SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT, dated as of September 29, 2000,
between PROBEX FLUIDS RECOVERY, INC., a Delaware corporation ("Grantor") and
PENNZOIL-QUAKER STATE COMPANY ("Secured Creditor").
WITNESSETH:
WHEREAS, Probex Corp., a Delaware corporation ("Borrower") has
executed and delivered to the Secured Creditor that certain Term Note of even
date herewith (the "Note"), in partial consideration of the purchase price under
that certain Asset Purchase Agreement dated as of September 6, 2000 between
Grantor, Borrower and Secured Creditor (as amended, the "Purchase Agreement");
WHEREAS, the assets to be conveyed pursuant to the Purchase
Agreement shall be conveyed to Grantor;
WHEREAS, the Grantor, as a direct subsidiary of the Borrower,
will substantially benefit, either directly or indirectly, from the loan made to
the Borrower pursuant to the Note; and
WHEREAS, it is a condition precedent to the obligation of the
Secured Creditor to make the loan to the Borrower under the Note that the
Grantor shall have executed and delivered this Security Agreement to the Secured
Creditor.
NOW, THEREFORE, in consideration of the benefits accruing to
Grantor, the receipt and sufficiency of which are hereby acknowledged, Grantor
hereby makes the following representations and warranties to the Secured
Creditor and hereby covenants and agrees with the Secured Creditor as follows:
ARTICLE I
INTERESTS
1.1 Grant of Security Interests.
(a) As security for the prompt and complete payment and performance
when due of all of the Secured Obligations, Grantor does hereby collaterally
assign and transfer unto the Secured Creditor, and does hereby grant to the
Secured Creditor, a continuing security interest of first priority in all of the
right, title and interest of Grantor in, to and under all of the following,
whether now existing or hereafter from time to time acquired: (i) each and every
Receivable, (ii) all Contracts together with all Contract Rights arising
thereunder, (iii) all Inventory, (iv) all Equipment, including, without
limitation, all vehicles, (v) all Marks, together with the registrations and
right to all
renewals thereof, and the goodwill of the business of Grantor symbolized by the
Marks, (vi) all Patents and Copyrights, and all reissues, renewals or extensions
thereof, (vii) all computer programs of Grantor and all intellectual property
rights therein and all other proprietary information of Grantor, including, but
not limited to, Trade Secret Rights, (viii) all other Goods, General
Intangibles, Chattel Paper, Documents, Instruments and Securities Accounts, (ix)
all insurance policies and (x) all Proceeds and products of any and all of the
foregoing (all of the above, collectively, the "Security Agreement Collateral").
(b) The security interests of the Secured Creditor under this
Agreement extend to all Security Agreement Collateral of the kind which is the
subject of this Agreement which Grantor may acquire at any time during the
continuation of this Agreement.
1.2 Power of Attorney. Grantor hereby constitutes and appoints the Secured
Creditor its true and lawful attorney-in-fact, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of Grantor or otherwise) to act, require, demand, receive, compound and
give acquittance for any and all monies and claims for monies due or to become
due to Grantor under or arising out of the Security Agreement Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or take any action or institute any proceedings which the
Secured Creditor may deem to be necessary or advisable in the premises, which
appointment as attorney is coupled with an interest.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Organization; Powers. Grantor is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
2.2 Authorization; Enforceability. The execution, delivery and performance
of the Loan Documents to be entered into by Grantor are within Grantor's
corporate powers and have been duly authorized by all necessary corporate and,
if required, stockholder action. This Agreement has been duly executed and
delivered by Grantor and constitutes, and each other Loan Document to which
Grantor is to be a party, when executed and delivered by Grantor, will
constitute, a legal, valid and binding obligation of Grantor, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
2.3 Approvals; No Conflicts. The execution, delivery and performance of
the Loan Documents by the Grantor (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Person or Governmental
Authority, except such as have been obtained or made and are in full force
2
and effect and except filings necessary to perfect Liens created under the Loan
Documents, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of Grantor or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon Grantor or its assets, or
give rise to a right thereunder to require any payment to be made by Grantor,
and (d) will not result in the creation or imposition of any Lien on any asset
of Grantor, except Liens created under the Loan Documents.
2.4 Necessary Filings. Upon filing of financing statements in the
respective offices or jurisdictions set forth in Annex A all filings,
registrations and recordings necessary or appropriate to create, preserve,
protect and perfect the security interest granted by Grantor to the Secured
Creditor hereby in respect of the Security Agreement Collateral will have been
accomplished and the security interest granted to the Secured Creditor pursuant
to this Agreement in and to the Security Agreement Collateral will constitute a
perfected security interest therein superior and prior to the rights of all
other Persons therein and subject to no other Liens and will be entitled to all
the rights, priorities and benefits afforded by the Code or other relevant law
as enacted in any relevant jurisdiction to perfected security interests.
2.5 No Liens. The Grantor is, and as to the Security Agreement Collateral
acquired by it from time to time after the date hereof, Grantor will be, the
owner of all Security Agreement Collateral free from any Lien, security
interest, encumbrance or other right, title or interest of any Person, and
Grantor shall defend the Security Agreement Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein
adverse to the Secured Creditor.
2.6 Other Financing Statements. There is no financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) on
file or of record in any relevant jurisdiction covering or purporting to cover
any interest of any kind in the Security Agreement Collateral (other than
financing statements filed in favor of the Secured Party) and Grantor will not
execute or authorize to be filed in any public office any financing statement
(or similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to.
2.7 Chief Executive Office; Records. The chief executive office of Grantor
is located at the address indicated on Annex A hereto. Grantor will not move its
chief executive office. The originals of all documents evidencing all
Receivables and Contract Rights and Trade Secret Rights of Grantor and the only
original books of account and records of Grantor relating thereto are, and will
continue to be, kept at such chief executive office. All Receivables and
Contract Rights of Grantor are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, the office location described above. Grantor shall not establish
new locations for such office.
2.8 Location of Inventory and Equipment. All Inventory and Equipment held
by Grantor is located at one of the locations shown on Annex B. Grantor agrees
that all Inventory and Equipment now held or subsequently acquired by it shall
be kept at (or shall be in transit to) one of the locations of Grantor shown on
Annex B hereto.
3
2.9 Recourse. This Agreement is made with full recourse to Grantor and
pursuant to and upon all the warranties, representations, covenants and
agreements on the part of Grantor contained herein. 2.10 Trade Names; Change of
Name. As of the date hereof, Grantor has nor operated in any jurisdiction under,
and in the preceding 18 months has not had or has not operated in any
jurisdiction under, any trade names, fictitious names or other names (including,
without limitation, any names of divisions or operations) except its legal name
and such other trade, fictitious or other names as are listed in Annex C hereto.
Except as set forth on Annex C, Grantor shall not change its legal name or
assume or operate in any jurisdiction under any trade, fictitious or other name
in any manner which might make any financing statement or continuation statement
filed in connection therewith misleading within the meaning of Section 9-402(7)
(or any analogous provision) of the Code except those names listed on Annex B
hereto.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1 Additional Representations and Warranties. As of the time when each of
its Receivables arises, Grantor shall be deemed to have represented and
warranted that such Receivable, and all records, papers and documents relating
thereto (if any) are genuine and in all respects what they purport to be, and
that all papers and documents (if any) relating thereto, (a) will represent the
genuine, legal, valid and binding obligation of the account debtor evidencing
indebtedness unpaid and owed by the respective account debtor arising out of the
performance of labor or services or the sale or lease and delivery of the
merchandise listed therein, or both, (b) will be the only original writings
evidencing and embodying such obligation of the account debtor named therein,
(c) will evidence true and valid obligations, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles of general applicability and (d)
will be in compliance and will conform in all material respects with all
applicable laws, including, without limitation, all federal, state and local
laws. Each Contract shall be the legal, valid and binding obligation of the
parties thereto, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles of general applicability and will be in compliance and will conform,
in all material respects, with all applicable laws.
3.2 Maintenance of Records. Grantor will keep and maintain, at its own
cost and expense, accurate records of its Receivables and Contracts, including,
but not limited to, the originals of all documentation (including each Contract)
with respect thereto, records of all payments received, all credits granted
thereon, all merchandise returned and all other dealings therewith, and Grantor
will make the same available on Grantor's premises to the Secured Creditor for
inspection, at Grantor's own cost and expense, at any and all reasonable times
upon prior
4
notice to an authorized officer of Grantor; provided however, if no Event of
Default has occurred and is then continuing, the Secured Creditor shall give
Grantor prior written notice of any such inspection. Upon the occurrence and
during the continuance of an Event of Default and upon the request of the
Secured Creditor, Grantor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts) and such
books and records to the Secured Creditor or to its representatives (copies of
which evidence and books and records may be retained by Grantor). Upon the
occurrence and during the continuance of an Event of Default, if the Secured
Creditor so directs, Grantor shall legend, in form and manner reasonably
satisfactory to the Secured Creditor, such tangible evidence of the Receivables
and the Contracts, as well as books, records and documents of Grantor evidencing
or pertaining to such Receivables and Contracts with an appropriate reference to
the fact that such Receivables and Contracts have been assigned to the Secured
Creditor and that the Secured Creditor has a security interest therein.
3.3 Direction to Account Debtors; Contracting Parties; etc. Upon the
occurrence and during the continuance of an Event of Default, and if the Secured
Creditor so directs Grantor, to the extent permitted by applicable law, Grantor
agrees (a) to cause all payments on account of the Receivables and Contracts to
be made directly to the Secured Creditor (b) that the Secured Creditor may, at
its option, directly notify the obligors with respect to any Receivables and/or
under any Contracts to make payments with respect thereto as provided in the
preceding clause (a), and (c) that the Secured Creditor may enforce collection
of any such Receivables and Contracts and may adjust, settle or compromise the
amount of payment thereof, in the same manner and to the same extent as Grantor.
Without notice to or assent by Grantor, the Secured Creditor shall deliver any
or all such amounts to the Secured Creditor to be applied in the manner provided
in Section 6.4 of this Agreement. The costs and expenses (including reasonable
attorneys' fees) of collection, whether incurred by Grantor or the Secured
Creditor, shall be borne by Grantor.
3.4 Modification of Terms; etc. Grantor shall not rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify in
any material respect any term relating to such indebtedness or make any material
adjustment with respect thereto, or extend or renew the same, or compromise or
settle any material dispute, claim, suit or legal proceeding relating thereto,
or sell any Receivable or Contract, or interest therein, without the prior
written consent of the Secured Creditor, Grantor will duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts and will do nothing to impair the rights of the
Secured Creditor in the Receivables or Contracts.
3.5 Collection. Grantor shall endeavor in accordance with reasonable
business practices to cause to be collected from the account debtor named in
each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts, services or products which are
delinquent, such amounts, services or products to be collected in accordance
with generally accepted lawful collection procedures) any and all amounts owing
under or on account of such Receivable or Contract, and apply forthwith upon
receipt thereof all such amounts as are so collected to the outstanding balance
of such Receivable or under such Contract. The costs and expenses (including,
without limitation, reasonable attorneys' fees) of collection, whether incurred
by Grantor or the Secured Creditor, shall be borne by Grantor.
5
3.6 Instruments. If Grantor owns or acquires any Instrument constituting
Security Agreement Collateral, Grantor will within ten Business Days notify the
Secured Creditor thereof, and promptly deliver such Instrument to the Secured
Creditor appropriately endorsed to the order of the Secured Creditor as further
security hereunder.
3.7 Further Actions. Grantor will, at its own expense, make, execute,
endorse, acknowledge, file and/or deliver to the Secured Creditor from time to
time such vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, powers of attorney, certificates,
reports and other assurances or instruments and take such further steps relating
to its Receivables, Contracts, Instruments, Equipment, including, without
limitation, vehicles, and other property or rights covered by the security
interest hereby granted, as the Secured Creditor may require to give effect to
the purposes of this Agreement.
ARTICLE IV
PROVISIONS CONCERNING ALL SECURITY AGREEMENT COLLATERAL
4.1 Protection of Secured Creditor's Security. Grantor will not do anything
to impair the rights of the Secured Creditor in the Security Agreement
Collateral. Grantor will at all times keep its Inventory and Equipment,
including vehicles, insured in favor of the Secured Creditor, at Grantor's own
expense to the extent and in the manner provided in Section 5.4 of this
Agreement. Upon Secured Creditor's request, all policies or certificates with
respect to such insurance shall be endorsed to the Secured Creditor's
satisfaction for the benefit of the Secured Creditor (including, without
limitation, endorsements (x) for casualty and property policies showing losses
payable to the Secured Creditor and (y) for liability policies listing the
Secured Creditor as additional insured) and deposited with the Secured Creditor.
If Grantor shall fail to insure its Inventory to the extent required by this
Agreement, or if Grantor shall fail to so endorse and deposit all policies or
certificates with respect thereto, the Secured Creditor shall have the right
(but shall be under no obligation) to procure such insurance and Grantor agrees
to reimburse the Secured Creditor for all costs and expenses of procuring such
insurance. Grantor assumes all liability and responsibility in connection with
the Security Agreement Collateral acquired by it and the liability of Grantor to
pay its Secured Obligations shall in no way be affected or diminished by reason
of the fact that such Security Agreement Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to Grantor.
4.2 Warehouse Receipts Non-Negotiable. Grantor agrees that if any warehouse
receipt or receipt in the nature of a warehouse receipt is issued with respect
to any of its Inventory, such warehouse receipt or receipt in the nature thereof
shall not be "negotiable" (as such term is used in Section 7-104 of the Code as
in effect in any relevant jurisdiction or under other relevant law).
4.3 Further Actions. Grantor will, at its own expense, make, execute,
endorse, acknowledge, file and/or deliver to the Secured Creditor from time to
time such lists, descriptions and designations of its Security Agreement
Collateral, warehouse receipts, receipts in the nature of warehouse receipts,
bills of lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Security Agreement Collateral and other
6
property or rights covered by the security interest hereby granted, which the
Secured Creditor deems appropriate to perfect, preserve or protect its security
interest in the Security Agreement Collateral.
4.4 Financing Statements. Grantor agrees to execute and deliver to the
Secured Creditor such financing statements or other documents, including
Certificates of Title, in form acceptable to the Secured Creditor, as the
Secured Creditor may from time to time request or as are necessary or desirable
in the opinion of the Secured Creditor to establish and maintain a valid,
enforceable, first-priority, perfected security interest in the Security
Agreement Collateral as provided herein and the other rights and security
contemplated hereby, all in accordance with the Code as enacted in any and all
relevant jurisdictions or any other relevant law. Grantor will pay any
applicable filing fees and related expenses. Grantor authorizes the Secured
Creditor to file any such financing statements or other documents, including
Certificates of Title, without the signature of Grantor. 4.5 Deposit Accounts.
Grantor shall cooperate with the Secured Creditor in obtaining, upon request of
the Secured Creditor, any control agreement the Secured Creditor deems necessary
in form and substances reasonably satisfactory to the Secured Creditor with
respect to any deposit accounts of Grantor.
ARTICLE V
ADDITIONAL COVENANTS
5.1 Existence; Conduct of Business. Grantor will do or cause to be done
all things necessary to preserve, renew and keep in full force and effect its
legal existence and the rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
business.
5.2 Payment of Obligations. Grantor will pay its Indebtedness and other
obligations, including tax liabilities, before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) Grantor has set aside on
its books adequate reserves with respect thereto in accordance with GAAP, (c)
such contest effectively suspends collection of the contested obligation and the
enforcement of any Lien securing such obligation and (d) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect.
5.3 Maintenance of Properties. Grantor will keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
5.4 Insurance. Grantor will maintain, with financially sound and reputable
insurance companies insurance in such amounts (with no greater risk retention)
and against such risks as are customarily maintained by companies of established
repute engaged in the same or similar businesses operating in the same or
similar locations. Grantor will furnish to the Secured Creditor, upon request,
information in reasonable detail as to the insurance so maintained.
7
5.5 Casualty and Condemnation. Grantor (a) will furnish to the Secured
Creditor prompt written notice of any casualty or other insured damage to any
material portion of any of its property or assets or the commencement of any
action or proceeding for the taking of any of its property or assets or any part
thereof or interest therein under power of eminent domain or by condemnation or
similar proceeding and (b) will ensure that the net proceeds of any such event
(whether in the form of insurance proceeds, condemnation awards or otherwise)
are promptly collected and applied to the Note.
5.6 Books and Records; Inspection and Audit Right. (a) Grantor will keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. Grantor will permit any representatives designated by the Secured
Creditor, upon reasonable prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
(b) Grantor will permit any representatives designated by the Secured
Creditor (including any consultants, accountants, lawyers and appraisers
retained by the Secured Creditor) to conduct evaluations and appraisals of the
Grantor's assets, all at such reasonable times and as often as reasonably
requested. Grantor shall pay the reasonable fees and expenses of any
representatives retained by the Secured Creditor to conduct any such evaluation
or appraisal
5.7 Compliance with Laws. Grantor will comply with all laws, rules, regu-
lations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
5.8 Indebtedness; Certain Equity Securities. (a) Grantor will not create,
incur, assume or permit to exist any Indebtedness (other than the Secured
Obligations).
(b) Grantor will not issue any preferred stock or other preferred
equity interests.
5.9 Liens. Grantor will not create, incur, assume or permit to exist any
Lien on any property or asset now owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or rights in
respect of any thereof, except for Liens created by the Loan Documents.
5.10 Fundamental Changes. (a) Grantor will not merge into or consolidate
with any other Person, or permit any other Person to merge into or consolidate
with it, or liquidate or dissolve;
(b) Grantor will not engage to any material extent in any business
other than businesses of the type conducted by Grantor on the date of execution
of this Agreement and businesses reasonably related thereto.
8
5.11 Investments, Loans, Advances, Guarantees and Acquisitions. Except as
contemplated by the Purchase Agreement and investments in Permitted Investments,
Grantor will not purchase, hold or acquire any equity interests in or evidences
of indebtedness or other securities (including any option, warrant or other
right to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit. Grantor shall not form or acquire any
subsidiary.
5.12 Asset Sales. Grantor will not sell, transfer, lease or otherwise
dispose of any asset, including any equity interest owned by it, except sales of
inventory and used or surplus equipment in the ordinary course of business.
5.13 Sale and Leaseback Transactions. Grantor will not enter into
any arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereinafter acquired, and thereafter rent or lease such property or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred.
5.14 Restricted Payments; Certain Payments of Indebtedness. (a) Grantor
will not declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
(b) Grantor will not make or agree to pay or make, directly or
indirectly, any payment or other distribution (whether in cash securities or
other property) of or in respect of principal of or interest on any Indebtedness
(other than the Secured Obligations), or any payment or other distribution
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any Indebtedness (other than the
Secured Obligations).
5.15 Transactions with Affiliates. Grantor will not sell, lease or other-
wise transfer any property or assets to, or purchase, lease or otherwise acquire
any property or assets from, or otherwise engage in any other transactions with,
any of its Affiliates, except transactions in the ordinary course of business
that are at prices and on terms and conditions not less favorable to Grantor
than could be obtained on an arm's-length basis from unrelated third parties.
5.16 Liens Upon Additional Property. Upon the request of Secured Creditor,
Grantor agrees to execute and deliver to Secured Creditor such other documents,
including deeds of trust and mortgages, as Secured Creditor may from time to
time request to establish and maintain a valid, enforceable, first-priority
perfected security interest in any property or asset of Grantor, including all
real property interests now or hereafter owed or leased by Grantor. All such
property shall at such time become additional "Security Agreement Collateral"
hereunder.
9
ARTICLE VI
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
6.1 Remedies, Obtaining the Security Agreement Collateral Upon Default.
Grantor agrees that, if any Event of Default shall have occurred, then and in
every such case, the Secured Creditor, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Code in all relevant jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take possession
of the Security Agreement Collateral or any part thereof, from Grantor or any
other Person who then has possession of any part thereof, with or without notice
or process of law, and for that purpose may enter upon Grantor's premises where
any of the Security Agreement Collateral is located and remove the same and use
in connection with such removal any and all services, supplies, aids and other
facilities of Grantor;
(b) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables) constituting
the Security Agreement Collateral to make any payment required by the terms of
such agreement or instrument directly to the Secured Creditor;
(c) withdraw all monies, securities and other instruments in the
deposit for application to the Secured Obligations;
(d) sell, assign or otherwise liquidate, or direct Grantor to sell,
assign or otherwise liquidate, any or all of the Security Agreement Collateral
or any part thereof in accordance with Section 6.2 and take possession of the
proceeds of any such sale or liquidation;
(e) take possession of the Security Agreement Collateral, or any
part thereof, by directing Grantor in writing to deliver the same to the Secured
Creditor at any place or places designated by the Secured Creditor, in which
event Grantor shall at its own expense:
(i) forthwith cause the same to be moved or delivered to the
place or places so designated by the Secured Creditor,
(ii) store and keep any Security Agreement Collateral so
delivered to the Secured Creditor at such place or places pending further action
by the Secured Creditor as provided in Section 6.2, and
(iii) while the Security Agreement Collateral shall be so stored
and kept, provide such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain it in good condition; and
(f) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Security Agreement
Collateral for such term and on such conditions and in such manner as the
Secured Creditor shall in its sole judgment determine (taking into account such
provisions as may be necessary to protect and preserve such Marks, Patents or
Copyrights);
10
it being understood that Grantor's obligation to so deliver the Security
Agreement Collateral is of the essence of this Agreement and that, accordingly,
upon application to a court of equity having jurisdiction, the Secured Creditor
shall be entitled to a decree requiring specific performance by Grantor of said
obligation.
6.2 Remedies, Disposition of the Security Agreement Collateral. Upon the
occurrence of an Event of Default, any Security Agreement Collateral repossessed
by the Secured Creditor under or pursuant to Section 6.1 and any other Security
Agreement Collateral whether or not so repossessed by the Secured Creditor may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Secured Creditor may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Security Agreement Collateral may be sold,
leased or otherwise disposed of, in the condition in which the same existed when
taken by the Secured Creditor or after any overhaul or repair (at the expense of
the Grantor) which the Secured Creditor shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the Grantor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor and shall be subject, for the 10 days after the receipt of such notice,
to the right of the Grantor or any nominee of Grantor to acquire the Security
Agreement Collateral involved at a price or for such other consideration at
least equal to the intended sale price or other consideration so specified. Any
such disposition which shall be a public sale permitted by such requirements
shall be made upon not less than 10 days' written notice to the Grantor
specifying the time and place of such sale. To the extent permitted by any such
requirement of law, the Secured Creditor, may bid for and become the purchaser
of the Security Agreement Collateral or any item thereof offered for sale in
accordance with this Section 6.2 without accountability to the Grantor. If,
under mandatory requirements of applicable law, the Secured Creditor shall be
required to make disposition of the Security Agreement Collateral within a
period of time which does not permit the giving of notice to the Grantor as
hereinabove specified, the Secured Creditor need give Grantor only such notice
of disposition as shall be reasonably practicable in view of such mandatory
requirements of applicable law. Grantor agrees to do or cause to be done all
such other acts and things as may be reasonably necessary to make such sale or
sales of all or any portion of the Security Agreement Collateral valid and
binding and in compliance with all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at Grantor's expense.
6.3 WAIVER OF CLAIMS. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT,
GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE SECURED CREDITOR'S TAKING POSSESSION OR
THE SECURED CREDITOR'S DISPOSITION OF ANY OF THE SECURITY AGREEMENT COLLATERAL,
INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY
11
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH GRANTOR WOULD OTHERWISE
HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE,
AND GRANTOR HEREBY FURTHER WAIVES, TO THE EXTENT PERMITTED BY LAW:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the Secured Creditor's gross negligence
or willful misconduct;
(b) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Secured Creditor's
rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay, extension
or moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of the
Security Agreement Collateral or any portion thereof, and Grantor, for itself
and all who may claim under it, insofar as it or they now or hereafter lawfully
may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Security Agreement Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the Grantor therein
and thereto, and shall be a perpetual bar both at law and in equity against
Grantor and against any and all Persons claiming or attempting to claim the
Security Agreement Collateral so sold, optioned or realized upon, or any part
thereof, from, through and under Grantor.
6.4 Application of Proceeds.
(a) All monies collected by the Secured Creditor upon any sale or
other disposition of the Security Agreement Collateral, together with all other
monies received by the Secured Creditor hereunder, shall be applied as follows:
(i) first, to the payment of all Secured Obligations owing to
the Secured Creditor of the type described in clauses (d) and (e) of the
definition of "Secured Obligations" contained in Article VIII hereof;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding Secured
Obligations shall be paid to the Secured Creditors; and
(b) third, to the extent proceeds remain after the application pur-
suant to the preceding clauses (i) and (ii), inclusive, and following the
termination of this Agreement, to the Grantor or to whomever may be lawfully
entitled to receive such surplus.
6.5 Remedies Cumulative. Each and every right, power and remedy hereby
specifically given to the Secured Creditor shall be in addition to every other
right, power and remedy specifically given under this Agreement, and the other
12
Loan Documents now or hereafter existing at law or in equity, or by statute, and
each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Secured Creditor. All
such rights, powers and remedies shall be cumulative, and the exercise or the
commencement of the exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Secured Creditor in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations and no course of dealing between Grantor and the Secured
Creditor or any holder of any of the Obligations shall impair any such right,
power or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. In the event that the Secured Creditor shall
bring any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Secured Creditor may recover expenses, including
attorneys' fees, and the amounts thereof shall be included in such judgment.
6.6 Discontinuance of Proceedings. In case the Secured Creditor shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Secured Creditor, then and in every such case the Grantor, the
Secured Creditor and the holders of any of the Obligations shall be restored to
their former positions and rights hereunder with respect to the Security
Agreement Collateral subject to the security interest created under this
Agreement, and all rights, remedies and powers of the Secured Creditor shall
continue as if no such proceeding had been instituted.
6.7 Louisiana Remedies. The provisions of this Section 6.7 shall, without
limiting the generality of any other provision of this Agreement, be applicable
in the event any foreclosure shall take place in Louisiana on any Security
Agreement Collateral or, in connection with any foreclosure hereunder, Louisiana
law shall otherwise be applicable. The Secured Creditor, instead of exercising
the power of sale herein conferred upon it, may proceed by a suit or suits at
law or in equity to foreclose the security interests hereunder granted and sell
the Security Agreement Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction. For the purposes of
Louisiana executory process procedures, Grantor does hereby acknowledge the
Secured Obligations and confess judgment in favor of the Secured Creditor for
the full amount of the Secured Obligations. Grantor does by these presents
consent and agree that upon the occurrence of an Event of Default it shall be
lawful for the Secured Creditor to cause all and singular the Security Agreement
Collateral to be seized and sold under executory or ordinary process, at the
Secured Creditor's sole option, without appraisement, appraisement being hereby
expressly waived, in one lot as an entirety or in separate parcels or portions
as the Secured Creditor may determine, to the highest bidder, and otherwise
exercise the rights, powers and remedies afforded herein and under applicable
Louisiana law. Any and all declarations of fact made by authentic act before a
Notary Public in the presence of two witnesses by a person declaring that such
facts lie within his knowledge shall constitute authentic evidence of such facts
for the purpose of executory process. Grantor hereby waives: (a) the benefit of
appraisement as provided in Louisiana Code of Civil Procedure Articles 2332,
2336, 2723 and 2724, and all other laws conferring the same; (b) the demand and
three days delay accorded by Louisiana Code of Civil Procedure Articles 2639 and
2721; (c) the notice of seizure required by Louisiana Code of Civil Procedure
Articles 2293 and 2721; (d) the three days delay provided by Louisiana Code of
13
Civil Procedure Articles 2331 and 2722; and (e) the benefit of the other
Louisiana Code of Civil Procedure Articles 2331, 2722 and 2723, not specifically
mentioned above. In the event the Security Agreement Collateral or any part
thereof is seized as an incident to an action for the recognition or enforcement
of this Agreement by executory process, ordinary process, sequestration, writ of
fieri facias, or otherwise, Grantor and the Secured Creditor agree that the
court issuing any such order shall, if petitioned for by the Secured Creditor,
direct the applicable sheriff to appoint as a keeper of the Security Agreement
Collateral, the Secured Creditor or any agent designated by the Secured Creditor
or any person named by the Secured Creditor at the times such seizure is
effected. This designation is pursuant to Louisiana Revised Statutes
9:5136-9:5140.2 and the Secured Creditor shall be entitled to all the rights and
benefits afforded thereunder as the same may be amended. It is hereby agreed
that the keeper shall be entitled to receive reasonable compensation, in
addition to its reasonable costs and expenses incurred in the administration or
preservation of the Security Agreement Collateral. The designation of keeper
made herein shall not be deemed to require the Secured Creditor to provoke the
appointment of such a keeper.
ARTICLE VII
INDEMNITY
7.1 Indemnity.
(a) Grantor agrees to indemnify, reimburse and hold the Secured
Creditor, and its successors, assigns, employees, agents and servants
(hereinafter in this Section 7.1, referred to individually as an "Indemnitee,"
and collectively as "Indemnitees") harmless from any and all liabilities,
obligations, losses, damages, injuries, penalties, claims, demands, actions,
suits, judgments and any and all costs and expenses (including reasonable
attorneys' fees and expenses) (for the purposes of this Section 7.1, the
foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement or any other Loan Document, or in
any other way connected with the enforcement of any of the terms of, or the
preservation of any rights hereunder or in any way relating to or arising out of
the ownership, ordering, purchase, delivery, control, acceptance, lease,
financing, possession, operation, condition, sale, return or other disposition,
or use of the Pledged Collateral, the Security Agreement Collateral or any other
property or asset of Grantor or Borrower (including, without limitation, latent
or other defects, whether or not discoverable), the violation of the laws of any
governmental body or unit, or any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 6.1(a) for losses, damages or liabilities to the extent
(i) caused by the gross negligence or willful misconduct of any Indemnitee or
(ii) Secured Creditor has expressly agreed to indemnify Borrower or Grantor
under the Purchase Agreement. Grantor agrees that upon written notice by any
Indemnitee of the assertion of
14
such a liability, obligation, loss, damage, penalty, claim, demand, action, suit
or judgment, Grantor shall assume full responsibility for the defense thereof.
(b) Without limiting the application of Section 7.1(a), Grantor agrees
to pay, or reimburse the Secured Creditor for any and all reasonable fees, costs
and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Secured Creditor's Liens on, and
security interest in, the Pledged Collateral and the Security Agreement
Collateral, including, without limitation, all fees and taxes in connection with
the recording or filing of instruments and documents in public offices, payment
or discharge of any taxes or Liens upon or in respect of the Pledged Collateral
and the Security Agreement Collateral, premiums for insurance with respect to
the Pledged Collateral and the Security Agreement Collateral and all other
reasonable fees, costs and expenses in connection with protecting, maintaining
or preserving the Pledged Collateral and the Security Agreement Collateral and
the Secured Creditor's interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Pledged Collateral and the Security Agreement
Collateral.
(c) Without limiting the application of Section 7.1(a) or (b), Grantor
agrees to pay, indemnify and hold each Indemnitee harmless from and against any
loss, costs, damages and expenses which such Indemnitee may suffer, expend or
incur in consequence of or growing out of any misrepresentation by Grantor or
Borrower in this Agreement, any other Loan Document, or in any writing
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any other Loan Document.
(d) If and to the extent that the obligations of Grantor under this
Section 7.1 are unenforceable for any reason, Grantor hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.
7.2 Indemnity Obligations Secured by Security Agreement Collateral;
Survival. Any amounts paid by any Indemnitee, as to which such Indemnitee has
the right to reimbursement, shall constitute Secured Obligations secured by the
Security Agreement Collateral. The indemnity obligations of Grantor contained in
this Article VII shall continue in full force and effect notwithstanding the
full payment of all the Loans incurred under the Note and the payment of all
other Secured Obligations and notwithstanding the discharge thereof.
ARTICLE VIII
DEFINITIONS
(a) Defined Terms. The following terms have the meanings herein
specified unless the context otherwise requires. Such definitions shall be
equally applicable to the singular and plural forms of the terms defined.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
15
"Agreement" means this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Certificate of Title" means any written instrument which may
be issued solely by and under the authority of any jurisdiction for any vehicle
which is required by such jurisdiction to be licensed or registered.
"Chattel Paper" has the meaning provided in the Code.
"Closing Date" means September 29, 2000.
"Code" shall mean the Uniform Commercial Code as in effect
from time to time in the State of Texas, including without limitation, the
Uniform Commercial Code as amended by Revised Article 9, provided that if by
reason of mandatory provisions of law, the creation and/or perfection or the
effect of perfection or non-perfection of the security interests in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than Texas, the term "Code" shall also mean the Uniform
Commercial Code as in effect from time to time in such other jurisdiction
(including without limitation, the Uniform Commercial Code as amended by Revised
Article 9) for purposes of the provisions hereof relating to such creation,
perfection or effect of perfection or non-perfection.
"Contract Rights" means all rights of Grantor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" means all contracts between Grantor and one or
more additional parties.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Copyrights" means any United States copyright which Grantor
now or hereafter has title, including any registration of any copyright in the
United States Copyright Office, as well as any application for a United States
copyright registration now or hereafter made with the United States Copyright
Office by Grantor.
"Documents" has the meaning provided in the Code.
"Equipment" means any "equipment," as such term is defined in
the Code, now or hereafter owned by Grantor and, in any event, shall include,
but shall not be limited to, all Vehicles, machinery, equipment, furnishings and
movable trade fixtures now or hereafter owned by Grantor and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Event of Default" means any Event of Default under, and as
defined in, the Note.
16
"General Intangibles" has the meaning provided in the Code and
shall in any event include all of the Grantor's Contract Rights and all
Contracts.
"Goods" has the meaning provided in the Code.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Grantor" has the meaning provided in the first paragraph of
this Agreement.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all guarantees by such Person of
Indebtedness of others, (h) all capital lease obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnitee" has the meaning provided in Section 7.1 of this
Agreement.
"Instrument" has the meaning provided in Article 9 of the
Code.
"Inventory" means merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all products and proceeds of whatever
sort and wherever located and any portion thereof which may be returned,
rejected, reclaimed or repossessed by the Secured Creditor from Grantor's
customers, and shall specifically include all "inventory" as such term is
defined in the Code, now or hereafter owned by Grantor.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
17
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Note and the Pledge
Agreement.
"Marks" means any trademarks and service marks now held or
hereafter acquired by Grantor which are registered in the United States Patent
and Trademark Office or in any similar office or agency of the United States or
any state thereof or any political subdivision thereof and any application for
such trademarks and service marks, as well as any unregistered marks used by
Grantor in the United States and trade dress, including logos, designs, trade
names, company names, business names, fictitious business names and other
business identifiers in connection with which any of these registered or
unregistered marks are used in the United States.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of Grantor or the Borrower, (b) the ability of the Grantor or the
Borrower to perform any of its obligations under any Loan Document or the
Purchase Agreement or (c) the rights of or benefits available to the Secured
Creditor under any Loan Document or the Purchase Agreement.
"Note" has the meaning set forth in the first WHEREAS clause
of this Agreement.
"Patent" means any United States patent to which Grantor now
or hereafter has title, including any divisions, continuations, reissues,
reexaminations, extensions and renewals thereof, as well as any application for
a United States patent now or hereafter made by an Assignor.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with the Loan Documents;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with the Loan Documents;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
18
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of Probex Corp. or any Subsidiary;
(f) lien on Optima 2000DV, Serial No. 3012 and on HP6890;
(g) capital leases existing as of the date hereof on phone systems,
computer systems and furniture of the Borrower; and
(h) lease of vehicles transferred pursuant to Purchase Agreement,
existing as of the date hereof and any renewals thereof;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Xxxxx'x;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000; and
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Pledge Agreement" means that certain Pledge Agreement of even
date herewith between Borrower and Secured Creditor, as the same may be amended
from time to time.
"Proceeds" has the meaning provided in the Code or under other
relevant law and, in any event, shall include, but not be limited to, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Secured Creditor or Grantor from time to time with respect to any of the
19
Security Agreement Collateral; (b) any and all payments (in any form whatsoever)
made or due and payable to Grantor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Security Agreement Collateral by any Governmental Authority (or any
person acting under color of Governmental Authority); and (c) any and all other
amounts from time to time paid or payable under or in connection with any of the
Security Agreement Collateral.
"Receivables" means any "account" as such term is defined in
the Code, now or hereafter owned by Grantor and, in any event, shall include,
but shall not be limited to, all of Grantor's rights to payment for goods sold
or leased or services performed by Grantor, whether now in existence or arising
from time to time hereafter, including, without limitation, rights evidenced by
an account, note, contract, security agreement, chattel paper or other evidence
of indebtedness or security, together with (a) all security pledged, assigned,
hypothecated or granted to or held by Grantor to secure the foregoing; (b) all
of Grantor's right, title and interest in and to any goods, the sale of which
gave rise thereto; (c) all guarantees, endorsements and indemnifications on, or
of, any of the foregoing; (d) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in connection therewith;
(e) all books, records, ledger cards, and invoices relating thereto; (f) all
evidences of the filing of financing statements and other statements and the
registration of other instruments in connection therewith and amendments
thereto, notices to other creditors or secured parties and certificates from
filing or other registration officers; (g) all credit information, reports and
memoranda relating thereto; and (h) all other writings related in any way to the
foregoing.
"Restricted Payment" means, as to any Person, any dividend or
other distribution (whether in cash, securities or other property) with respect
to any equity interests in such Person, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any equity interests in such Person or any option, warrant or
other right to acquire any such equity interests in such Person.
"Revised Article 9" means the uniform revision of Article 9 of
the Uniform Commercial Code, with new provisions added to other Articles of the
Uniform Commercial Code contemplated by such revision, all as approved in 1999
by The American Law Institute and by the National Conference of Commissioners on
Uniform State Laws.
"Secured Creditor" shall have the meaning provided in the
first paragraph of this Agreement.
"Secured Obligations" means (a) the full and prompt payment
when due (whether at stated maturity, by acceleration or otherwise) of all
obligations, including, without limitation, principal, interest, premiums, fees,
expenses, costs of collection, and indemnity payments (including obligations
which, but for the automatic stay under Section 362(a) of the Bankruptcy Code,
would become due) and liabilities of Grantor and Borrower, now existing or
hereafter incurred under, arising out of or in connection with any Loan Document
to which Grantor and/or Borrower is a party and the due performance and
compliance by Grantor and Borrower with the terms of each such Loan Document;
(b) any and all sums advanced by the Secured Creditor in order to preserve the
Security Agreement Collateral or the Pledged Collateral or preserve its security
20
interest in the Security Agreement Collateral or in any collateral pledged under
any other Security Document; (c) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations or liabilities of
Grantor and/or Borrower referred to in clauses (a) and (b), the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Security Agreement Collateral or of any
collateral pledged under any other Security Document, or of any exercise by the
Secured Creditor of its rights hereunder or thereunder, together with reasonable
attorneys' fees and court costs; and (d) all amounts paid by any Indemnitee as
to which such Indemnitee has the right to reimbursement under Section 7.1 of
this Agreement or under any other Loan Document.
"Security Documents" means the Pledge Agreement and this
Agreement.
"Subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
(b) Code Terms. Grantor acknowledges and agrees that all terms used
herein to describe the Security Agreement Collateral which are defined in the
Code shall have the meanings stated in the Code. Grantor further acknowledges
and agrees that in applying the law of any jurisdiction that has now or
hereafter enacted all or substantially all of Revised Article 9, the Code terms
used herein to describe the Security Agreement Collateral shall also have the
meanings given those terms under Revised Article 9, it being the agreement and
intention of Grantor in each instance that such collateral be included in the
Security Agreement Collateral description, whether prior to or after the
effectiveness of Revised Article 9 in such jurisdiction.
ARTICLE IX
MISCELLANEOUS
9.1 Notices, Etc. All notices and other communications hereunder shall be
in writing and shall be delivered or mailed by first class mail, postage
prepaid, addressed:
21
(a) if to Grantor, at:
Probex Fluids Recovery, Inc.
One Galleria Tower
00000 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) if to the Secured Creditor, at:
Pennzoil-Quaker State Company
000 Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
9.2 Waiver; Amendment. None of the terms and conditions of this Agreement may be
changed, waived, modified or varied except as executed in writing by Secured
Creditor. No delay on the part of the Secured Creditor in exercising any of its
rights, remedies, powers and privileges hereunder or partial or single exercise
thereof, shall constitute a waiver thereof. No notice to or demand on Grantor in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any of the rights of the Secured
Creditor to any other or further action in any circumstances without notice or
demand.
9.3 Obligations Absolute. The obligations of Grantor hereunder shall remain in
full force and effect without regard to, and shall not be impaired by, (a) the
lack of validity and enforceability of the Note or any of the other Loan
Documents; (b) any change in the time, manner or place of payment of, or in any
other term of, any of the Secured Obligations or any other amendment or waiver
or any consent to any departure from the Note or any of the other Loan
Documents; (c) any exchange, release or nonperfection of any of the Security
Agreement Collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations; or (d)
any other circumstance which might otherwise constitute a defense available to,
or discharge of, Grantor or any other Person that is a party to any Loan
Document in respect of the Secured Obligations. This Agreement shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Secured Creditor upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Grantor or the
Borrower, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Grantor or the Borrower
or any substantial part of its property, or otherwise, all as though such
payments had not been made. All payments hereunder will be paid without set-off
or counterclaim and in immediately available funds and in United States Dollars.
22
9.4 Successors and Assigns. This Agreement shall be binding upon Grantor and its
successors and assigns and shall inure to the benefit of the Secured Creditor
and its successors and assigns, provided that Grantor may not transfer or assign
any or all of its rights or obligations hereunder. All agreements, statements,
representations and warranties made by Grantor herein or in any certificate or
other instrument delivered by Grantor or on its behalf under this Agreement
shall be considered to have been relied upon by the Secured Creditors and shall
survive the execution and delivery of this Agreement, and the other Loan
Documents, regardless of any investigation made by the Secured Creditor or on
its behalf.
9.5 Headings Descriptive. The headings of the several sections of this Agreement
are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
9.6 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.7 Grantor's Duties. It is expressly agreed, anything herein contained to the
contrary notwithstanding, that Grantor shall remain liable to perform all of the
obligations assumed by it with respect to the Security Agreement Collateral, and
the Secured Creditor shall not have any obligations or liabilities with respect
to any Security Agreement Collateral by reason of or arising out of this
Agreement, nor shall the Secured Creditor be required or obligated in any manner
to perform or fulfill any of the obligations of Grantor under or with respect to
any Security Agreement Collateral.
9.8 Counterparts. This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
9.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF TEXAS.
9.10 Waivers.
(a) GRANTOR WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (I)
NOTICE OF ACCEPTANCE OF THIS AGREEMENT; (II) ANY RIGHT TO REVOKE OR OTHERWISE
TERMINATE THIS AGREEMENT; (III) NOTICE OF DEMAND FOR PAYMENT, PRESENTMENT,
PROTEST, NOTICE OF DISHONOR OR NONPAYMENT; (IV) NOTICE OF DEFAULT; (V) NOTICE OF
ALL OTHER DEMANDS AND NOTICES TO WHICH GRANTOR MIGHT OTHERWISE BE ENTITLED, AND
23
(VI) ANY NECESSITY, WHETHER SUBSTANTIVE OR PROCEDURAL, THAT JUDGMENT PREVIOUSLY
BE RENDERED AGAINST BORROWER OR ANY OTHER PERSON OR ENTITY, OR THE GRANTOR OR
BORROWER OR ANY OTHER PERSON OR ENTITY BE JOINED IN SUCH CAUSE, OR THAT A
SEPARATE ACTION BE BROUGHT AGAINST GRANTOR OR BORROWER OR ANY OTHER PERSON OR
ENTITY.
(b) GRANTOR AND SECURED CREDITOR HEREBY EXPRESSLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS THAT ANY OF THEM MAY HAVE
TO TRIAL BY JURY (I) IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE, AND GRANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND SECURED CREDITOR MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SUBSECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GRANTOR
TO THE WAIVER OF GRANTOR'S RIGHT TO TRIAL BY JURY.
(c) TO THE EXTENT NOT OTHERWISE EXPRESSLY PROVIDED HEREIN, GRANTOR
EXPRESSLY WAIVES ALL DEFENSES BASED ON SURETYSHIP OR IMPAIRMENT OF COLLATERAL.
(d) GRANTOR ACKNOWLEDGES THAT IT MAKES THE WAIVERS AND AGREEMENTS SET FORTH
IN SUBSECTIONS (a), (b) AND (c) ABOVE KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS
AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THOSE WAIVERS WITH ITS
ATTORNEYS, AND THAT THESE WAIVERS CONSTITUTE A MATERIAL INDUCEMENT FOR SECURED
CREDITOR TO ENTER INTO THE NOTE AND MAKE THE LOAN. GRANTOR FURTHER ACKNOWLEDGES
THAT SECURED CREDITOR HAS NOT AGREED WITH OR REPRESENTED TO GRANTOR OR ANY OTHER
PERSON THAT THE PROVISIONS OF SUBSECTIONS (a), (b) AND (c) ABOVE WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES.
24
9.11 Submission to Jurisdiction; Waivers. Grantor hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the district courts of Xxxxxx County,
Texas, and of the United States District Court of the Southern District of Texas
(Houston Division), and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have the venue of
any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to Grantor at its address
referred to in Section 9.1 or at such other address of which the Secured
Creditor shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to xxx in
any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 9.11 any special, exemplary, punitive or consequential damages.
9.12 Acknowledgments. Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents; and
(b) the Secured Creditor has no fiduciary relationship with or duty to
Grantor arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Secured Creditor, on one hand,
and the Grantor, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor.
25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
PROBEX FLUIDS RECOVERY, INC.
By:__________________________
Name:________________________
Title:_______________________
PENNZOIL-QUAKER STATE COMPANY
By:__________________________
Name:________________________
Title:_______________________
26
ANNEX A
SCHEDULE OF CHIEF EXECUTIVE OFFICE
AND OTHER RECORD LOCATIONS
Probex Fluids Recovery, Inc.
One Galleria Tower
00000 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Chief Financial Officer
Tel.: (000) 000-0000
Fax: (000) 000-0000
Petroleum Products, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Location of Assets of SES as noted on Annex I attached to the First Amendment to
Asset Purchase Agreement, dated September 29, 2000
ANNEX B
SCHEDULE OF INVENTORY, EQUIPMENT
AND TITLED VEHICLE LOCATIONS
Same as Annex I
ANNEX C
SCHEDULE OF TRADE, FICTITIOUS
AND OTHER NAMES
None
I-1