EXHIBIT 10.7
BORROWER PLEDGE AGREEMENT
PLEDGE 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, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the Agent and the Lenders.
R E C I T A L S
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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 the Foreign Subsidiary Obligations (as defined in the
Credit Agreement);
WHEREAS, in satisfaction of such condition, the Borrower has agreed to
guarantee payment and performance of all of the Foreign Subsidiary 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. (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:
"Agreement": this Pledge Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code from time to time in effect in the
State of New York.
"Collateral": the Pledged Collateral and all Proceeds thereof.
"Collateral Account": any bank or other account established to hold
money Proceeds, maintained under the sole dominion and control of, and on
terms and conditions satisfactory to, the Agent, subject to withdrawal by
the Agent, for the account of the Banks, and the Borrower as provided in
subsection 8(a) and Section 15 of this Agreement.
"Domestic Issuer": as of any date, (i) each corporation, partnership or
other non-governmental entity (including, but not limited to, all of the
Borrower's Subsidiaries and other Affiliates) incorporated or organized
under the laws of any state or other jurisdiction of the United States of
America that has issued any equity, debt and/or other securities that are
beneficially owned by the Borrower, and (ii) any government (including, but
not limited to, the government of the United States of America and any
state or other jurisdiction thereof) and any political subdivision or
agency thereof that has issued debt or other securities that are
beneficially owned by the Borrower.
"Excluded Stock": all of the outstanding shares of Capital Stock listed
on Schedule 3 to this Agreement, which shall include (a) the shares of
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capital stock of each Foreign Subsidiary that, if pledged to the Agent at
such time pursuant to this Agreement, would cause the undistributed earning
of such Foreign Subsidiary as determined for U.S. federal income tax
purposes to be treated as a deemed dividend to the any parent company of
such Foreign Subsidiary for U.S. federal income tax purposes; provided,
however, that if any shares of capital stock of a Foreign Subsidiary may
subsequently be pledged to the Agent without being treated as a deemed
dividend, such shares shall no longer be Excluded Shares, in which case
Schedule 2 and Schedule 3 to this Agreement shall be promptly amended to
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reflect such change and (b) the shares of capital stock of each of the
Inactive Subsidiaries; provided, however, that if such Inactive Subsidiary
is not dissolved within 90 days of the Closing Date, the Borrower shall
promptly deliver to the Agent, for the ratable benefit of the Banks, the
shares of such Inactive Subsidiary, in which case Schedule 1 and Schedule 3
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to this Agreement shall be promptly amended to reflect such change.
"Foreign Issuer": as of any date, any corporation, partnership,
government (and any political subdivision or agency thereof) or entity
other than a Domestic Issuer that has issued equity, debt and/or any other
security that is beneficially owned by the Borrower.
"Issuers": the collective reference to the Domestic Issuers and the
Foreign Issuers; individually each an "Issuer."
"Notes": all promissory notes, instruments, certificates, chattel paper
and all other writings that evidence or represent any claim of any nature
whatsoever of the Borrower against any Person, including, without
limitation, certificates of deposit, government securities, notes,
debentures and all other debt securities.
"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
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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).
"Pledged Collateral": the Pledged Stock and the Pledged Notes.
"Pledged Notes": all of the Notes owned or acquired by the Borrower at
any time prior to the termination of this Agreement.
"Pledged Stock": all shares of Capital Stock (other than Excluded Stock)
owned or acquired by the Borrower at any time prior to the termination of
this Agreement.
"Proceeds": all "proceeds" (as such term is defined in Article 9 of the
Code) of the Pledged Collateral and, in any event, shall include, without
limitation, all dividends, interest and all other income from the Pledged
Collateral, collections thereon or distributions with respect thereto, and
principal payments, instruments, and other property from time to time
received, receivable or otherwise distributed in respect of, or in exchange
for, the Pledged Collateral.
"Securities Act": the Securities Act of 1933, as amended.
(c) 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.
(d) The meanings given to terms defined in this Agreement shall
be equally applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. (a) Subject to Section 2(b) of
this Agreement, the Borrower hereby delivers to the Agent, for the ratable
benefit of the Banks, all the Pledged Collateral and the Borrower hereby grants
to the Agent, for the ratable benefit of the Banks, a valid first priority
security interest in the Collateral, 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. In the event that
the Borrower acquires or otherwise obtains any Pledged Collateral after the
Closing Date, the Borrower shall promptly (but in no event later than two (2)
Business Days after receipt) deliver such Pledged Collateral to the Agent, for
the ratable benefit of the Banks.
(b) In the event that a valid first priority security interest
in the Capital Stock of any Foreign Subsidiary cannot be granted to the Agent,
for the ratable benefit of the Banks, under any applicable foreign laws by
physical delivery of such Capital Stock to the Agent, the Borrower shall take
all actions that are
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necessary or desirable under applicable law to grant a valid first priority
security interest in such Capital Stock to the Agent, for the ratable benefit of
the Banks.
3. Stock and Other Powers. The Borrower agrees that at any time and from
time to time, at the expense of the Borrower, the Borrower will promptly execute
and deliver, or cause to be executed and delivered, all stock and bond powers,
proxies, assignments, instruments and documents and take all further action,
that the Agent determines is reasonably necessary or desirable to perfect any
security interest granted or purported to be granted by this Agreement or to
enable the Agent, for the ratable benefit of the Banks, to exercise and enforce
its rights and remedies under this Agreement with respect to any Collateral and
to carry out the provisions and purposes of this Agreement. In the event that
the Borrower is unable to subdivide the stock certificates representing the
Capital Stock of a Foreign Issuer in such a manner that only stock certificates
representing Pledged Stock are delivered to the Agent, for the ratable benefit
of the Banks, then the Borrower may deliver to the Agent, for the ratable
benefit of the Banks, stock certificates that represent both Pledged Stock and
Excluded Stock; provided, however, that if any stock certificates are delivered
to the Agent, for the ratable benefit of the Banks, that represent any Excluded
Stock, neither the Agent nor any Bank shall have any interest in such Excluded
Stock and the Agent shall hold such Excluded Stock for the benefit of the
Borrower; provided further, however, that if any stock certificate representing
Pledged Stock and Excluded Stock is delivered to the Agent, for the ratable
benefit of the Banks, the Borrower shall promptly take such actions as are
necessary to subdivide each such stock certificate in such manner that the only
stock certificates in the possession of the Agent represent Pledged Stock and,
in any event, the Borrower shall deliver all such divided stock certificates to
the Agent, for the ratable benefit of the Banks, within thirty days of the
Closing Date.
4. Representations and Warranties. The Borrower represents and warrants
that on the Closing Date and on each Borrowing Date:
(a) The shares of Pledged Stock listed in Schedule 1 to this
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Agreement, as amended pursuant to Section 5(d) of this Agreement, constitute all
the issued and outstanding shares of all classes of Capital Stock issued by
Domestic Issuers owned, held or possessed by the Borrower.
(b) The shares of Pledged Stock listed in Schedule 2 to this
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Agreement, as amended pursuant to Section 5(d) of this Agreement, constitute all
the issued and outstanding shares of all classes of Capital Stock issued by
Foreign Issuers owned, held or possessed by the Borrower other than the Excluded
Stock. All of the shares of Excluded Stock owned, held or possessed by the
Borrower are listed on Schedule 3 to this Agreement, as amended.
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(c) The Notes listed on Schedule 4 to this Agreement, as
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amended pursuant to Section 5(e) of this Agreement, constitute all the Notes
owned, held or possessed by the Borrower.
(d) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(e) The Borrower is the record and beneficial owner of the
Pledged Collateral, free of any and all Liens or options in favor of, or claims
of, any other Person, except the security interest created by this Agreement.
(f) Upon delivery to the Agent of the stock certificates and
Notes evidencing the Pledged Collateral (other than the Capital Stock of Foreign
Subsidiaries for which the Agent, for the ratable benefit of the Banks, cannot
obtain a valid first priority security interest in such Capital Stock under
applicable
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foreign law by taking possession of such Capital Stock), the security interest
in such Pledged Collateral created by this Agreement will constitute a valid and
duly perfected first priority security interest in such Pledged Collateral,
enforceable in accordance with its terms against all creditors of the Borrower
and any Persons purporting to purchase any such Pledged Collateral from the
Borrower.
(g) The Borrower has taken all actions necessary to grant the
Agent, for the ratable benefit of the Banks, a valid first priority security
interest in all of the Capital Stock of Foreign Subsidiaries owned by the
Borrower and the security interest created by this Agreement in such Pledged
Collateral will constitute a valid and duly perfected first priority security
interest in such Pledged Collateral, enforceable in accordance with its terms
against all creditors of the Borrower and any Persons purporting to purchase any
such Pledged Collateral from the Borrower.
5. Covenants. Subject to the right of the Borrower under subsection 9.6
of the Credit Agreement with respect to Permitted Sales, 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 interest created by this
Agreement is released:
(a) If at any time after the Closing Date the Borrower shall, as
a result of its ownership of any Pledged Collateral, become entitled to receive
or shall receive any shares of Capital Stock (other than Excluded Stock), Note
or other security (including, without limitation, any certificate representing a
stock dividend, debt security or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate or Note
issued in connection with any reorganization), option or rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
Pledged Collateral, or otherwise in respect thereof, the Borrower shall accept
the same as the agent of the Agent and the Banks, hold the same in trust for the
Agent and the Banks and deliver the same forthwith to the Agent in the exact
form received, duly indorsed by the Borrower to the Agent, if required, together
with an undated stock power or bond power covering such stock certificate, Note
or other security duly executed in blank by the Borrower and with signature
guaranteed, if applicable, to be held by the Agent, subject to the terms of this
Agreement, as additional collateral security for the Obligations; provided,
however, if the Borrower becomes entitled to receive or shall receive any shares
of Capital Stock of a Foreign Subsidiary (other than Excluded Stock) and the
Agent, for the ratable benefit of the Banks, cannot obtain a valid first
priority security interest in such Capital Stock under applicable foreign law by
taking physical delivery of such Capital Stock, the Borrower shall not be
required to deliver such Capital Stock to the Agent but shall promptly take all
actions that are necessary or desirable under applicable law to grant the Agent,
for the ratable benefit of the Banks, a valid first priority security interest
in such Capital Stock.
(b) Without the prior written consent of the Agent, unless
otherwise permitted by the Credit Agreement, the Borrower will not (i) vote to
enable, or take any other action to permit, any Issuer that is a Subsidiary or
other Affiliate of the Borrower to issue any stock or other equity securities of
any nature or to issue any other securities convertible into or granting the
right to purchase or exchange for any stock or other equity securities of any
nature of such Issuer, (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, (iii) create,
incur or permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any part of the Collateral or any interest therein, or
(iv) enter into any agreement or undertaking restricting the right or ability of
the Borrower or the Agent to sell, assign or transfer any of the Collateral.
(c) The Borrower shall maintain the security interests created
in favor of the Agent, for the ratable benefit of the Banks, in the Collateral
pursuant to this Agreement as valid and duly perfected first priority security
interests and shall defend such security interests against claims and demands of
all Persons
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whomsoever. 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 actions as the Agent may request for the purposes of obtaining or
preserving all of the benefits, rights and powers granted to the Agent and the
Banks pursuant to this Agreement. In addition, the Borrower shall, and shall
cause all of its Foreign Subsidiaries to, execute and deliver such further
documents and instruments and take such further actions as are necessary or
desirable, or that are requested by the Agent, to create and maintain in favor
of the Agent, for the ratable benefit of the Banks, valid and duly perfected
first priority security interests in all of the Collateral under all applicable
foreign laws and shall defend such security interests against claims and demands
of all Persons whomsoever.
(d) If the Borrower shall at any time after the Closing Date
own or acquire any shares of Capital Stock (other than Excluded Stock) of any
Person that has not been delivered to the Agent, whether in connection with an
acquisition or otherwise, the Borrower shall (i) immediately deliver such shares
of Capital Stock, and all stock certificates evidencing the same, to the Agent
to be held as collateral security for the Obligations under this Agreement, (ii)
promptly deliver a supplement to this Agreement, substantially in the form of
Exhibit A to this Agreement (each, a "Stock Pledge Supplement") adding such
shares of Capital Stock to Schedule 1 or Schedule 2, as applicable, to this
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Agreement, and (iii) if such Capital Stock was issued by a Subsidiary of the
Borrower, promptly cause such Subsidiary to execute and deliver an
Acknowledgement and Consent substantially in the form of Exhibit B to this
Agreement; provided, however, if the Borrower becomes entitled to receive or
shall receive any shares of Capital Stock of a Foreign Subsidiary (other than
Excluded Stock) at any time after the Closing Date and the Agent, for the
ratable benefit of the Banks, cannot obtain a valid first priority security
interest in such Capital Stock under applicable foreign law by taking physical
delivery of such Capital Stock, the Borrower shall promptly take all actions
that are necessary or desirable under applicable law to grant the Agent, for the
ratable benefit of the Banks, a valid first priority security interest in such
Capital Stock. If the Borrower shall at any time after the Closing Date acquire
or own any shares of Excluded Stock not listed on Schedule 3 to this Agreement,
the Borrower shall promptly amend Schedule 3 to include such shares of Excluded
Stock.
(e) If the Borrower shall at any time after the Closing Date own
or acquire any Notes that have not been delivered and pledged to the Agent, the
Borrower shall (i) immediately deliver such Notes to the Agent to be held as
collateral security for the Obligations under this Agreement, (ii) promptly
deliver a supplement to this Agreement, substantially in the form of Exhibit C
to this Agreement (each, a "Note Pledge Agreement Supplement") adding such Notes
to Schedule 4 to this Agreement, and (iii) if the issuer of such Notes is a
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Subsidiary of the Borrower, promptly cause such issuer to execute and deliver an
Acknowledgement and Consent substantially in the form of Exhibit D to this
Agreement.
(f) Except to the extent permitted by Sections 9.2 and 9.6 of
the Credit Agreement, the Borrower shall not, and shall not allow any of its
Subsidiaries to, issue any Capital Stock or Notes; provided, however, that the
Borrower shall not, and shall not allow any of its Subsidiaries to, issue any
Capital Stock or Notes to the Borrower or any Subsidiary of the Borrower
pursuant to the Credit Agreement unless such Capital Stock (other than Excluded
Stock) or Notes have been pledged to the Agent, for the ratable benefit of the
Banks, in accordance with the provisions of this Agreement.
(g) Except to the extent permitted by the Credit Agreement, the
Borrower shall not sell, assign, transfer, pledge or otherwise convey or grant
any interest in any shares of Excluded Stock that are owned, held or possessed
by the Borrower.
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(h) If following a change in the relevant sections of the Code
or the regulations, rules, rulings, notices or other official pronouncements
issued or promulgated thereunder, counsel for the Borrower reasonably acceptable
to the Agent and the Required Lenders does not within 30 days after a request
from the Agent and the Required Lenders deliver evidence, in form an substance
reasonably satisfactory to the Agent and the Required Lenders, with respect to
any Foreign Issuer which has not already had all of its stock pledged pursuant
to this Agreement, that a pledge of 66-2/3% or more of the total combined voting
power of all classes of Capital Stock of such Foreign Issuer entitled to vote,
would cause the undistributed earnings of such Foreign Issuer as determined for
federal income tax purposes to be treated as a deemed dividend to any direct or
indirect United States parent of such Foreign Issuer for federal income tax
purposes, then that portion of such Foreign Issuer's outstanding Capital Stock
not theretofore pledged pursuant to this Agreement shall promptly be pledged to
the Agent, for the ratable benefit of the Banks, pursuant to this Agreement and
the Borrower shall deliver such related documents as required pursuant to
subsection 5(d) of this Agreement (including, without limitation, the stock
certificates or other instruments evidencing such Capital Stock, a Stock Pledge
Agreement Supplement and an Acknowledgement and Consent in the form of Exhibit B
if the Foreign Issuer is a Subsidiary of the Borrower) to the Agent.
6. Cash Dividends; Voting Rights; Proceeds. (a) Unless an Event of Default
shall have occurred and be continuing and the Agent shall have given notice to
the Borrower of the Agent's intent to exercise its corresponding rights pursuant
to Section 7 of this Agreement, the Borrower shall be permitted to receive,
retain and use all cash dividends and interest paid from time to time in respect
of the Pledged Collateral in accordance with the terms and conditions of the
Credit Agreement and to exercise all voting and corporate rights with respect to
the Pledged Collateral; provided, however, that under no circumstances shall any
vote be cast or corporate right exercised or other action taken that would
adversely affect the rights of the Agent or any of the Banks under the Credit
Agreement, this Agreement or any other Loan Document.
(b) Unless an Event of Default shall have occurred and be
continuing and the Agent shall have given notice to the Borrower of the Agent's
intent to exercise its corresponding rights pursuant to Section 7 of this
Agreement, the Borrower shall be permitted to receive, retain and use all other
Proceeds (in addition to cash dividends and interest paid on the Pledged
Collateral) from the Collateral in accordance with the terms and conditions of
the Credit Agreement.
7. Rights of the Banks and the Agent. If an Event of Default shall have
occurred and be continuing and the Agent shall give notice of its intent to
exercise such rights to the Borrower, (i) the Agent shall have the right to
receive any and all Proceeds paid in respect of the Collateral and all Proceeds
of Proceeds and make application thereof to the Obligations in the manner
provided in subsection 8(a) and Section 15 of this Agreement, and (ii) all
Pledged Collateral shall be registered in the name of the Agent or its nominee,
and the Agent or its nominee may thereafter exercise (1) all voting, corporate
and other rights pertaining to the Pledged Collateral at any meeting of
shareholders or creditors of any issuer or otherwise, and (2) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such Pledged Collateral as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any issuer, or upon the exercise by the Borrower or the Agent of
any right, privilege or option pertaining to such Pledged Collateral, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Collateral with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the Agent may
reasonably determine), all without liability except to account for property
actually received by the Agent, provided, however, that the Agent shall have no
duty to the Borrower to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
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8. Remedies. (a) If an Event of Default shall have occurred and be
continuing, all Proceeds received by the Borrower consisting of cash, check or
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 Section 15 of this Agreement, continue to be
collateral security for all the Obligations and such Proceeds shall not
constitute payment of the Obligations until applied as provided in Section 15 of
this Agreement.
(b) 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 in this Agreement and in 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 which 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, and/or may
forthwith sell, assign, give options 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, in the
over-the-counter market, at any exchange, broker's board or office of the Agent
or any Bank or elsewhere upon such terms and conditions as it may reasonably
deem advisable and at such prices as it may reasonably 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, to the extent permitted by law, hereby waived or released. The Agent shall
apply any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale as provided in
Section 15 of this Agreement, after deducting all costs and expenses incurred in
respect thereof 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 of counsel to the Agent). 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. The Borrower shall remain liable for any
deficiency if the proceeds of any sale or other disposition of 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.
9. Registration Rights; Private Sales. (a) If the Agent shall determine
to exercise its right to sell any or all of the Pledged Collateral pursuant to
Section 8 of this Agreement, and if the Agent determines that it is necessary or
desirable to have the Pledged Collateral, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the Borrower will cause
any issuer that is an Affiliate of the Borrower, and the Borrower will use its
best efforts to cause any other issuer, to (i) execute and deliver, and cause
the directors and officers of such issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the reasonable opinion of the Agent, necessary or advisable to register
the Pledged Collateral, or that portion thereof to be sold under the provisions
of the Securities Act, (ii) use its best efforts to cause the registration
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statement relating thereto to become effective and to remain effective for a
period expiring on the earlier of (A) one year from the date of the first public
offering of the Pledged Collateral and (B) such time that all of the Pledged
Collateral is sold, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus that, in the judgment of the
Agent, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Borrower agrees to cause any issuer that is
an Affiliate of the Borrower, and the Borrower will use its best efforts to
cause any other issuer, to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions that the Agent shall designate and to
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) that will satisfy the provisions of
subsection 11(a) of the Securities Act.
(b) The Borrower recognizes that the Agent may be unable to
effect a public sale of any or all of the Pledged Collateral, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Borrower acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such issuer would agree to do so.
(c) The Borrower further agrees to use its best efforts to do or
cause to be done all such other acts as may be reasonably necessary to make any
sale or sales of all or any portion of the Pledged Collateral pursuant to this
Section 9 valid and binding and in compliance with any and all other applicable
Requirements of Law. The Borrower further agrees that (i) a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to the Agent
and the Banks, and (ii) the Agent and the Banks have no adequate remedy at law
in respect of such breach and, as a consequence, each and every covenant
contained in this Section 9 shall be specifically enforceable against the
Borrower.
10. Irrevocable Authorization and Instruction to Issuer. The Borrower
hereby authorizes and instructs each issuer of Pledged Collateral to comply with
any instruction received by it from the Agent in writing that states that an
Event of Default has occurred, without any other or further instructions from
the Borrower, and the Borrower agrees that each issuer shall be fully protected
in complying with any such instructions.
11. Agent's Appointment as Attorney-in-Fact. (a) The Borrower hereby
irrevocably constitutes and appoints the Agent and any officer or agent of the
Agent, with full power of substitution, as its true and lawful attorney-in-fact
(each, an "Attorney") with full irrevocable power and authority in the place and
stead of the Borrower and in the name of the Borrower or in the Agent's own
name, from time to time in the Agent's discretion upon and during the
continuance of an Event of Default, 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, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.
(b) The Borrower hereby ratifies all actions taken by each
Attorney pursuant to the power of attorney granted in Section 11(a) of this
Agreement. All powers, authorizations and agencies contained in this Agreement
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are coupled with an interest and are irrevocable until this Agreement is
terminated and the security interests created hereby are released.
(c) The expenses of any Attorney incurred in connection with any
action taken pursuant to this Section 11, 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.
12. 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 securities and property for its own
account, except that the Agent shall have no obligation to invest funds held in
any Collateral Account and may hold the same as demand deposits. 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 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 their interests 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 or with respect to 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).
13. 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.
14. 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.
15. Application of Proceeds. Unless otherwise instructed by the Required
Lenders and the Issuing Bank, the Proceeds from any sale of Collateral pursuant
to subsection 8(b) of this Agreement, as well as any Collateral consisting of
cash, whether held in a Collateral Account or held in trust by the Borrower for
the Agent pursuant to subsection 8(a) of this Agreement, 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).
16. Termination and Release. (a) This Agreement and the security
interests created under this Agreement shall terminate when all of the
Obligations have been fully and indefeasibly paid and when the Banks have no
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further Commitments under the Credit Agreement and no Letters of Credit are
outstanding or unreimbursed, at which time the Agent shall reassign and deliver
to the Borrower, or to such person or persons as the Borrower shall reasonably
designate, against receipt, all Collateral that has not been sold or otherwise
applied by the Agent pursuant to this Agreement and that is still being held by
the Agent under this Agreement, together with appropriate instructions of
reassignment and release. Any such reassignment, shall be without recourse to
or any warranty by the Agent and at the expense of the Borrower.
(b) All Collateral 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 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 such person or persons as the Borrower
shall reasonably designate, against receipt, such Collateral together with
appropriate instructions of reassignment and release, (ii) any representation,
warranty or covenant contained in this Agreement relating to the Collateral
shall no longer be deemed to be made with respect to such sold, transferred or
otherwise disposed Collateral, and (iii) all schedules to this Agreement shall
be amended to the extent necessary to reflect any such sale, transfer of
disposition. Any such reassignment, shall be without recourse to, or any
warranty by, the Agent and at the expense of the Borrower.
17. 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
subsection 12.2 of the Credit Agreement.
18. 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.
19. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except in accordance with the provisions of Section 12.1
of the Credit Agreement and pursuant to a written instrument executed by the
Borrower and the Agent; provided, however, that this Agreement shall be
supplemented by each Stock Pledge Agreement Supplement and Note Pledge Agreement
Supplement delivered pursuant to this Agreement and the schedules to this
Agreement shall be amended and updated by the Borrower as and to the extent
required by this Agreement.
(b) Neither the Agent nor any Bank shall by any act (except by a
written instrument pursuant to Section 19(a) 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, the Credit Agreement or any other Loan
Document. 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.
(c) 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.
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20. Section Headings. The section 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.
21. 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.
22. 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 Agreement to be duly
executed and delivered as of the date first above written.
GENCOR INDUSTRIES, INC.
By: /s/ John Elliott
-----------------------------------
Name: John Elliott
Title: Executive Vice President
Schedules:
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Schedule 1 Description of Pledged Stock of Domestic Issuers
Schedule 2 Description of Pledged Stock of Foreign Issuers
Schedule 3 List of Excluded Stock
Schedule 4 Description of Pledged Notes
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