EXHIBIT 10.30.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement"), dated as of September 13, 2001,
is by and between Probex Corp., a Delaware corporation ("Debtor"), and Single
Spur Investments, LLC ("Secured Party").
RECITALS:
A. Concurrently with the execution of this Agreement, Debtor is
executing that certain Secured Promissory Note in the original aggregate
principal amount of $500,000, in favor of Secured Party (as amended, restated or
modified, the "Note").
B. The execution and delivery of this Agreement is required by the
terms of the Note and is a condition to its effectiveness.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Security Interest and Pledge
Section 1.1 Security Interest and Pledge. As collateral security for
the prompt payment in full, when due, of all of the obligations, indebtedness
and liabilities of Debtor to Secured Party arising pursuant to or in connection
with the Note or this Agreement, whether now existing or hereafter arising,
whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several, Debtor hereby pledges and grants to Secured
Party, a fourth priority security interest in and to all of Debtor's right,
title and interest in and to the following (such property being hereinafter
sometimes called the "Collateral"):
(a) all accounts, accounts receivable, documents, instruments, chattel
paper, and general intangibles of Debtor and all products and proceeds thereof;
and
(b) all equipment, inventory, machinery, and fixtures of Debtor and all
accessions thereto and all products and proceeds thereof;
provided, however, the Collateral shall exclude (i) all Intellectual Property of
Debtor and its subsidiaries (for purposes of this Agreement, "Intellectual
Property" means, with respect to any entity, proprietary information, trade
secret or knowledge, including, without limitation, confidential information,
patents, trademarks, service marks, inventions, products, designs, development
techniques, methods, know-how, techniques, systems, processes, software
programs, works of authorship, formulae and any other information of a technical
nature), and (ii) all collateral evidenced by that certain Security Agreement,
dated as of November 29, 2000, by and between Probex Fluids Recovery, Inc.
("PFR"), a wholly-owned subsidiary of the Debtor, and Wilmington Trust Company
("WTC"), as collateral agent for the holders of PFR's 7% Senior Secured
Convertible Notes Due November 2004, which includes, but is not limited to, all
accounts, accounts receivable, documents, instruments, chattel paper, general
intangibles, equipment, inventory, machinery, and fixtures and all accessions
thereto and all products and proceeds thereof of PFR, and all capital stock of
PFR evidenced by that certain Pledge Agreement, dated as of November 29, 2000,
by and between the Debtor and WTC and acknowledged by PFR (collectively, the
"PFR Assets"), all of which are subject to a lien and security interest in favor
of the holders of PFR's 7% Senior Secured Convertible Notes Due November 2004.
Section 1. 2 Obligations. The Collateral shall secure the following
obligations, indebtedness and liabilities of Debtor (all such obligations and
indebtedness being hereinafter sometimes called the "Obligations"):
(a) the obligations and indebtedness of Debtor to Secured Party
evidenced by the Note;
(b) all costs and expenses, including, without limitation, all
reasonable attorneys' fees and legal expenses, incurred by Secured Party to
preserve and maintain the Collateral, collect the obligations herein described,
and enforce this Agreement;
(c) all extensions, renewals and modifications of any of the foregoing.
Representations and Warranties
To induce Secured Party to enter into this Agreement, Debtor represents
and warrants to Secured Party that:
Section 2.1 Title. Except for the first, second and third priority
security interests granted to the secured parties named in those certain
Security Agreements dated February 20, 2001 and July 13, 2001, and that certain
Intercreditor and Security Agreement dated September 7, 2001, respectively (the
"Prior Secured Parties"), and the security interest granted herein, Debtor owns,
and with respect to the Collateral acquired after the date hereof, Debtor will
own, the Collateral free and clear of any lien, security interest, or other
encumbrance.
Section 2.2 Accounts. Unless Debtor has given Secured Party written
notice to the contrary, whenever the security interest granted hereunder
attaches to an account, Debtor shall be deemed to have represented and warranted
to Secured Party as to each and all of its accounts that (i) each account is
genuine and in all respects what it purports to be, (ii) each account represents
the legal, valid, and binding obligation of the account debtor evidencing
indebtedness unpaid and owed by such account debtor arising out of the
performance of labor or services by Debtor or the sale or lease of goods by
Debtor, (iii) the amount of each account represented as owing is the correct
amount actually and unconditionally owing except for normal trade discounts
granted in the ordinary course of business, and (iv) no account is subject to
any offset, counterclaim, or other defense.
Section 2.3 Financing Statements. No financing statement, security
agreement, or other lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
collateral agents for the Prior Secured Parties, and Secured Party pursuant to
this Agreement.
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Section 2.4 Organization and Authority. Debtor is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
incorporation. Debtor has the corporate power and authority to execute, deliver,
and perform this Agreement, and the execution, delivery, and performance of this
Agreement by Debtor has been authorized by all necessary corporate action on the
part of Debtor and does not and will not violate any law, rule or regulation or
the certificate of incorporation or bylaws of Debtor and does not and will not
conflict with, result in a breach of, or constitute a default under the
provisions of any indenture, mortgage, deed of trust, security agreement, or
other instrument or agreement pursuant to which Debtor or any of its property is
bound.
Section 2.5 Principal Place of Business. The principal place of
business and chief executive office of Debtor, and the office where Debtor keeps
its books and records, is located at the address of Debtor shown beside its name
on the signature page hereof.
Section 2.6 Location of Collateral. All inventory, machinery, and
equipment of Debtor are located in Dallas County or Xxxxxx County, Texas.
Affirmative and Negative Covenants
Debtor covenants and agrees with Secured Party that:
Section 3.1 Maintenance. Debtor shall maintain the Collateral in good
operating condition and repair and shall not permit any waste or destruction of
the Collateral or any part thereof. Debtor shall not use or permit the
Collateral to be used in violation of any law or inconsistently with the terms
of any policy of insurance. Debtor shall not use or permit the Collateral to be
used in any manner or for any purpose that would impair the value of the
Collateral or expose the Collateral to unusual risk.
Section 3.2 Encumbrances. Debtor shall not create, permit, or suffer to
exist, and shall defend the Collateral against, any lien, security interest, or
other encumbrance on the Collateral except the pledge and security interest of
the Prior Secured Parties and Secured Party hereunder, and shall defend Debtor's
rights in the Collateral and Secured Party's security interest in the Collateral
against the claims of all others, except the Prior Secured Parties.
Section 3.3 Modification of Collateral. Debtor shall do nothing to
impair the rights of Secured Party in the Collateral. Without the prior written
consent of Secured Party, Debtor shall not grant any extension of time for any
payment with respect to the Collateral, or compromise, compound, or settle any
of the Collateral, or release in whole or in part any person or entity liable
for payment with respect to the Collateral, or allow any credit or discount for
payment with respect to the Collateral other than normal trade discounts granted
in the ordinary course of business, or release any lien, security interest, or
assignment securing the Collateral, or otherwise amend or modify any of the
Collateral.
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Section 3.4 Sale of Collateral. Debtor shall not sell, assign, or
otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party, other than in the ordinary course of business
of Debtor and its subsidiaries.
Section 3.5 Further Assurances. At any time and from time to time, upon
the request of Secured Party, and at the sole expense of Debtor, Debtor shall
promptly execute and deliver all such further instruments and documents and take
such further action as Secured Party may deem reasonably necessary or desirable
to preserve and perfect their security interest in the Collateral and carry out
the provisions and purposes of this Agreement, including, without limitation,
the execution and filing of such financing statements as Secured Party may
require. A carbon, photographic, or other reproduction of this Agreement or of
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Section 3.6 Risk of Loss; Insurance. Debtor shall be responsible for
any loss of or damage to the Collateral. Debtor shall maintain, with financially
sound and reputable companies, insurance policies (i) insuring the Collateral
against loss by fire, explosion, theft, and such other risks and casualties as
are customarily insured against by companies engaged in the same or similar
business, and (ii) insuring Debtor, the Prior Secured Parties and Secured Party
against liability for personal injury and property damage relating to the
Collateral and the operation of Debtor's business, such policies to be in such
amounts and covering such risks as are customarily insured against by companies
engaged in the same or similar business, with losses payable to Debtor, the
Prior Secured Parties and Secured Party as their respective priority interests
may appear. All insurance with respect to the Collateral shall provide that no
cancellation, reduction in amount, or change in coverage thereof shall be
effective unless Secured Party has received thirty (30) days prior written
notice thereof. Debtor shall deliver to Secured Party copies of all insurance
policies covering the Collateral or any part thereof upon request. In addition,
Debtor shall cause Probex Fluids Recovery, Inc., a Delaware corporation and
Debtor's wholly-owned subsidiary, to maintain insurance policies in such amounts
and covering such risks as are customarily insured against by companies engaged
in the same or similar business.
Section 3.7 Warehouse Receipts Non-Negotiable. Debtor 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 Uniform Commercial Code as adopted by the State of Texas).
Section 3.8 Inspection Rights. Debtor shall permit Secured Party and
its representatives to examine or inspect the Collateral wherever located and to
examine, inspect, and copy Debtor's books and records at any reasonable time and
as often as Secured Party may desire.
Section 3.9 Taxes. Debtor agrees to pay or discharge prior to
delinquency all taxes, assessments, levies, and other governmental charges
imposed on it or its property, except Debtor shall not be required to pay or
discharge any tax, assessment, levy, or other governmental charge if (i) the
amount or validity thereof is being contested by Debtor in good faith by
appropriate proceedings diligently pursued, (ii) such proceedings do not involve
any risk of sale, forfeiture, or loss of the Collateral or any interest therein,
and (iii) adequate reserves therefor have been established in conformity with
generally accepted accounting principles.
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Section 3.10 Obligations. Debtor shall duly and punctually pay and
perform the Obligations.
Section 3.11 Notification. Debtor shall promptly notify Secured Party
of (i) any lien, security interest, encumbrance, or claim made or threatened
against the Collateral, (ii) any material change in the Collateral, including,
without limitation, any material damage to or loss of the Collateral, and (iii)
the occurrence or existence of any Event of Default (as defined in the Note) or
the occurrence or existence of any condition or event that, with the giving of
notice or lapse of time or both, would be an Event of Default.
Section 3.12 Corporate Changes. Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
Debtor shall have given Secured Party thirty (30) days prior written notice
thereof and shall have taken all action deemed reasonably necessary or desirable
by Secured Party to make each financing statement not seriously misleading.
Debtor shall not change its principal place of business, chief executive office,
or the place where it keeps its books and records unless it shall have given
Secured Party thirty (30) days prior written notice thereof and shall have taken
all action deemed reasonably necessary or desirable by Secured Party to cause
the security interest in the Collateral to be perfected with the priority
required by this Agreement.
Section 3.13 Books and Records; Information. Debtor shall keep accurate
and complete books and records of the Collateral and Debtor's business and
financial condition in accordance with generally accepted accounting principles
consistently applied. Debtor shall from time to time at the request of Secured
Party deliver to Secured Party such information regarding the Collateral and
Debtor, to the extent publicly disclosed, as Secured Party may reasonably
request, including, without limitation, lists and descriptions of the Collateral
and evidence of the identity and existence of the Collateral. Debtor shall xxxx
its books and records to reflect the security interest of Secured Party under
this Agreement.
Section 3.14 Compliance with Agreements. Debtor shall comply in all
material respects with all mortgages, deeds of trust, instruments, and other
agreements binding on it or affecting its properties or business.
Section 3.15 Compliance with Laws. Debtor shall comply with all
applicable laws, rules, regulations, and orders of any court or governmental
authority.
Section 3.16 Location of Collateral. Debtor shall not move any of its
equipment, machinery, or inventory from the locations specified herein without
the prior written consent of Secured Party.
Section 3.17 Intellectual Property. So long as any of the Obligations
remain outstanding, Debtor shall not create, permit, or suffer to exist, any
lien, security interest, or other encumbrance on, and shall not sell, assign, or
otherwise dispose of, the Intellectual Property, in any case, without the prior
written consent of Secured Party; provided, however, the foregoing shall not
limit the Debtor's or its subsidiaries' ability to license or otherwise
distribute the Intellectual Property while retaining its ownership interest
therein.
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Rights of Secured Party and Debtor
Section 4.1 Power of Attorney. DEBTOR HEREBY IRREVOCABLY CONSTITUTES
AND APPOINTS SECURED PARTY AND ANY OFFICER OR AGENT THEREOF, WITH FULL POWER OF
SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH FULL IRREVOCABLE
POWER AND AUTHORITY IN THE PLACE AND STEAD AND IN THE NAME OF DEBTOR OR IN ITS
OWN NAME, FROM TIME TO TIME IN SECURED PARTY'S DISCRETION, TO TAKE ANY AND ALL
ACTION AND TO EXECUTE ANY AND ALL DOCUMENTS AND INSTRUMENTS WHICH MAY BE
NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT. THIS POWER
OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.
Secured Party shall not be under any duty to exercise or withhold the exercise
of any of the rights, powers, privileges, and options expressly or implicitly
granted to Secured Party in this Agreement, and shall not be liable for any
failure to do so or any delay in doing so. Secured Party shall not be liable for
any act or omission or for any error of judgment or any mistake of fact or law
in its individual capacity or in its capacity as attorney-in-fact except acts or
omissions resulting from its willful misconduct. This power of attorney is
conferred on Secured Party solely to protect, preserve, and realize upon Secured
Party's security interest in the Collateral.
Section 4.2 Secured Party's Duty of Care. Other than the exercise of
reasonable care in the physical custody of the Collateral while held by Secured
Party, Secured Party shall not have any responsibility for or obligation or duty
with respect to all or any part of the Collateral or any matter or proceeding
arising out of or relating thereto, including, without limitation, any
obligation or duty to collect any sums due in respect thereof or to protect or
preserve any rights against prior parties or any other rights pertaining
thereto; it being understood and agreed that Debtor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality of
the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral, if Secured Party take such
action, for purposes of preserving rights in the Collateral, as Debtor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Debtor, and no refusal by Secured
Party to comply with any such request by Debtor, shall be deemed to be a failure
to exercise reasonable care.
Default
Section 5. Rights and Remedies. If any event of default shall occur
under either the Note or this Agreement, Secured Party shall have all of the
rights and remedies of secured parties under the Uniform Commercial Code as
adopted by the State of Texas as well as any other rights and remedies permitted
under or provided by applicable law, subject in all respects to the rights of
the Prior Secured Parties.
Miscellaneous
Section 6.1 No Waiver; Cumulative Remedies. No failure on the part of
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
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operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any further exercise
thereof or the exercise of any other right, power, or privilege. The rights and
remedies provided for in this Agreement are cumulative and not exclusive of any
rights and remedies provided by law.
Section 6.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Debtor and Secured Party and their respective
heirs, personal representatives, successors and assigns, except that Debtor may
not assign any of its rights or obligations under this Agreement without the
prior written consent of Secured Party.
Section 7.3 Amendment; Entire Agreement. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.4 Notices. All notices and other communications provided for
in this Agreement shall be given or made in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified beside its name on the signature pages
hereof; or, as to any party at such other address as shall be designated by such
party in a notice to the other party given in accordance with this Section.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy, subject to
telephone confirmation of receipt, or when personally delivered or, in the case
of a mailed notice, three (3) days business days after deposit in the mails, in
each case given or addressed as aforesaid.
Section 7.5 Applicable Law; Venue; Service of Process. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section 7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 7.7 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 of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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Section 7.8 Headings. The headings, captions and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 7.9 Construction. Debtor and Secured Party acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Debtor and Secured
Party.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
PROBEX CORP.,
a Delaware corporation
Address:
00000 Xxxx Xxxx, Xxxxx 0000 By: /s/ Xxxxx X. Xxxx
Xxxxxx, Xxxxx 00000 --------------------------------
Attn: Xxxxx X. Xxxx, CFO Name: Xxxxx X. Xxxx
Facsimile: (000) 000-0000 Title: Senior Vice President
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SECURED PARTY:
-------------
Address:
SINGLE SPUR INVESTMENTS, LLC
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx Xxxx By: /s/ Xxxxxxx Xxxx
Facsimile: (000) 000-0000 -------------------------------
Name: Xxxxxxx Xxxx
Title: Manager
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