EXHIBIT 10.5
BORROWER SECURITY AGREEMENT
BORROWER SECURITY AGREEMENT, dated as of December 10, 1996, made by GENCOR
INDUSTRIES, INC. (the "Borrower") in favor of CREDIT LYONNAIS NEW YORK BRANCH,
as Agent (in such capacity, the "Agent") for the Issuing Bank (as defined below)
and the several banks and other financial institutions (the "Lenders") from time
to time parties to the Credit Agreement, dated as of December 10, 1996 (as the
same may be amended, supplement or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the Lenders, Credit Lyonnais New York
Branch as the Issuing Bank for the Letters of Credit (the "Issuing Bank" and,
together with the Lenders, the "Banks"), and the Agent.
R E C I T A L S
WHEREAS, the Lenders have severally agreed to make Loans to the Borrower,
and the Issuing Bank has agreed to issue Letters of Credit in favor of the
Borrower and the Foreign Subsidiaries (as defined in the Credit Agreement), upon
the terms and subject to the conditions set forth in the Credit Agreement;
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make any Loans to the Borrower, and it is a condition precedent to the
obligation of the Issuing Bank to issue any Letters of Credit to the Borrower or
any of its Foreign Subsidiaries, that the Borrower guarantee payment and
performance of all of each Foreign Subsidiary's obligations and liabilities
under the Credit Agreement and the other Loan Documents;
WHEREAS, in satisfaction of such condition, the Borrower has agreed to
guarantee payment and performance of all of each Foreign Subsidiary's
obligations and liabilities under the Credit Agreement and the other Loan
Documents pursuant to Section 4.10 of the Credit Agreement; and
WHEREAS, it is a further condition precedent to the obligation of the
Lenders to make any Loans to the Borrower, and it is a further condition
precedent to the obligation of the Issuing Bank to issue any Letters of Credit
to the Borrower or any of its Foreign Subsidiaries, that the Borrower shall have
executed and delivered this Agreement to the Agent, for the ratable benefit of
the Banks, to secure payment and performance of all of the Borrower's
obligations and liabilities under the Credit Agreement and the other Loan
Documents.
A G R E E M E N T
NOW, THEREFORE, to induce (i) the Agent and the Banks to enter into the
Credit Agreement, (ii) the Lenders to make Loans to the Borrower, and (iii) the
Issuing Bank to issue Letters of Credit to the Borrower and its Foreign
Subsidiaries, the Borrower hereby agrees with the Agent, for the ratable benefit
of the Banks, as follows:
1. Defined Terms.
1.1 Definitions. (a) Unless otherwise defined in this Agreement,
capitalized terms shall have the meanings given to them in the Credit Agreement.
(b) The following terms shall have the following meanings:
"Accounts": any and all right, title and interest of the Borrower to
payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not it has
been earned or performed, and whether now or hereafter acquired or arising in
the future, including, without limitation, accounts receivable from the
Subsidiaries and other Affiliates of the Borrower.
"Accounts Receivable": all right, title and interest of the Borrower to the
Accounts and all of its right, title and interest in any returned goods,
together with all rights, titles, securities and guaranties with respect to the
Accounts, including any rights to stoppage in transit, replevin, reclamation and
resales, and all related security interests, liens and pledges, whether
voluntary or involuntary.
"Agreement": this Security Agreement, as the same may be amended, modified
or otherwise supplemented from time to time.
"Bank Accounts": all right, title and interest of the Borrower in and to
all accounts of whatever nature maintained by the Borrower with any bank or
other financial institution.
"Code": the Uniform Commercial Code as from time to time in effect in the
State of New York.
"Collateral": as defined in Section 2 of this Agreement.
"Collateral Account": any collateral account established by the Agent in
accordance with the provisions of this Agreement or the Credit Agreement.
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"Contracts": all rights of the Borrower under the Purchase Agreement (as
defined in the Credit Agreement) and all other contracts and agreements to which
the Borrower is a party or under which the Borrower has any right, title or
interest or to which the Borrower or any property of the Borrower is subject, as
the same may from time to time be amended, supplemented or otherwise modified,
including, without limitation, (a) all rights of the Borrower to receive moneys
due and to become due to it thereunder or in connection therewith, (b) all
rights of the Borrower to damages arising out of, or with respect to any breach
or default in respect thereof, and (c) all rights of the Borrower to exercise
all remedies thereunder, in each case to the extent the grant by the Borrower of
a security interest pursuant to this Agreement in its rights under such contract
or agreement is not prohibited without the consent of any other Person, or is
permitted with consent if all necessary consents to such grant of a security
interest have been obtained from all such other Persons (it being understood
that the Borrower shall use its best efforts to secure such consents and that
the Borrower shall obtain the consent of all of its Affiliates that are
necessary); provided that the foregoing limitation shall not affect, limit,
restrict or impair the grant by the Borrower of a security interest pursuant to
this Agreement in any Account or any money or other amounts due or to become due
under any contract or agreement (including, without limitation, the Purchase
Agreement).
"Copyright Agreement": the Borrower Copyright Security Agreement, dated as
of the date of this Agreement, made by the Borrower in favor of the Lenders.
"Copyright Collateral": the collective reference to (a) all of Copyrights
filed with the Register of Copyrights in the Library of Congress and, to the
extent applicable, any similar office or agency of any state, territory or
possession of the United States or any similar office or agency of any other
countries or used by the Borrower in the United States, any state, territory or
possession thereof or any other country (including, without limitation, the
copyrights, copyright registrations and copyright applications listed on
Schedule 1 to the Copyright Agreement); (b) any renewals or extensions of any
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Copyright; (c) all income, royalties, damages and payments now and hereafter due
or payable with respect to the Copyrights (including, without limitation,
payments under all licenses entered into in connection with the Copyrights and
damages and payments for past or future infringements of the Copyrights); (d)
all right, title and interest in all physical materials embodying works with
respect the Borrower owns or holds rights in any Copyrights; (e) the right to
xxx for past, present and future infringements of the Copyrights; (f) all rights
corresponding to the Copyrights throughout the world; (g) the goodwill of the
Borrower's business connected with and symbolized by the Copyrights; (h) any
written agreement naming the Borrower as licensor or licensee, granting any
right in or to any Copyright or copyright registration in the United States or
any foreign country; (i) any and all present and future agreements, whether
written or oral (including, without limitation, assignments and consents), as
any such agreements may from time to time be amended or supplemented, pursuant
to which the Borrower now has or hereafter acquires any direct or beneficial
interest in any Copyright, or is a grantor of rights to any third party with
respect to any copyright, whether as a party to any such agreement or as an
assignee of any rights under any such agreement; and (j) all products and
Proceeds of the foregoing.
"Copyrights": all copyrights, copyright registrations and copyright
applications are owned by the Borrower, or in which the Borrower acquires any
right or interest, at any time prior to the termination of this Agreement.
"Documents": all Instruments, files, records, ledger sheets, and documents
covering or relating to any of the Accounts, Equipment, General Intangibles,
Inventory, Copyright Collateral, Patent Collateral, Trademark Collateral and
proceeds.
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"Equipment: all equipment, furniture and furnishings, tools, accessories,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, including Fixtures, and all other tangible
personal property whether or not similar to any of the foregoing items that are
now or hereafter acquired by the Borrower.
"Fixtures": all items that would otherwise constitute items of Collateral,
whether now owned or hereafter acquired, that become so related to particular
real estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles": as defined in the Code; provided, however, that with
respect to any general intangibles arising under any contract or agreement, the
term "General Intangibles" shall include such general intangibles only if the
grant by the Borrower of a security interest pursuant to this Agreement in its
rights under such contract or agreement is not prohibited without the consent of
any other Person, or is permitted with consent and all necessary consents to
such grant of a security interest have been obtained from all such other Persons
(it being understood that the Borrower shall use its best efforts to secure such
consents and that the Borrower shall obtain the consent of all of its Affiliates
that are necessary); provided that the foregoing limitation shall not affect,
limit, restrict or impair the grant by the Borrower of a security interest
pursuant to this Agreement in any Account or any money or other amounts due or
to become due under any Contract.
"Instrument": as defined in the Code.
"Inventory": all right, title and interest of the Borrower in and to goods
intended for sale or lease by the Borrower, or consumed in the Borrower's
business (including, without limitation, all operating parts and supplies),
together with all raw materials, work-in-progress and finished goods, whether
now owned or hereafter acquired or arising.
"Obligations": the collective reference to the unpaid principal of, and the
accrued and unpaid interest on, the Loans and all other obligations and
liabilities of the Borrower to the Agent and the Banks (including, without
limitation, all of the Borrower's obligations and liabilities under Sections 4
and 5 of the Credit Agreement and the Borrower's liability for all interest that
accrues after the maturity of the Loans and all interest that accrues after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating the Borrower whether or not a claim
for post-filing or post petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred, that may arise under, out of, or in connection
with, the Credit Agreement, any other Loan Document, any Interest Rate Agreement
entered into by the Borrower with any Bank pursuant to the Credit Agreement or
any other document made, delivered or given in connection with the Credit
Agreement, any other Loan Document or any such Interest Rate Agreement, whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Agent and the Banks that are required to be paid
by the Borrower pursuant to the terms of the Credit Agreement, this Agreement
any other Loan Document or any Interest Rate Agreement entered into by the
Borrower with any Bank pursuant to the Credit Agreement or any other document
made, delivered or given in connection with the Credit Agreement, any other Loan
Document or any such Interest Rate Agreement).
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"Patent Agreement": the Borrower Patent Collateral Assignment, dated as of
the date of this Agreement, made by the Borrower in favor of the Agent for the
Lenders.
"Patent Collateral": the collective reference to (a) all of Patents
(including, without limitation, the Patents set forth on Schedule 1 to the
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Patent Agreement) and the invitations and improvements described and claimed in
such Patents; (b) all patentable inventions owned by the Borrower at any time
prior to the termination of this Agreement; (c) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any Patents or
patentable inventions; (d) all income, royalties, damages and payments now and
hereafter due or payable with respect to any Patents or patentable inventions
(including, without limitation, payments under all licenses entered into in
connection with any Patent or patentable invention and damages and payments for
past or future infringements of any Patent or patentable invention); (e) the
right to xxx for past, present and future infringements of any Patent or
patentable invention; (f) all rights corresponding to the Patents and patentable
inventions throughout the world, and (g) all products and Proceeds of the
foregoing.
"Patents": all of the patents, patent registrations and patent applications
are owned by the Borrower, or in which the Borrower acquires any right or
interest, at any time prior to the termination of this Agreement.
"Proceeds": any consideration received from the sale, exchange or other
disposition of any asset or property that constitutes Collateral, any value
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property that constitutes Collateral, and shall include,
without limitation, all cash and negotiable instruments received or held on
behalf of the Agent pursuant to subsection 5.3 of this Agreement.
"Trademark Agreement": the Borrower Trademark Security Agreement, dated as
of the date of this Agreement, made by the Borrower in favor of the Agent and
the Lenders.
"Trademark Collateral": the collective reference to (a) all of Trademarks
filed with the U.S. Patent and Trademark Office and, to the extent applicable,
any similar office or agency of any state, territory or possession of the United
States or any similar office or agency of any other countries or used by the
Borrower in the United States, any state, territory or possession thereof or any
other country (including, without limitation, all of the Trademarks listed on
Schedule 1 to the Trademark Agreement); (b) all renewals and extensions of the
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Trademarks; (c) all income, royalties, damages and payments now and hereafter
due or payable with respect to the Trademarks (including, without limitation,
payments under all licenses entered into in connection with the Trademarks and
damages and payments for past or future infringements of the Trademarks); (d)
the right to xxx for past, present and future infringements of the Trademarks;
(e) all rights corresponding to the Trademarks throughout the world; (f) the
goodwill of Borrower's business connected with and symbolized by the Trademarks;
and (g) all products and Proceeds of the foregoing.
"Trademarks" means all the trademarks, trademark registrations, tradenames
and trademark applications that are owned by the Borrower, or in which the
Borrower acquires any right or interest, at any time prior to the termination of
this Agreement.
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1.2 Other Definitions. (a) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
section and subsection references are to this Agreement unless otherwise
specified.
(b) The meanings given to terms defined in this Agreement shall be
equally applicable to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance when and as due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Borrower hereby
grants to the Agent, for the ratable benefit of the Banks, a security interest
in all of the following property now owned or at any time hereafter acquired by
the Borrower (collectively, the "Collateral"):
(a) all Accounts Receivable;
(b) all Contracts;
(c) all Copyright Collateral;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Inventory;
(i) all Patent Collateral;
(j) all Trademark Collateral;
(k) all Bank Accounts;
(l) all books and records pertaining to the Collateral;
(m) all Fixtures; and
(n) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Representations and Warranties. The Borrower hereby represents and
warrants that on the Closing Date and on each Borrowing Date:
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3.1 Title; No Other Liens. Except for the security interest granted to
the Agent, for the ratable benefit of the Banks, pursuant to the Loan Documents
and other Permitted Liens, the Borrower owns each item of the Collateral free
and clear of any and all Liens or claims of others. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except for such
agreements, statements and notices that have been filed (i) in favor of the
Agent, for the ratable benefit of the Banks, pursuant to this Agreement, and
(ii) to perfect Permitted Liens.
3.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and actions
specified in Schedule 3.2 to this Agreement and any other actions required by
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Section 4.3 of this Agreement shall constitute valid and duly perfected security
interests in the Collateral in favor of the Agent, for the ratable benefit of
the Banks, and (b) are prior to all other Liens other than Permitted Liens.
3.3 Inventory and Equipment. All of the Inventory and the Equipment are
kept at the locations set forth on Schedule 3.3 to this Agreement, as amended
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pursuant to Section 4.4 of this Agreement.
3.4 Chief Executive Office. The Borrower's chief executive office and
chief place of business are set forth on Schedule 3.4 to this Agreement, as
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amended pursuant to Section 4.4 of this Agreement.
3.5 Account Records. The location or locations at which the Borrower
keeps its records concerning the Accounts are set forth on Schedule 5.4 of this
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Agreement, as amended pursuant to Section 4.4 of this Agreement.
4. Covenants. The Borrower covenants and agrees with the Agent and the
Banks that, from and after the Closing Date until this Agreement is terminated
and the security interests created hereby are released:
4.1 Maintenance Of Insurance. (a) The Borrower shall maintain insurance
policies in accordance with the requirements of the Credit Agreement.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Agent of written notice
thereof, and (ii) name the Agent and the Banks as loss payees or additional
insureds, as the case may be.
(c) The Borrower shall deliver to the Agent and the Banks a report
of a reputable insurance broker with respect to such insurance during the month
of December in each calendar year commencing in 1997 and such supplemental
reports with respect thereto as the Agent may from time to time reasonably
request, all of which shall be in form and substance satisfactory to the Agent.
4.2 Payment of Obligations. The Borrower shall pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all material taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for labor,
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materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
generally accepted accounting principles with respect thereto have been provided
on the books of the Borrower and such proceedings do not involve any material
risk of the sale, forfeiture or loss of any material part of the Collateral.
4.3 Maintenance of Perfected Security Interest; Further Documentation. (a)
Except as otherwise permitted by the Credit Agreement, the Borrower shall cause
all filings and other actions listed in Schedule 3.2 to this Agreement to be
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taken on or prior to the Closing Date, after which the Agent, for the ratable
benefit of the Banks, shall have a valid and duly perfected first priority
security interest in all Collateral described in such filings. Upon the
Borrower's receipt of any interest in any Collateral after the Closing Date, the
Borrower shall promptly take all actions required to provide the Agent, for the
ratable benefit of the Banks, with a valid and duly perfected first priority
security interest in such Collateral. The Borrower shall maintain the security
interests created in favor of the Agent, for the datable benefit of the Banks,
in the Collateral pursuant to this Agreement as valid and duly perfected first
priority security interests subject only to Permitted Liens and shall defend
such security interests against claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
the Agent, and at the sole expense of the Borrower, the Borrower shall promptly
and duly execute and deliver such further instruments and documents and take
such further action as the Agent may reasonably request for the purpose of
obtaining or preserving all of the benefits, rights and powers granted to the
Agent and the Banks pursuant to this Agreement.
4.4 Changes in Locations, Name, etc. The Borrower shall not permit any of
the changes described below to occur unless (x) at least 20 days prior to such
change, the Agent shall have received written notice of such change and an
updated copy of each schedule to this Agreement that is required to be updated
as result of such change, and (y) all filings and notices have been made to
maintain in favor of the Agent, for the ratable benefit of the Banks, a valid
and duly perfected first priority security interest in the Collateral, subject
to no Liens other than Permitted Liens:
(a) permit any of the Inventory or Equipment to be kept at a
location other than those set forth in Schedule 3.3 to this Agreement, as
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amended;
(b) change the location of its chief executive office and chief
place of business from those set forth on Schedule 3.4 to this Agreement, as
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amended;
(c) change the location of the place where it keeps its records
concerning the Accounts from those set forth on Schedule 3.5 to this Agreement,
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as amended; or
(d) change its name, identity or corporate structure to such an
extent that any financing statement filed in favor of the Agent in connection
with this Agreement would become inaccurate or misleading.
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4.5 Further Identification of Collateral. The Borrower shall furnish to
the Agent and the Banks from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Agent may reasonably request, all of which shall be
in form and substance satisfactory to the Agent.
4.6 Notices. The Borrower shall advise the Agent and the Banks promptly,
in reasonable detail, at their respective addresses set forth in the Credit
Agreement of:
(a) any Lien (other than Permitted Liens) on any Collateral; and
(b) the occurrence of any other event that could reasonably be
expected to have a material adverse effect on (i) the security interests created
in favor of the Agent, for the ratable benefit of the Banks, in the Collateral
pursuant to this Agreement or any other Loan Document, or (ii) the aggregate
value of the Collateral.
4.7 Indemnification. The Borrower agrees to pay, and to save the Agent
and the Banks harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (a) with respect to, or
resulting from, any delay by the Borrower in paying, any and all excise, sales
or other taxes that may be payable or determined to be payable by the Borrower
with respect to any of the Collateral, and (b) with respect to, or resulting
from, any delay by the Borrower in complying with any Requirement of Law
applicable to any of the Collateral. The provisions of this Section 4.7 shall
survive the termination of this Agreement.
4.8 Use and Disposition of Collateral. The Borrower shall not (i) make or
permit to be made an assignment, pledge or hypothecation of the Collateral, and
shall grant no other security interest in the Collateral (other than pursuant to
the Loan Documents and except for any Permitted Liens), or (ii) make or permit
to be made any transfer of the Collateral, and shall remain at all times in
possession of the Collateral other than transfers to the Agent pursuant to the
provisions of this Agreement; provided, however, that notwithstanding the
foregoing, the Borrower may use and dispose of the Collateral in any lawful
manner not in violation of the provisions of this Agreement, the Credit
Agreement or any other Loan Document unless the Collateral Agent shall, after an
Event of Default has occurred and during the continuance thereof, notify the
Borrower not to sell, convey, lease, assign, transfer or otherwise dispose of
any Collateral.
4.9 Securing Consents. The Borrower shall use its best efforts to secure
all consents from third parties that are necessary to grant to the Agent, for
the ratable benefit of the Banks, a valid and duly perfected first priority
security interest in all Contracts and General Intangibles; provided, however,
that the Borrower shall obtain all consents from the Affiliates that are
necessary to grant to the Agent, for the ratable benefit of the Banks, a valid
and duly perfected first priority security interest in all Contracts and General
Intangibles.
5. Provisions Relating to Accounts.
5.1 Borrower Remains Liable under Accounts. Notwithstanding anything in
this Agreement to the contrary, the Borrower shall remain liable under each of
the Accounts to observe and perform all the conditions and obligations to be
observed and performed by it under each Account, all in accordance with the
terms of any contract or agreement giving rise to each such Account. Neither
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the Agent nor any Bank shall have any obligation or liability under any Account
(or any agreement giving rise to an Account) by reason of or arising out of this
Agreement or the receipt by the Agent or any Bank of any payment relating to
such Account pursuant to this Agreement, nor shall the Agent or any Bank be
obligated in any manner to perform any of the obligations of the Borrower under
or pursuant to any Account (or any agreement giving rise to an Account), to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
under any Account (or any agreement giving rise to an Account), to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts that may have been assigned to it or to which it may be
entitled at any time or times.
5.2 Analysis of Accounts. The Agent shall have the right at any time to
make test verifications of the Accounts in any manner and through any medium
that it considers reasonably advisable, and the Borrower shall furnish all such
assistance and information as the Agent may reasonably require in connection
with such test verifications. At any time and from time to time upon the
occurrence and during the continuance of an Event of Default, upon the Agent's
reasonable request and at the expense of the Borrower, the Borrower shall cause
independent public accountants or others satisfactory to the Agent to furnish to
the Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Accounts. Upon the occurrence and during the
continuance of an Event of Default, the Agent in its own name or in the name of
others may communicate with account debtors on the Accounts to verify with them
to the Agent's reasonable satisfaction the existence, amount and terms of any
Accounts.
5.3 Collections on Accounts. (a) The Agent hereby authorizes the Borrower
to collect the Accounts, and the Agent may curtail or terminate said authority
at any time after the occurrence and during the continuance of an Event of
Default. If required by the Agent at any time after the occurrence and during
the continuance of an Event of Default, any payments of Accounts, when collected
by the Borrower during the continuance of such an Event of Default, (i) shall be
forthwith (and, in any event, within two Business Days) deposited by the
Borrower in the exact form received, duly indorsed by the Borrower to the Agent
if required, in a Collateral Account maintained under the sole dominion and
control of and on terms and conditions reasonably satisfactory to the Agent,
subject to withdrawal by the Agent as provided in subsection 9.3 of this
Agreement, and (ii) until so turned over, shall be held by the Borrower in trust
for the Agent and the Banks, segregated from all other funds of the Borrower.
(b) At the Agent's request after the occurrence and during the
continuance of an Event of Default, the Borrower shall deliver to the Agent all
original and other documents evidencing, and relating to, the agreements and
transactions that gave rise to the Accounts (including, without limitation, all
original orders, invoices and shipping receipt).
5.4 Covenants. (a) At the request of the Agent at any time, the Borrower
shall represent to the Banks the amount owed, and all such representations by
the Borrower shall be true and correct in all material respects. Any account
debtor with respect to any Account specified by the Agent or the aggregate
amount owing by all or certain of the account debtors with respect to the
Accounts specified by the Agent.
(b) Upon the occurrence and during the continuance of an Event of
Default, without the prior written consent of the Agent, the Borrower shall not
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grant any extension of the time of payment of any Account or compromise,
compound or settle any Account Receivable the same for less than the full amount
thereof, release, wholly or partly, any person liable for the payment thereof,
or allow any credit or discount whatsoever thereon other than extensions,
credits, discounts, compromises or settlements granted or made in the ordinary
course of business.
6. Provisions Relating to Contracts.
6.1 Borrower Remains Liable under Contracts. Notwithstanding anything in
this Agreement to the contrary, the Borrower shall remain liable under each
Contract to observe and perform all the conditions and obligations to be
observed and performed by it under such Contract, all in accordance with and
pursuant to the terms and provisions of such Contract. Neither the Agent nor
any Bank shall have any obligation or liability under any Contract by reason of
or arising out of this Agreement or the receipt by the Agent or any such Bank of
any payment relating to such Contract pursuant to this Agreement, nor shall the
Agent or any Bank be obligated in any manner to perform any of the obligations
of the Borrower under or pursuant to any Contract, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Contract, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts that may have been assigned to it or to that
it may be entitled at any time or times.
6.2 Communication With Contracting Parties. Upon the occurrence and
during the continuance of an Event of Default, the Agent in its own name or in
the name of others may communicate with parties to any or all of the Contracts
to verify with them to the Agent's satisfaction the existence, amount and terms
of such Contracts.
7. Provisions Relating to Copyrights.
7.1 Representations and Warranties. All of the representations and
warranties made by the Borrower with respect to the Copyright Collateral in the
Copyright Agreement are true and correct in all material respects when made and
on the Closing Date.
8. Provisions Relating to Patents and Trademark and Patents.
8.1 Representations and Warranties. All representations and warranties
made by the Borrower with respect to the Trademark Collateral in the Trademark
Agreement are true and correct in all material respects when made.
(b) All representations and warranties made by the Borrower with
respect to the Patent Collateral in the Patent Agreement are true and correct in
all material respects when made.
9. Remedies.
9.1 Notice to Account Debtors and Contract Parties. Upon the request of
the Agent at any time after the occurrence and during the continuance of an
Event of Default, the Borrower shall notify account debtors on the Accounts and
parties to the Contracts that the Accounts and the Contracts have been assigned
to the Agent, for the ratable benefit of the Banks, and that payments in respect
of such Accounts shall be made directly to the Agent.
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9.2 Proceeds to be Turned Over To Agent. In addition to the rights of the
Agent and the Banks specified in subsection 5.3 of this Agreement, if an Event
of Default shall occur and be continuing, all Proceeds received by the Borrower
consisting of cash, checks and cash equivalents shall upon the Agent's request
be held by the Borrower in trust for the Agent and the Banks, segregated from
other funds of the Borrower, and shall, upon the Agent's request (it being
understood that the exercise of remedies by the Agent or the Banks in connection
with an Event of Default under subsection 10(f) of the Credit Agreement shall be
deemed to constitute a request by the Agent for the purposes of this sentence)
forthwith upon receipt by the Borrower be turned over to the Agent in the exact
form received by the Borrower (duly indorsed by the Borrower to the Agent, if
required) and held by the Agent in a Collateral Account maintained under the
sole dominion and control of the Agent and on terms and conditions satisfactory
to the Agent. All Proceeds held by the Agent in a Collateral Account (or by the
Borrower in trust for the Agent and the Banks) shall, subject to subsection 9.3
of this Agreement, continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in subsection 9.3 of this Agreement.
9.3 Application of Proceeds. (a) If an Event of Default shall have
occurred and be continuing and any Proceeds are being held in a Collateral
Account or by the Borrower in trust for the Agents pursuant to Section 5.3(a) or
9.2 of this Agreement, then unless otherwise instructed by the Required Lenders,
such Proceeds shall be applied by the Agent to pay the Obligations that are then
due and payable (whether at the stated maturity, by acceleration or otherwise).
(b) All amounts deposited into a Collateral Account by the Borrower
pursuant to Section 8.14 of the Credit Agreement shall be released to the
Borrower or applied by the Agent as provided in Section 8.14 of the Credit
Agreement; provided, however, that if an Event of Default shall have occurred
and be continuing, the Agent shall apply all such funds to the repayment of the
Loans in accordance with Section 5.1(c) of the Credit Agreement.
(c) All funds in the Borrower's possession or control that are
required to be deposited into a Collateral Account shall be held by the Borrower
in trust for the Agent, for the ratable benefit of the Banks, segregated from
other funds of the Borrower until such funds are deposited into a Collateral
Account.
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9.4 Code Remedies. If an Event of Default shall have occurred and be
continuing, the Agent on behalf of the Banks may exercise, in addition to all
other rights and remedies granted to the Agent and the Banks in this Agreement,
any Loan Document and any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code (whether or not the Code applies to any part of the Collateral) and any
other applicable laws. Without limiting the generality of the foregoing, the
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Borrower or any other Person (all and each of such
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral or any part thereof, or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Agent or any Bank or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Agent or any Bank 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 the whole or any part of the Collateral so sold, free of (to the extent
permitted by law) any right or equity of redemption in the Borrower, which right
or equity is hereby (to the extent permitted by law) waived or released. The
Borrower further agrees, at the Agent's request, to assemble the Collateral and
make it available to the Agent at places that the Agent shall reasonably select,
whether at the Borrower's premises or elsewhere. The Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses incurred therein or
incidental to the care or safekeeping of any of the Collateral or reasonably
relating to the Collateral or the rights of the Agent and the Banks under this
Agreement (including, without limitation, attorneys' fees and disbursements) to
the payment in whole or in part of the Obligations, in such order as the Agent
may elect, and only after such application and after the payment by the Agent of
any other amount required by any provision of law (including, without
limitation, Section 9-504(l)(c) of the Code) need the Agent account for the
surplus, if any, to the Borrower. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be in
writing and deemed reasonable and proper if given at least 10 days before such
sale or other disposition.
9.5 Waiver; Deficiency. The Borrower waives and agrees not to assert any
rights or privileges that it may acquire under Section 9-112 of the Code. The
Borrower shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and
the fees and disbursements of any attorneys employed by the Agent or any Bank to
collect such deficiency.
10. Agent's Appointment as Attorney-in-Fact; Agent's Performance of
Borrower's Obligations.
10.1 Powers. The Borrower hereby irrevocably constitutes and appoints the
Agent and any officer or agent of the Agent (each, an "Attorney") with full
power of substitution, as its true and lawful attorney-in-fact, with full
irrevocable power and authority in the place and stead of the Borrower and in
the name of the Borrower or in its own name from time to time in the Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, the
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Borrower hereby gives each Attorney the power and right, on behalf of the
Borrower, without notice to or assent by the Borrower, to do the following upon
the occurrence and during the continuance of an Event of Default:
(a) in the name of the Borrower or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or Contract or with respect to any other
Collateral and to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the Agent for the
purpose of collecting any and all such moneys due under any Account, Instrument,
General Intangible or Contract or with respect to any other Collateral whenever
payable;
(b) in the case of any Copyright Collateral, Patent Collateral or
Trademarks Collateral, to execute and deliver any and all agreements,
instruments, documents, and papers as the Agent may reasonably request to
evidence the security interest of the Agent, for the ratable benefit of the
Banks, in such Collateral; and the goodwill and general intangibles of the
Borrower relating thereto or represented thereby;
(c) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance called
for by the terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof;
(d) to execute, in connection with any sale provided for in
subsection 9.4 of this Agreement, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral or any part
thereof; and
(e) (i) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Agent or as the Agent shall direct; (ii) to ask or demand for,
collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Contract or other Collateral; (iii) to sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other documents in
connection with any part of the Collateral; (iv) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to protect, preserve, or realize upon the Collateral or any part
thereof and to enforce any other right in respect of any part of the Collateral;
(v) to defend any suit, action or proceeding brought against the Borrower with
respect to any part of the Collateral; (vi) to settle, compromise or adjust any
such suit, action or proceeding and, in connection therewith, to give such
discharges or releases as the Agent may deem appropriate; (vii) to assign.
license or sublicense any Copyright Collateral, Patent Collateral or Trademark
Collateral, (along with the goodwill of the business to which any such
Collateral pertains) throughout the world for such term or terms on such
conditions, and in such manner, as the Agent shall in its sole discretion
determine; and (viii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any part of the Collateral as
fully and completely as though the Agent were the absolute owner thereof for all
purposes, and to do, at the Agent's option and the Borrower's expense, at any
time, or from time to time, all acts and things that the Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral or any part
thereof and the security interests of the Agent, for the ratable benefit of the
Banks, and to effect the intent of this Agreement, all as fully and effectively
as the Borrower might do.
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10.2 Performance by an Attorney of Borrower's Obligations. If the
Borrower fails to perform or comply with any of its agreements contained in this
Agreement, at the option of the Agent, any Attorney may, but without any
obligation, perform or comply, or otherwise cause performance or compliance,
with such agreement.
10.3 Borrower's Reimbursement Obligation. The expenses of the Agent
incurred in connection with any actions taken pursuant to this Section 10,
together with interest thereon at a rate per annum equal to 3 1/2% above the
Base Rate then in effect from the date payment is demanded by the Agent to the
date reimbursed by the Borrower, shall be payable by the Borrower to the Agent
on demand.
10.4 Ratification; Power Coupled With An Interest. The Borrower hereby
ratifies all actions taken by each Attorney pursuant to this Section 10. All
powers, authorizations and agencies contained in this Agreement are coupled with
an interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
11. Duty of Agent. The Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it in the same
manner as the Agent deals with similar property for its own account. None of
the Agent, any Bank or any of their respective directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any of the Collateral upon the request of the Borrower
or any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Agent and the Banks
under this Agreement are solely to protect the interests of the Agent and the
Banks in the Collateral and shall not impose any duty upon the Agent or any Bank
to exercise any such powers. The Agent and the Banks shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to the Borrower for any act or failure to act under
this Agreement, except for their own gross negligence or willful misconduct (as
determined in a final non-appealable judgment by a court of competent
jurisdiction).
12. Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, the Borrower authorizes the Agent to file financing statements with
respect to the Collateral without the signature of the Borrower in such form and
in such filing offices as the Agent reasonably determines appropriate to perfect
the security interests granted to the Agent, for the ratable benefit of the
Banks, pursuant to this Agreement. A carbon, photographic or other reproduction
of this Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
13. Authority of Agent. The Borrower acknowledges that the rights and
responsibilities of the Agent under this Agreement with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any option,
voting right, request, judgment or other right or remedy provided for in this
Agreement or resulting or arising out of this Agreement shall, as between the
Agent and the Banks, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them but,
as between the Agent and the Borrower, the Agent shall be conclusively presumed
to be acting as agent for the Banks with full and valid authority so to act or
refrain from acting.
14. Notices. All notices, requests and demands to or upon the Agent or
the Borrower under this Agreement shall be given or made in accordance with the
Credit Agreement.
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15. Termination and Release. (a) This Agreement and the security
interests created in favor of the Agent, for the ratable benefit of the Banks,
pursuant to this Agreement shall terminate when all of the Obligations have been
fully and indefeasibly paid and when the Banks have no further Commitments under
the Credit Agreement and no Letters of Credit are outstanding or unreimbursed,
at which time the Agent shall execute and deliver to the Borrower, or to such
person or persons as the Borrower shall reasonably designate, all Uniform
Commercial Code termination statements and similar documents prepared by the
Borrower at the Borrower's expense that the Borrower shall reasonably request to
evidence the release of the Liens and the security interests created by this
Agreement with respect to the Collateral.
(b) All Collateral used, sold, transferred or otherwise disposed of
by the Borrower in accordance with the terms of the Credit Agreement (including,
without limitation, pursuant to a waiver or amendment of the terms of the Credit
Agreement), shall be used, sold, transferred or otherwise disposed of free and
clear of the Lien and the security interest created under this Agreement. In
connection with any such sale, transfer or disposition of Collateral, (i) the
Agent shall deliver to the Borrower, or to such person or persons as the
Borrower shall reasonably designate, all Uniform Commercial Code termination
statements and similar documents prepared by the Borrower at the Borrower's
expense that the Borrower shall reasonably request to evidence the release of
the Liens and security interests created under such Agreement with respect to
such Collateral, and (ii) any representation, warranty or covenant contained in
this Agreement relating to such Collateral shall no longer be deemed to be made
with respect to such used, sold, transferred or otherwise disposed Collateral.
16. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Amendments in Writing, No Waiver; Cumulative Remedies.
17.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 12.1 of the Credit Agreement and pursuant to a written
instrument executed by the Borrower and the Agent; provided, however, that the
schedules to this Agreement shall be amended and updated by the Borrower as and
to the extent required by this Agreement.
17.2 No Waiver by Course of Conduct. Neither the Agent nor any Bank shall
by any act (except by a written instrument pursuant to subsection 17.1 of this
Agreement) or delay be deemed to have waived any right or remedy under this
Agreement or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions of this Agreement. No failure to
exercise, nor any delay in exercising, on the part of the Agent or any Bank, any
right, power or privilege under this Agreement shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege under
this Agreement shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Agent or any
Bank of any right or remedy under this Agreement on any one occasion shall not
be construed as a bar to any right or remedy that the Agent or such Bank would
otherwise have on any future occasion.
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17.3 Remedies Cumulative. The rights and remedies provided to the Agent
and the Banks in this Agreement are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.
18. Section Headings. The section and subsection headings used in this
Agreement are for convenience of reference only and are not to affect the
construction of this Agreement or be taken into consideration in the
interpretation of this Agreement.
19. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Borrower and shall inure to the benefit of the
Borrower, the Agent and the Banks and their successors and assigns; provided,
however, that the Borrower may not assign any of its rights, or delegate any of
its duties or obligations, under this Agreement without the prior written
consent of the Agent.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF.
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
GENCOR INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Name: Xxxx Xxxxxxx
Title: Executive Vice President
Schedules:
---------
Schedule 3.2 Filings and Other Actions Required to Perfect Security Interests
Schedule 3.3 Inventory and Equipment
Schedule 3.4 Location of Chief Executive Office and Chief Place of Business
Schedule 3.5 Location of Account Records
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