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EXHIBIT 10(n)
SECURITY AGREEMENT
This Security Agreement (the "SECURITY AGREEMENT") is entered into as
of the 30th day of November, 2000, by PEERLESS MFG. CO., a Texas corporation
having its principal place of business in 2819 Walnut Hill Lane, Dallas, Texas
75229 ("DEBTOR"), in favor of BANK OF AMERICA, N.A., a national banking
association ("BANK OF AMERICA"), as collateral agent (in such capacity, the
"COLLATERAL AGENT") for the Lenders (as defined herein).
R E C I T A L S
A. Bank of America has previously extended one or more credit
facilities to the Debtor pursuant to the Bank of America Loan Documents (as
herein defined).
B. Chase (as herein defined) has previously extended one or more credit
facilities to the Debtor pursuant to the Chase Loan Documents (as herein
defined).
C. In return for Bank of America's and Chase's agreements to waive
certain events of default existing under the Loan Documents (as herein defined),
the Debtor has agreed to grant a security interest in the Collateral (as herein
defined) to secure the Obligations (as herein defined) which include both the
Bank of America Debt (as herein defined) and the Chase Debt (as herein defined).
The Debtor, by and through the action of its board of directors, has determined
that it may reasonably be expected to benefit, directly and indirectly, from the
granting of this security interest.
D. The Lenders have appointed Bank of America to serve as Collateral
Agent under this Security Agreement pursuant to the terms of an Intercreditor
Agreement among them and the Debtor dated as of November 30th, 2000 (as the same
may be amended, the "INTERCREDITOR AGREEMENT").
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Debtor and the Collateral Agent on behalf of itself and Chase
(and their respective successors and assigns), hereby agree as follows:
1.0 TERMS. In addition to any other terms defined herein, the following
terms shall have the meanings set forth below. Terms not defined herein which
are defined in the Texas Uniform Commercial Code, as amended by Act of June 18,
1999, 76th Leg., R.S. Chap. 414, Tex. Sess. Law Serv. 2639 (Vernon) (to be
codified as an amendment in Tex. Bus. & Comm. Code Ann.ss.9.101, et seq.)
effective July 1, 2001 (the "UCC"), have the meanings specified in the UCC, and
the definitions specified in Article 9 of the UCC control in the case of any
conflicting definitions in the UCC. The singular number includes the plural and
vice versa. Captions of Sections do not limit the terms of such Sections.
"ACCOUNTS" means all of Debtor's now owned or existing or hereafter
acquired or arising accounts and includes all of Debtor's rights to payment
arising out of the transfer of rights in Debtor's tangible or intangible
personal property, and all supporting obligations.
"ACCOUNT DEBTOR" means each person who is obligated on, under, or
with respect to any Payment Rights Collateral.
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"BANK OF AMERICA DEBT" means all obligations, indebtedness, and
liabilities of the Debtor to Bank of America arising pursuant to any of the Bank
of America Loan Documents, pursuant to any interest rate swap, interest rate
caps, interest rate collars, or other similar agreements entered into by Bank of
America with the Debtor enabling Debtor to fix or limit its actual interest
expense, pursuant to any foreign exchange, currency hedging, or other agreement
entered into by Bank of America with the Debtor enabling Debtor to limit the
market risk of the Debtor actually holding currency in either the cash or
futures markets, or pursuant to any deposit or cash management products and
services provided to the Debtor, in each case whether now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several, including,
without limitation, the obligation of the Debtor to repay loans, any
reimbursement obligations arising in connection with any letter of credit,
interest on the loans and such reimbursement obligations, credit extended on
uncollected funds and all fees, costs, and expenses (including attorneys' fees
and expenses) provided for in the Bank of America Loan Documents or such
agreements enabling the Debtor to fix or limit its interest expense or limit its
market risk of holding currency or the agreements governing the deposit and cash
management products and services provided to the Debtor.
"BANK OF AMERICA LOAN DOCUMENTS" mean all loan agreements, notes,
letters of credit, documents, instruments, guarantees, security agreements,
deeds of trust, pledge agreements, certificates and agreements between the
Debtor and Bank of America which reflect any loan or other extension of credit
made by Bank of America to the Debtor, or which are delivered by the Debtor to
Bank of America in connection with any loan or other extension of credit by Bank
of America to the Debtor. The loan documents include this Security Agreement and
the Intercreditor Agreement.
"CERTIFICATED SECURITIES" means all of Debtor's now owned or
existing or hereafter acquired or arising certificated securities.
"CHASE" means The Chase Manhattan Bank, a New York banking
association.
"CHASE DEBT" means all obligations, indebtedness, and liabilities
of the Debtor to Chase arising pursuant to any of the Chase Loan Documents,
pursuant to any interest rate swap, interest rate caps, interest rate collars,
or other similar agreements entered into by Chase with the Debtor enabling
Debtor to fix or limit its actual interest expense, pursuant to any foreign
exchange, currency hedging, or other agreement entered into by Chase with the
Debtor enabling Debtor to limit the market risk of the Debtor actually holding
currency in either the cash or futures markets, or pursuant to any deposit or
cash management products and services provided to the Debtor, in each case
whether now existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint
and several, including, without limitation, the obligation of the Debtor to
repay loans, any reimbursement obligations arising in connection with any letter
of credit, interest on the loans and such reimbursement obligations, credit
extended on uncollected funds and all fees, costs, and expenses (including
attorneys' fees and expenses) provided for in the Chase Loan Documents or such
agreements enabling the Debtor to fix or limit its interest expense or limit its
market risk of holding currency or pursuant to any deposit or cash management
products and services provided to the Debtor.
"CHASE LOAN DOCUMENTS" mean all loan agreements, notes, letters of
credit, documents, instruments, guarantees, security agreements, deeds of trust,
pledge agreements, certificates and agreements between the Debtor and Chase
which reflect any loan or other extension of credit made by Chase to the Debtor,
or which are delivered by the Debtor to Chase in connection with any loan or
other extension of credit by Chase to the Debtor. The loan documents include
this Security Agreement and the Intercreditor Agreement.
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"CHATTEL PAPER" means all of Debtor's now owned or existing or
hereafter acquired or arising, tangible and intangible chattel paper.
"COLLATERAL" means all of the following wherever located: (a)
Accounts, (b) Chattel Paper, (c) Deposit Accounts, (d) Documents, (e) Equipment,
(f) General Intangibles, (g) Instruments, (h) Inventory, (i) Investment
Property, (j) Letter of Credit Rights, (k) Tort Claims, (l) all dividends,
distributions, and income attributable to proceeds, products, additions to,
substitutions, replacements and supporting obligations for, model conversions,
and accessions of, any and all Collateral; "proceeds" includes, without
limitation, all proceeds of any insurance (including any surrender value
therefor, any right to return, or unearned premiums), causes and rights of
action, remedies, privileges, settlements, judicial and arbitration judgments
and awards, indemnities, liens, warranties, or guaranties payable from time to
time with respect to or security for any of the Collateral, and (m) all ledgers,
files, writings, records, data bases, plans, drawings, and information relating
to any of the foregoing.
"COLLATERAL AGENT" means Bank of America in its capacity as the
collateral agent under the Security Agreement, or any successor collateral
agent.
"DEPOSIT ACCOUNTS" means all of Debtor's now owned or existing or
hereafter acquired or arising deposit accounts.
"DOCUMENTS" means all of Debtor's now owned or existing or
hereafter acquired or arising documents.
"EQUIPMENT" means all of Debtor's now owned or existing or
hereafter acquired or arising equipment and fixtures of every description used
or useful in the conduct of Debtor's business, and all accessories, accessions,
additions, attachments, substitutions, replacements, improvements, parts, and
other property now or hereafter affixed thereto or used in connection therewith.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.0 hereof.
"GENERAL INTANGIBLES" means all of Debtor's now owned or existing
or hereafter acquired or arising general intangibles (including all payment
intangibles) and in any event includes all rights to tax refunds, all
copyrights, patents, trademarks, trade secrets, service marks, formulae,
blueprints, technology, trade dress, logotypes, rights arising out of leases,
licenses, and contracts which are not accounts, chattel paper, or instruments
(including, without limitation, dividends and rights to payment arising out of
partnership agreements and management contracts), computer software, options,
warranties, service contracts, program services, rights to refund,
reimbursement, indemnification, and subrogation, goodwill, licenses, royalties,
franchises, customer lists, reversions from any retirement plan or arrangement,
and all other choses in action and causes of action.
"INSTRUMENTS" means all of Debtor's now owned or existing or
hereafter acquired or arising instruments, including all of Debtor's promissory
notes.
"INTANGIBLE COLLATERAL" means all Collateral other than Equipment
and Inventory.
"INTERCREDITOR AGREEMENT" has the meaning set forth in Recital D
hereof.
"INVENTORY" means all of Debtor's now owned or existing or
hereafter acquired or arising goods, merchandise, and other personal property
furnished under any contract of service or intended for
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sale or lease, including all raw materials, work in process, finished goods and
materials and supplies, of any kind, nature, or description, that are used or
consumed by Debtor's business, or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling, or finishing of such
goods, merchandise, and other personal property, all goods consigned by or to
Debtor, all goods previously constituting Equipment which are at any time in
question being held for sale or lease in the ordinary course of Debtor's
business, and all returned or repossessed goods now or at any time or times
hereafter in the possession or under the control of Debtor.
"INVESTMENT PROPERTY" means all of Debtor's now owned or existing
or hereafter acquired or arising investment property, including without
limitation or in addition, all financial assets and all the following:
(a) all the capital stock, partnership interests, membership
interests and other ownership interests issued by, and all other ownership
interest in, all subsidiaries of Debtor (that are not Foreign Subsidiaries, as
defined below) now owned or hereafter created or acquired and owned by the
Debtor, including without limitation, the capital stock or other ownership
interests described on Exhibit 1.1;
(b) sixty-six and two thirds percent (66 2/3%) of all the capital
stock, partnership interests, membership interests or other ownership interests
of each subsidiary of Debtor organized outside of the United States of America
(the "FOREIGN SUBSIDIARIES"), now owned or hereafter created or acquired and
owned by Debtor, including without limitation those specifically described on
Exhibit 1.2 hereto; and
(c) all the commodity accounts and security accounts described on
Exhibit 3.7.
"LENDERS" means Bank of America and Chase.
"LETTER OF CREDIT RIGHTS" means all of Debtor's now owned or
existing or hereafter acquired or arising rights to payment and performance
under any letter of credit.
"LIEN" means any mortgage, deed of trust, pledge, security
interest, lien, conditional sale or other title retention agreement, or any
financing statement or any distraint, writ of attachment, writ of garnishment,
writ of sequestration, or similar writ or any other encumbrance of any nature
whatsoever, whether voluntary or not.
"LOAN DOCUMENTS" means the Bank of America Loan Documents and the
Chase Loan Documents.
"OBLIGATIONS" means the following described obligations:
(a) Payment and performance by Debtor of all of the Bank of America
Debt and all of the Chase Debt; and
(b) To the extent not included in subparagraph (a), all sums
advanced or expenses or costs incurred by the Collateral Agent or any Lender
pursuant to, or permitted by, the terms of this Security Agreement, plus
interest thereon at the highest lawful rate per annum for past due payments,
from the date such advances are made or expenses or costs are incurred until
reimbursed, such costs to include, but not be limited to, all costs of the
Collateral Agent or any Lender to obtain, administer,
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preserve and protect and enforce this Security Agreement and collect the
Obligations and maintain and preserve the Collateral.
"PAYMENT RIGHTS COLLATERAL" means all Collateral consisting of
General Intangibles which constitute payment intangibles, Accounts, and Chattel
Paper.
"PERMITTED LIENS" means (a) liens and security interests in favor
of the Collateral Agent for the benefit of the Lenders: (b) carriers',
warehousemen's, mechanics', and other similar liens and charges arising under
applicable law in the ordinary course of Debtor's business securing obligations
that are not incurred in connection with the obtaining of loans and which are
not overdue; (c) taxes and assessments not delinquent or actively being
contested in good faith by Debtor; (d) deposits or pledges for goods or services
made in the ordinary course of a Debtor's business; (e) title of a bona fide
lessor of tangible personal property to Debtor under a contract which does not
create a security interest under the UCC; (f) the encumbrances described on
Exhibit 1.3; and (g) liens and security interests in favor of third parties
which are granted with the prior written consent of the Collateral Agent acting
at the direction of the Lenders.
"SECURITY AGREEMENT" means this Security Agreement and all
amendment hereof or supplements hereto.
"SECURITY INTEREST" means the security interest granted by Debtor
to the Collateral Agent under this Security Agreement.
"SOLVENT" when used with respect to any person means that the fair
value of the property of such person is on the date of determination, greater
than the total amount of the liabilities (including contingent liabilities) of
such person as of such date and that, as of such date, such person is able to
pay all indebtedness of such person as such indebtedness matures.
"TORT CLAIMS" means all of Debtor's currently existing commercial
tort claims.
2.0 SECURITY.
2.1 Security Interest. As security for the payment or performance,
as the case may be, in full of the Obligations, Debtor hereby bargains, sells,
conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to
the Collateral Agent, its successors and assigns for the ratable benefit of the
Lenders, and hereby grants to the Collateral Agent, its successors and assigns
for the ratable benefit of the Lenders, a security interest in all of Debtor's
right, title and interest in, to and under the Collateral.
2.2 Debtor to Remain Liable. Debtor shall remain liable under and
shall preserve the liability of all other parties to each agreement constituting
part of the Collateral and shall perform all of its obligations thereunder. The
exercise by the Collateral Agent of any of its rights hereunder shall not
release Debtor from any duties under any agreement. The Collateral Agent has no
obligation or liability with respect to any of the Collateral under any
agreement by reason or arising out of the assignment thereof to the Collateral
Agent or the granting to the Collateral Agent of a security interest therein or
the receipt by the Collateral Agent of any payment relating to any such
agreement.
3.0 REPRESENTATIONS. Debtor makes the following representations to the
Collateral Agent and to each of the Lenders:
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3.1 Enforceability. Debtor has all requisite authority to execute,
deliver, and perform its duties under, and has duly authorized, executed, and
delivered, this Security Agreement and the Intercreditor Agreement; and this
Security Agreement and the Intercreditor Agreement is enforceable against Debtor
in accordance with their respective terms. The execution, delivery, and
performance hereof by Debtor do not violate, and do not require any
authorization, notice, or filing under, any agreement, judgment, injunction,
decree, determination, award, rule, regulation, order, or writ of any person,
entity, court, or governmental agency or authority. This Security Agreement
creates in favor of the Collateral Agent an enforceable security interest; prior
to or contemporaneous with the execution hereof, all filings necessary or
appropriate to create, preserve, and perfect the Security Interest have been
accomplished; and the Security Interests in the Collateral constitute perfected
security interests therein free of all other Liens other than Permitted Liens.
3.2 No Proceeding. There is no pending or threatened claim or
proceeding which if determined adversely to Debtor would materially and
adversely affect any aspect of Debtor's business or the Collateral.
3.3 Financial Condition of Debtor. Debtor is Solvent. All financial
or credit statements or information of or relating to Debtor delivered to or
relied upon by the Lenders prior to, contemporaneously with, or subsequent to
the execution of this Security Agreement, are true, correct, complete, and valid
and accurately reflect Debtor's financial condition.
3.4 Title to Collateral and Related Matters.
(a) Debtor has rights in or power to transfer the Collateral
and its title to the Collateral free of any dispute, counterclaim, or defense.
(b) Each obligation constituting Payment Rights Collateral is a
valid and enforceable obligation representing an undisputed debt owing by the
Account Debtor to Debtor for a fixed sum as set forth in an invoice or other
document or instrument representing the same. No Payment Rights Collateral is
subject to any defense, right of offset, counterclaim or adjustment.
(c) Exhibit 3.4(c) lists all trade names by which Debtor is now
known or has been previously known.
(d) None of the Collateral is an accession to goods other than
goods constituting part of the Collateral.
3.5 Instruments in Payment of Intangible Collateral. Debtor has not
received any note, trade acceptance, draft, or other instrument with respect to
or in payment of any Payment Rights Collateral, except checks received in the
ordinary course of business.
3.6 Address and Place of Business. Attached as Exhibit 3.6 is a
complete and correct description of all real property owned by Debtor. None of
the property listed on Exhibit 3.6 is mortgaged. The chief executive office of
Debtor is 2819 Walnut Hill Lane, Dallas, Texas 75229. All of Debtor's records or
copies thereof pertaining to the Collateral and the proceeds thereof are now
maintained at its chief executive office. Within the past four (4) months,
Debtor has not changed the location of its chief executive office or where it
keeps its records concerning the Collateral. Debtor has no places of business
other than the locations listed on Exhibit 3.6. None of the Equipment or
Inventory has, within the four (4) months preceding the date of this Security
Agreement, been located at any place other than the addresses specified in the
preceding sentence, except for in-transit Inventory, Inventory held at customer
locations
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for assembly in the ordinary course of business, and Equipment held by third
parties for repair from time to time in the ordinary course of business. As of
the date hereof, the jurisdictions in which Inventory is being held at Debtor's
customer locations for assembly in the ordinary course of business are
Minnesota, Wisconsin and Texas. No person or entity other than Debtor and
Collateral Agent has possession of any of the Collateral, except for Inventory,
which in the ordinary course of Debtor's business, is located at the premises of
the Debtor's customers for purposes of its assembly; provided that no such
Inventory is located at a customer's site for more than four months before title
transfers to the customer and the customer pays the purchase price therefor.
3.7 Deposit, Commodity and Securities Accounts. Exhibit 3.7
correctly identifies all deposit, commodity and securities accounts owned by
Debtor and the institutions holding such accounts. No party other than Debtor
has control over any Investment Property or such accounts..
3.8 Name and Organization of Debtor. Debtor's exact legal name and
the jurisdiction under which Debtor is organized are as set forth in the first
paragraph of this Security Agreement. Debtor has not changed its name within the
five (5) years immediately preceding the date of this Security Agreement, and
Debtor conducts no business under any other name, whether or not registered as
an assumed name, except as specified in Exhibit 3.4(c). Exhibit 3.4(c) sets
forth an accurate list of all names of all predecessor companies of Debtor
including the names of any entities it acquired (by stock purchase, asset
purchase, merger or otherwise) and the chief place of business, chief executive
office, and jurisdiction of organization of each such predecessor company. For
purposes of the foregoing, a "predecessor company" shall mean, with respect to
Debtor, any party whose assets or equity interests are acquired by Debtor or who
was merged with or into Debtor within the last five years prior to the date
hereof.
3.9 Delivery of Collateral. Except as provided by Section 4.12,
Debtor has delivered to Collateral Agent all Collateral the possession of which
is necessary to perfect the security interest of Collateral Agent therein. All
certificates of title evidencing Equipment have been delivered to Collateral
Agent.
3.10 Intellectual Property. All intellectual property of the Debtor
that is registered with or for which an application for registration has been
filed with any governmental authority will be identified on Exhibit 3.10 on or
before January 15, 2001, and such information will be true, correct and
complete.
4.0 COVENANTS. Debtor covenants as follows:
4.1 In General. Debtor will (a) maintain good and marketable title
to all Collateral free of any Lien (other than Permitted Liens), dispute,
counterclaim, or defense; (b) perform fully and promptly all agreements
contained herein and in all other Loan Documents; (c) conduct all business
efficiently and without voluntary interruption; (d) preserve all material
rights, privileges, and franchises held or used in its business; (e) at its cost
and expense, defend any action which may affect the Security Interest or
Debtor's title to the Collateral; and (f) cooperate with the Collateral Agent so
that the Collateral Agent is allowed to obtain a control agreement in form and
substance satisfactory to the Collateral Agent with respect to Collateral which
consists of deposit accounts, investment property, letter of credit rights, or
electronic chattel paper.
4.2 Notices. Debtor promptly will notify the Collateral Agent and
each Lender of (a) any material adverse change in Debtor's financial condition
or any change which materially affects any of the Collateral or the Security
Interest; (b) any claim, action, or proceeding which could materially and
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adversely affect the value of, or Debtor's title to, any of the Collateral, or
the effectiveness of the Security Interest; and (c) the occurrence of any Event
of Default.
4.3 Processing, Sale, Collections, Etc.
(a) Debtor will use Equipment constituting Collateral solely in
the conduct of Debtor's business, will keep all tangible Collateral in good
order and repair, and will not waste or destroy any part of the Collateral nor
use any of the Collateral in violation of any statute or ordinance.
(b) Until notice from the Collateral Agent to the contrary,
given at any time after the occurrence and during the continuance of any Event
of Default, Debtor (i) may, in the ordinary course of its business, at its own
expense, sell, lease, or furnish under contracts of service any of the Inventory
(but no such sale or use shall limit or impair the Security Interest in any
proceeds thereof); (ii) will, at its own expense, endeavor to collect, when due,
all amounts due with respect to any of the Intangible Collateral, and take such
action with respect to such collection as the Collateral Agent may reasonably
request or, in the absence of such request, as Debtor may deem advisable; and
(iii) may grant in the ordinary course of business, to any person obligated on
any of the Intangible Collateral, any rebate, refund, or allowance to which such
person may be lawfully entitled, and accept, in connection therewith, the return
of goods, the sale or lease of which shall have given rise to such Intangible
Collateral.
(c) Except as permitted by Section 4.3(b), 4.3(d) or 4.12, the
Collateral Agent does not authorize Debtor to, and Debtor will not sell, lease,
assign, license, transfer, or otherwise dispose of or in any manner alter,
modify, manufacture, process, or assemble the Collateral or any part thereof. If
Debtor with or without the consent of the Collateral Agent disposes of a
substantial part of the Collateral, Debtor will notify the Collateral Agent and
each Lender of such disposition.
(d) Any Equipment constituting Collateral which is worn out,
destroyed, or damaged beyond repair may be disposed of but will promptly be
replaced by Equipment, free of any Lien except for Permitted Liens, which has a
value or utility at least equal as of the date of replacement to the value or
utility of the replaced Equipment as of the date hereof.
(e) Except as contemplated by Section 4.3(b), 4.3(d) and 4.12,
so long as Debtor holds any proceeds of the Collateral, Debtor will hold same
separate and apart from any other property of Debtor and in trust for the
Collateral Agent and shall not commingle the proceeds of Collateral with any of
Debtor's funds or property.
(f) Debtor will place a legend on all Chattel Paper
constituting part of the Collateral that the Collateral Agent has a security
interest in such Chattel Paper.
4.4 Change of Name or Location; Third Parties in Possession. Debtor
will not change its state of organization, name, or form of organization or
conduct any of its business under any name except its legal name or those
identified on Exhibit 3.4(c) without the prior, written consent of the Lenders,
which consent is conditioned on Debtor's delivery of all documents necessary or
desirable to preserve the Security Interest. Debtor will not establish a new
location for its jurisdiction of organization, chief executive office or for
maintaining its books and records nor the location of any Collateral (other than
Inventory held at customer locations) until it has given to the Collateral Agent
not less than thirty (30) days' prior written notice of its intention to do so
which identifies such new location and provides such other information and
documents in connection therewith as the Collateral Agent or any Lender may
request. Debtor shall notify the Collateral Agent as of the end of each calendar
quarter if any of Debtor's then current customers are located in any
jurisdictions other than those described in Section 3.6, such
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notification to include a listing of the additional jurisdictions. Debtor shall
not permit any third party (including any warehouseman, bailee, agent,
consignee, customer or processor) to hold any Collateral, except as contemplated
by Section 3.6 or unless Debtor shall: (i) notify such third party of the
security interests created hereby; (ii) instruct such party to hold all such
Collateral for Collateral Agent's account subject to Collateral Agent's
instructions; and (iii) take all other actions the Collateral Agent reasonably
deems necessary to perfect and protect its and the Debtor's interests in such
Collateral pursuant to the requirements of the UCC of the applicable
jurisdiction where the warehouseman, bailee, consignee, agent, processor or
other third party is located (including the filing of a financing statement in
the proper jurisdiction naming the applicable third party as debtor and the
Debtor as secured party and notifying the third party's secured lenders of the
Debtor's interest in such Collateral before the third party receives possession
of the Collateral in question). If an Event of Default occurs and the Lenders
request, Debtor shall take the actions specified in clauses (i) through (iii) of
the foregoing sentence with respect to Inventory in possession of its customers.
4.5 Records. Debtor will maintain a complete and accurate set of
books and records containing up-to-date posting of all Debtor's transactions.
Debtor will keep proper books and records with respect to the Collateral and
will upon request mark or otherwise make entries with respect to such books and
records to reflect the Security Interest.
4.6 Reports. Debtor will furnish the Collateral Agent for the
benefit of the Lenders with such information with respect to the Collateral as
the Collateral Agent may request. Debtor will deliver to the Collateral Agent on
a periodic basis as the Collateral Agent or any Lender determines, a report
describing the kind, location, and quantity of Inventory and a report in form
satisfactory to the Collateral Agent accurately showing and describing the
Payment Rights Collateral and including, among other information, the aging of
each item of Payment Rights Collateral. Debtor will deliver to the Collateral
Agent, together with each such report, duplicate invoices, shipping receipts,
and such other evidence of shipment or delivery of the goods or performance of
the services or the performance of such other act or acts giving rise to such
Payment Rights Collateral as the Collateral Agent or any Lender may, from time
to time, require. If Debtor grants to any Account Debtor a credit, or if Debtor
receives back any goods which Debtor had delivered to an Account Debtor, Debtor
will forthwith give notice to the Collateral Agent, in writing, of the issuance
of such credit or the return of such goods. Debtor will promptly advise the
Collateral Agent of the existence of any dispute with respect to any Intangible
Collateral.
4.7 INDEMNITY. DEBTOR INDEMNIFIES AND AGREES TO HOLD THE COLLATERAL
AGENT AND EACH LENDER AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS (EACH AN "INDEMNIFIED PARTY" AND COLLECTIVELY THE
"INDEMNIFIED PARTIES") HARMLESS FROM AND AGAINST ANY LOSS, CLAIM, DEMAND, OR
EXPENSE (INCLUDING ATTORNEYS' FEES) (INDIVIDUALLY, A "CLAIM") ARISING BY REASON,
OR IN ANY MANNER RELATED TO, THIS SECURITY AGREEMENT, THE INTERCREDITOR
AGREEMENT OR THE COLLATERAL OR THE FAILURE OF DEBTOR TO COMPLY WITH ANY STATE OR
FEDERAL STATUTE, RULE, REGULATION, ORDER, OR DECREE INCLUDING, WITH RESPECT TO
EACH INDEMNIFIED PARTY, ALL CLAIMS ARISING BY REASON OF THE NEGLIGENCE OF SUCH,
OR ANY OTHER, INDEMNIFIED PARTY BUT EXCLUDING, WITH RESPECT TO ANY INDEMNIFIED
PARTY ANY CLAIM ARISING BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH INDEMNIFIED PARTY. The applicable indemnified party shall control the
defense of any Claim, but Debtor will pay the cost thereof. This indemnity is in
addition to and not in any manner in limitation of the other indemnification
provisions of the other Loan Documents.
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4.8 Taxes. Debtor will pay all taxes and assessments on the
Collateral or on its use or operation prior to the time such taxes become past
due, except such as are being contested in good faith by appropriate proceedings
and with reserves which are adequate in the opinion of the Collateral Agent.
4.9 Mortgagees' and Landlords' Waivers. Debtor will cause each
mortgagee of all real estate owned by Debtor and each landlord of all premises
leased by Debtor to execute and deliver to the Collateral Agent instruments, in
form and substance satisfactory to the Collateral Agent, by which such mortgagee
or landlord waives or subordinates all of its rights, if any, to all of the
Collateral.
4.10 Insurance. Debtor will maintain insurance at all times with
respect to all Collateral in such amounts and against such risks as the
Collateral Agent may require and, if required by the Collateral Agent, provide
originals or certified copies thereof to the Collateral Agent. Each insurer
shall agree, by endorsement upon the policy or policies issued by it or by
independent instrument furnished to the Collateral Agent, that (a) it will give
the Collateral Agent at least thirty (30) days prior written notice of the
effective date of any material alternation or cancellation of such policy, and
(b) the coverage shall not be terminated, reduced, or affected in any manner
because of any breach of violation by Debtor of any warranty, declaration, or
condition of such insurance policy.
4.11 Operations. Debtor will at all times comply in all material
respects with all applicable law, the non-compliance with which could have a
materially adverse effect on Debtor or the Collateral.
4.12 Further Assurances; Exceptions to Delivery. Debtor authorizes
the Collateral Agent to file a financing statement describing the Collateral.
Debtor will at its own expense take all action as the Collateral Agent may at
any time request to protect, assure or enforce the Collateral Agent's interests,
rights and remedies created by, provided in or emanating from this Security
Agreement. Debtor will (a) immediately deliver to the Collateral Agent, in due
form for transfer (endorsed in blank or accompanied by duly executed, undated,
appropriate blank stock or bond powers) all Certificated Securities, Chattel
Paper, Instruments, Documents, and writings evidencing General Intangibles which
are interests in or obligations of the issuer of such writings constituting part
of the Collateral; (b) cause the Security Interest to be duly noted on any
certificate of title issuable with respect to any of the Collateral and
forthwith deliver to the Collateral Agent each such certificate of title; and
(c) execute and deliver to the Collateral Agent, in due form for filing or
recording (and pay the cost of filing or recording the same in all public
offices deemed necessary or advisable by the Collateral Agent) such assignments
(including assignments of life insurance), security agreements, mortgages, deeds
of trust, pledge agreements, consents, waivers, financing statements (and
amendments thereof), stock or bond powers, and other documents, and do such
other acts and things, all as may from time to time in the opinion of the
Collateral Agent or any Lender be necessary or desirable to establish and
maintain a valid perfected first priority security interest in the Collateral
free of all Liens other than Permitted Liens. Notwithstanding the foregoing or
anything else herein to the contrary, prior to the Collateral Agent's written
notice to the contrary, Debtor may: (i) retain for collection in the ordinary
course of business checks representing Proceeds of Accounts received in the
ordinary course of business; (ii) retain any letters of credit received in the
ordinary course of business; (iii) retain and utilize in the ordinary course of
business all dividends and interest paid in respect to any Investment Property;
and (iv) retain any Documents received and further negotiated in the ordinary
course of business. If the Collateral Agent requests at any time, Debtor shall
take such action as the Collateral Agent may require to (a) deliver all letters
of credit and Documents pledged as Collateral hereunder to Collateral Agent and
(b) instruct all Account Debtors and all other parties making payments on or in
respect of any Collateral (including without limitation, any Investment
Property) to make payment thereon to the Collateral Agent in accordance with
Section 5.5.
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4.13 Accessions and Fixtures. Debtor will not permit any of the
Collateral to become an accession to goods other than goods constituting the
Collateral. If any of the Collateral is to be attached to real property, Debtor
will give the Collateral Agent written notice of (a) the legal description of
the real property to which such Collateral is to be attached, and (b) the name
of the record owner thereof.
4.14 Warehouse Receipts Non-Negotiable. The Debtor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
in respect of any portion of the Collateral, such warehouse receipt or receipt
in the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the UCC) unless such warehouse receipt or receipt in the nature thereof
is delivered to the Collateral Agent.
4.15 Voting Rights; Distributions, Etc. So long as no Event of
Default shall have occurred and be continuing, the Debtor shall be entitled to
exercise any and all voting and other consensual rights (including, without
limitation, the right to give consents, waivers and notifications) pertaining to
any of Investment Property; provided, however, that no vote shall be cast or
consent, waiver or ratification given or action taken without the prior written
consent of the Collateral Agent which would be inconsistent with or violate any
provision of this Security Agreement or any other Loan Document.
4.16 Transfers and Other Liens; Additional Investments. Except as
permitted by the terms of this Security Agreement or any other Loan Document,
the Debtor agrees that it will (i) not permit any issuer of any of the
Collateral to issue any shares of stock, or any other equity, partnership,
membership or other ownership interest, any notes or other securities or
instruments in addition to or in substitution for any of the Collateral, and
(ii) pledge hereunder, immediately upon its acquisition thereof, any and all
such shares of stock or other equity, partnership, membership and other
ownership interests, notes or instruments.
4.17 Intellectual Property Covenants. If, before the Obligations
are paid in full, Debtor obtains any new intellectual property or rights thereto
or becomes entitled to the benefit of any intellectual property, Debtor shall
give to Collateral Agent prompt written notice thereof, and shall execute and
deliver, in form and substance satisfactory to Collateral Agent, a security
agreement describing any such new intellectual property for filing with the
applicable governmental authorities. Debtor shall: (a) prosecute diligently any
copyright, patent, or trademark application at any time pending which is
necessary for the conduct of Debtor's business; (b) make application on all new
copyrights, patents and trademarks as reasonably deemed appropriate by Debtor;
(c) preserve and maintain all rights in the intellectual property that are
necessary for the conduct of Debtor's business; and (d) upon and after the
occurrence and during the continuance of an Event of Default, use its reasonable
efforts to obtain any consents, waivers or agreements necessary to enable
Collateral Agent to exercise its remedies with respect to the intellectual
property. Debtor shall not abandon any pending copyright, patent or trademark
application, or copyright, patent, trademark or any other intellectual property
which is necessary for the conduct of Debtor's business without the prior
written consent of the Lenders.
4.18 Deposit, Commodity and Security Accounts. The Debtor shall not
open any new deposit, commodity or security account or otherwise utilize any
such account other than the accounts identified on Exhibit 3.7 unless Debtor
shall have given the Collateral Agent thirty (30) days prior written notice
thereof and shall have taken all action deemed necessary or desirable by the
Collateral Agent to cause its Security Interest therein to be perfected. Prior
to the occurrence and continuance of an Event of Default, the Debtor may make
purchases and sales of Investment Property (that does not constitute equity
interests in its subsidiaries) in accordance with the restrictions on investment
set out in the Loan Documents. After the occurrence and during the continuance
of an Event of Default, the Debtor shall not
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be authorized to make purchases and sales of the Investment Property. Debtor
will not give any party control over any Investment Property. On or before
January 15, 2001, Debtor shall have taken all action required by the Collateral
Agent to give the Collateral Agent control over the accounts described in
Exhibit 3.7, including without limitation, the execution and delivery among
Debtor, the Collateral Agent and the institutions identified on Exhibit 3.7 of
control agreements in form and substance satisfactory to the Collateral Agent.
4.19 Commercial Tort Claims. The Debtor will grant to the
Collateral Agent a security interest in any commercial tort claim that arises
after the date hereof that relates to or arises out of the Collateral or the
conduct of the Debtor's business in relation thereto.
4.20 Update of Exhibits. On or before December 15, 2000, Debtor
agrees to update and complete Exhibit 3.6 and provide legal descriptions
acceptable to the Collateral Agent for all of the real estate listed on Exhibit
3.6 along with each of the following for each parcel of real estate listed
thereon:
(a) a title report or title commitment listing all exceptions
to title applicable thereto;
(b) the documentation relating to the exceptions to title
described in clause (a);
(c) any available appraisal, surveys and environmental
reports; and
(d) a certification relating to the parcel's flood zone
classification.
On or before January 15, 2001, Debtor agrees to update and complete fully all of
the exhibits attached to this Agreement other than Exhibit 3.6.
4.21 Liens Against Real Estate. On or before December 15, 2000,
Debtor will mortgage to the Collateral Agent all of Debtor's interest in all of
the real property described on Exhibit 3.6 pursuant to one or more deeds of
trust (each, as amended, a Deed of Trust) which shall be satisfactory in form
and substance to the Collateral Agent and the Lenders. These Deeds of Trust
shall be executed as and when the legal descriptions for the real estate
described on Exhibit 3.6 become available. The Deeds of Trust shall secure the
payment and performance of the Obligations.
4.22 Delivery of Certain Investment Property. On or before January
15, 2001, Debtor shall deliver to the Collateral Agent share certificates or
other appropriate evidence of ownership, as well as duly executed stock powers,
of the entities listed on Exhibits 1.1 and 1.2, together with the articles of
incorporation, bylaws or other similar governing documents of each such entity,
certifications from the appropriate governmental authorities as to the existence
and good standing of each such entity and such other documents as the Collateral
Agent may require (including pledge agreements) to insure the attachment,
perfection and priority of the security interests created hereby in such
Collateral under the laws of the jurisdiction of organization of the companies
listed on Exhibit 1.2.
5.0 THE COLLATERAL AGENT'S RIGHTS. The Collateral Agent and the Lenders
have the following rights without regard to the occurrence of an Event of
Default:
5.1 Information. The Collateral Agent or either Lender may at any
time obtain from any party any information concerning Debtor, Debtor's business
or affairs, the Collateral, or the Obligations, and neither the Collateral
Agent, either Lender nor the person furnishing such information shall be liable
to Debtor in respect thereof. At any reasonable time and from time to time, the
Collateral
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Agent, either Lender or any of their respective representatives may at Debtor's
expense to the extent permitted by applicable law inspect the Collateral and
examine, audit, inspect, verify, and make copies of and abstracts from the books
and records, and visit the properties of Debtor, discuss the affairs, finances,
and accounts of Debtor with any of its officers or directors and discuss the
affairs, finances, and accounts of Debtor with its independent public
accountants; and Debtor will permit such accountants to disclose to the
Collateral Agent and the Lenders all financial statements and other information
they may have with respect to Debtor.
5.2 Delivery of Collateral. The Collateral Agent may at any time
demand and Debtor shall deliver to the Collateral Agent possession or control of
any of the Collateral.
5.3 Performance by the Collateral Agent. The Collateral Agent may,
but is not obligated to, perform or attempt to perform any agreement of Debtor
contained herein. If any material part of the Collateral becomes the subject of
any proceeding and Debtor fails to defend fully such proceeding and to protect
Debtor's and the Collateral Agent's rights in such Collateral in good faith, the
Collateral Agent may, at the Lenders' option but at Debtor's cost, elect to
defend and control the defense of such litigation or other proceeding, and may
(a) select and retain counsel, (b) determine whether settlement shall be offered
or accepted, and (c) determine and negotiate all settlement terms.
5.4 Preservation. Debtor has the risk of loss of the Collateral.
The Collateral Agent's duty with respect to any Collateral in the possession of
the Collateral Agent is solely to use reasonable care in the custody and
preservation of the Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if it takes such action for that purpose as Debtor may request in
writing, but failure by the Collateral Agent to comply with any such request
shall not of itself be deemed a failure to exercise such reasonable care.
NEITHER THE COLLATERAL AGENT NOR EITHER LENDER IS RESPONSIBLE FOR, NOR ARE THE
OBLIGATIONS (OR DEBTOR'S LIABILITY WITH RESPECT THERETO) SUBJECT TO SETOFF OR
REDUCTION BY REASON OF, ANY SHORTAGE, DISCREPANCY, DAMAGE, LOSS, OR DESTRUCTION
IN OR TO THE COLLATERAL nor, in any event, any depreciation in the value of the
Collateral. Neither the Collateral Agent nor either Lender is required to
fulfill any of the obligations of Debtor with respect to any of the Collateral,
or to make any payment, or to make any inquiry as to the nature or sufficiency
of any payment received by it or the sufficiency of any performance of any party
under any of the Collateral, or to present or file any claim, or to take any
action to enforce any performance or the payment of any amounts which have been
assigned to it, in which it has been granted a security interest, or to which it
may be entitled at any time. Neither the Collateral Agent nor either Lender has
any duty to maintain in force, to prevent lapse or impairment of, or to exercise
any rights with respect to any of the Collateral or any insurance thereon, or to
exercise any rights, options or privileges respecting any of the Collateral or
to take any steps necessary to preserve rights against prior or other parties or
to enforce collection of the Collateral or any part thereof by legal proceedings
or otherwise. The duties of the Collateral Agent are to account to Debtor for
Collateral actually received by the Collateral Agent and to receive collections,
remittances and payments on such Collateral as and when made and received by the
Collateral Agent and hold same as Collateral or apply same to the Obligations
pursuant to the terms hereof.
5.5 Regarding Intangible Collateral. The Collateral Agent may at
any time without prior notice to Debtor and without the necessity of foreclosing
thereon, notify any person liable in respect of any Payment Rights Collateral to
make payment directly to the Collateral Agent and receive such payments and
otherwise enforce Debtor's rights against Account Debtors. All payments so
received will be applied as specified herein. Upon request of the Collateral
Agent, at any time, Debtor will so notify the Account Debtors and will indicate
on all billings to Account Debtors that all monies due thereon are payable to
the Collateral Agent. The Collateral Agent has the right to verify the Payment
Rights
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Collateral or any portion thereof in the name of Debtor, in the name of the
Collateral Agent, or otherwise. Except as specifically permitted in this
Security Agreement, Debtor will not agree to any modification of the terms of
any Payment Rights Collateral without the prior written consent of the
Collateral Agent. If any Intangible Collateral evidences a security interest of
Debtor in any property, Debtor will take all steps necessary to perfect such
security interest. After an Account Debtor has been notified of the assignment
of the Collateral to the Collateral Agent, Debtor shall not release, compromise,
or adjust any Payment Rights Collateral, or any guaranty, security, or lien
therefor, or grant any discounts, allowances, or credits thereon, or bring any
suit to enforce payment thereof. Neither the Collateral Agent nor either Lender
is liable for any error, omission, or delay occurring in the settlement,
collection, or payment of or enforcement of rights with respect to any Payment
Rights Collateral or of any instrument received in full or part payment thereof
or in dealing with any lien, security, or guaranty of or any other contractual
undertaking related to any Payment Rights Collateral. The Collateral Agent may
require Debtor to deposit in a bank account in a bank of the Collateral Agent's
choice over which the Collateral Agent alone shall have the authority to make
withdrawals, or deliver to the Collateral Agent all checks, drafts, money, or
other cash proceeds of the Collateral, immediately upon receipt thereof and in
form received (except for any necessary endorsement or assignment to permit a
collection). The Collateral Agent may hold the funds in said account as
additional Collateral or may, at the Lenders' discretion, apply same to the
Obligations. The Collateral Agent may attempt to collect from any party liable
in respect of any Payment Rights Collateral, by suit or otherwise, any sums due
thereon and otherwise to enforce Debtor's rights with respect thereto, and may
surrender, release, or exchange any Collateral therefor and extend, renew, or
compromise any sums payable in connection therewith, but the Collateral Agent
and the Lenders are in any event entitled to charge back against Debtor any
uncollected Payment Rights Collateral.
6.0 DEFAULT. Debtor is in default under this Security Agreement upon
the happening of any of the following events or conditions (each an "EVENT OF
DEFAULT"): (a) the failure of any party liable to pay when due any portion of
the Obligations; (b) the failure of Debtor or any other party liable for the
Obligations to perform fully, faithfully and promptly the agreements, covenants
and conditions contained in this Security Agreement or any of the Loan Documents
(including without limitation those specified in Sections 4.18, 4.20, 4.21 and
4.22 hereof); (c) the making of any representation by Debtor or any other party
liable for the Obligations in this Security Agreement, any of the Loan
Documents, or in any instrument delivered in connection herewith which is untrue
or misleading in any material respect at the time such representation or
warranty is made; (d) the sale, assignment, distribution, transfer or granting
of a Lien on any of the Collateral to or in favor of any party other than the
Collateral Agent, unless otherwise expressly permitted by this Security
Agreement or in writing by the Collateral Agent; (e) the entry of a judgment or
levy against any part of the Collateral or any execution, attachment,
sequestration, distraint warrant or other like or similar writ is issued with
respect to any of the Collateral; (f) the title of Debtor to any substantial
part of the Collateral becomes the subject of litigation which would or might,
in the Collateral Agent's opinion, upon final determination result in
substantial impairment or loss of the security provided by this Security
Agreement and upon notice by the Collateral Agent to Debtor such litigation is
not dismissed within 30 days of such notice; (g) the entry of a decree or order
for relief by a court having jurisdiction in the premises in respect of Debtor
in an involuntary case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Debtor or of any substantial part
of Debtor's property, or ordering the winding-up or liquidation of the affairs
of Debtor and the continuance of any such decree or order unstayed and in effect
for a period of thirty (30) consecutive days; (h) the commencement by Debtor of
a voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or the consent by Debtor to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or
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other similar official) of Debtor or for any substantial part of Debtor's
property, or the making by Debtor of any assignment for the benefit of
creditors, or the failure of Debtor generally to pay its debts as such debts
become due, or the taking of any action by Debtor in furtherance of any of the
foregoing; (i) the occurrence, with respect to any party liable in respect of
the Obligations, of any of the events specified in subsections (g) or (h) of
this Section; (j) the death, incapacity, dissolution, merger, consolidation, or
termination of existence of Debtor or any other person or entity liable to pay
any portion of the Obligations; (k) the loss, theft, substantial damage to or
destruction of any material portion of the Collateral; (l) the occurrence of any
Event of Default, as such term may be defined in any Loan Document; or (m) the
determination by either Lender that the results of any field examination of the
books and records of Debtor or the Collateral or other property of Debtor
conducted by either Lender pursuant to the provisions of the Loan Documents are
not acceptable to such Lender. Debtor agrees that any Event of Default hereunder
shall, notwithstanding the terms of the Loan Documents, create an Event of
Default under each Loan Document.
7.0 REMEDIES. Upon the occurrence of an Event of Default, and at any
time thereafter, if any Event of Default is continuing, the Collateral Agent or
the Lenders, or both, as the case may be, have the following rights and remedies
to the full extent permitted by applicable law:
7.1 Acceleration. Each Lender may declare the Obligations owed to
it secured hereby, or any part thereof, immediately due and payable, whereupon
same shall be due and payable without demand, presentment for payment, notice of
non-payment, protest, notice of protest, notice of intent to accelerate, notice
of acceleration and all other notices or without further action of any kind, all
of which are hereby expressly waived by Debtor; and the Collateral Agent and the
Lenders may proceed to enforce payment of same and exercise all of the rights
and remedies provided by the UCC as well as all other rights and remedies
possessed by the Collateral Agent under this Security Agreement, or by the
Lenders under any other Loan Document or otherwise.
7.2 Removal and Possession. The Collateral Agent may require Debtor
to assemble the Collateral and make it available to the Collateral Agent at any
place designated by the Collateral Agent which is reasonably convenient to both
parties. The Collateral Agent is entitled to immediate possession of all books
and records pertaining to any of the Collateral. The Collateral Agent may leave
the Collateral on Debtor's or any other party's premises but under the
Collateral Agent's control or may remove the Collateral from the premises of
Debtor or from wherever located, and, for purposes of removal and possession,
the Collateral Agent or its representatives may enter any premises of Debtor
without legal process and thereafter hold or store same, and Debtor waives and
releases the Collateral Agent and the Lenders, from all claims in connection
therewith or arising therefrom, and the Collateral Agent may maintain at
Debtor's expense on Debtor's premises a custodian who may exercise the
Collateral Agent's rights to protect the Collateral.
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7.3 Sale of Collateral.
(a) The Collateral Agent may sell the Collateral, in one or
more sales or parcels, at such price as the Collateral Agent deems adequate and
for cash or on credit or for future delivery, without assumption of any credit
risk, any portion of the Collateral, at any broker's board or at public or
private sale, without demand of performance or notice of intention to sell. The
purchaser of any Collateral sold shall thereafter hold the same free from any
claim or right, including any equity of redemption, of Debtor. The Collateral
Agent may make any such sale subject to any limitation or restriction, including
but not limited to a limitation in the method of offering the Collateral or in
the number or identity of prospective bidders, which the Collateral Agent may
believe to be necessary to comply with any requirement of applicable law or in
order to obtain any required approval of the purchase or the purchaser by any
governmental authority or officer. No such limitation or restriction shall cause
such sale not to be considered a commercially reasonable sale, nor shall the
Collateral Agent or either Lender be liable or accountable to Debtor, nor shall
the Obligations be subject to any reduction, by reason of the fact that the
proceeds of a sale subject to any such limitation or restriction are less than
otherwise might have been obtained. Without notice to or consent by Debtor, the
Collateral Agent may exercise all rights as the insured, beneficiary, or owner
of any insurance policy and may surrender same and receive the surrender value
thereof or sell same pursuant to the terms thereof.
(b) Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Collateral Agent will give Debtor commercially reasonable notice of the time and
place of any public sale thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. The requirements of
commercially reasonable notice are met if such notice is given in accordance
with Section 10.1 at least five (5) days before the time of the sale or
disposition. Expenses of retaking, holding, preparing for sale, selling, leasing
or the like shall include the Collateral Agent's attorneys' fees and legal
expenses, and all such expenses shall be borne by Debtor. Public or private
sales, for cash or on credit, to a wholesaler or retailer or investor, or use of
Collateral of the types subject to this Security Agreement, or public auction,
are commercially reasonable since differences in the sales prices generally
realized in the different kinds of sales are ordinarily offset by the
differences in the costs and the credit risks of such sales.
(c) At any sale the Collateral Agent may sell any part of the
Collateral without warranty of any kind and may specifically disclaim any
warranty of title or the like, and none of the foregoing will be considered to
make the sale not commercially reasonable.
(d) The Debtor waives all rights of marshaling, valuation and
appraisal in respect of the Collateral.
(e) The Collateral Agent may cause any or all of the Collateral
held by it to be transferred into the name of the Collateral Agent or the name
or names of the Collateral Agent's nominee or nominees.
(f) The Collateral Agent may exercise any and all rights and
remedies of the Debtor under or in respect of the Collateral, including, without
limitation, any and all rights of the Debtor to demand or otherwise require
payment of any amount under, or performance of any provision of, any of the
Collateral and any and all voting rights and corporate powers in respect of the
Collateral. Debtor shall execute and deliver (or cause to be executed and
delivered) to the Collateral Agent all such proxies and other instruments as the
Collateral Agent may reasonably request for the purpose of enabling the
Collateral Agent to exercise the voting and other rights which it is entitled to
exercise pursuant to this
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clause (f) and to receive the dividends, interest and other distributions which
it is entitled to receive hereunder.
(g) For purposes of enabling the Collateral Agent to exercise
its rights and remedies under this Section 7.3 and enabling the Collateral Agent
and its successors and assigns to enjoy the full benefits of the Collateral in
each case as the Collateral Agent shall be entitled to exercise its rights and
remedies under this Section 7.3, the Debtor hereby grants to the Collateral
Agent an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to the Debtor) to use, assign, license or
sublicense any of the intellectual property, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and all computer programs used for the completion or printout
thereof and further including in such license such rights of quality control and
inspection as are reasonably necessary to prevent the trademarks included in
such license from claims of invalidation. This license shall also inure to the
benefit of all successors, assigns and transferees of the Collateral Agent.
7.4 Other Rights.
(a) The Collateral Agent and the Lenders may exercise all other
rights any of them may have under any of the other agreements between Debtor and
the Collateral Agent, either Lender, or any combination of the Debtor, the
Collateral Agent and either or both of the Lenders or under applicable law. The
Collateral Agent is entitled to the appointment of a receiver to take possession
of all or any portion of the Collateral and to exercise any such powers as the
court confers upon the receiver.
(b) With the prior written consent of both Lenders, the
Collateral Agent may accept all or part of the Collateral in full or, if Debtor
so agrees in writing, partial satisfaction of the Obligations.
7.5 Exercise of Rights. The Collateral Agent may exercise its
rights with respect to the Collateral in such manner and in such order as the
Collateral Agent determines, and the Collateral Agent is not required to
license, sell, or dispose of any part of the Collateral or to collect, or
attempt to collect, any sum payable by reason of the Collateral before the
Collateral Agent may collect the Obligations, nor is the Collateral Agent
obligated to attempt to collect the Obligations before licensing, selling, or
disposing of any part of the Collateral. The Collateral Agent may, without
foreclosing thereon, license, collect and otherwise enforce all amounts owing on
the Collateral or any proceeds or otherwise enforce all of Debtor's or the
Collateral Agent's rights in any of the Collateral. Neither Debtor nor any other
party liable in respect of the Obligations may direct the application of any
proceeds received by the Collateral Agent, and the Collateral Agent may apply
any such proceeds as herein provided.
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7.6 Proceeds of Sale.
(a) All proceeds of sale or other disposition or collection of
the Collateral (whether before or after default), at the Collateral Agent's
discretion and to the extent permitted by applicable law, shall be applied first
to all costs and expenses of sale or other disposition or collection, including
attorneys' fees, and expenses for holding, preparing for sale, and selling the
property; second, in whatever order the Collateral Agent elects (acting at the
direction of the Lenders under the terms of the Intercreditor Agreement), to
payment or collateralization of the Obligations (as set forth in the
Intercreditor Agreement); third, to the settling of any other Liens or claims
against the Collateral. Any cash held by the Collateral Agent as Collateral and
all cash proceeds received by the Collateral Agent in respect of any sale of,
collection from or other realization upon all or any part of the Collateral may,
in the discretion of the Lenders, be held by the Collateral Agent as collateral
for, and then or at any time thereafter applied in whole or in part by the
Lenders against, the Obligations in the order permitted by the Intercreditor
Agreement. If the Obligations are fully satisfied and there are no other claims
to any surplus, Debtor is entitled to any surplus of the Collateral or the
proceeds received therefrom, but Debtor remains liable for any deficiency.
(b) If the Collateral Agent sells any of the Collateral on
credit, Debtor is entitled to credit on the Obligations for those payments
actually made by the purchaser received by the Collateral Agent and applied to
the debt of the purchaser for such purchase.
8.0 ATTORNEY-IN-FACT. DEBTOR APPOINTS THE COLLATERAL AGENT AS DEBTOR'S
ATTORNEY-IN-FACT (WITHOUT REQUIRING IT TO ACT AS SUCH) WITH FULL POWER OF
SUBSTITUTION TO DO ANY ACT WHICH DEBTOR IS OBLIGATED BY THIS SECURITY AGREEMENT
TO DO AND TO TAKE ANY AND ALL ACTIONS AND TO EXECUTE ANY AND ALL DOCUMENTATION
WHICH THE COLLATERAL AGENT OR ANY LENDER AT ANY TIME AND FROM TIME TO TIME DEEMS
NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS SECURITY AGREEMENT,
INCLUDING, WITHOUT LIMITATION, (a) to receive cash and to receive and to endorse
the name of Debtor on all checks, drafts, money orders, or other instruments for
the payment of monies that are payable to Debtor and constitute collections of
the Collateral, (b) to execute in the name of Debtor schedules, assignments,
documents, financing statements, amendments of financing statements, and other
papers deemed necessary or appropriate by the Collateral Agent to perfect,
preserve, or enforce the Security Interest, (c) to exercise all rights of Debtor
in the Collateral, (d) to make withdrawals from and to close deposit accounts
and other accounts with any financial institution into which proceeds may have
been deposited and to apply funds so withdrawn as provided herein, (e) to
receive, open, and read mail addressed to Debtor, (f) to prepare, adjust,
execute, deliver, and receive payment under insurance claims and to collect and
receive payment of and endorse any instrument in payment of loss or return
premiums on any other insurance refund or return and to apply such amounts as
received by the Collateral Agent, at the Collateral Agent's sole option, toward
repayment of the Obligations or replacement of the Collateral, and (g) to sell,
transfer, pledge, convey, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do, at the
Collateral Agent's option and the Debtor's expense, at any time, or from time to
time, all acts and things which the Collateral Agent deems necessary to protect,
preserve, maintain, or realize upon the Collateral and the Collateral Agent's
Security Interest therein. THE POWER OF ATTORNEY HEREIN CONFERRED IS GRANTED FOR
VALUABLE CONSIDERATION, IS COUPLED WITH AN INTEREST, AND IS IRREVOCABLE SO LONG
AS ANY PART OF THE OBLIGATIONS IS UNPAID. THIS POWER OF ATTORNEY IS CONFERRED ON
THE COLLATERAL AGENT SOLELY TO PROTECT, PRESERVE, MAINTAIN AND REALIZE UPON ITS
SECURITY INTEREST IN THE COLLATERAL.
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9.0 RIGHT OF SETOFF. Upon the occurrence of an Event of Default or any
condition, event, or act which, with the giving of notice or lapse of time, or
both, would constitute such an Event of Default, each Lender is authorized at
any time and from time to time, without notice to Debtor or to any other person,
any such notice being hereby expressly waived, to set off and to appropriate and
to apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by such Lender to or for the credit or the account of
Debtor against and on account of the Obligations, any other liabilities of
Debtor to such Lender under this Security Agreement or the Loan Documents to
which such Lender is a party or any other agreement between Debtor and such
Lender, including, without limiting the generality of the foregoing, all claims
of any nature or description, whether or not such Lender has made any demand
hereunder and although said liabilities or claims, or any of them, are
contingent or unmatured and whether or not other security held by such Lender is
considered by such Lender to be adequate. All such amounts set off and applied
shall be shared among the Lenders as set forth in the Intercreditor Agreement.
10.0 MISCELLANEOUS.
10.1 Notice. Any notice required or permitted by this Security
Agreement shall be of record and shall be valid, sufficient, and commercially
reasonable if deposited in the mail, certified mail, postage prepaid, return
receipt requested, or if delivered by facsimile, overnight courier, or personal
delivery addressed to the parties as set forth as follows, unless such address
is changed by written notice hereunder:
(a) If to the Collateral Agent:
Bank of America, N.A., as Collateral Agent
901 Main Street, 7th Floor
Dallas, Texas 75202
(214) 209-3140
(b) If to Debtor:
Peerless Mfg. Co.
2819 Walnut Hill Lane
Dallas, Texas 75229
(214) 351-0194
Notices shall be effective as follows: (i) if given by mail, on the earlier of
(a) three business days following deposit in a post office or other official
depositary under the care and custody of the United States Postal Service or (b)
actual receipt as shown on the return receipt; (ii) if given by facsimile, on
the day of transmission if made within normal business hours of the recipient
and otherwise on the following business day; or (iii) if by personal delivery or
overnight courier, on the day of delivery to the appropriate address set forth
above; or (iv) if delivery is refused by the addressee, on the day of the first
presentation thereof to the addressee. Any delivery receipt or affidavit of
messenger shall be presumptive evidence of delivery to the addressee or refusal
by the addressee to accept delivery, as the case may be. Any address for notice
may be changed by written notice to the other party.
10.2 Assignment of Collateral. The Collateral Agent may assign,
transfer, or deliver to any successor collateral agent any or all of the rights
of the Collateral Agent in the Collateral, and thereafter the Collateral Agent
shall be fully discharged from all responsibility with respect to the Collateral
so assigned, transferred, or delivered. Such transferee shall be vested with all
the powers and
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rights of the Collateral Agent hereunder with respect to such Collateral, but
the Collateral Agent shall retain all rights and powers hereby given with
respect to any of the Collateral not so assigned or transferred.
10.3 Alteration, Etc. No waiver, amendment, modification, or
alteration of any provision of this Security Agreement (individually, an
"ALTERATION"), nor consent to any departure by Debtor from the terms hereof, or
from the terms of any other document, is effective unless such is in writing and
signed by the Collateral Agent and the Lenders; and any such Alteration is
effective only for the specific purpose and in the specific instance given;
provided that without the agreement of the Collateral Agent or the Lenders,
Debtor may execute supplements to this Agreement amending the exhibits hereto to
comply with its obligations under Sections 3.10, 4.20, 4.21 and 4.22 hereof. No
waiver by the Collateral Agent or either Lender, as the case may be, of any
Event of Default shall be deemed to be a waiver of any other or subsequent Event
of Default; nor shall such waiver be deemed to be a continuing waiver. No delay
of the Collateral Agent or either Lender, as the case may be, in exercising any
right shall be deemed to be a waiver thereof, nor shall one exercise of any
right affect or impair the exercise of any other right. Time is of the essence
in Debtor's performance hereof.
10.4 Expenses. To the extent permitted by applicable law Debtor
promptly will pay, upon demand, any out-of-pocket expenses incurred by the
Collateral Agent or any Lender in connection herewith, including all costs,
expenses, taxes, assessments, insurance premiums, repairs (including repairs to
realty or other property to which any Collateral may have been attached), court
costs, attorneys' fees, rent, storage costs, and expenses of sales incurred in
connection with the administration of this Security Agreement, the enforcement
of the rights of the Collateral Agent hereunder, whether incurred before or
after the occurrence of an Event of Default or incurred in connection with the
perfection, preservation, or defense of the Security Interest, or the custody,
protection, collection, repossession, enforcement or sale or the Collateral. All
such expenses shall become part of the Obligations and shall bear interest at
the highest lawful rate from the date paid or incurred by the Collateral Agent
or either of the Lenders until paid by Debtor.
10.5 Parties Bound. The rights of the Collateral Agent and each
Lender hereunder inure to the benefit of their respective successors and
assigns. The terms of this Security Agreement bind the successors and assigns of
the parties hereto, but Debtor may not assign any of its rights or obligations
hereunder without the prior written consent of the Lenders. All representations,
warranties, and covenants of Debtor survive the execution and delivery hereof.
All indemnities and expense reimbursement obligations by Debtor in favor of the
Indemnified Parties survive termination or release of this Security Agreement.
This Security Agreement constitutes a continuing agreement, and applies to all
future transactions, whether or not contemplated at the date hereof, and all
renewals, modifications, and extensions thereof.
10.6 Remedies Cumulative, Etc. All rights and remedies of the
Collateral Agent and the Lenders hereunder are cumulative of each other and of
every other right or remedy which the Collateral Agent and the Lenders or any of
them may otherwise have at law or in equity or under any other document for the
enforcement of the Security Interest or the enforcement of any duties of Debtor
or any other party liable in respect of the Obligations. The exercise by the
Collateral Agent and the Lenders of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise of other rights or
remedies.
10.7 Copy as Financing Statement. A carbon, photographic, or other
reproduction of this Security Agreement or a financing statement describing the
Collateral is sufficient as a financing statement.
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10.8 Severability. If any portion of the Obligations or if any
provision of this Security Agreement is held to be invalid or unenforceable for
any reason, such holding shall not affect any other portion of the Obligations
or any other provision contained herein or contained in any other agreement
between Debtor and the Collateral Agent, and the same shall continue in full
force and effect according to their terms.
10.9 Applicable Law. This Security Agreement and each issue
related hereto, including the validity and enforceability hereof, shall be
governed and construed according to and determined under the laws of the State
of Texas and is performable in Dallas County, Texas.
10.10 ENTIRE AGREEMENT. THIS SECURITY AGREEMENT TOGETHER WITH THE
OTHER LOAN DOCUMENTS EMBODIES THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS RELATING TO THE SUBJECT MATTER HEREOF. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS AMONG THE PARTIES HERETO.
10.11 Usury Savings Clause. The parties hereto intend to conform
strictly to the usury laws applicable to the transactions giving rise to the
Obligations. Accordingly, (a) the aggregate of all consideration which
constitutes interest under controlling applicable law that is contracted for,
charged, or received under the Obligations or otherwise in connection with the
Obligations shall never exceed the maximum amount allowed by such applicable
law, and any excess shall be credited by the Lender receiving same on the
principal amount of the Obligations owed to such Lender (or, to the extent that
the principal amount thereof has been or would thereby be paid in full, refunded
by the Collateral Agent to Debtor); and (b) if the maturity of the Obligations
is accelerated or if there is any required or permitted prepayment, such
consideration that constitutes interest under controlling applicable law may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by the
Lender receiving same on the principal amount of the Obligations owed to such
Lender (with any amount in excess thereof to be refunded by the Collateral Agent
to Debtor).
10.12 Reinstatement. If any payment received by the Collateral
Agent or either Lender is or must be rescinded or returned, the Obligations
shall, to the extent that such payment is or must be rescinded or returned, be
deemed to have continued in existence, notwithstanding such payment, and the
Security Interest shall continue to be effective or be reinstated.
10.13 Conflicts. If any item of Collateral hereunder also
constitutes Collateral granted to either Lender under any other Loan Document
executed by Debtor, in the event of any conflict between the provisions under
this Security Agreement and those under such other Loan Document, the provision
or provisions selected by the Collateral Agent (acting at the direction of the
Lenders) shall control with respect to such Collateral.
10.14 ARBITRATION. DEBTOR AGREES THAT ANY CONTROVERSY OR CLAIM
BETWEEN OR AMONG THE PARTIES HERETO SHALL BE DETERMINED BY BINDING ARBITRATION
IN ACCORDANCE WITH THE ARBITRATION PROVISIONS OF THE OTHER LOAN DOCUMENTS.
10.15 Waiver of Bond. In the event the Collateral Agent seeks to
take possession of any or all of the Collateral by judicial process, the Debtor
hereby irrevocably waives any bonds and any
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surety or security relating thereto that may be required by applicable law as an
incident to such possession, and waives any demand for possession prior to the
commencement of any such suit or action.
EXECUTED as of the day, month and year first above written.
PEERLESS MFG. CO.
By: /s/ Sherrill Stone
---------------------------------------
Sherrill Stone
Chairman and Chief Executive Officer
BANK OF AMERICA, N.A., as Collateral Agent
By /s/ J. Shelby Farris
---------------------------------------
J. Shelby Farris, Vice President
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EXHIBIT 1.1
TO
PEERLESS MFG. CO.
SECURITY AGREEMENT
Pledged Shares
Domestic Subsidiaries
Name State of Description of Each Par Value Number of Certificate No.
Incorporation Class and Series Issued Shares
(If Applicable)
- ---- ------------- ------------------- --------- ------------- ---------------
PMC Acquisition, Inc. Texas Common $0.01 1,000 1
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EXHIBIT 1.2
TO
PEERLESS MFG. CO.
SECURITY AGREEMENT
Pledged Shares
Foreign Subsidiaries
Name Place of Description of Each Par Value Number of Certificate No.
Incorporation Class and Series Issued Shares
(If Applicable)
- ---- ------------- ------------------- --------- ------------- ---------------
Peerless Europe B.V. Netherlands * * * *
Peerless Europe Ltd. United Kingdom * * * *
Peerless (Barbados) Inc. Barbados * * * *
* To be completed on or before January 15, 2001.
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EXHIBIT 1.3
TO
PEERLESS MFG. CO.
SECURITY AGREEMENT
Permitted Liens
FINANCING DATE FILED SECURED PARTY JURISDICTION
STATEMENT NUMBER
---------------- ---------- ------------- ------------
9600061809 April 1, 1996 Ikon Texas Secretary of
14875 Landmark Boulevard State
Dallas, TX 75240
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EXHIBIT 3.4(c)
TO
PEERLESS MFG. CO.
SECURITY AGREEMENT
Trade and Other Names; Predecessor Company
1. Trade and Other Names:
None
2. Predecessor Companies:
None
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EXHIBIT 3.6
TO
PEERLESS MFG. CO.
SCHEDULE OF REAL PROPERTY AND BUSINESS LOCATIONS
COUNTY OWNER LOCATION TYPE PARTIAL LEGAL VALUE
------ ----- -------- ---- ------------- -----
1. Collin PEERLESS MFG. CO. by N/A 34.0839 Acres of Real 820 BLK/SHT LOT/TR 1 $357,840
Deed dated 11/6/90 of Wylie Property ACRES 34.0839 SURVEY
record in Vol. 3386, SHELBY SB
Pg. 340
2. Dallas PEERLESS MFG. CO. by 2811 Walnut Hill Real Property and LOT 4 WALNUT HILL LN & $1,100,000
Deed dated 9/25/91 of Improvements located MKT RR
record in Vol. 76177, thereon
Pg. 132
3. Dallas PEERLESS MFG. CO. by 2817 -2835 Walnut Hill Real Property and 121,342 SQFT OF LAND IN $718,740
Deed dated 8/1/84 of Improvements located WILLIAM MOONEYHAM SURVEY
record in Vol. 84151, thereon ABST NO. 946, BLOCK NO.
Pg. 4303 6458
4. Dallas PEERLESS MFG. CO. by 1729 Broadway 2 Acres of Real WILLIAM LARNER ABST 799 $565,870
Deed dated 9/26/77 of Property and PG 508 TR 36 ACS 2.00
record in Vol. 77188, Improvements located
Pg. 458 thereon
5 Denton PEERLESS MFG. CO. by 1115 Duncan St. Real Property and EXPRESSWAY INDUSTRIAL $477,600
Deed dated 6/1/73 of Improvements located PARK, BLOCK A, LOT 4 (N
record in Vol. 676, thereon PT) 4/278-A
Pg.344-346
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EXHIBIT 3.7
TO
PEERLESS MFG. CO.
SECURITY AGREEMENT
Deposit, Commodity and Security Accounts
BANK ACCT. NO. ACCT. NAME DESCRIPTION
- ---- --------- ---------- -----------
BANK OF AMERICA:
125-207-9666 Peerless Mfg. Co. General Fund
125-207-9666 Peerless Mfg. Co. Wire Transfers from General Fund
125-253-9853 Peerless Mfg. Co. Payroll Account
CHASE BANK OF TEXAS:
32407011570 Peerless Mfg. Co. General Fund
ROYAL BANK OF CANADA:
212-884-1 Peerless Mfg. Co. General Fund
UNITED OVERSEAS BANK LIMITED:
101-343-974-0 Peerless Mfg. Co. - Singapore Singapore Dollar
General Fund
MERRILL LYNCH
540-07040 Peerless Mfg. Co. CMA Money Funds
WELLS FARGO BANK
1097-156830-000 Peerless Mfg. Co. CD's $61,000.00 see notes
1097-217137-000 Peerless Mfg. Co. CD's $212,342.81
$273,342.81
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EXHIBIT 3.10
TO
PEERLESS MFG. CO.
SECURITY AGREEMENT
Intellectual Property
COPYRIGHTS
-------------------------------------------------------------------------------------------------------
Country of Applications or Registration or
Owner of Record Registration Copyright Registration No. Filing Date Expiration Date Title
- --------------- ------------ --------- ---------------- --------------- --------------- -----
COPYRIGHTS LICENSES
------------------------------------------------------------------------
Name of Agreement Patent Date of Agreement
- ----------------- ------ -----------------
PATENTS
------------------------------------------------------------------------------------------------------
Owner of Record
After Assignment Country Patent Applications or Registration Issue Date
Agreements are Filed of Origin Identification Registration No. or Filing Date (if known Expiration Date
- -------------------- --------- -------------- ---------------- -------------- ---------- ---------------
PATENT LICENSES
------------------------------------------------------------------------
Name of Agreement Patent Date of Agreement
- ----------------- ------ -----------------
TRADEMARKS
------------------------------------------------------------------------------------------------------
Country Applications or
Owner of Record of Origin Trademark Registration No. Filing Date Expiration Date Goods
- --------------- --------- --------- ---------------- ----------- --------------- -----
TRADEMARK LICENSES
------------------------------------------------------------------------
Name of Agreement Patent Date of Agreement
- ----------------- ------ -----------------
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