereof as if a Trigger
Event shall have occurred in which case all such decisions (other than those
the principal economic effect of which is borne solely or primarily by Agent or
the Lenders) shall thereafter be made jointly by Agent and Guarantors. In
furtherance of such provisions, Agent shall provide Guarantors with notice of
Agent's knowledge of actual claims against Agent or Lenders of the type
described in this section and shall consult with the Guarantors in connection
with its proposed defense or other disposition of such claims.
2.9 Deferral of Subrogation, Etc. Notwithstanding anything to the
contrary in this Guaranty, or in any other Loan Document, each Guarantor
hereby:
(a) expressly and irrevocably waives, on behalf of itself and its
successors and assigns (including any surety), until the later of the
Termination Date or the "Termination Date" under and as defined in that certain
Limited Supplemental Guaranty of even date herewith executed and delivered by
the Guarantors in favor of Agent and Lenders, any and all rights at law or in
equity to subrogation, to reimbursement, to exoneration, to contribution, to
indemnification, to set off or to any other rights that could accrue to a
surety against a principal, to a guarantor against a principal, to a guarantor
against a maker or obligor, to an accommodation party against the party
accommodated, to a holder or transferee against a maker, or to the holder of
any claim against any Person, and which such Guarantor may have or hereafter
acquire against any Credit Party, the other Guarantor or any other Person in
connection with or as a result of such Guarantor's execution, delivery and/or
performance of this Guaranty; and
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(b) acknowledges and agrees (i) that this waiver is intended to
benefit Agent and Lenders and shall not limit or otherwise effect such
Guarantor's liability hereunder or the enforceability of this Guaranty, and
(ii) that Agent, Lenders and their respective successors and assigns are
intended third party beneficiaries of the waivers and agreements set forth in
this Section 2.9 and their rights under this Section 2.9 shall survive payment
in full of the Guaranteed Obligations.
2.10 Election of Remedies. If Agent may, under applicable law,
proceed to realize benefits under any of the Loan Documents giving Agent and
Lenders a Lien upon any Collateral owned by any Credit Party or other Person,
either by judicial foreclosure or by non-judicial sale or enforcement, Agent
may, at its sole option, determine which of such remedies or rights it may
pursue without affecting any of such rights and remedies under this Guaranty.
If, in the exercise of any of its rights and remedies, Agent shall forfeit any
of its rights or remedies, including its right to enter a deficiency judgment
against any Credit Party or other Person, whether because of any applicable
laws pertaining to "election of remedies" or the like, each Guarantor hereby
consents to such action by Agent and waives any claim based upon such action,
even if such action by Agent shall result in a full or partial loss of any
rights of subrogation which either Guarantor might otherwise have had but for
such action by Agent. Any election of remedies which results in the denial or
impairment of the right of Agent to seek a deficiency judgment against any
Credit Party or other Person shall not impair either Guarantor's obligation to
pay the Guaranteed Obligations hereunder. In the event Agent shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or the
Loan Documents, Agent may bid all or less than the amount of the Guaranteed
Obligations and the amount of such bid need not be paid by Agent but shall be
credited against the Guaranteed Obligations. The amount of the successful bid
at any such sale shall be conclusively deemed to be the fair market value of
the collateral and the difference between such bid amount and the remaining
balance of the Guaranteed Obligations shall be conclusively deemed to be the
amount of the Guaranteed Obligations guaranteed under this Guaranty,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
and Lenders might otherwise be entitled but for such bidding at any such sale.
3. DELIVERIES. (a) In a form, scope and substance satisfactory to
Agent, the Guarantors shall deliver or cause to be delivered, to Agent (or to
the extent the items described below are to be executed or delivered by the
Administrative GP, its officers, directors or attorneys, or otherwise relate to
the Irrevocable Instruction, the Guarantors shall exert their reasonable
commercial efforts to deliver or cause to be delivered to Agent), as soon as
practicable following the execution of this Guaranty, the Credit Agreement and
the L/C Agreement, each of the following:
(i) the Irrevocable Instruction;
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(ii) a certificate of the corporate secretary of Pegasus Investors
GP, Inc., a Delaware corporation ("Corporate GP"), as general partner of
Pegasus Investors, L.P., a Delaware limited partnership and the managing
general partner of each Guarantor (the "Managing GP"), certifying (A) that
attached thereto are true, correct and current copies of the Partnership
Agreements, the agreement of limited partnership of the Managing GP and the
certificate of incorporation and bylaws of the Corporate GP (in each case,
including any and all signatures, exhibits, schedules, annexes and
amendments thereto, as applicable); (B) that the execution, delivery and
performance of this Guaranty and all other agreements, documents and
instruments executed and delivered in connection herewith by the
Guarantors, the Managing GP and the Corporate GP, individually or on behalf
of the Guarantors (or either one of them) (1) are within the partnership,
corporate power (as applicable) of such Person, (2) have been duly
authorized by all necessary and proper partnership, corporate, partner or
shareholder action (as applicable) of such Persons, (3) do not contravene
any provision of such Person's partnership agreement, certificate of
incorporation or bylaws, (4) do not violate any law or regulation, or any
order or decree of any court or Governmental Authority applicable to such
Person, (5) do not conflict with or result in the breach or termination of,
constitute a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Person is a party or by which
such Person or any of its property is bound, (6) do not result in the
creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Agent, on behalf of itself and Lenders,
pursuant to this Guaranty, (7) do not require the consent or approval of
any Governmental Authority or any other Person except as has been
previously obtained and (8) do not result in an Event of Dissolution or any
Trigger Event; (C) that attached thereto are true, correct and current
copies of all partnership and corporate resolutions and other
authorizations of the limited partnership panel, board of directors,
management committee or other managing bodies of the Guarantors, the
Managing GP and the Corporate GP which were adopted and approved in
connection with, and necessary to permit, the execution, delivery and
performance of this Guaranty by of on behalf of either of the Guarantors
and all other agreements, documents and instruments executed and delivered
by or on behalf of either of the Guarantors in connection herewith; (D) the
incumbency and true or facsimile signatures of all officers of the
Corporate GP on behalf of the Managing GP and the Guarantors, which will or
have executed and delivered this Guaranty or any other agreements,
documents or instruments executed and delivered by or in behalf of either
of the Guarantors in connection herewith and (E) that no Event of
Dissolution or other Trigger Event has occurred and is continuing;
(iii) a certificate of the company secretary (or other equivalent) of
Pegasus Administration Limited, a Cayman Islands limited duration company
and the administrative general partner of each Guarantor (the
"Administrative GP"), certifying (A) that attached thereto are true,
correct and current copies of the charter and bylaws of the Administrative
GP (including any and all signatures, exhibits, schedules, annexes and
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amendments thereto); (B) that the execution, delivery and performance of
the Irrevocable Instruction and all other agreements, documents and
instruments executed and delivered in connection therewith by the
Administrative GP, (1) are within the company power of the Administrative
GP, (2) have been duly authorized by all necessary and proper company
action of the Administrative GP, (3) do not contravene any provisions of
the Administrative GP's charter or bylaws, (4) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority
applicable to the Administrative Agent, and (5) do not require the consent
or approval of any Governmental Authority or any other person, except as
has been previously obtained, (C) that attached thereto are true, correct
and current copies of all company resolutions and other authorizations of
the board of directors or other managing body of the Administrative GP
which were adopted and approved in connection with, and necessary to
permit, the execution, delivery and performance of the Irrevocable
Instruction on behalf of the Administrative GP and all other agreements,
documents and instruments executed and delivered by the Administrative GP
and (D) the incumbency and true or facsimile signatures of all officers of
the Administrative GP which will or have executed and delivered the
Irrevocable Instruction or any other agreements, documents or instruments
executed and delivered by the Administrative GP in connection therewith;
(iv) certificates of limited partnership of each Guarantor and the
Managing GP, and a certificate of incorporation of the Corporate GP, in
each case certified, as of a date no earlier than thirty (30) days prior to
the date on which the Irrevocable Instruction is executed and delivered, by
the Secretary of State of Delaware together with good standing certificates
of such Person from the Secretary of State of Delaware, and certificates of
existence and good standing with respect to the Administrative GP certified
by the Cayman Islands (or appropriate agency thereof) as of a date no
earlier than thirty (30) days prior to the date on which the Irrevocable
Instruction is executed and delivered; and
(v) an opinion of counsel to the Guarantors, the Managing GP and the
Corporate GP, favorably addressing, as a matter of Delaware partnership and
corporate law and New York law, as applicable, as to this Guaranty,
substantially in the form delivered by such counsel as of October 27, 1997
with respect to that certain Limited Supplemental Guaranty of even date
herewith; and
(vi) an opinion of counsel to the Administrative GP, favorably
addressing, as a matter of the laws of the Cayman Islands, (A) the
organization, existence and good standing in the jurisdiction of
organization and principal place of business of the Administrative GP, (B)
each of the matters described in Section 3(a)(iii)(B) hereof, (C) the
enforceability of the provisions of the Irrevocable Instruction against the
Administrative GP and (D) the irrevocability of the Irrevocable
Instruction.
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(b) Promptly following the execution and delivery by Borrower to the
Guarantors of the "Litigation Warrants" referred to defined in and in
accordance with the Series A Preferred Stock Documents and delivery by
Borrowers of the Litigation Warrant Opinion (or waiver thereof by the
Guarantors), the Guarantors shall confirm such occurrence in a writing
delivered to the Agent and shall deliver to Agent a certificate (i) setting
forth a calculation of (and showing in reasonable detail) the Net Assets and
Unpaid Capital Obligations of each Guarantor, and the Aggregate Net Capital and
Aggregate Portfolio Cash Flow as of the date of such certification and (ii)
stating that each of the representatives and warranties set forth in Section 4
hereof are true and correct as of the date thereof. Promptly following Agent's
receipt of each of the items described in Section 3(a) hereof and the
Guarantors written confirmation and certification referred to in the
immediately preceding sentence (or waiver thereof by Agent), Agent shall
confirm such occurrence in a writing delivered to Guarantors. Upon Agent's
delivery of such confirmation and the issuance of the Litigation L/C, and
notwithstanding anything herein or any fact to the contrary, the Effectiveness
Conditions shall, for all purposes of this Guaranty, be deemed to have been
satisfied and the Effective Date shall be deemed to have occurred.
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders to make the
Loans and incur Letter of Credit Obligations and Litigation L/C Obligations
under the Credit Agreement and L/C Agreement, each Guarantor makes the
following representations and warranties to Agent and each Lender, as of the
date hereof (except as provided below), all of which shall survive the
execution and delivery of this Guaranty:
4.1 Corporate Existence; Corporate Power; Compliance with Law. Each
of the statements contained in clauses (B) and (E) of Section 3(a)(ii) are
true, accurate and complete. Guarantor is in compliance with all applicable
provisions of law, except where the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect
upon such Guarantor, its properties or its ability to perform its obligations
hereunder.
4.2 Enforceable Guaranteed Obligations. This Guaranty constitutes
the legal, valid and binding obligation of each Guarantor, enforceable against
such Guarantor in accordance with its terms.
4.3 Trigger Event. As of the date hereof, no Trigger Event has
occurred and is continuing.
5. FURTHER ASSURANCES. Guarantor agrees, upon the written request of
Agent on or following the Effective Date, to execute and deliver to Agent, from
time to time, any additional instruments or documents reasonably considered
necessary by Agent to cause their Guaranty or the Irrevocable Instruction to
be, become or remain valid and effective in accordance with its terms.
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6. CASH COLLATERAL. If both the Effective Date and one or more Trigger
Events shall have occurred, the Guarantors shall promptly deliver to Agent,
cash or other immediately available funds in an amount equal to the Limitation
Amount as cash collateral for the Guaranteed Obligations and Guarantors'
payment and performance obligations under this Guaranty. Such funds shall be
held by Agent in a cash collateral account (the "Cash Collateral Account")
maintained at a bank or financial institution acceptable to Agent and shall be
invested (for the account of the Guarantors) in short term, highly rated
securities or interest bearing accounts, in a manner acceptable to Agent. The
Cash Collateral Account shall be in the name of Guarantors and shall be pledged
to, and subject to the control of, Agent, for the benefit of Agent and Lenders,
in a manner satisfactory to Agent. Each Guarantor hereby pledges and grants to
Agent, on behalf of Lenders, a security interest in all such funds held in the
Cash Collateral Account from time to time and all proceeds thereof, as security
for the payment of the Guaranteed Obligations and Guarantors' payment and
performance obligations under this Guaranty, whether or not then due. From
time to time after the occurrence and during the continuation of any Guarantor
Default, Agent may apply any and all funds held in the Cash Collateral Account
to the payment or cash collateralization of the Guaranteed Obligations and
Guarantors' payment and performance obligations under this Guaranty. Neither
Guarantor nor any Person claiming on behalf of or through either Guarantor
shall have any right to withdraw any of the funds held in the Cash Collateral
Account until the ninety-first (91st) day following the Termination Date.
7. REPORTING. From and after the Effective Date, each Guarantor shall
deliver or cause to be delivered to Agent, the following:
(a) at the same times as are delivered or required to be delivered to
each partner of the Guarantors pursuant to Section 8.2 (or any successor
provision thereto) of the Partnership Agreements, each of the reports,
statements, financial statements, schedules, summaries and other information
described in such section (and without giving effect to any amendments or
modifications thereto), excluding, however, any items delivered pursuant to
Section 8.2(d) thereof and the Schedule K-1's referred to in Section 8.2(b)
thereof;
(b) within 45 calendar days after the end of each of the first three
fiscal quarters of the Guarantors, and within 90 days after the end of each
fiscal year of the Guarantors, a written certification of the amounts of the
Net Assets and Unpaid Capital Obligations of each Guarantor, and the Aggregate
Net Capital and Aggregate Portfolio Cash Flow, in each case as of the last day
of such fiscal quarter or fiscal year, as the case may be, and, upon request by
Agent, together with written copies of any and all financial statements and
other written information (redacted to delete proper names to the extent deemed
appropriate by the Guarantors) used by the Guarantors in determining, for such
period, the Net Assets of each Guarantor and the Aggregate Portfolio Cash Flow
for each Portfolio Companies;
(c) notice, within 30 days thereof, of (i) each transfer by any
partner of its interest in either Guarantor, each additional commitment of an
existing partner of either Guarantor, and each "Subsequent Closing" of either
Guarantor (as defined in the Partnership
15
<PAGE> 16
Agreements), the amounts transferred or committed, the Unpaid Capital
Obligations of each of the partners party to such assignment, commitment or
"Subsequent Closing", and a recalculation of the Net Assets and Unpaid Capital
Obligations of each Guarantor and the Aggregate Net Capital, in each case after
giving effect to such transactions (provided, however, that no notice shall be
required under this clause (i) with respect to any such transfer, additional
commitment or "Subsequent Closing", if the changes in the amount of the Unpaid
Capital Obligations of each partner party to, such transactions are less than
$2,000,000), and (ii) each closing of any Portfolio Investment a recalculation
of the Net Assets and Unpaid Capital Obligations of each Guarantor, and the
Aggregate Net Capital, in each case after giving effect to such closing;d
(d) promptly following its occurrence, notice of the existence and
nature of any Trigger Event; and
(e) promptly following either Guarantors' knowledge thereof, notice of
the commencement by or against either Guarantor of any material litigation
relating to the affairs of such Guarantor.
8. CERTAIN AMENDMENTS TO LOAN DOCUMENTS. Notwithstanding anything
herein to the contrary, Agent and Lenders shall not agree to any of the
following waivers or modifications with respect to the Loan Documents, without
the Guarantors' prior written consent:
(a) a waiver of or modification to any of the conditions set forth in
Section 2.3 of the Credit Agreement (other than the condition set forth in
clause (I)(b) or (II)(b) thereof);
(b) a waiver of any Event of Default which has actually caused an
acceleration, or was the basis for an actual acceleration, of Obligations
under the Credit Agreement;
(c) a waiver of any Default or Event of Default which was the basis
for an actual exercise by Agent of any of its post-default remedies as a
secured lender with respect to the Collateral of the type provided under
the applicable Uniform Commercial Code;
(d) any modification the effect of which is to extend the maturity of
any commitment relating to Term Loan C or the Litigation Obligations or the
due date for receipt of any payment of any principal, interest or Fees
payable under the Credit Agreement with respect to the Term Loan C or the
Litigation L/C Obligations (provided that Agent and Lenders may waive any
such Fees in their discretion with the only consequence being that such
waived Fees shall thereafter no longer constitute Guaranteed Obligations
herewith);
16
<PAGE> 17
(e) any modification the effect of which is to increase the interest
or Fees payable with respect to the Term Loan C or the Litigation
Obligations;
(f) any release of Agent's Liens created pursuant to the Litigation
Collateral Documents if the aggregate forced liquidation value of the
property subject to all such releases exceeds $2,000,000, excluding,
however, all such releases in connection with the sale or other disposition
by Borrower or any of its Subsidiaries of the property subject thereto,
whether or not such sale is in the ordinary course of Borrower's or such
Subsidiary's business;
(g) any amendment to any Collateral Document other than a Litigation
Collateral Document if such amendment enhances the rights and benefits
thereunder to Agent and Lenders, unless a substantially similar amendment
to the corresponding Litigation Collateral Document, if any, is also made
(other than omissions that are subsequently corrected); or
(h) any waiver of an Event of Default under Section 8.1(h) of the
Credit Agreement.
9 OTHER TERMS.
9.1. Entire Agreement. This Guaranty constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements relating to a guaranty of the loans and advances under the
Loan Documents and/or the Guaranteed Obligations.
9.2. Headings. The headings in this Guaranty are for convenience of
reference only and are not part of the substance of this Guaranty.
9.3. Severability. Whenever possible, each provision of this Guaranty
shall be interpreted in such a manner to be effective and valid under
applicable law, but if any provision of this Guaranty 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 Guaranty.
9.4. Notices. 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 or serve upon another any such communication
with respect to this Guaranty, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
addressed to the party to be notified as follows:
17
<PAGE> 18
(a) If to Agent, at:
General Electric Capital Corporation
10 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
Attention: Account Manager
Telecopier No.: (312) 419-5957
Telephone No.: (312) 419-0985
with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: H. Bruce Bernstein
Telecopy Number: (312) 853-7036
Telephone Number: (312) 853-7000
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: General Counsel
Telecopy Number: (203) 316-7889
Telephone Number: (203) 316-7552
(b) If to any Lender, at the address of suchlender specified in the
Credit Agreement.
(c) If to either Guarantor, at the address of specified on Schedule I
hereto.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) Business Days after the same shall have been deposited
with the United States mail, registered or certified mail, return receipt
requested, with proper postage prepaid, (ii) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 9.4), (iii) one (1)
Business Day after
18
<PAGE> 19
deposit with a reputable overnight carrier with all charges prepaid, or (iv)
when delivered, if hand-delivered by messenger. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any of the above-listed persons designated to receive copies
shall in no way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
9.5. Successors and Assigns. This Guaranty and all obligations of each
Guarantor hereunder shall be binding upon the successors and assigns of such
Guarantor (including a debtor-in-possession on behalf of such Guarantor) and
shall, together with the rights and remedies of Agent, for itself and for the
benefit of Lenders, hereunder, inure to the benefit of Agent and Lenders, all
future holders of any instrument evidencing any of the Guaranteed 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 Guaranteed Obligations or any portion thereof or
interest therein shall in any manner affect the rights of Agent and Lenders
hereunder. Neither Guarantor may assign, sell, hypothecate or otherwise
transfer any interest in or obligation under this Guaranty.
9.6. No Waiver; Cumulative Remedies; Amendments. 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, for itself and the ratable benefit of Lenders, of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Agent would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Guaranty may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed by
Agent and Guarantors.
9.7. Termination. This Guaranty is a continuing guaranty and shall
remain in full force and effect until the Termination Date. On or after the
Termination Date, Agent shall deliver to Guarantor such documents as Guarantor
may reasonably request to evidence such termination.
9.8. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which shall collectively and separately constitute one
and the same agreement.
19
<PAGE> 20
9.9. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. THIS GUARANTY
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. GUARANTOR HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED NEW YORK COUNTY, NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG
GUARANTORS, AGENT OR ANY LENDER PERTAINING TO THIS GUARANTY OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT AGENT AND GUARANTORS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, NEW
YORK AND, PROVIDED, FURTHER, THAT NOTHING IN THIS GUARANTY SHALL BE DEEMED OR
OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO REALIZE ON PAYMENT CLAIMS OR ANY OTHER SECURITY FOR
THE GUARANTEED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS. EACH GUARANTOR EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH GUARANTOR 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. EACH GUARANTOR 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
GUARANTOR AT THE ADDRESS SET FORTH ON SCHEDULE I HERETO 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.
9.10. 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), GUARANTORS AND AGENT
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
20
<PAGE> 21
SYSTEM AND OR ARBITRATION, GUARANTORS AND AGENT WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH
THIS GUARANTY AND THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO
OR THERETO.
9.11 Confidentiality. Agent agrees to use commercially reasonable
efforts (equivalent to the efforts Agent applies to maintaining the
confidentiality of its own confidential information) to maintain as
confidential the existence, terms and conditions of this Guaranty, and all
information received by Agent with respect to the Guarantors pursuant to this
Guaranty, except that, subject to the terms and provisions of that certain
letter agreement dated as of October 27, 1997 among GE Capital and the
Guarantors regarding certain information about the limited partners of the
Guarantors, Agent may disclose such information (a) to Persons employed or
engaged by Agent in evaluating, approving, structuring or administering the
Loan Documents and related Obligations and Commitments; (b) to any Lender or
bona fide assignee or participant or potential assignee or participant of a
Lender (or successor Agent or prospective successor Agent) that has agreed in
writing to comply with the covenant contained in this Section 9.11 (and any
such Lender, bona fide assignee or participant or potential assignee or
participant or Agent or prospective successor Agent may disclose such
information to Persons employed or engaged by them as described in clause (a)
above), which writing has been delivered to the Guarantors; (c) as required or
requested by any Governmental Authority or reasonably believed by Agent to be
compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, in the opinion of Agent's counsel, required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any litigation to which Agent is a party; or (f) which
ceases to be confidential through no fault of Agent; provided, however, that
Agent shall use its best efforts to give Guarantors as much advance notice of
the proposed disclosure as is reasonably possible under the circumstances and;
provided, further, however, that, the failure by Agent, any Lender, any
assignee, participant or prospective participant to comply with the terms of
this Section 9.11 shall not operate as a defense, or give rise to any setoff
claims, with respect to any obligation of either Guarantor under this Guaranty.
9.12 Notification to Limited Partners. The Guarantors shall notify
each of their respective limited partners of the existence and general terms
and conditions of this Guaranty along with the next quarterly financial report
which is delivered to such limited partners after the date hereof pursuant to
Section 8.2 of its Partnership Agreements.
* * * *
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Guaranty as of the date first above written.
PEGASUS PARTNERS, L.P.
By: PEGASUS INVESTORS, L.P.,
as Managing General Partner
By: PEGASUS INVESTORS GP, INC.,
as General Partner
By: /s/ Richard M. Cion
-----------------------------
Name: Richard M. Cion
--------------------
Title: Vice President
-------------------
PEGASUS RELATED PARTNERS, L.P.
By: PEGASUS INVESTORS, L.P.,
as Managing General Partner
By: PEGASUS INVESTORS GP, INC.,
as General Partner
By: /s/ Richard M. Cion
-----------------------------
Name: Richard M. Cion
--------------------
Title: Vice President
------------------
Agreed and Accepted as of this
24th day of October, 1997:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent Lender
By: /s/ Timothy S. Van Kirk
---------------------------
Name: Timothy S. Van Kirk
-------------------
Title: Duly Authorized Signatory
--------------------------
22
<PAGE> 23
SCHEDULE I
Address for Notices:
Pegasus Partners, L.P. Pegasus Related Partners, L.P.
99 River Road 99 River Road
Cos Cob, Connecticut 06807 Cos Cob, Connecticut 06807
<PAGE> 1
EXHIBIT 10.66
CODE-ALARM, INC.
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE; DEFINITIONS. The purpose of the
Code-Alarm, Inc. 1997 Stock Option Plan (the "Plan") is to offer to certain
employees of Code-Alarm, Inc., a Michigan corporation (the "Corporation") and
its subsidiaries, options to acquire equity interests in the Corporation,
thereby attracting, retaining and motivating such persons, and strengthening the
mutuality of interests between such persons and the Corporation's shareholders.
For purposes of the Plan, the following initially capitalized
words and phrases shall be defined as set forth below, unless the context
clearly requires a different meaning:
a. "Affiliate" means, with respect to a person or entity, a
person that directly or indirectly controls, or is controlled by, or is under
common control with such person or entity.
b. "Board" means the Board of Directors of the Corporation,
as constituted from time to time.
c. "Cause" occurs when the Participant, as determined by the
Board:
(i) has engaged in any type of disloyalty to the
Corporation, including without limitation, fraud,
embezzlement, theft, or dishonesty in the course of
his employment or engagement, or has otherwise
breached any fiduciary duty owed to the Corporation;
(ii) has been convicted of a felony;
(iii) has disclosed trade secrets or confidential
information of the Corporation;
(iv) has breached any agreement with or duty to the
Corporation in respect of confidentiality,
non-disclosure, non- competition or otherwise; or
(v) has been terminated for cause pursuant to the terms
of his employment agreement with the Corporation.
d. "Change of Control" means a merger, reorganization or
consolidation involving the Corporation or sale of all or substantially all of
the assets of the Corporation, if the shareholders of the Corporation
immediately before such merger, reorganization or consolidation or sale of
assets do not or will not own directly or indirectly immediately following such
merger, reorganization or consolidation or sale of assets, more than fifty
percent (50%) of the combined
<PAGE> 2
voting power of the outstanding voting securities of the corporation resulting
from or surviving such merger, reorganization or consolidation or sale of
assets.
e. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
f. "Committee" shall mean the Committee appointed by the Board
in accordance with Section 2 of the Plan, if one is appointed, in which event
in connection with this Plan, the Committee shall possess all of the power and
authority of, and shall be authorized to take any and all actions required to
be taken hereunder by, and make any and all determinations required hereunder
by, the Board.
g. "Disability" shall mean a disability of an employee or
officer which renders such employee or officer unable to perform the full
extent of his duties and responsibilities by reason of his illness or
incapacity for 6 months out of any 12-month period; provided that,
(i) if an optionee is bound by the terms of an
employment agreement between the optionee and
the Corporation, whether the optionee is
"Disabled" for purposes of the Plan shall be
determined in accordance with the procedures
set forth in said employment agreement, if
such procedures are therein provided; and
(ii) an optionee bound by such an employment
agreement shall not be determined to be
Disabled under the Plan any earlier than he
would be determined to be disabled under his
employment agreement.
"Disabled" shall mean having a Disability.
h. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
i. "Fair Market Value" means, as of any date: (i) the average
of the closing prices of the Stock as reported on the principal nationally
recognized stock exchange on which the Stock is traded on the 20 trading days
ending with such date; or (ii) if the Stock is not listed or admitted to
unlisted trading privileges on a nationally recognized stock exchange, the
average of the closing prices of the Stock as reported by The NASDAQ Stock
Market on the 20 trading days ending with such date; or (iii) if the Stock is
not listed or admitted to unlisted trading privileges on a nationally
recognized stock exchange or traded on The NASDAQ Stock Market, then the Fair
Market Value shall be determined by the Board acting in its discretion.
j. "Non-Employee Director" shall have the meaning set forth in
Rule 16b-3(b)(3)promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission so long as such director is also an "outside director" as
defined in the rules and regulations under Section 162(m) of the Code.
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<PAGE> 3
k. "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
l. "Participant" means an employee of the Corporation or a
Subsidiary to whom an Option is granted pursuant to the Plan.
m. "Rules" means Section 16 of the Exchange Act and the
regulations promulgated thereunder.
n. "Securities Broker" means a registered securities broker
acceptable to the Corporation who agrees to effect the cashless exercise of an
Option pursuant to Section 5(j) hereof.
o. "Stock" means the common stock, without par value, of the
Corporation, subject to substitution or adjustment as provided in Section 3(c)
hereof.
p. "Stock Option" or "Option" means any option to purchase
shares of Stock granted pursuant to Section 5 hereof.
q. "Subsidiary" means, in respect of the Corporation, a
subsidiary corporation, whether now or hereafter existing, as defined in
Sections 424(f) and (g) of the Code.
SECTION 2. ADMINISTRATION. The Plan shall be administered by
the Board. The Board may at any time by a unanimous vote, with each member
voting, appoint a Committee consisting of not less than two persons to
administer the Plan on behalf of the Board, subject to such terms and
conditions as the Board may prescribe, provided that each Committee member
shall be a Non-Employee Director. Members of the Committee shall serve for
such period of time as the Board may determine. Members of the Board or the
Committee who are eligible for Options or have been granted Options may vote on
any matters affecting the administration of the Plan or any Options pursuant to
the Plan, except that no such member shall act upon an Option to himself or
herself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board or Committee during which action is taken
with respect to an Option to himself or herself.
From time to time the Board may increase the size of the
Committee and appoint additional members thereto (provided such new members are
Non-Employee Directors), remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies however caused, or remove all
members of the Committee and thereafter directly administer the Plan.
The Committee shall have full authority to grant to eligible
persons under Section 4 Stock Options. In particular, the Committee shall have
the authority:
a. to select the persons to whom Stock Options may
be granted hereunder;
-3-
<PAGE> 4
b. to determine the number of shares of Stock, if
any, to be covered by each such award granted hereunder;
c. to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder,
including, but not limited to, the share price and any restriction or
limitation, any vesting provisions, or any vesting acceleration or forfeiture
waiver regarding any Stock Option and/or the shares of Stock relating thereto,
or the length of the period following termination of employment of any
Participant during which any Stock Option may be exercised, based on such
factors as the Committee shall determine, in its sole discretion;
d. to determine whether and under what circumstances
a Stock Option may be settled in cash or stock; and
e. to determine whether and under what circumstances
a Stock Option may be exercised without a payment of cash under Section 5(j).
The Committee shall have the authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan as
it shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any Option issued under the Plan (and any agreements
relating thereto); to amend the terms of any agreement relating to any Option
issued under the Plan; and to otherwise supervise the administration of the
Plan. The Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or in any Option granted in the manner and to the
extent it shall deem necessary to carry out the intent of the Plan.
All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the
Corporation and Participants. No member of the Committee shall be liable for
any good faith determination, act or failure to act in connection with the Plan
or any award made under the Plan.
SECTION 3. STOCK SUBJECT TO THE PLAN.
a. Stock Subject to the Plan. The stock to be subject to Options
under the Plan shall be shares of Stock and may be either authorized and
unissued shares of Stock or shares of Stock held in the treasury of the
Corporation. The maximum number of shares of Stock that may be the subject of
Options under the Plan is 1,317,178 and the Corporation shall reserve for the
purposes of the Plan, out of its authorized and unissued shares of Stock or out
of shares of Stock held in its treasury, or partly out of each, such number of
shares. Notwithstanding the foregoing, no individual shall receive Options for
more than an aggregate of 925,000 shares of Stock authorized for grant under
the Plan.
b. Effect of the Expiration or Termination of Options. If and to
the extent that an Option granted under the Plan expires, terminates or is
canceled or forfeited for any reason without having been exercised in full, the
shares of Stock associated with the expired,
-4-
<PAGE> 5
terminated, canceled or forfeited portion of the Option shall not become
available for grant under the Plan.
c. Other Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, Stock distribution or dividend, Stock split or
combination, or other change in corporate structure affecting the Stock, such
substitution or adjustment shall be made in the number and option price of
securities subject to outstanding Options granted under the Plan, as may be
determined to be appropriate by the Committee in its sole discretion, provided
that the number of securities subject to any Option shall always be a whole
number.
SECTION 4. ELIGIBILITY. Officers and other employees of the
Corporation or its Subsidiaries are eligible to be granted Options under the
Plan.
SECTION 5. STOCK OPTIONS. Stock Options granted under the Plan shall
be Non-Qualified Stock Options.
Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem appropriate:
a. Option Price. The exercise price per share of Stock
purchasable under a Non-Qualified Stock Option shall be $1.88.
b. Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more than ten years
after the date the Option is granted. No Option may be exercised by any person
after expiration of the term of the Option.
c. Exercisability. Subject to the termination provisions set
forth in Sections 5(f) through (h), Stock Options shall vest and be exercisable
only upon satisfaction of the following two conditions:
(i) Time. Subject to Section 5(i), with respect to
the grant of Options under the Plan, 1/3 of the number of shares subject to such
Option shall vest and be exercisable three (3) years from the date of grant, a
second 1/3 of such shares shall vest and be exercisable four (4) years from the
date of grant, and the final 1/3 of such shares shall vest and be exercisable
five (5) years from the date of grant.
(ii) Stock Price. The Fair Market Value of the Stock
(or the price per share to be paid in the event of a Change of Control, as
determined by the Committee for purposes of this Section 5(c)(ii)) shall have
reached or exceeded the level specified in column (B) below during the time
period set forth in column (A) below, measured from the date of adoption of this
Plan:
-5-
<PAGE> 6
A B
Up to 1 year $ 2 3/8
1 to 2 years $ 3
2 to 3 years $ 3 7/8
3 to 4 years $ 5
4 to 5 years $ 6 5/8
5 to 6 years $ 8 5/8
After 6 years $11 1/2
d. Method of Exercise. Subject to the exercise provisions under
Section 5(c) and the termination provisions set forth in Sections 5(f) through
(h), Stock Options may be exercised in whole or in part at any time and from
time to time during the term of the Option, by giving written notice of exercise
to the Corporation specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or such other instrument as the Committee may accept.
As determined by the Committee, in its sole discretion, at or after grant,
payment in full or in part (but only for whole shares) of the exercise price of
a Stock Option may be made in the form of Stock based on the Fair Market Value
of the Stock on the date the Option is exercised.
No shares of Stock shall be issued upon exercise of an Option until full
payment therefor has been made. A Participant shall not have the right to
dividends and other rights of a shareholder with respect to shares of Stock
subject to the Option until the Participant has given written notice of
exercise, has paid in full for such shares, and, if requested, has given the
representation described in Section 8(a) hereof.
e. Non-transferability of Options. No Stock Option shall be
transferable by the Participant otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order, as defined
in the Code or Title I of the Employee Retirement Income Security Act of 1974,
and all Stock Options shall be exercisable, during the Participant's lifetime,
only by the Participant or, in the event of his Disability, by his personal
representative.
f. Termination by Reason of Death. Subject to Section 5(i), if a
Participant's service with the Corporation or any Subsidiary terminates by
reason of death, any Stock Option held by such Participant may thereafter be
exercised, to the extent then exercisable, by the legal representative of the
estate or by the legatee of the Participant under the will of the Participant,
for a period expiring (i) at such time as may be specified by the Committee at
the time of grant, or (ii) if not specified by the Committee, then one year
from the date of death, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, then upon the expiration of the stated term of such
Stock Option.
g. Termination by Reason of Disability. Subject to Section 5(i), if a
Participant's service with the Corporation or any Subsidiary terminates by
reason of Disability, any Stock Option held by such Participant may thereafter
be exercised by the Participant or his personal representative, to the extent
it was exercisable at the time of termination, for a period expiring (i) at
such time as may be specified by the Committee at the time of grant, or (ii) if
not
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<PAGE> 7
specified by the Committee, then six months from the date of termination of
service, or (iii) if sooner than the applicable period specified under (i) or
(ii) above, then upon the expiration of the stated term of such Stock Option;
provided, however, that if the Participant dies within such period, any
unexercised Stock Option held by such Participant shall, at the sole discretion
of the Committee, thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of six months from the date of
such death (or such other period as may be specified by the Committee) or until
the expiration of the stated term of such Stock Option, whichever period is
shorter.
h. Other Termination. If a Participant's service with the
Corporation or any Subsidiary terminates for any reason other than death,
Disability, termination for Cause or voluntary termination, any Stock Option
held by such Participant may thereafter be exercised by the Participant, to the
extent it was exercisable at the time of such termination, for a period expiring
(i) thirty (30) days from the date of termination of service, or (ii) if sooner
than the applicable period specified under (i) above, then upon the expiration
of the stated term of such Stock Option. If a Participant's service terminates
for Cause or pursuant to his voluntary termination, any Stock Option held by
such Participant shall be deemed to have expired and become non-exercisable on
the day prior to the Participant's termination from service.
i. Change of Control. All Stock Options outstanding as of the date of
a Change of Control shall be deemed to have satisfied the "Time" condition for
exercisability of Options set forth in Section 5(c)(i).
j. Cashless Exercise. To the extent permitted under the Rules, in
the sole discretion of the Committee, the Corporation may cooperate in a
"cashless exercise" of an Option. The cashless exercise shall be effected by
the Participant delivering to the Securities Broker instructions to sell a
sufficient number of shares of Stock to cover the costs and expenses associated
therewith.
SECTION 6. AMENDMENTS AND TERMINATION. The Board may amend, alter or
discontinue the Plan at any time and from time to time, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant with respect to a Stock Option which has been granted under the
Plan, without the Participant's consent, or which, without the approval of the
Corporation's shareholders, would:
a. except as expressly provided in the Plan, increase the total
number of shares of Stock reserved for the purposes of the Plan;
b. change the persons or class of persons eligible to participate in
the Plan; or
c. extend the maximum option term under Section 5(b) of the Plan.
Subject to the above provisions, the Board shall have broad authority
to amend the Plan to take into account changes in applicable tax laws and
accounting rules, as well as other developments. Notwithstanding the
foregoing, no amendment to the Plan may be made by the
-7-
<PAGE> 8
Board without the approval of the Corporation's shareholders if such approval
would be required under the Rules in order to ensure that transactions effected
under the Plan are eligible for the benefit of Rule 16b-3.
SECTION 7. UNFUNDED STATUS OF PLAN. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or optionee by the
Corporation, nothing contained herein shall give any such Participant or
optionee any rights that are greater than those of a general creditor of the
Corporation. In its sole discretion, the Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Stock or payments in lieu of Stock hereunder.
SECTION 8. GENERAL PROVISIONS.
a. The Committee may require each person acquiring Stock under the
Plan to represent to and agree with the Corporation in writing that the
Participant is acquiring the Stock for investment purposes and without a view to
distribution thereof and as to such other matters as the Committee believes are
appropriate to ensure compliance with applicable Federal and state securities
laws. The certificate evidencing such award and any securities issued pursuant
thereto may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer and compliance with securities laws.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities Act of 1933, as amended, the Exchange
Act, any stock exchange upon which the Stock is then listed, and any other
applicable Federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
b. Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
c. The adoption of the Plan shall not confer upon any employee of the
Corporation or a Subsidiary any right to continued employment with the
Corporation or such Subsidiary, nor shall it interfere in any way with the
right of the Corporation or such Subsidiary to terminate the employment of any
of its employees at any time.
d. No later than the date as of which an amount first becomes
includable in the gross income of the Participant for Federal income tax
purposes with respect to any Option under the Plan, the Participant shall pay to
the Corporation, or make arrangements satisfactory to the Committee regarding
the payment, of any Federal, state or local taxes of any kind required by law to
be withheld with respect to such amount. Unless otherwise determined by the
Committee, the minimum required withholding obligations may be settled with
Stock, including Stock that is
-8-
<PAGE> 9
part of the award that gives rise to the withholding requirement. The
obligations of the Corporation under the Plan shall be conditional on such
payment or arrangements and the Corporation shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
e. The Plan and all Options granted and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Michigan.
SECTION 9. EFFECTIVE DATE OF PLAN. This Plan shall become effective
on the date that it is adopted by the Board. The Board may grant Options
hereunder prior to approval of the Plan or any material amendments thereto by
the holders of a majority of the Corporation's outstanding voting stock.
Notwithstanding the foregoing, no Option granted under this Plan may be
exercised prior to the satisfaction of the following condition: the
Corporation's adoption of a Charter Amendment increasing the Corporation's
authorized shares of common stock to 20 million.
SECTION 10. TERM OF PLAN. No Stock Option shall be granted pursuant
to the Plan on or after the tenth (10th) anniversary of the date of shareholder
approval of the Plan, but awards granted prior to such tenth (10th) anniversary
may extend beyond that date.
Executed this ____ day of ______________________, 1997.
[CORPORATE SEAL] CODE-ALARM, INC.
Attest: _______________________ By:________________________________
-9-
<PAGE> 1
EXHIBIT 10.67
October 27, 1997
Pegasus Partners, L.P.
Pegasus Related Partners, L.P.
99 River Road
Cos Cob, Connecticut 06807
Code Alarm, Inc.
950 East Whitcomb
Madison Heights, MI 48071
Gentlemen:
We refer to the Unit Purchase Agreement dated as of the date hereof
among Code Alarm, Inc. (the "Company"), Pegasus Partners, L.P. and Pegasus
Related Partners, L.P. (the "Purchase Agreement"). Capitalized terms used but
not defined herein have the meanings ascribed to them in the Purchase
Agreement. This letter agreement is being delivered to each of you pursuant to
Section 3.01(o) of the Purchase Agreement.
In order to induce the Purchasers to enter into the Purchase Agreement
and related documents, each of the undersigned, other than the Kenneth M.
Mueller Charitable Remainder Unitrust, hereby agrees that he or it will not at
any time or from time to time, directly or indirectly, offer, sell, offer to
sell, contract to sell, or otherwise sell or dispose of, in the aggregate, a
number of shares of Common Stock in excess of twenty percent (20%) of the
shares of Common Stock beneficially owned by such party as of the date hereof;
provided, that during any 12-month period, the Robyn L. Mueller Trust shall be
entitled to sell up to 20% of the shares of Common Stock beneficially owned by
it at the beginning of such 12-month period. The obligations of each of the
undersigned pursuant to this paragraph shall be null and void and of no further
force and effect upon the earlier of (i) the fifth anniversary of the date
hereof and (ii) the date on which the Purchasers no longer hold, together with
their successors and assigns, at least 25% of the Units initially issued to
them pursuant to the Purchase Agreement (for purposes of this calculation,
Units, the Attached Warrants of which have been exercised for shares of Common
Stock which are still held by the party who exercised such Attached Warrants
shall be counted as Units held by such exercising party).
Each of the undersigned hereby agrees that he or it will vote all of
the shares of Common Stock beneficially owned by him or it in favor of approval
of the Charter Amendment, at any and all meetings at which the Charter
Amendment is presented to shareholders for approval, until the Charter
Amendment is approved by the Company's shareholders.
Each of the undersigned, individually and not jointly, represents and
warrants with respect to himself or itself that he or it is the beneficial
owner of the number of shares of Common Stock set forth opposite his or its
name on Annex A hereto, free and clear of any
<PAGE> 2
security interests, liens, charges, encumbrances, equities, claims, options
(other than pledges pursuant to commercially customary brokers margin accounts)
or limitations of whatever nature and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such shares), other than those arising under the Securities Act of
1933, as amended, and applicable state securities laws.
Very truly yours,
ROBYN L. MUELLER TRUST
By: /s/ Robyn L. Mueller
-------------------------------------
Robyn L. Mueller, Trustee
KENNETH M. MUELLER CHARITABLE
REMAINDER UNITRUST
By: /s/ Kenneth M. Mueller
-------------------------------------
Kenneth M. Mueller, Trustee
/s/ Rand Mueller
-----------------------------------------
Rand W. Mueller
Accepted and Agreed:
PEGASUS PARTNERS, L.P.
By: /s/ Richard M. Cion
----------------------------------
Name: Richard M. Cion
Title: Vice President - Pegasus Investors GP, Inc.
PEGASUS RELATED PARTNERS, L.P.
By: /s/ Richard M. Cion
----------------------------------
Name: Richard M. Cion
Title: Vice President - Pegasus Investors GP, Inc.
CODE ALARM INC.
By: /s/ Rand Mueller
----------------------------------
Name: Rand Mueller
Title: President
<PAGE> 3
ANNEX A
NO. OF SHARES OF PERCENTAGES OF
SHAREHOLDER COMMON STOCK OWNED SHARES OWNED
----------- ------------------ --------------
Rand W. Mueller 11,250(1) less than 1%
Kenneth M. Mueller 120,793(2) 5.204%
Charitable Remainder Unitrust
Robyn L. Mueller Trust 538,810 23.216%
- --------------
(1) Includes 11,250 shares of Common Stock to which Rand M. Mueller has the
right to acquire beneficial ownership, within 60 days, by the exercise of
options granted under the Company's 1987 Stock Option plan.
(2) Includes 750 shares of Common Stock to which Kenneth M. Mueller has the
right to acquire beneficial ownership, within 60 days, by the exercise of
options granted under the Company's 1987 Stock Option plan.
<PAGE> 1
EXHIBIT 10.68
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
This agreement, made as of the 20th day of May, 1997 (the effective date), by
and between Code Alarm, Inc. a Michigan corporation, (hereinafter referred to
as the "Company") and Rand W. Mueller residing at Bloomfield Hills, Michigan
(hereinafter referred to as the Executive);
WITNESSETH
WHEREAS, the Executive and the company desire to EXTEND the agreement
concerning the terms and conditions of the Executive's employment by the
company for a specified term.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the company and the Executive agree as follows:
1. PARAGRAPH 1 of the agreement is amended and restated as follows:
The company hereby employs the Executive to perform executive services for the
company as hereinafter provided and the Executive hereby accepts such
employment and agrees to render such services to the company on terms and
conditions set forth in this agreement for an employment term commencing the
effective date of this agreement and terminating on May 31, 2001, or in
accordance with the provisions of paragraph 7 hereof, unless earlier terminated
pursuant to paragraph 6 of this agreement. If the Company does not give
written notice to the Executive prior to May 31, 1999 that his employment will
not be continued after May 31, 2001, then the term of his employment hereunder
shall be extended for an additional 12 months to May 31, 2002, and shall
annually be extended for additional consecutive 12 month periods unless the
Company shall gave given written notice to the Executive at least 24 months
prior to the expiration of the then current term of his employment.
2. All other terms of the original and amended Employment Agreement shall
remain unchanged.
IN WITNESS WHEREOF, the parties thereto have caused this amendment to be duly
accepted and ratified.
CODE ALARM, INC.
By: /Craig Camalo
--------------------------
Craig Camalo
Vice President of Finance,
Secretary and Treasurer
/Rand W. Mueller
--------------------------
Rand W. Mueller
<PAGE> 2
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
This Amendment No. 5 (the "Amendment") to the Employment Agreement dated
as of May 29, 1987, as amended, between Code-Alarm, Inc. a Michigan corporation
("Company") and Rand W. Mueller (the "Executive") (the "Employment Agreement")
is dated as of October 15, 1997.
Recitals:
A. The Company and Executive are parties to the Employment Agreement,
pursuant to which the Executive is employed by the Company for the
consideration stated therein.
B. The Company and the Executive desire to amend the Compensation and
Benefits section of the Agreement as set forth in this Amendment.
NOW, THEREFORE, the parties agrees that the Employment Agreement is hereby
amended as follows:
1. Paragraph 3 of the Agreement is amended to read in its entirety as
follows:
Commencing on October 1, 1997, and continuing during the Employment Term,
Executive shall be paid a salary by Company of $500,000 per annum, payable in
monthly installments. During the Employment Term, the Company will provide
Executive with the perquisites comparable to those which have been provided to
him heretofore as an employee of the Company. Executive shall be entitled to
participate in those of the Company's benefit plans for which he is eligible.
During the Employment Term, the Company will pay Executive an annual incentive
bonus, in addition to his salary, equal to five (5) percent of Operating Income
(pre-bonus and pre-interest and pre-taxes) after the first five million dollars
($5,000,000) of Operating Income, as shown by the audited financial statement
sent to the shareholders of the Company, payable within sixty (60) days after
the end of the calendar year; provided, however, that the Board of Directors of
the Company may allow Executive, not more often than quarterly, to draw of up
seventy (70) percent of the Executive's projected bonus based upon the
year-to-date results of the operations of the Company.
2. This Amendment shall be governed by and construed in accordance with
the laws of the State of Michigan.
3. In all respects not inconsistent with the terms and provisions of this
Amendment, the Employment Agreement is hereby ratified, adopted, approved and
confirmed.
4. All other terms of the original and amended Employment Agreement shall
remain unchanged.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date set forth above.
CODE-ALARM, INC.
By: /s/ Craig S. Camalo
-----------------------------
Craig S. Camalo
Vice President of Finance,
Secretary and Treasurer
/s/ Rand W. Mueller
-----------------------------------
Rand W. Mueller
<PAGE> 1
EXHIBIT 10.69
EMPLOYMENT AGREEMENT
This agreement made as of the 20th day of May, 1997 (the effective date), by
and between Code Alarm, Inc. a Michigan corporation, (hereinafter referred to
as the "Company") and Craig S. Camalo residing Ann Arbor, Michigan.
(hereinafter referred to the Executive);
WITNESSETH
WHEREAS, the Executive and the company desire to enter into an agreement
concerning the terms and conditions of the Executive's employment by the
company for a specified term.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the company and the Executive agree as follows:
1. EMPLOYMENT TERM
The company hereby employs the Executive to perform executive services for the
company as hereinafter provided and the Executive hereby accepts such
employment and agrees to render such services to the Company on terms and
conditions set forth in this agreement for an employment term commencing the
effective date of this agreement and terminating on May 31, 2001, or in
accordance with the provisions of paragraph 7 hereof, unless earlier terminated
pursuant to paragraph 6 of this agreement. If the Company does not give
written notice to the Executive prior to May 31, 1999 that his employment will
not be continued after May 31, 2001, then the term of his employment hereunder
shall be extended for an additional 12 months to May 31, 2002, and shall
annually be extended for additional consecutive 12 month period unless the
Company shall have given written notice to the Executive at least 24 months
prior to the expiration of the then current term of his employment.
2. DUTIES DURING THE EMPLOYMENT TERM
Executive's position with the Company during the Employment Term shall be as
Vice President Finance and Chief Financial Officer. Executive shall have
general and active management of all of the Finance, Information Technology,
and Administrative affairs for the Company and shall see that all orders of the
CEO and the Board of Directors of the Company are carried into effect.
Executive will also fulfill such other reasonable and proper management duties
as may be assigned to him by the CEO of the Company. During the Employment
Term the Executive shall devote his best efforts, including his full business
time, to affairs of the Company. Executive shall not, without prior written
consent, engage in any other business activity except for personal investments
in a passive capacity.
<PAGE> 2
3. COMPENSATION AND BENEFITS.
During the Employment Term the Executive will be paid a salary of not less than
$100,000 per year, payable in 26 installments per year. The Company will also
pay the executive an annual incentive bonus in addition to his salary equal to
1% of the first $1M of operating income, and 2% of all additional operating
income as reported in the Company's annual report. The Company may allow the
Executive to draw up to 75% of the accrued bonus not more often than quarterly
within 45 days after the end of each quarter upon the release of the Company's
form 10Q indicating the operating income achieved cumulative through that
quarter. The Executive will also receive, or be entitled to, at least the same
benefits, perquisites and vacation he now receives, including company car and
expenses. The Executive will also be entitled to receive a bonus based on the
increase in Company's Shareholder value. The first time only, after the
effective date of this agreement, that the common stock price of Code Alarm,
Inc. exceeds $10 and remains at or above $10 for 30 consecutive days, and for
each additional $10 incremental increase in the stock price which remains at or
above that level for 30 consecutive days, the Company will pay the Executive a
bonus equal to the annual base salary of the Executive prevailing at that time.
The bonus will be payable in 3 equal installments, the first immediately when
it is earned, the 2nd after 12 months, and the 3rd after an additional 12
months. If the Executive shall not be employed by the Company, for any reason
at the time that any bonus installment is due, the remaining installments will
be forfeited by the Executive.
4. EXPENSES
During the Employment Term, the Executive shall be entitled to reimbursement of
all reasonable expenses incurred in connection with the business of the
Company.
5. DISABILITY
In the event of disability of the Executive, the Company may elect, by giving
written notice, to terminate the Employment Term. "Disability" shall be as
defined by the Social Security Administration.
6. TERMINATION FOR CAUSE
At any time during the Employment Term, the Company shall have the right to
terminate the Executive for cause with 10 days prior written notice. Cause
shall mean any conduct by the Executive which (1) constitutes a felony, fraud
or gross malfeasance on the part of the Executive (ii) results in a material
breach of the Executive's obligations under this agreement (iii) results in
willful neglect of the Executive's duties hereunder.
7. TERMINATION WITHOUT CAUSE
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<PAGE> 3
The Employment Term of this agreement may be terminated without cause by (a)
the death of the Executive or (b) disability of the Executive as provided in
paragraph 5 hereof.
8. SEVERANCE
If the Company terminates Executive, Executive shall be entitled to
continuation of all salary and benefits, including company car and expenses for
18 months, and recovery of all legal fees and expenses if Executive succeeds in
litigation with the Company for any issue related to the termination.
9. COMPETITION
During, the Employment Term and for a period of six (6) months following the
termination of this agreement, the Executive will not, without prior written
consent from the company, engage in any business which is in direct or indirect
competition with the Company as a consultant, employee, director, partner, or
any other capacity. A breach of this commitment by the Executive shall result
in immediate termination of any and all future obligations under this agreement
by the Company.
During, the Employment Term and for a period of six (6) months following the
termination of this agreement, the Executive will not, without prior written
consent from the Company, divulge to others customer lists, business methods,
samples, patterns, engineering designs, artwork, plans, inventions,
distribution or dealer information, or any other confidential information of
the Company, solicit or accept any accounts of the Company, or induce employees
of the Company to accept employment elsewhere.
Executive acknowledges and agrees that by virtue of his position with the
Company he will have intimate knowledge of the activities and affairs of the
Company, including trade secrets and other confidential information. As a
result, and also because of the unique and extraordinary services the Executive
is capable of performing for the Company, or it's competitors, the Executive
recognizes that the services to be rendered are of a special character and have
a peculiar value which cannot be adequately compensated by damages alone.
Executive therefore agrees that if he renders services to a competitor of the
Company, the Company shall be entitled to immediate injunctive relief to
restrain the Executive from rendering his services to any competitor of the
Company in addition to any other remedies which the Company may be entitled by
law.
Executive will not remove or retain, or make copies of any figures,
calculations letters, papers or information relating to business of the Company
or its affiliates. The Company shall be the sole and exclusive owner of all of
the ideas and suggestions made by the Executive to the Company during the
course of his employment, whether or not they are subject to patent or
trademark protection, and all materials which relate to the business which are
confidential.
10. BINDING AGREEMENT; ASSIGNMENT
-3-
<PAGE> 4
This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective executors, administrators, heirs, legatees,
devises, legal representatives, successors and assigns. Neither this agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other except that the Company may assign this
agreement to any business entity succeeding to substantially all of the
business or the assets of the Company.
Options granted Executive March 27, 1997 (20,000 Options) will immediately vest
100% if there is a substantial change in ownership or control in the Company,
merger, combination, after completion of Pegasus/GECC refinancing, or Executive
is terminated for any reason.
11. VALIDITY
In the event that any provision of this agreement is held invalid or
unenforceable, the same shall not affect in any respect whatsoever the validity
of the remainder of this agreement.
12. ENTIRE AGREEMENT; AMENDMENT
This agreement constitutes the entire agreement, between the parties and
supersedes all prior negotiations and agreements. There are no
representations, promises, terms, conditions, warranties, understandings,
commitments between the parties other than those expressly set forth herein.
This agreement cannot be modified except in writing executed by both parties.
13. WAIVER
Neither a waiver by either party hereto of a breach or a default under any
provision of this agreement, nor the failure of either party to enforce any
provision or exercise any right remedy or privilege hereunder shall be
construed as a waiver of any such provision hereunder.
14. LIMITATIONS ON BENEFITS OF THIS AGREEMENT
It is the explicit intention of the parties hereto that no person or entity
other than the parties hereto shall be entitled to bring any action to enforce
any provision of this agreement except either party hereto and that this
agreement shall be solely for the benefit of the parties hereto.
15. NOTICES
Any notice must be in writing and delivered by first-class or certified mail to
the party's address listed below or any such new address as may be specified by
written notice.
-4-
<PAGE> 5
The Company: The Executive:
Code Alarm, Inc. 3584 Creekside Drive
950 East Whitcomb Ann Arbor, MI 48105
Madison Heights, MI 48071
16. GOVERNING LAW
This agreement, the rights and obligations hereunder, and any claims or
disputes relating thereto, shall be governed by and construed under the laws of
the State of Michigan.
17. COUNTERPARTS
This agreement may be executed in two or more counterparts each of which shall
be deemed to be an original and all of which together shall constitute one and
the same agreement.
IN WITNESS WHEREOF, the Company has caused this agreement to be duly executed
on its behalf and the Executive has duly executed this agreement as of the date
first written above.
CODE ALARM, INC. /s/ Craig S. Camalo
----------------------------
By: /s/ Rand Mueller
---------------------
Its: President
--------------------- -----------------------------
-5-
<PAGE> 1
EXHIBIT 10.70
EMPLOYMENT AGREEMENT
This agreement, made as of the 20th day of May, 1997 (the effective date), by
and between Code Alarm, Inc. a Michigan corporation, (hereinafter referred to
as the "Company") and Peter Stouffer residing in Clarkston, Michigan.
(hereinafter referred to as the Executive);
WITNESSETH
WHEREAS, the Executive and the company desire to enter into an agreement
concerning the terms and conditions of the Executive's employment by the
company for a specified term.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the company and the Executive agree as follows:
1. EMPLOYMENT TERM
The company hereby employs the Executive to perform executive services for the
company as hereinafter provided and the Executive hereby accepts such
employment and agrees to render such services to the Company on terms and
conditions set forth in this agreement for an employment term commencing the
effective date of this agreement and terminating on May 31, 2001, or in
accordance with the provisions of paragraph 7 hereof, unless earlier terminated
pursuant to paragraph 6 of this agreement. If the Company does not give written
notice to the Executive prior to May 31, 1999 that his employment will not be
continued after May 31, 2001, then the term of his employment hereunder shall
be extended for an additional 12 months to May 31, 2002, and shall annually be
extended for additional consecutive 12 month period unless the Company shall
have given written notice to the Executive at least 24 months prior to the
expiration of the then current term of his employment.
2. DUTIES DURING THE EMPLOYMENT TERM
Executive's position with the Company during the Employment Term shall be as
Vice President of Manufacturing and Engineering. Executive shall have general
and active management of all of the manufacturing, engineering and purchasing
affairs for the Company and shall see that all orders of the CEO and the Board
of Directors of the Company are
<PAGE> 2
carried into effect. Executive will also fulfill such other reasonable and
proper management duties as may be assigned to him by the CEO of the Company.
During the Employment Term the Executive shall devote his best efforts,
including his full business time, to affairs of the Company. Executive shall
not, without prior written consent, engage in any other business activity
except for personal investments in a passive capacity.
3. COMPENSATION AND BENEFITS.
During the Employment Term the Executive will be paid a salary of not less than
$105,000 per year, payable in 26 installments per year. The Company will also
pay the Executive an annual incentive bonus in addition to his salary equal to
1% of the first $1M of operating income, and 2% of all additional operating
income as reported in the Company's annual report. The Company may allow the
Executive to draw up to 75% of the accrued bonus not more often than quarterly
within 45 days after the end of each quarter upon the release of the Company's
form 10Q indicating the operating income achieved cumulative through that
quarter. The Executive will also be entitled to participate in benefits and
perquisites for which he is eligible.
The Executive will also be entitled to receive a bonus based on the increase in
Company's Shareholder value. The First time only , after the effective date of
this agreement ,that the common stock price of Code Alarm, Inc. exceeds $10 and
remains at or above $10 for 30 consecutive days, and for each additional $10
incremental increase in the stock price which remains at or above that level
for 30 consecutive days, the Company will pay the Executive a bonus equal to
the annual base salary of the Executive prevailing at that time. The bonus will
be payable in 3 equal installments, the first immediately when it is earned,
the 2nd after 12 months, and the 3rd after an additional 12 months. If the
Executive shall not be employed by the Company, for any reason ,at the time
that any bonus installment is due, the remaining installments will be forfeited
by the Executive.
4. EXPENSES.
During the Employment Term, the Executive shall be entitled to reimbursement of
all reasonable expenses incurred in connection with the business of the
Company.
5. DISABILITY
<PAGE> 3
In the event of disability of the Executive, the Company may elect, by giving
written notice, to terminate the Employment Term. "Disability" shall be as
defined by the Social Security Administration.
6. TERMINATION FOR CAUSE
At any time during the Employment Term, the Company shall have the right to
terminate the Executive for cause with 10 days prior written notice. Cause
shall mean any conduct by the Executive which (I) constitutes a felony, fraud
or gross malfeasance on the part of the Executive (ii) results in a material
breach of the Executive's obligations under this agreement (iii) results in
willful neglect of the Executive's duties hereunder.
7. TERMINATION WITHOUT CAUSE.
The Employment Term of this agreement may be terminated without cause by (a)
the death of the Executive or (b) disability of the Executive as provided in
paragraph 5 hereof.
8. COMPETITION
During the Employment Term and for a period of two (2) years following the
termination of this agreement, the Executive will not , without prior written
consent from the company, engage in any business which is in direct or indirect
competition with the Company as a consultant, employee, director, partner, or
any other capacity. A breach of this commitment by the Executive shall result
in immediate termination of any and all future obligations under this agreement
by the Company.
During the Employment Term and for a period of two (2) years following the
termination of this agreement, the Executive will not, without prior written
consent from the Company, divulge to others customer lists, business methods,
samples, patterns, engineering designs, artwork, plans, inventions,
distribution or dealer information, or any other confidential information of
the Company, solicit or accept any accounts of the Company, or induce employees
of the Company to accept employment elsewhere.
Executive acknowledges and agrees that by virtue of his position with the
Company he will have intimate knowledge of the activities and affairs of the
Company, including trade secrets and other confidential information. As a
result , and also because of the unique and extraordinary services the
Executive is capable of performing for the Company, or its competitors, the
Executive recognizes that the services
<PAGE> 4
to be rendered are of a special character and have a peculiar value which
cannot be adequately compensated by damages alone. Executive therefore agrees
that if he renders services to a competitor of the Company, the Company shall
be entitled to immediate injunctive relief to restrain the Executive from
rendering his services to any competitor of the Company in addition to any
other remedies which the Company may be entitled by law.
Executive will not remove or retain, or make copies of any figures,
calculations letters, papers or information relating to business of the Company
or its affiliates. The Company shall be the sole and exclusive owner of all of
the ideas and suggestions made by the Executive to the Company during the
course of his employment, whether or not they are subject to patent or
trademark protection, and all materials which relate to the business which are
confidential.
9. BINDING AGREEMENT ; ASSIGNMENT
This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective executors, administrators, heirs, legatees,
devisees, legal representatives, successors and assigns. Neither this agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other except that the Company may assign this
agreement to any business entity succeeding to substantially all of the
business or the assets of the Company.
10. VALIDITY
In the event that any provision of this agreement is held invalid or
unenforceable, the same shall not affect in any respect whatsoever the validity
of the remainder of this agreement.
11. ENTIRE AGREEMENT ; AMENDMENT
This agreement constitutes the entire agreement between the parties and
supersedes all prior negotiations and agreements. There are no representations,
promises, terms, conditions, warranties, understandings, commitments between
the parties other than those expressly set forth herein. This agreement cannot
be modified except in writing executed by both parties.
12. WAIVER
<PAGE> 5
Neither a waiver by either party hereto of a breach or a default under any
provision of this agreement, nor the failure of either party to enforce any
provision or exercise any right remedy or privilege hereunder shall be
construed as a waiver of any such provision hereunder.
13. LIMITATIONS ON BENEFITS OF THIS AGREEMENT
It is the explicit intention of the parties hereto that no person or entity
other than the parties hereto shall be entitled to bring any action to enforce
any provision of this agreement except either party hereto and that this
agreement shall be solely for the benefit of the parties hereto.
14. NOTICES
Any notice must be in writing and delivered by first-class or certified mail to
the party's address listed below or any such new address as may be specified by
written notice.
The Company: The Executive:
Code Alarm, Inc. Peter Stouffer
950 East Whitcomb 9892 Creekwood Trail
Madison Heights, MI 48071 Davisburg, MI 48350
15. GOVERNING LAW
This agreement , the rights and obligations hereunder, and any claims or
disputes relating thereto, shall be governed by and construed under the laws of
the State of Michigan.
16. COUNTERPARTS
This agreement may be executed in two or more counterparts each of which shall
be deemed to be an original and all of which together shall constitute one and
the same agreement.
<PAGE> 6
IN WITNESS WHEREOF, the Company has caused this agreement to be duly executed
on its behalf and the Executive has duly executed this agreement as of the date
first written above.
CODE ALARM, INC. /Peter Stouffer
August 11, 1997
By:/Rand Mueller
-------------
Its: President and CEO
<PAGE> 1
EXHIBIT 10.71
EMPLOYMENT AGREEMENT
This agreement, made as of the 20th day of May, 1997 (the effective date), by
and between Code Alarm, Inc. a Michigan corporation, (hereinafter referred to
as the "Company") and Michael Schroeder residing in Mt. Clemens, Michigan.
(hereinafter referred to as the Executive);
WITNESSETH
WHEREAS, the Executive and the company desire to enter into an agreement
concerning the terms and conditions of the Executive's employment by the
company for a specified term.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the company and the Executive agree as follows:
1. EMPLOYMENT TERM
The company hereby employs the Executive to perform executive services for the
company as hereinafter provided and the Executive hereby accepts such
employment and agrees to render such services to the Company on terms and
conditions set forth in this agreement for an employment term commencing the
effective date of this agreement and terminating on May 31, 2001, or in
accordance with the provisions of paragraph 7 hereof, unless earlier terminated
pursuant to paragraph 6 of this agreement. If the Company does not give written
notice to the Executive prior to May 31, 1999 that his employment will not be
continued after May 31, 2001, then the term of his employment hereunder shall
be extended for an additional 12 months to May 31, 2002, and shall annually be
extended for additional consecutive 12 month period unless the Company shall
have given written notice to the Executive at least 24 months prior to the
expiration of the then current term of his employment.
2. DUTIES DURING THE EMPLOYMENT TERM
Executive's position with the Company during the Employment Term shall be as
Vice President of Sales and Marketing. Executive shall have general and active
management of all of the sales and marketing affairs
<PAGE> 2
for the Company and shall see that all orders of the CEO and the Board of
Directors of the Company are carried into effect. Executive will also fulfill
such other reasonable and proper management duties as may be assigned to him by
the CEO of the Company. During the Employment Term the Executive shall devote
his best efforts, including his full business time, to affairs of the Company.
Executive shall not, without prior written consent, engage in any other
business activity except for personal investments in a passive capacity.
3. COMPENSATION AND BENEFITS.
During the Employment Term the Executive will be paid a salary of not less than
$90,000 per year, payable in 26 installments per year. The Company will also
pay the Executive an annual incentive bonus in addition to his salary equal to
1% of the first $1M of operating income, and 2% of all additional operating
income as reported in the Company's annual report. The Company may allow the
Executive to draw up to 75% of the accrued bonus not more often than quarterly
within 45 days after the end of each quarter upon the release of the Company's
form 10Q indicating the operating income achieved cumulative through that
quarter. The Executive will also be entitled to participate in benefits and
perquisites for which he is eligible.
The Executive will also be entitled to receive a bonus based on the increase in
Company's Shareholder value. The First time only , after the effective date of
this agreement ,that the common stock price of Code Alarm, Inc. exceeds $10 and
remains at or above $10 for 30 consecutive days, and for each additional $10
incremental increase in the stock price which remains at or above that level
for 30 consecutive days, the Company will pay the Executive a bonus equal to
the annual base salary of the Executive prevailing at that time. The bonus will
be payable in 3 equal installments, the first immediately when it is earned,
the 2nd after 12 months, and the 3rd after an additional 12 months. If the
Executive shall not be employed by the Company, for any reason ,at the time
that any bonus installment is due, the remaining installments will be forfeited
by the Executive.
4. EXPENSES.
During the Employment Term, the Executive shall be entitled to reimbursement of
all reasonable expenses incurred in connection with the business of the
Company.
5. DISABILITY
<PAGE> 3
In the event of disability of the Executive, the Company may elect, by giving
written notice, to terminate the Employment Term. "Disability" shall be as
defined by the Social Security Administration.
6. TERMINATION FOR CAUSE
At any time during the Employment Term, the Company shall have the right to
terminate the Executive for cause with 10 days prior written notice. Cause
shall mean any conduct by the Executive which (I) constitutes a felony, fraud
or gross malfeasance on the part of the Executive (ii) results in a material
breach of the Executive's obligations under this agreement (iii) results in
willful neglect of the Executive's duties hereunder.
7. TERMINATION WITHOUT CAUSE.
The Employment Term of this agreement may be terminated without cause by (a)
the death of the Executive or (b) disability of the Executive as provided in
paragraph 5 hereof.
8. COMPETITION
During the Employment Term and for a period of two (2) years following the
termination of this agreement, the Executive will not , without prior written
consent from the company, engage in any business which is in direct or indirect
competition with the Company as a consultant, employee, director, partner, or
any other capacity. A breach of this commitment by the Executive shall result
in immediate termination of any and all future obligations under this agreement
by the Company.
During the Employment Term and for a period of two (2) years following the
termination of this agreement, the Executive will not, without prior written
consent from the Company, divulge to others customer lists, business methods,
samples, patterns, engineering designs, artwork, plans, inventions,
distribution or dealer information, or any other confidential information of
the Company, solicit or accept any accounts of the Company, or induce employees
of the Company to accept employment elsewhere.
Executive acknowledges and agrees that by virtue of his position with the
Company he will have intimate knowledge of the activities and affairs of the
Company, including trade secrets and other confidential information. As a
result , and also because of the unique and extraordinary services the
Executive is capable of performing for the Company, or it's competitors, the
Executive recognizes that the services
<PAGE> 4
to be rendered are of a special character and have a peculiar value which
cannot be adequately compensated by damages alone. Executive therefore agrees
that if he renders services to a competitor of the Company, the Company shall
be entitled to immediate injunctive relief to restrain the Executive from
rendering his services to any competitor of the Company in addition to any
other remedies which the Company may be entitled by law.
Executive will not remove or retain, or make copies of any figures,
calculations letters, papers or information relating to business of the Company
or its affiliates. The Company shall be the sole and exclusive owner of all of
the ideas and suggestions made by the Executive to the Company during the
course of his employment, whether or not they are subject to patent or
trademark protection, and all materials which relate to the business which are
confidential.
9. BINDING AGREEMENT ; ASSIGNMENT
This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective executors, administrators, heirs, legatees,
devisees, legal representatives, successors and assigns. Neither this agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other except that the Company may assign this
agreement to any business entity succeeding to substantially all of the
business or the assets of the Company.
10. VALIDITY
In the event that any provision of this agreement is held invalid or
unenforceable, the same shall not affect in any respect whatsoever the validity
of the remainder of this agreement.
11. ENTIRE AGREEMENT ; AMENDMENT
This agreement constitutes the entire agreement between the parties and
supersedes all prior negotiations and agreements. There are no representations,
promises, terms, conditions, warranties, understandings, commitments between
the parties other than those expressly set forth herein. This agreement cannot
be modified except in writing executed by both parties.
12. WAIVER
<PAGE> 5
Neither a waiver by either party hereto of a breach or a default under any
provision of this agreement, nor the failure of either party to enforce any
provision or exercise any right remedy or privilege hereunder shall be
construed as a waiver of any such provision hereunder.
13. LIMITATIONS ON BENEFITS OF THIS AGREEMENT
It is the explicit intention of the parties hereto that no person or entity
other than the parties hereto shall be entitled to bring any action to enforce
any provision of this agreement except either party hereto and that this
agreement shall be solely for the benefit of the parties hereto.
14. NOTICES
Any notice must be in writing and delivered by first-class or certified mail to
the party's address listed below or any such new address as may be specified by
written notice.
The Company: The Executive:
Code Alarm, Inc. Michael Schroeder
950 East Whitecomb 27850 Lauren Street East
Madison Heights, MI 48071 Mt. Clemens, MI 48045
15. GOVERNING LAW
This agreement , the rights and obligations hereunder, and any claims or
disputes relating thereto, shall be governed by and construed under the laws of
the State of Michigan.
16. COUNTERPARTS
This agreement may be executed in two or more counterparts each of which shall
be deemed to be an original and all of which together shall constitute one and
the same agreement.
<PAGE> 6
IN WITNESS WHEREOF, the Company has caused this agreement to be duly executed
on its behalf and the Executive has duly executed this agreement as of the date
first written above.
CODE ALARM, INC. /Michael Schroeder
------------------
By: /Rand Mueller
-------------
Its:President and CEO
<PAGE> 1
EXHIBIT 10.72
CODE-ALARM, INC.
950 E. WHITCOMB DRIVE
MADISON HEIGHTS, MICHIGAN 48071
October 1, 1997
Mr. Kenneth M. Mueller
10594 Springmill Lane
Perrysburg, OH 43551
Dear Mr. Mueller:
This letter will confirm our current understanding relative to the special
services which you have agreed to continue to perform for Code-Alarm, Inc. ("
Code-Alarm").
You have been performing consultant services, as further defined below,
for Code-Alarm under a letter agreement by and between yourself and Code-Alarm
dated August 24, 1987 (the "Letter Agreement"). The Letter Agreement was
extended beyond its original expiration date to the present time by oral
agreement between you and Code-Alarm. Through your execution and return of
this letter, you acknowledge the termination of the Letter Agreement and
payment in full by Code-Alarm of all amounts owing thereunder to you by
Code-Alarm. The terms and conditions of this letter supersede all prior
written and oral agreements between yourself and Code-Alarm regarding the
continuation of your consulting services with Code-Alarm.
Code-Alarm hereby agrees to continue to engage you, effective as of
October 1, 1997, as an independent contractor to serve Code-Alarm as a
consultant in connection with all aspects of its business, including without
limitation the development of public relations and special projects.
You have agreed to continue to serve as a member of the Board of Directors
of Code-Alarm. Your services as a director will not be separately compensated,
your only compensation being that hereinafter provided for your consulting
services. Your consulting services hereunder shall be subject to the overall
direction and control of the Board of Directors of Code-Alarm.
Your consulting services hereunder, plus attendance at directors
meetings, shall obligate you to devote no more than three (3) days per week.
For such services during the Stated Term of this Agreement (as defined below)
you shall be paid at the rate of $14,000.00 per year by Code-Alarm. Any change
in the rate of payment upon any extension of the Stated Term of this agreement
must be agreed upon in writing by the parties prior to the beginning of such
extension. All payments shall be made quarterly, in arrears. No finder's fees
or commissions or any other
<PAGE> 2
compensation are payable to you in connection with any services rendered
hereunder unless such fee is payable by virtue of a specific prior written
agreement relating thereto.
This agreement will be effective as of October 1, 1997 and shall continue
until September 30, 2000 (the "Stated Term"). The Stated Term shall
automatically be extended for successive 12-month periods commencing on October
1 of each year following each September 30 on which the Stated Term otherwise
would expire. Notwithstanding the foregoing, either party may terminate this
agreement during or at the end of the Stated Term, including any extension
thereof, if that party has given written notice of termination in writing to
the other party of its decision to terminate this agreement at least ninety
days prior to the date of termination. In the event of termination by either
party or your death during the Stated Term, or during any extension of the
Stated Term, you, or your estate, as the case may be, shall be entitled to
compensation at the annual rate hereinabove specified (including any agreed
upon changes) for the period up to such termination or death on a pro rata
basis.
You understand that it will be your responsibility to report and pay
federal and state self-employment taxes which, by law, may be required in
connection with your services hereunder and any taxes of a similar nature
imposed by any governmental authority.
Your reasonable travel and other business expenses incurred in connection
with the performance of services hereunder will be reimbursed to you upon
presentation of properly authenticated statements of such expenses.
You agree to maintain in confidence all confidential information, data,
records, reports, and business plans made available to you in connection with
performance of the services hereunder and upon termination of this agreement to
return all such items to Code-Alarm.
We would appreciate your acknowledgment that the foregoing correctly sets
forth the agreement and understanding between you and Code-Alarm by signing but
the original and duplicate copy of this letter and returning the original to
us. The duplicate copy is for your files.
Sincerely yours,
CODE-ALARM, INC.
By: /s/ Rand Mueller
-------------------------------
Rand W. Mueller, President
I acknowledge receipt of and agreement to
the foregoing letter agreement.
Kenneth M. Mueller
Date: /s/ Kenneth M. Mueller
-----------------------
