SECURITY AGREEMENT
Exhibit 10.31
THIS SECURITY AGREEMENT (this “Agreement”), dated as of November 1, 2010, and
effective as of the Effective Date (defined below), is made and given by UNIVERSAL ELECTRONICS
INC., a corporation organized under the laws of the State of Delaware (the “Grantor”), to
U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Secured Party”).
RECITALS
A. The Grantor and the Secured Party have entered into a Amended and Restated Credit Agreement
dated as of November 1, 2010 (as the same may hereafter be amended, supplemented, extended,
restated, or otherwise modified from time to time, the “Credit Agreement”) pursuant to
which the Secured Party has agreed to extend to the Grantor certain credit accommodations
consisting of a revolving credit and a term loan to finance in part the Acquisition (Enson) (as
defined in the Credit Agreement).
B. It is a condition precedent to the obligation of the Secured Party to extend credit
accommodations pursuant to the terms of the Credit Agreement that this Agreement be executed and
delivered by the Grantor.
C. The Grantor finds it advantageous, desirable and in its best interests to comply with the
requirement that it execute and deliver this Security Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and to induce the Secured Party to enter into
the Credit Agreement and to extend credit accommodations to the Grantor thereunder, the Grantor
hereby agrees with the Secured Party for the Secured Party’s benefit as follows:
Section 1. Defined Terms.
1(a) As used in this Agreement, the following terms shall have the meanings indicated:
“Account” means a right to payment of a monetary obligation, whether or
not earned by performance, (i) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be
rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a
secondary obligation incurred or to be incurred, (v) for energy provided or to be
provided, (vi) for the use or hire of a vessel under a charter or other contract,
(vii) arising out of the use of a credit or charge card or information contained on
or for use with the card, or (viii) as winnings in a lottery or other game of chance
operated, sponsored, licensed or authorized by a State or governmental unit of a
State, or person licensed or authorized to operate the game by a State or
governmental unit of a State. The term includes health-care insurance receivables.
“Account Debtor” means a Person who is obligated on or under any
Account, Chattel Paper, Instrument or General Intangible.
“Chattel Paper” means a record or records that evidence both a monetary
obligation and a security interest in specific goods, a security interest in
specific goods and software used in the goods, a security interest in specific goods
and license of software used in the goods, a lease of specific goods, or a lease of
specific goods and license of software used in the goods.
“Collateral” means all property and rights in property now owned or
hereafter at any time acquired by the Grantor in or upon which a Security Interest
is granted to the Secured Party by the Grantor under this Agreement.
“Deposit Account” means any demand, time, savings, passbook or similar
account maintained with a bank.
“Document” means a document of title or a warehouse receipt.
“Effective Date” means November 8, 2010, unless the Grantor satisfies
all of the conditions set forth in Article III of the Credit Agreement on or before
November 8, 2010, in which case this Agreement shall never take effect and shall be
null and void.
“Equipment” means all machinery, equipment, motor vehicles, furniture,
furnishings and fixtures, including all accessions, accessories and attachments
thereto, and any guaranties, warranties, indemnities and other agreements of
manufacturers, vendors and others with respect to such Equipment.
“Event of Default” has the meaning given to such term in Section 18.
“Financing Statement” has the meaning given to such term in Section 4.
“Fixtures” means goods that have become so related to particular real
property that an interest in them arises under real property law.
“General Intangibles” means any personal property (other than goods,
Accounts, Chattel Paper, Deposit Accounts, Documents, Instruments, Investment
Property, Letter of Credit Rights, and money) including things in action, contract
rights, payment intangibles, software, corporate and other business records,
inventions, designs, patents, patent applications, service marks, trademarks,
tradenames, trade secrets, internet domain names, engineering drawings, good will,
registrations, copyrights, licenses, franchises, customer lists, tax refund claims,
royalties, licensing and product rights, rights to the retrieval from third parties
of electronically processed and recorded data and all rights to payment resulting
from an order of any court.
“Instrument” means a negotiable instrument or any other writing that
evidences a right to the payment of a monetary obligation and is not itself a
security agreement or lease and is of a type that is transferred in the ordinary
course of business by delivery with any necessary endorsement or assignment.
2
“Inventory” means goods, other than farm products, that are leased by a
person as lessor, are held by a person for sale or lease or to be furnished under a
contract of service, are furnished by a person under a contract of service, or
consist of raw materials, work in process, or materials used or consumed in a
business or incorporated or consumed in the production of any of the foregoing and
supplies, in each case wherever the same is located, whether in transit, on
consignment, in retail outlets, warehouses, terminals or otherwise, and all property
the sale, lease or other disposition of which has given rise to an Account and that
has been returned to the Grantor or repossessed by the Grantor or stopped in
transit.
“Investment Property” means a security, whether certificated or
uncertificated, a security entitlement, a securities account and all financial
assets therein, a commodity contract or a commodity account.
“Letter of Credit Right” means a right to payment or performance under
a letter of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.
“Lien” means any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device (including
the interest of the lessors under capitalized leases), in, of or on any assets or
properties of the Person referred to.
“Obligations” means (a) all indebtedness, liabilities and obligations
of the Grantor to the Secured Party of every kind, nature or description under the
Credit Agreement, including the Grantor’s obligation on any promissory note or notes
under the Credit Agreement and any note or notes hereafter issued in substitution or
replacement thereof, (b) all liabilities of the Grantor under this Agreement, and
(c) any and all other liabilities and obligations of the Grantor to the Secured
Party of every kind, nature and description, whether direct or indirect or hereafter
acquired by the Secured Party from any Person, absolute or contingent, regardless of
how such liabilities arise or by what agreement or instrument they may be evidenced,
and in all of the foregoing cases whether due or to become due, and whether now
existing or hereafter arising or incurred.
“Person” means any individual, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or other
capacity.
“Security Interest” has the meaning given such term in Section 2.
1(b) All other terms used in this Agreement that are not specifically defined herein
shall have the meaning assigned to such terms in Article 9 of the Uniform Commercial Code as
in effect in the State of California
3
1(c) Unless the context of this Agreement otherwise clearly requires, references to the
plural include the singular, references to the singular include the plural, and “or” has the
inclusive meaning represented by the phrase “and/or.” The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The words
“hereof,” “herein,” and “hereunder” and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision. References to Sections are
references to Sections in this Agreement unless otherwise provided.
Section 2. Grant of Security Interest. As security for the payment and performance of
all of the Obligations, the Grantor hereby grants to the Secured Party a security interest (the
“Security Interest”) in all of the Grantor’s right, title, and interest in and to the
following, whether now or hereafter owned, existing, arising or acquired and wherever located:
2(a) All Accounts.
2(b) All Chattel Paper.
2(c) All Deposit Accounts.
2(d) All Documents.
2(e) All Equipment.
2(f) All Fixtures.
2(g) All General Intangibles.
2(h) All Instruments.
2(i) All Inventory.
2(j) All Investment Property.
2(k) All Letter of Credit Rights.
2(l) To the extent not otherwise included in the foregoing, all other rights to the
payment of money, including rents and other sums payable to the Grantor under leases, rental
agreements and other Chattel Paper; all books, correspondence, credit files, records,
invoices, bills of lading, and other documents relating to any of the foregoing, including,
without limitation, all tapes, cards, disks, computer software, computer runs, and other
papers and documents in the possession or control of the Grantor or any computer bureau from
time to time acting for the Grantor; all rights in, to and under all policies insuring the
life of any officer, director, stockholder or employee of the Grantor, the proceeds of which
are payable to the Grantor; all accessions and additions to, parts and appurtenances of,
substitutions for and replacements of any of the foregoing; and all proceeds (including
insurance proceeds) and products thereof.
4
Section 3. Grantor Remains Liable. Anything herein to the contrary notwithstanding,
(a) the Grantor shall remain liable under the Accounts, Chattel Paper, General Intangibles and
other items included in the Collateral to the extent set forth therein to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the
exercise by the Secured Party of any of the rights hereunder shall not release the Grantor from any
of its duties or obligations under the Accounts or any other items included in the Collateral, and
(c) the Secured Party shall have no obligation or liability under Accounts, Chattel Paper, General
Intangibles and other items included in the Collateral by reason of this Agreement, nor shall the
Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or
to take any action to collect or enforce any claim for payment assigned hereunder.
Section 4. Title to Collateral. The Grantor has (or will have at the time it acquires
rights in Collateral hereafter acquired or arising) and shall maintain so long as the Security
Interest may remain outstanding, title to each item of Collateral (including the proceeds and
products thereof), free and clear of all Liens except the Security Interest and except Liens
permitted by the Credit Agreement. The Grantor shall not license any Collateral. The Grantor
shall defend the Collateral against all claims or demands of all Persons (other than the Secured
Party) claiming the Collateral or any interest therein. As of the date of execution of this
Security Agreement, no effective financing statement or other similar document used to perfect and
preserve a security interest under the laws of any jurisdiction (a “Financing Statement”)
covering all or any part of the Collateral is on file in any recording office, except such as may
have been filed (a) in favor of the Secured Party relating to this Agreement, or (b) to perfect
Liens permitted by the Credit Agreement.
Section 5. Disposition of Collateral. The Grantor shall not sell, lease or otherwise
dispose of, or discount or factor with or without recourse, any Collateral, except for sales of
items of Inventory in the ordinary course of business and dispositions of Equipment that are
immediately replaced with comparable replacement equipment.
Section 6. Names, Offices, Locations, Jurisdiction of Organization. The Grantor’s
legal name (as set forth in its constituent documents filed with the appropriate governmental
official or agency) is as set forth in the opening paragraph hereof. The jurisdiction of
organization of the Grantor is the state of Delaware, and the organizational number of the Grantor
is set forth on the signature page of this Agreement. The Grantor shall from time to time at the
request of the Secured Party provide the Secured Party with current good standing certificates
and/or state-certified constituent documents from the appropriate governmental officials. The
chief place of business and chief executive office of Grantor are located at its address set forth
on the signature page hereof. The Grantor shall not locate or relocate any item of Collateral into
any jurisdiction in which an additional Financing Statement would be required to be filed to
maintain the Secured Party’s perfected security interest in such Collateral. The Grantor shall not
change its name, the location of its chief place of business and chief executive office or its
corporate structure (including without limitation, its jurisdiction of organization) unless the
Secured Party has been given at least 30 days’ prior written notice thereof and the Grantor has
executed and delivered to the Secured Party such Financing Statements and other instruments
required or appropriate to continue the perfection of the Security Interest.
5
Section 7. Rights to Payment. Except as the Grantor otherwise advises the Secured
Party in writing, each Account, Chattel Paper, Document, General Intangible and Instrument
constituting or evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation of the Account Debtor or
other obligor named therein or in the Grantor’s records pertaining thereto as being obligated to
pay or perform such obligation. Without the Secured Party’s prior written consent, the Grantor
shall not agree to any modifications, amendments, subordinations, cancellations or terminations of
the obligations of any such Account Debtors or other obligors except in the ordinary course of
business and in amounts not exceeding $10,000 per Account Debtor or other obligor in any calendar
year. The Grantor shall perform and comply in all material respects with all its obligations under
any items included in the Collateral and exercise promptly and diligently its rights thereunder.
Section 8. Further Assurances; Attorney-in-Fact.
8(a) From time to time, at its expense, the Grantor shall promptly execute and deliver
all further instruments and documents, and take all further action, that may be necessary or
that the Secured Party may reasonably request, in order to perfect and protect the Security
Interest or to enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral (but any failure to request or assure that the
Grantor execute and deliver such instrument or documents or to take such action shall not
affect or impair the validity, sufficiency or enforceability of this Agreement and the
Security Interest, regardless of whether any such item was or was not executed and delivered
or action taken in a similar context or on a prior occasion). Without limiting the
generality of the foregoing, the Grantor shall, promptly and from time to time at the
request of the Secured Party: (i) execute and file such Financing Statements or
continuation statements in respect thereof, or amendments thereto, and such other
instruments or notices (including fixture filings with any necessary legal descriptions as
to any goods included in the Collateral that the Secured Party determines might be deemed to
be fixtures, and instruments and notices with respect to vehicle titles), as may be
necessary or desirable, or as the Secured Party may request, in order to perfect, preserve,
and enhance the Security Interest; (ii) obtain from any bailee holding any item of
Collateral an acknowledgement, in form satisfactory to the Secured Party that such bailee
holds such collateral for the benefit of the Secured Party; (iii) obtain from any securities
intermediary, or other party holding any item of Collateral, control agreements in form
satisfactory to the Secured Party (iv) and deliver and pledge to the Secured Party, all
Instruments and Documents, duly indorsed or accompanied by duly executed instruments of
transfer or assignment, with full recourse to the Grantor, all in form and substance
satisfactory to the Secured Party; (v) obtain waivers, in form satisfactory to the Secured
Party, of any claim to any Collateral from any landlords or mortgagees of any property where
any Inventory or Equipment is located.
8(b) The Grantor hereby authorizes the Secured Party to file one or more Financing
Statements or continuation statements in respect thereof, and amendments thereto, relating
to all or any part of the Collateral without the signature of the Grantor where permitted by
law. The Grantor irrevocably waives any right to notice of any such filing. A photocopy or
other reproduction of this Agreement or any Financing Statement
6
covering the Collateral or any part thereof shall be sufficient as a Financing
Statement where permitted by law.
8(c) The Grantor shall furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may reasonably request, all in
reasonable detail and in form and substance reasonably satisfactory to the Secured Party.
8(d) In furtherance, and not in limitation, of the other rights, powers and remedies
granted to the Secured Party in this Agreement, the Grantor hereby appoints the Secured
Party the Grantor’s attorney-in-fact, with full authority in the place and stead of Grantor
and in the name of Grantor or otherwise, from time to time in the Secured Party’s good faith
discretion, to take any action (including the right to collect on any Collateral) and to
execute any instrument that the Secured Party may reasonably believe is necessary or
advisable to accomplish the purposes of this Agreement, in a manner consistent with the
terms hereof.
Section 9. Taxes and Claims. The Grantor shall promptly pay all taxes and other
governmental charges levied or assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interest, as well as all other claims of any
kind (including claims for labor, material and supplies) against or with respect to the Collateral,
except to the extent (a) such taxes, charges or claims are being contested in good faith by
appropriate proceedings, (b) such proceedings do not involve any material danger of the sale,
forfeiture or loss of any of the Collateral or any interest therein and (c) such taxes, charges or
claims are adequately reserved against on the Grantor’s books in accordance with generally accepted
accounting principles.
Section 10. Books and Records. The Grantor shall keep and maintain at its own cost
and expense satisfactory and complete records of the Collateral, including a record of all payments
received and credits granted with respect to all Accounts, Chattel Paper and other items included
in the Collateral.
Section 11. Inspection, Reports, Verifications. The Grantor shall at all reasonable
times permit the Secured Party or its representatives to examine or inspect any Collateral, any
evidence of Collateral and the Grantor’s books and records concerning the Collateral, wherever
located. The Grantor shall from time to time when requested by the Secured Party furnish to the
Secured Party a report on its Accounts, Chattel Paper, General Intangibles and Instruments, naming
the Account Debtors or other obligors thereon, the amount due and the aging thereof. The Secured
Party or its designee is authorized to contact Account Debtors and other Persons obligated on any
such Collateral from time to time to verify the existence, amount and/or terms of such Collateral.
Section 12. Notice of Loss. The Grantor shall promptly notify the Secured Party of
any loss of or material damage to any material item of Collateral or of any substantial adverse
change, known to Grantor, in any material item of Collateral or the prospect of payment or
performance thereof.
7
Section 13. Insurance. The Grantor shall keep the Inventory and Equipment insured
against “all risks” for the full replacement cost thereof subject to a deductible not exceeding
$10,000 and with an insurance company or companies satisfactory to the Secured Party, the policies
to protect the Secured Party as its interests may appear, with such policies or certificates with
respect thereto to be delivered to the Secured Party at its request. Each such policy or the
certificate with respect thereto shall provide that such policy shall not be canceled or allowed to
lapse unless at least 30 days’ prior written notice is given to the Secured Party.
Section 14. Lawful Use; Fair Labor Standards Act. The Grantor shall use and keep the
Collateral, and shall require that others use and keep the Collateral, only for lawful purposes,
without violation of any federal, state or local law, statute or ordinance. All Inventory of the
Grantor as of the date of this Agreement that was produced by the Grantor or with respect to which
the Grantor performed any manufacturing or assembly process was produced by the Grantor (or such
manufacturing or assembly process was conducted) in compliance in all material respects with all
requirements of the Fair Labor Standards Act, and all Inventory produced, manufactured or assembled
by the Grantor after the date of this Agreement will be so produced, manufactured or assembled, as
the case may be.
Section 15. Action by the Secured Party. If the Grantor at any time fails to perform
or observe any of the foregoing agreements, the Secured Party shall have (and the Grantor hereby
grants to the Secured Party) the right, power and authority (but not the duty) to perform or
observe such agreement on behalf and in the name, place and stead of the Grantor (or, at the
Secured Party’s option, in the Secured Party’s name) and to take any and all other actions that the
Secured Party may reasonably deem necessary to cure or correct such failure (including, without
limitation, the payment of taxes, the satisfaction of Liens, the procurement and maintenance of
insurance, the execution of assignments, security agreements and Financing Statements, and the
indorsement of instruments); and the Grantor shall thereupon pay to the Secured Party on demand the
amount of all monies expended and all costs and expenses (including reasonable attorneys’ fees and
legal expenses) incurred by the Secured Party in connection with or as a result of the performance
or observance of such agreements or the taking of such action by the Secured Party, together with
interest thereon from the date expended or incurred at the highest lawful rate then applicable to
any of the Obligations, and all such monies expended, costs and expenses and interest thereon shall
be part of the Obligations.
Section 16. Insurance Claims. As additional security for the payment and performance
of the Obligations, the Grantor hereby assigns to the Secured Party any and all monies (including
proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other
rights of the Grantor with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business records or valuable
papers pertaining thereto. At any time, whether before or after the occurrence of any Event of
Default, the Secured Party may (but need not), in the Secured Party’s name or in Grantor’s name,
execute and deliver proofs of claim, receive all such monies, indorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release any claim against
the issuer of any such policy. Notwithstanding any of the foregoing, so long as no Event of
Default exists the Grantor shall be entitled to all insurance proceeds with respect to Equipment or
Inventory provided that such proceeds are applied to the cost of replacement Equipment or
Inventory.
8
Section 17. The Secured Party’s Duties. The powers conferred on the Secured Party
hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon
it to exercise any such powers. The Secured Party shall be deemed to have exercised reasonable
care in the safekeeping of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to the safekeeping that the Secured Party accords its own property of
like kind. Except for the safekeeping of any Collateral in its possession and the accounting for
monies and for other properties actually received by it hereunder, the Secured Party shall have no
duty, as to any Collateral, as to ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the
Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any Persons or any other rights pertaining to any
Collateral. The Secured Party will take action in the nature of exchanges, conversions,
redemptions, tenders and the like requested in writing by the Grantor with respect to the
Collateral in the Secured Party’s possession if the Secured Party in its reasonable judgment
determines that such action will not impair the Security Interest or the value of the Collateral,
but a failure of the Secured Party to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care with respect to the taking of any necessary steps to preserve
rights against any Persons or any other rights pertaining to any Collateral.
Section 18. Default. Each of the following occurrences shall constitute an “Event of
Default” under this Agreement: (a) the Grantor fails to observe or perform any covenant or
agreement applicable to the Grantor under this Agreement; (b) any representation or warranty made
by the Grantor in this Agreement or any schedule, exhibit, supplement or attachment hereto or in
any financial statements, reports, or certificates heretofore or at any time hereafter submitted by
or on behalf of the Grantor to the Secured Party proves to have been false or materially misleading
when made; or (c) any “Event of Default” occurs under the Credit Agreement.
Section 19. Remedies on Default. Upon an Event of Default and at any time thereafter:
19(a) The Secured Party may exercise and enforce any and all rights and remedies
available upon default to a secured party under Article 9 of the Uniform Commercial Code as
in effect in the State of California
19(b) The Secured Party shall have the right to enter upon and into and take possession
of all or such part or parts of the properties of the Grantor, including lands, plants,
buildings, Equipment, Inventory and other property as may be necessary or appropriate in the
judgment of the Secured Party to permit or enable the Secured Party to manufacture,
produce, process, store or sell or complete the manufacture, production, processing,
storing or sale of all or any part of the Collateral, as the Secured Party may elect, and to
use and operate said properties for said purposes and for such length of time as the
Secured Party may deem necessary or appropriate for said purposes without the payment of any
compensation to Grantor therefor. The Secured Party may require the Grantor to, and the
Grantor shall, at its expense and upon request of the Secured Party forthwith, assemble all
or part of the Collateral as directed by the Secured Party and make
9
it available to the Secured Party at a place or places to be designated by the Secured
Party.
19(c) Any disposition of Collateral may be in one or more parcels at public or private
sale, at any of the Secured Party’s offices or elsewhere, for cash, on credit, or for future
delivery, and upon such other terms as the Secured Party may reasonably believe are
commercially reasonable. The Secured Party shall not be obligated to dispose of Collateral
regardless of notice of sale having been given, and the Secured Party may adjourn any public
or private sale from time to time by announcement made at the time and place fixed therefor,
and such disposition may, without further notice, be made at the time and place to which it
was so adjourned.
19(d) The Secured Party is hereby granted a license or other right to use, without
charge, all of the Grantor’s property, including, without limitation, all of the Grantor’s
labels, trademarks, copyrights, patents and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of, advertising for sale
and selling any Collateral, and the Grantor’s rights under all licenses and all franchise
agreements shall inure to the Secured Party’s benefit until the Obligations are paid in
full.
19(e) If notice to the Grantor of any intended disposition of Collateral or any other
intended action is required by law in a particular instance, such notice shall be deemed
commercially reasonable if given in the manner specified for the giving of notice in Section
24 at least ten calendar days prior to the date of intended disposition or other action, and
the Secured Party may exercise or enforce any and all other rights or remedies available by
law or agreement against the Collateral, against the Grantor, or against any other Person or
property. The Secured Party (i) may dispose of the Collateral in its then present condition
or following such preparation and processing as the Secured Party deems commercially
reasonable, (ii) shall have no duty to prepare or process the Collateral prior to sale,
(iii) may disclaim warranties of title, possession, quiet enjoyment and the like, and (iv)
may comply with any applicable state or federal law requirements in connection with a
disposition of the Collateral and none of the foregoing actions shall be deemed to adversely
affect the commercial reasonableness of the disposition of the Collateral.
Section 20. Remedies as to Certain Rights to Payment. Upon the occurrence of an Event
of Default and at any time thereafter the Secured Party may notify any Account Debtor or other
Person obligated on any Accounts or other Collateral that the same have been assigned or
transferred to the Secured Party and that the same should be performed as requested by, or paid
directly to, the Secured Party, as the case may be. The Grantor shall join in giving such notice,
if the Secured Party so requests. The Secured Party may, in the Secured Party’s name or in the
Grantor’s name, demand, xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such Collateral or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or change the obligation
of any such Account Debtor or other Person. If any payments on any such Collateral are received by
the Grantor after an Event of Default has occurred, such payments shall be held in trust by the
Grantor as the property of the Secured Party and shall not be commingled with any
10
funds or property of the Grantor and shall be forthwith remitted to the Secured Party for
application on the Obligations.
Section 21. Application of Proceeds. All cash proceeds received by the Secured Party
in respect of any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Secured Party, be held by the Secured Party as collateral
for, or then or at any time thereafter be applied in whole or in part by the Secured Party against,
all or any part of the Obligations (including, without limitation, any expenses of the Secured
Party payable pursuant to Section 24).
Section 22. Costs and Expenses; Indemnity. The Grantor shall pay or reimburse the
Secured Party on demand for all reasonable out-of-pocket expenses paid or incurred by the Secured
Party, including in each case all filing and recording costs and fees, taxes, charges and
disbursements of outside counsel to the Secured Party (determined on the basis of such counsel’s
generally applicable rates, which may be higher than the rates such counsel charges the Secured
Party in certain matters) and/or the allocated costs of in-house counsel incurred from time to
time, in connection with the creation, perfection, protection, satisfaction, foreclosure,
collection or enforcement of the Security Interest and the preparation, administration,
continuance, amendment or enforcement of this Agreement, and all such costs and expenses shall be
part of the Obligations. The Grantor shall indemnify and hold the Secured Party harmless from and
against any and all claims, losses and liabilities (including reasonable attorneys’ fees) growing
out of or resulting from this Agreement and the Security Interest (including enforcement of this
Agreement) or the Secured Party’s actions pursuant hereto, except claims, losses or liabilities
resulting from the Secured Party’s gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. Any liability of the Grantor to indemnify and hold
the Secured Party harmless pursuant to the preceding sentence shall be part of the Obligations.
The obligations of the Grantor under this Section shall survive any termination of this Agreement.
Section 23. Waivers; Remedies; Marshalling. This Agreement can be waived, modified,
amended, terminated or discharged, and the Security Interest can be released, only explicitly in a
writing signed by the Secured Party. A waiver so signed shall be effective only in the specific
instance and for the specific purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any rights and remedies available to the Secured Party. All rights and
remedies of the Secured Party shall be cumulative and may be exercised singly in any order or
sequence, or concurrently, at the Secured Party’s option, and the exercise or enforcement of any
such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any
other. The Grantor hereby waives all requirements of law, if any, relating to the marshalling of
assets that would be applicable in connection with the enforcement by the Secured Party of its
remedies hereunder, absent this waiver.
Section 24. Notices. Any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery, facsimile
transmission, overnight courier or United States mail (postage prepaid) addressed to such party at
the address specified on the signature page hereof, or at such other address as such party
specifies to the other party hereto in writing. All periods of notice shall be measured from the
date of delivery if manually delivered, from the date of sending if sent by facsimile transmission,
11
from the first business day after the date of sending if sent by overnight courier, or from
four days after the date of mailing if mailed.
Section 25. Grantor Acknowledgments. The Grantor hereby acknowledges that (a) it has
been advised by counsel in the negotiation, execution and delivery of this Agreement, (b) the
Secured Party has no fiduciary relationship to the Grantor, the relationship being solely that of
debtor and creditor, and (c) no joint venture exists between the Grantor and the Secured Party.
Section 26. Continuing Security Interest; Assignments under Credit Agreement. This
Agreement shall (a) create a continuing security interest in the Collateral and shall remain in
full force and effect until payment in full of the Obligations and the expiration of the
obligations, if any, of the Secured Party to extend credit accommodations to the Grantor, (b) be
binding upon the Grantor, its successors and assigns, and (c) inure to the benefit of, and be
enforceable by, the Secured Party and its successors, transferees, and assigns. Without limiting
the generality of the foregoing clause (c), the Secured Party may assign or otherwise transfer all
or any portion of its rights and obligations under the Credit Agreement to any other Persons to the
extent and in the manner provided in the Credit Agreement and may similarly transfer all or any
portion of its rights under this Security Agreement to such Persons.
Section 27. Termination of Security Interest. Upon payment in full of the Obligations
and the expiration of any obligation of the Secured Party to extend credit accommodations to the
Grantor, the Security Interest shall terminate. Upon any such termination, the Secured Party will
return to the Grantor such of the Collateral then in the possession of the Secured Party as have
not been sold or otherwise applied pursuant to the terms hereof and execute and deliver to the
Grantor such documents as the Grantor reasonably requests to evidence such termination. Any
reversion or return of Collateral upon termination of this Agreement and any instruments of
transfer or termination shall be at the expense of the Grantor and shall be without warranty by, or
recourse on, the Secured Party. As used in this Section, “Grantor” includes any assigns of
Grantor, any Person holding a subordinate security interest in any of the Collateral or whoever
else may be lawfully entitled to any part of the Collateral.
Section 28. Governing Law and Construction. THE VALIDITY, CONSTRUCTION, AND
ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
CALIFORNIA. Whenever possible, each provision of this Agreement and any other statement,
instrument or transaction contemplated hereby or relating hereto shall be interpreted so as to be
effective and valid under such applicable law, but if any provision of this Agreement or any other
statement, instrument or transaction contemplated hereby or relating hereto is held to be
prohibited or invalid under such applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Agreement or any other statement, instrument, or transaction
contemplated hereby or relating hereto.
12
Section 29. Consent to Jurisdiction. AT THE OPTION OF THE SECURED PARTY, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL OR STATE COURT SITTING IN ORANGE COUNTY, CALIFORNIA OR LOS
ANGELES COUNTY, CALIFORNIA, AND THE GRANTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH
COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IF THE GRANTOR
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE SECURED PARTY AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
Section 30. Waiver of Notice and Hearing. THE GRANTOR HEREBY WAIVES ALL RIGHTS TO A
JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE SECURED PARTY OF ITS RIGHTS TO POSSESSION
OF THE COLLATERAL WITHOUT JUDICIAL PROCESS OR OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON THE
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY
COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND THIS AGREEMENT.
Section 31. Waiver of Jury Trial. EACH OF THE GRANTOR AND THE SECURED PARTY, BY ITS
ACCEPTANCE OF THIS AGREEMENT, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 32. Judicial Reference Agreement.
32(a) Any and all disputes, claims, and controversies arising out of this Agreement or
the transactions contemplated thereby (including, but not limited to, actions arising in
contract or tort and any claims by the Grantor against the Secured Party related in any way
to the Security Interest or the Obligations) (individually, a “Dispute”) that are
brought before a forum in which pre-dispute waivers of the right to trial by jury are
invalid under applicable law shall be subject to the terms of this Section 32.
32(b) Any and all Disputes shall be heard by a referee and resolved by judicial
reference pursuant to California Code of Civil Procedure Sections 638 et seq. The referee
shall be a retired California state court judge or an attorney licensed to practice law in
the State of California with at least 10 years’ experience practicing commercial law.
Neither the Grantor nor the Secured Party shall seek to appoint a referee that may be
disqualified pursuant to California Code of Civil Procedure Section 641 or 641.2 without the
prior written consent of the other party. If the Secured Party and the Grantor are unable
to agree upon a referee within 10 calendar days after one party serves a written
13
notice of intent for judicial reference upon the other party, then the referee will be
selected by the court in accordance with California Code of Civil Procedure Section 640(b).
32(c) The referee shall render a written statement of decision and shall conduct the
proceedings in accordance with the California Code of Civil Procedure, the Rules of Court,
and California Evidence Code, except as otherwise specifically agreed by the parties and
approved by the referee. The referee’s statement of decision shall set forth findings of
fact and conclusions of law. The decision of the referee shall be entered as a judgment in
the court in accordance with the provisions of California Code of Civil Procedure Sections
644 and 645. The decision of the referee shall be appealable to the same extent and in the
same manner that such decision would be appealable if rendered by a judge of the superior
court.
32(d) Nothing in this Section 32 shall be deemed to apply to or limit the right of the
Secured Party (i) to exercise self-help remedies such as (but not limited to) setoff, (ii)
to foreclose judicially or nonjudicially against any real or personal property collateral,
or to exercise judicial or nonjudicial power of sale rights, (iii) to obtain from a court
provisional or ancillary remedies (including, but not limited to, injunctive relief, a writ
of possession, prejudgment attachment, a protective order, or the appointment of a
receiver), or (iv) to pursue rights against any party in a third-party proceeding in any
action brought against the Secured Party (including actions in bankruptcy court). The
Secured Party may exercise the rights set forth in the foregoing clauses (i) through (iv),
inclusive, before, during, or after the pendency of any judicial reference proceeding.
Neither the exercise of self-help remedies nor the institution or maintenance of an action
for foreclosure or provisional or ancillary remedies or the opposition to any such
provisional remedies shall constitute a waiver of the right of any party, including, but not
limited to, the claimant in any such action, to require submission to judicial reference of
the merits of the Dispute occasioning resort to such remedies. No provision in the Loan
Documents regarding submission to jurisdiction and/or venue in any court is intended or
shall be construed to be in derogation of the provisions in any Loan Document for judicial
reference of any of Dispute.
32(e) If a Dispute includes multiple claims, some of which are found not subject to
this Section 32, the Parties shall stay the proceedings of such Dispute or the part or parts
thereof not subject to this Section 32 until all other Disputes or parts thereof are
resolved in accordance with this Section 32. If there are Disputes by or against multiple
parties, some of which are not subject to this Section 32, the Grantor and the Secured Party
shall sever the Disputes subject to this Section 32 and resolve them in accordance with this
Section 32. During the pendency of any Dispute that is submitted to judicial reference in
accordance with this Agreement, each of the parties to such Dispute shall bear equal shares
of the fees charged and costs incurred by the referee in performing the services described
in this Section 32. The compensation of the referee shall not exceed the prevailing rate
for like services. The prevailing party shall be entitled to reasonable court costs and
legal fees, including customary attorney fees, expert witness fees, paralegal fees, the fees
of the referee, a reimbursement of fees and costs paid during the pendency of a dispute in
accordance with this Section 32(d), and other reasonable costs
14
and disbursements charged to the party by its counsel, in such amount as the Referee
determines.
32(f) In the event of any challenge to the legality or enforceability of this Section
32, the prevailing party shall be entitled to recover the costs and expenses from the
non-prevailing party, including reasonable attorneys’ fees, incurred by it in connection
with such challenge.
32(g) THIS SECTION 32 CONSTITUTES A “REFERENCE AGREEMENT” BETWEEN THE BORROWER AND THE
BANK WITHIN THE MEANING OF AND FOR PURPOSES OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTION
638.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument.
Section 34. General. All representations and warranties in this Agreement or in any
other agreement between the Grantor and the Secured Party shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations. The Grantor waives
notice of the acceptance of this Agreement by the Secured Party. Captions in this Agreement are
for reference and convenience only and shall not affect the interpretation or meaning of any
provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be duly executed and
delivered by its officer thereunto duly authorized as of the date first above written.
| UNIVERSAL ELECTRONICS INC. |
||||
| By | ||||
| Title | ||||
Address for Grantor:
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax (000) 000-0000
Xxxxxxx, XX 00000
Fax (000) 000-0000
Grantor’s Tax ID # 2108379
Address for the Secured Party:
U.S. Bank National Association
U.S. Bank National Association
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax (000) 000-0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax (000) 000-0000
Signature Page to Security Agreement
