EXHIBIT 10.9.6
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THIS INSTRUMENT AND THE OBLIGATIONS REPRESENTED THEREBY IS
SUBORDINATE IN ALL RESPECTS TO CERTAIN OBLIGATIONS OF CHEMPOWER,
INC. AND ITS SUBSIDIARIES TO FIRST NATIONAL BANK OF OHIO,
INCLUDING A PROMISSORY NOTE IN THE MAXIMUM PRINCIPAL AMOUNT OF
$15,700,000 DATED AS OF FEBRUARY 28, 1997.
SECURITY AGREEMENT
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(Chempower, Inc.)
THIS SECURITY AGREEMENT (this "Security Agreement"),
dated as of February 28th, 1997, is made by CHEMPOWER, INC., an
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Ohio corporation, including any divisions thereof ("Grantor") in
favor of XXXXXX X. XXXX, his executors, administrators,
successors, and assigns, as Agent ("Agent"), for Xxxxxx X. Xxxx
and Xxxx X. Rochester (jointly and severally, the "Principal
Shareholders").
W I T N E S S E T H:
WHEREAS, Grantor, American Eco Corporation, an Ontario,
Canada corporation ("American Eco"), and Sub Acquisition Corp.,
an Ohio corporation, are parties to that certain Agreement and
Plan of Merger dated as of September 10, 1996 (the "Merger
Agreement"); and
WHEREAS, in order to effectuate the transactions
contemplated by the Merger Agreement, the Agent, the Principal
Shareholders, the Grantor, and American Eco have entered into
that certain Financing Agreement of even date herewith
("Financing Agreement"); and
WHEREAS, the transactions under the Merger Agreement
and under the Financing Agreement will inure to the benefit of
the Grantor; and
WHEREAS, all collateral assigned or otherwise granted
in connection with the Financing Agreement is to be granted to
and/or held by, as the case may be, the Agent for the benefit of
the Principal Shareholders; and
WHEREAS, the execution and delivery of this Security
Agreement by the Grantor is required as a condition to the
parties' obligations under the Financing Agreement;
NOW, THEREFORE, for good and valuable consideration,
the Grantor and the Agent agree as follows:
1. DEFINITIONS. As used in this Security Agreement,
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the following terms, which are in addition to terms defined
elsewhere in this Security Agreement, shall have the respective
meanings indicated below:
"Accounts Receivable" shall include all accounts,
accounts receivable, contract rights for the payment of money,
instruments, other obligations and receivables and all other
rights to payment, in all cases whether now owned or hereafter
acquired by the Grantor, whether now existing or hereafter
arising.
"Collateral" shall mean and include all of the
Grantor's assets, interests, facilities, and property of every
kind and description (real, personal or mixed, tangible or
intangible), wherever located, regardless of whether such assets,
interests, facilities, and property are now owned or hereafter
acquired by the Grantor and whether now existing or hereafter
arising, including without limitation, (i) all Accounts
Receivable, (ii) all Depository Accounts, (iii) all Equipment,
(iv) all General Intangibles, (v) all Inventory, (vi) all
accessions and products, (vii) all additions to or substitutions
or replacements for any of the foregoing, (viii) all proceeds of
or from any of the foregoing, (including insurance proceeds
whether or not the Agent is the loss payee thereunder), and (ix)
in all cases, whether now owned or existing or hereafter acquired
or arising.
"Depository Accounts" shall include all funds,
balances, checks, drafts and cash held by or deposited with, and
all accounts (regardless of whether they are designated as
savings, checking, cash collateral, operating or otherwise)
maintained by the Grantor at banks or other institutions;
"Equipment" shall mean all designs, patterns,
machinery, equipment, appliances, furniture, fixtures, supplies,
and tangible personal property of every kind and description, now
owned or hereafter acquired by the Grantor.
"General Intangibles" shall mean all property
(other than Accounts Receivable and Equipment) including, but not
limited to choses in action, tax refunds, trademarks and trade
names, copyrights, patents and patent applications, judgments,
awards, warehouse receipts, and designs and patterns (to the
extent that they are not Equipment), now owned or hereafter
acquired by the Grantor and whether now existing or hereafter
arising.
"Inventory" shall mean all goods held by Grantor
for sale or lease or to be furnished under contracts of service
or so furnished, raw materials, work in process, or materials
used or consumed in business, now owned or hereafter acquired by
the Grantor.
2. DEFINITIONS INCORPORATED FROM THE FINANCING
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AGREEMENT. Capitalized terms used but not defined herein shall
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have the respective meanings ascribed to such terms in the
Financing Agreement. In the event that any of the documents
contemplated in the Financing Agreement are from time to time
amended or modified or any instrument is substituted in
replacement thereof, such amendment, modification, or
substitution shall, from and after the date thereof, be included
within the definition of such document contained herein.
3. SECURITY INTEREST. The Grantor, its
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successors and assigns, hereby grants to the Agent, and its
successors and assigns, a security interest in all the
Collateral, whether now owned or existing or hereafter acquired
or arising, together with all proceeds therefrom to secure the
following:
(a) the payment of all amounts heretofore or
hereafter owing to the Agent under the Principal
Shareholders' Note and the Principal Shareholders'
Guaranty and/or under or in connection with the
Financing Agreement (the "Payments");
(b) the payment by the Grantor of all costs and
expenses (including reasonable attorneys' fees)
incurred by the Agent in the collection of the Payments
and in the enforcement of its rights under the
Financing Agreement;
(c) the payment by the Grantor of all sums
expended or advanced by the Agent pursuant to the terms
of this Security Agreement;
(d) the performance by the Grantor of all of its
obligations under the Financing Agreement; and
(e) the payment of any and all other amounts
(including principal, interest, fees, expenses, or
charges) of any kind or description now or hereafter
owing by the Grantor to the Agent.
4. THE GRANTOR REMAINS LIABLE. Anything herein
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to the contrary notwithstanding, (a) the Grantor shall remain
liable under all contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its
duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by the
Agent of any of its rights hereunder shall not release the
Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral, and (c) the Agent
shall not have any obligation or liability under the contracts
and agreements included in the Collateral or be obligated to
perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
5. ACCOUNTS RECEIVABLE. The Grantor agrees as
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follows:
(a) The Grantor shall, after the occurrence and
during the continuance of an Event of Default, at the request of
the Agent, execute and deliver a form of agreement satisfactory
to the Agent and its counsel, establishing a lock box and cash
collateral arrangement with the Agent.
(b) In the event a government (including the
United States Government, the government of any state or any
local government) or any department, agency, instrumentality or
subdivision thereof is an account debtor or obligor on any
Accounts Receivable, or is a party to any contract or order out
of which will arise an Account Receivable of the Grantor, the
Grantor shall promptly notify the Agent of that fact, comply with
the Assignment of Claims Act of 1940 (or any substantially
equivalent federal, state, or local law) and will execute such
further instruments and take such further steps requested by the
Agent in order that the Account Receivable and all moneys due
under such contracts and/or order, shall be assigned to the Agent
and due notice thereof given to the appropriate governmental
official.
(c) After the occurrence of an Event of Default,
the Agent shall have the right from time to time (at the
Grantor's expense) to arrange for verification of all Accounts
Receivable directly with the account debtors or by other methods
reasonably satisfactory to the Agent. Any such verification shall
be conducted in such a manner as to minimize disruption to the
Grantor.
(d) In the event any Accounts Receivable of the
Grantor is evidenced by chattel paper or other negotiable
instruments, the Grantor shall, after the occurrence and during
the continuance of an Event of Default, deliver the same to the
Agent as soon as possible and prior to such delivery shall hold
the same in trust for the benefit of the Agent. The Grantor shall
endorse any chattel paper or other negotiable instruments in
favor of the Agent. The Agent is hereby appointed as attorney-in-
fact for the Grantor for such purpose.
(e) Except as otherwise provided in this
subsection, the Grantor shall use its reasonable efforts to
collect, at its own expense, all amounts due or to become due to
the Grantor on the Accounts Receivable; provided, however, after
the occurrence of an Event of Default, upon the request of the
Agent, the Grantor shall take such action (at the Grantor's
expense) as reasonably requested by the Agent to collect any one
or more Accounts Receivable. After the occurrence of an Event of
Default and during the continuance thereof, the Agent shall have
the right at any time, upon written notice to the Grantor and at
the expense of the Grantor, to take such action to collect the
Accounts Receivable as the Agent deems proper, and to adjust,
settle and compromise payment thereof (without notice to or the
consent of the Grantor), in the same manner and to the same
extent as the Grantor might have done. At such time as the Agent
exercises its rights pursuant to the preceding sentence, the
Grantor shall not take any action to collect, adjust, settle or
compromise any Account Receivable except with the written consent
of the Agent and any collections of Accounts Receivable received
or held by the Grantor shall be property of the Agent, shall be
held in trust for the benefit of the Agent and shall be delivered
to the Agent immediately with all requisite endorsements in favor
of the Agent which the Agent may make as attorney-in-fact for the
Grantor. The Agent has no obligation to the Grantor to collect or
attempt to collect any Accounts Receivable or to preserve any
rights against any party in connection therewith.
6. EQUIPMENT AND INVENTORY--POSSESSION. The
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Grantor shall be entitled to the possession of its Equipment and
Inventory and to use the same in connection with its business
until the occurrence of an Event of Default.
7. SECURITIES. Concurrent with the execution of
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this Security Agreement, American Eco shall execute and deliver
to the Agent the Pledge Agreement covering all shares of Grantor
then or thereafter owned by American Eco. With respect to
Collateral in the possession of the Agent and covered by the
Pledge Agreement, the provisions of both the Pledge Agreement and
this Security Agreement shall cover such property, but in the
event of a conflict, the Pledge Agreement shall govern.
8. GOODS HELD BY A THIRD PARTY. The Grantor
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shall not, without the prior written consent of the Agent,
relinquish possession of any Collateral to any bailee or third
person other than the Agent or other than in the ordinary course
of its business or as otherwise permitted by this Security
Agreement.
9. RECORDS. The Grantor will at all times keep
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accurate and complete records, consistent with past practice, of
its Accounts Receivable, General Intangibles, Inventory, and
Equipment, and the Agent shall have the right at all reasonable
times to examine and inspect the same and to make copies thereof.
10. REPRESENTATIONS AND WARRANTIES OF THE
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GRANTOR. The Grantor represents, warrants, and covenants to the
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Agent as follows, effective immediately after, but not as of or
prior to, the Closing of the Merger:
(a) The Grantor warrants that it is and will be
the sole owner of all Accounts Receivable now or hereafter
appearing on its books, and that the same are and will be,
during the term of this Security Agreement, free and clear
from any and all assignments, liens, and security interests
except as created hereby;
(b) The Grantor warrants that it is and, during
the term of this Security Agreement, will be the sole owner
of its Equipment, Inventory, and General Intangibles; that
the same will be used solely in connection with the
Grantor's business; that the Collateral will be kept only in
the County or Counties identified on Exhibit 1 hereto; that
all of the Equipment, Inventory, and General Intangibles are
free and clear of all liens and encumbrances whatsoever,
except as provided in this Security Agreement, except for
the security interest granted under a security agreement
between Grantor and First National Bank of Ohio dated as of
February 28, 1997, and except for purchase money security
interests incurred prior to the date hereof in the ordinary
course of business; and the Grantor will warrant and defend
the Equipment, Inventory, and General Intangibles unto the
Agent, its successors and assigns, against all lawful claims
and demands whatsoever of all persons claiming by, from,
through or under the Grantor;
(c) The Grantor will not permit the Collateral to
become subject to any lien or other security interest,
whether prior or subordinate to the security interest of the
Agent created hereunder except as provided in the Financing
Agreement, except for the security interest granted under a
security agreement between Grantor and First National Bank
of Ohio dated as of February 28, 1997, and except for
purchase money security interests incurred prior to the date
hereof in the ordinary course of business;
(d) The Grantor will obtain and maintain, or
cause to be obtained and maintained, policies of insurance
as required by the Financing Agreement.
(e) The Grantor will keep and maintain the
Equipment and every part thereof in good condition and
repair, ordinary wear and tear excepted, so as to serve the
purpose for which it is designed and intended;
(f) The Grantor will pay, or cause to be paid,
all taxes and assessments which may be levied, assessed, or
charged on or against the Collateral or which the Grantor
may be required to pay by reason of its ownership of the
Collateral, including franchise and similar taxes, as the
same become due and payable; provided, however, the Grantor
shall not be required to pay any such tax or assessment so
long as the validity or amount thereof shall be contested in
good faith and by appropriate proceedings, but this proviso
shall apply only if the property subject thereto shall not
then be subject to sale or foreclosure in order to satisfy
any tax lien which has attached as security therefor;
(g) The Grantor shall, from time to time as
requested by the Agent, take such action and execute and
deliver to the Agent all such financing statements,
instruments, supplements, further assurances, and security
or other agreements as may be required or requested by the
Agent in order to perfect and continue the Agent's security
interest in the Collateral;
(h) The Grantor warrants that its only places of
business are located in the County or Counties identified on
Exhibit 1 hereto, and that the Grantor will keep all records
concerning the Collateral in said Counties.
11. THE AGENT'S DUTIES. The powers conferred on
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the Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any
such powers. The Agent shall not have any duty as to the
Collateral or as to taking necessary steps to preserve rights
against prior parties.
12. DEFAULT REMEDIES. If an Event of Default
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shall occur, the Agent shall have the following rights:
(a) To perform any defaulted covenant or
agreement of this Security Agreement to such extent as the
Agent shall determine and advance such moneys as it shall
deem advisable for the aforesaid purpose and all moneys so
advanced shall be secured hereby and shall be repaid
promptly upon demand; provided, however, that nothing herein
contained shall be construed to require the Agent to advance
money for any of the aforesaid purposes;
(b) To notify all account debtors to make
payments directly to the Agent or otherwise as the Agent
shall in its sole discretion direct;
(c) To take control of any and all proceeds to
which the Agent may be entitled under this Security
Agreement or under any applicable laws;
(d) To declare all of the indebtedness secured
hereby to be immediately due and payable, and this Security
Agreement in default and subject to foreclosure proceedings
and/or other rights, options, and remedies as provided under
other applicable law;
(e) To take immediate possession of the
Collateral and, with or without taking possession of the
Collateral, to sell, lease, or otherwise dispose of any or
all of the Collateral, either at public or private sale,
upon commercially reasonable terms, and the Agent or its
nominee may become the purchaser thereof at public or
private sale and if the Agent is the purchaser, the price
therefor may be paid pursuant to a credit bid of the Agent
or its nominee. Any sale may be adjourned at any time and
from time to time to a reasonably specified time and place
by announcement at the time and place of sale as previously
fixed, without further notice by publication or otherwise of
the time and place of such adjourned sale. The proceeds of
any sale shall be applied (i) first to the expenses of
taking, holding, and preparing for sale or disposition, and
sale or disposition and the like (including reasonable
attorneys' fees), (ii) next to the principal and interest
due on account of the Payments and the other amounts secured
under subsections (a) through (d) of Section 3 hereof, (iii)
next to amounts secured under subsection (e) of Section 3
hereof, (iv) next to the holder of any subordinate security
interest therein if written notification of demand therefor
is received before distribution of the proceeds, and (v)
lastly, any surplus to the Grantor, and the Grantor shall
remain liable for any deficiency. Any such sale, public or
private, may be made on credit at the option of the Agent.
The Agent shall have the right to conduct any such sale on
the Grantor's premises, and the Agent shall have such right
of possession of said premises as shall be necessary or
convenient for such purpose;
(f) Following compliance with the requirements of
applicable law, to retain the Collateral in satisfaction of
the obligations and indebtedness hereby secured and hold the
Collateral so retained, absolutely free from any claim or
right whatsoever (including, without limitation, any equity
or right of redemption of Grantor) which Grantor hereby
specifically waives. Grantor specifically agrees that
advance written notice of a proposal by the Agent to retain
the Collateral in satisfaction of the obligations and
indebtedness hereby secured of no less than five (5) days is
commercially reasonable and otherwise unobjectionable;
(g) To take immediate possession of the
Collateral and to use or operate the Collateral in order to
preserve the same or its value, and collect, receive, and
use all of the net profits from such use or operation to pay
indebtedness secured by such Collateral;
(h) To require the Grantor, to the extent
practicable and at the Grantor's expense, to assemble the
Collateral and make it available to the Agent at such
locations within the county wherein such Collateral is
located as the Agent shall designate; and
(i) To proceed to protect and enforce the Agent's
rights by a suit or suits in equity or at law, whether for
specific performance or otherwise, in aid of the execution
of any power herein granted, for any foreclosure hereunder,
or for the enforcement of any other proper legal or
equitable remedy.
The Agent shall have any and all other rights and remedies
provided by law or equity, including, without limitation, the
rights and remedies of a secured party. The Agent's rights and
remedies will be cumulative, and no waiver of any default will
affect any other subsequent default. The rights and remedies
provided in this Security Agreement are cumulative, may be
exercised concurrently or separately, may be exercised from time
to time and in such order, without any marshalling, as the Agent
shall determine. Nothing herein contained shall be construed as
preventing the Agent from taking all lawful actions to protect
its interest in the event that liquidation, insolvency,
bankruptcy, reorganization, or foreclosure proceedings of any
nature whatsoever affecting the property or assets of the Grantor
should be instituted.
13. GENERAL PROVISIONS.
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(a) This Security Agreement and the security
interests of the Agent in the Collateral created hereby
shall cease and terminate only upon the complete
satisfaction of all obligations of the Grantor specified in
Section 3 hereof.
(b) Except where the application of another law
is mandatory, this Security Agreement shall be construed to
be a contract made under and pursuant to the laws of Ohio,
and all of the terms, covenants, and conditions contained
herein shall be governed by and construed in accordance with
such laws.
(c) This Security Agreement, all supplements
hereto and all amendments hereof, shall inure to the benefit
of and be binding upon the Grantor, the Agent and its
respective successors and assigns.
(d) No waiver of any term, provision, covenant,
or condition contained in this Security Agreement, or of any
breach of any such term, provision, covenant or condition,
shall constitute a waiver of any other or subsequent breach
or justify or authorize the non-observance on any other
occasion of such term, provision, covenant, or condition
contained in this Security Agreement.
(e) This Security Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original and all of which together shall constitute one and
the same Security Agreement.
IN WITNESS WHEREOF, the parties have executed or
have caused this Security Agreement to be executed in Cleveland,
Ohio, on the date first above written by its officers thereunto
duly authorized.
GRANTOR:
CHEMPOWER, INC.
By:/s/Xxxxxx X. Xxxx
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Name:Xxxxxx X. Xxxx
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Title:V.P. Finance
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AGENT: XXXXXX X. XXXX
By:/s/Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, as Agent for
the Principal Shareholders
EXHIBIT 1
(Counties of Location of Collateral, Place of Business,
and Business Records)
Summit County, Ohio
Xxxxxxxx County, Ohio
Washington County, Pennsylvania
Xxxxxx County, West Virginia
Humphreys County, Tennessee
Xxxxx County, Nevada
