Exhibit 2.2
EXECUTION COPY
SECURITY AGREEMENT, dated as of January 13, 1999, made by THERMATRIX
INC., a Delaware corporation ("Grantor") and Wexford Capital Partners II, L.P.,
a Delaware limited partnership, Wexford Overseas Partners I, L.P., a Cayman
Islands exempted limited partnership, Wexford Special Situations 1996, L.P., a
Delaware limited partnership, Wexford Special Situations 1996 Institutional,
L.P., a Delaware limited partnership, Wexford Special Situations 1996 Limited, a
Cayman Islands exempted company, and Wexford-Euris Special Situations 1996,
L.P., a Delaware limited partnership (collectively, the "Lenders") and WEXFORD
MANAGEMENT LLC, a Connecticut limited liability company, as Agent (the "Agent").
W I T N E S S E T H :
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WHEREAS, Wahlco Environmental Systems Inc. ("Wahlco"), Agent and
lenders are parties to an Amended and Restated Credit Agreement dated January
30, 1998 (the "1998 Credit Agreement"), under which Wahlco has borrowed funds
from time to time, and Wahlco has also borrowed funds through a non-committed
line of credit established, guaranteed and collateralized at the Chase Manhattan
Bank in February 1997 (the "Chase Facility"), and Wahlco is obligated to repay
such borrowings and amounts otherwise due under the 1998 Credit Agreement and
the Chase Facility.
WHEREAS, pursuant to an Agreement and Plan of Merger, dated November
9, 1998 (the "Merger Agreement"), among Wahlco, Thermatrix and TMX Acquisition
Sub I, Inc., a wholly owned subsidiary of Thermatrix ("Merger Sub"), Merger Sub
will merge with and into Wahlco and Wahlco will become a wholly owned subsidiary
of Thermatrix at the effective time of the Merger;
WHEREAS, in connection with the Merger, Grantor has agreed to guaranty
the obligations of Wahlco to the Lenders and to Chase and has executed the
Guarantee, dated the date hereof, in favor of the Lenders and the Agent;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
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The following terms, as used herein, have the following respective meanings:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by Grantor, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to Grantor arising from the sale, lease or exchange of goods
or other property by it and/or the performance of services by it (including,
without limitation, any such obligation which might be characterized as an
account, contract right or general intangible under the UCC in effect in any
jurisdiction) and all of
Grantor's rights in, to and under all purchase orders for goods, services or
other property, and all of Grantor's rights to any goods, services or other
property represented by any of the foregoing (including returned or
repossessed goods and unpaid sellers' rights of rescission, replevin,
reclamation and rights to stoppage in transit) and all monies due to or to
become due to Grantor under all contracts for the sale, lease or exchange of
goods or other property and/or the performance of services by it (whether or
not yet earned by performance on the part of Grantor), in each case whether
now in existence or hereafter arising or acquired including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Copyright Office" means the United States Copyright Office.
"Copyrights" means all of the following now or hereafter acquired by
Grantor: (i) all copyrights, registrations and applications therefor, (ii) all
renewals and extensions thereof, (iii) all income, royalties, damages and
payments now and hereafter due or payable or both with respect thereto,
including, without limitation, damages and payments for past or future
infringements or misappropriations thereof, (iv) all rights to sue for past,
present and future infringements or misappropriations thereof, and (v) all other
rights corresponding thereto throughout the world.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now owned or hereafter
acquired by Grantor.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Grantor, including without limitation all motor vehicles,
trucks, trailers, railcars and barges.
"Federal Intellectual Property Laws" means the Copyright Act and the
Patent and Trademark Act.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by Grantor, including, without
limitation, (i) all obligations or indebtedness owing to Grantor (other than
Accounts) from whatever source arising, (ii) all patents, patent licenses,
trademarks, trademark licenses, rights in intellectual property, goodwill, trade
names, service marks, trade secrets, copyrights, permits and licenses, (iii) all
rights or claims in respect of refunds for taxes paid and (iv) all rights in
respect of any pension plan or similar arrangement maintained for employees of
Grantor.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) evidencing, representing, arising from or
existing in respect of, relating to, securing or otherwise supporting the
payment of, any of the Accounts, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by Grantor.
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"Intellectual Property Collateral" means all of the Copyrights,
Licenses, Patents, Trademarks and Trade Secrets as to which the Lenders and the
Agent have been granted a security interest hereunder.
"Inventory" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired by Grantor, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"License" means any Patent License, Trademark License or other license
as to which the Lenders and the Agent have been granted a security interest
hereunder.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the UCC).
"Material Adverse Effect" shall mean material adverse effect on (i)
the condition (financial or otherwise), operations, performance, properties,
assets, business or prospects of the Grantor taken as a whole, (ii) Grantor's
ability to pay or perform the Secured Obligations, (iii) the Lenders' Liens on
the Collateral or the priority of any such Lien.
"Patent License" means any written agreement granting any right to
practice any invention on which a Patent is in existence now owned or hereafter
acquired by Grantor.
"Patents" means all of the following now or hereafter acquired by
Grantor: (i) all patents and patent applications, (ii) all inventions and
improvements described and claimed therein, (iii) all releases, divisions,
continuations, renewals, extensions and continuations-in-part thereof, (iv) all
income, royalties, damages and payments now and hereafter due and/or payable to
Grantor with respect thereto, including, without limitation, damages and
payments for past, present or future infringements or misappropriations thereof,
(v) all rights to sue for past, present and future infringements or
misappropriations thereof, and (vi) all other rights corresponding thereto
throughout the world.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, completed and supplemented with the schedules and attachments
contemplated thereby to the satisfaction of the Agent, and duly executed by the
chief executive officer and the chief legal officer of Grantor.
"Permitted Liens" means the Security Interests and the following
encumbrances: (i) Liens for taxes or assessments or other governmental charges
or levies, not yet due and payable; (ii) pledges or deposits securing
obligations under workmen's compensation,
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unemployment insurance, social security or public liability laws or similar
legislation; (iii) pledges or deposits securing bids, tenders, contracts
(other than contracts for the payment of money) or equipment or leases to
which Grantor is a party as lessee made in the ordinary course of business;
(iv) deposits securing public or statutory obligations of Grantor; and (v)
deposits securing or in lieu of surety, appeal or customs bonds in proceedings
to which Grantor is a party; (vi) any Liens securing Grantor's obligations to
Venture Lending Group, a division of Cupertino National Bank ("Venture")
existing on the Closing Date; (vii) Liens (1) upon or in any equipment
acquired or held by Grantor to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (2) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired, accessions thereto, replacements thereof, substitutions therefor and
improvements thereon, and the proceeds of such equipment; (xiii) leases or
subleases and license and sublicenses granted to others in the ordinary course
of business not interfering in any material respect with the business of
Grantor, and any interest or title of a lessor, licensor or under any lease or
license; (xi) Liens on assets (including the proceeds thereof and accessions
thereto) that existed at the time such assets were acquired by Grantor;
provided such Liens are not granted in contemplation of or in connection with
the acquisition of such asset by Grantor; (x) easements, reservations, rights-
of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances affecting real property not constituting a
Material Adverse Effect; (xi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of customs duties in
connection with the importation of goods; (xii) Liens which constitute rights
of set-off of a customary nature or banker's Liens with respect to amounts on
deposit, whether arising by operation of law or by contract, in connection
with arrangements entered into with banks in the ordinary course of business;
(xiii) Liens on insurance proceeds in favor of insurance companies granted
solely as security for financed premiums; and (xiv) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the types described above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"Proceeds" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, collateral, including without limitation all claims of Grantor against
third parties for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of insurance in respect
of, any collateral, and any condemnation or requisition payments with respect to
any collateral, in each case whether now existing or hereafter arising.
"PTO" means United States Patent and Trademark Office.
"Secured Obligations" means the obligations of Grantor under the
Guaranty secured under this Agreement.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
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"Trade Secrets" means trade secrets, along with any and all (i)
income, royalties, damages and payments now and hereafter due and/or payable to
Grantor with respect thereto, including, without limitation, damages and
payments thereof, (ii) rights to sue for past, present and future infringements
or misappropriations thereof, and (iii) all other rights corresponding thereto
throughout the world.
"Trademark License" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Grantor.
"Trademarks" means all of the following now owned or hereafter
acquired by Grantor: (i) all trademarks (including service marks and trade
names, whether registered or at common law), registrations and applications
therefor, and the entire product lines and goodwill of Grantor's business
connected therewith and symbolized thereby, (ii) all renewals thereof, (iii) all
income, royalties, damages and payments now and hereafter due or payable or both
with respect thereto, including, without limitation, damages and payments for
past, present or future infringements or misappropriations thereof, (iv) all
rights to sue for past, present and future infringements or misappropriations
thereof, and (v) all other rights corresponding thereto throughout the world.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York; provided that if by reason of mandatory
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provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or non-
perfection.
2. REPRESENTATIONS AND WARRANTIES.
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Grantor represents and warrants as follows:
(A) Grantor has good and marketable title to all of the Collateral in
which Grantor purports to grant a Security Interest hereunder, free and clear of
any Liens other than the Permitted Liens. [Grantor has taken all actions
necessary under the UCC to perfect its interest in any Accounts purchased or
otherwise acquired by it, as against its assignors and creditors of its
assignors.]
(B) Grantor has not performed any acts which might prevent the Agent
from enforcing any of the terms of this Agreement or which would limit the Agent
in any such enforcement. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security Interests and
Permitted Liens, and other than the other the LIM/Mannesman Security Agreement
entered into in connection with the Merger Agreement, no financing statement,
mortgage, security agreement, filings with the Copyright Office and the PTO or
similar or equivalent document or instrument covering all or any part of the
Collateral in which Grantor purports to grant a Security Interest hereunder is
on file or of record in any jurisdiction in which such filing or recording would
be effective to perfect a Lien on such Collateral. No such Collateral is in the
possession of any Person (other than Grantor) asserting
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any claim thereto or security interest therein, except that the Agent or its
designee may have possession of Collateral as contemplated hereby.
(C) On or before Friday, January 22, 1999, Grantor shall deliver the
Perfection Certificate to the Agent. The information set forth therein shall be
correct and complete. As promptly as practicable, but in no event later than 30
days after the date hereof, Grantor shall furnish to the Agent file search
reports from each UCC filing office set forth in Schedule 7 to the Perfection
Certificate confirming the filing information set forth in such Schedule.
(D) The Security Interests constitute valid security interests under
the UCC securing the Secured Obligations. When UCC financing statements in the
form specified in Exhibit A shall have been filed in the offices specified in
the Perfection Certificate and the requisite filings have been made in the
Copyright Office and the PTO, the Security Interests shall constitute perfected
security interests in the Collateral (except Inventory in transit) in which
Grantor purports to grant a Security Interest hereunder to the extent that a
security interest therein may be perfected by filing pursuant to the UCC and the
Federal Intellectual Property Laws, prior to all other Liens and rights of
others therein except for the Permitted Liens.
(E) All Inventory in which Grantor purports to grant a Security
Interest hereunder has or will have been produced in compliance with the
applicable requirements of the Fair Labor Standards Act, as amended.
3. THE SECURITY INTERESTS.
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(A) In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all of the obligations of Grantor hereunder and under the Guaranty, Grantor
hereby grants to the Agent for the ratable benefit of the Lenders a continuing
security interest in and to all of the following property of Grantor, whether
now owned or existing or hereafter acquired or arising and regardless of where
located (all being collectively referred to as the "Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) Copyrights;
(8) Patents;
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(9) Patent Licenses;
(10) Trademarks;
(11) Trademark Licenses;
(12) Trade Secrets;
(13) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer materials
and records) of Grantor pertaining to any of the Collateral; and
(14) All Proceeds of all or any of the Collateral described in Clauses
1 through 13 hereof.
(B) The Security Interests are granted as security only and shall not
subject the Agent or any Lender to, or transfer or in any way affect or modify,
any obligation or liability of Grantor with respect to any of the Collateral or
any transaction in connection therewith. Notwithstanding the foregoing, the
security interest granted herein shall not extend to and the term "Collateral"
shall not include any property, rights or licenses to the extent the granting of
a security interest therein (i) would be contrary to applicable law or (ii) is
prohibited by or would constitute a default under any agreement or document
governing such property rights or licenses (but only to the extent such
prohibition is enforceable under applicable law).
4. FURTHER ASSURANCES; COVENANTS.
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(A) Grantor will not change its name in any manner unless it shall
have given the Agent prior written notice thereof Grantor will not change the
location of (i) its chief executive office or chief place of business or (ii)
the locations where it keeps or holds any Collateral or any records relating
thereto from the applicable location described in the Perfection Certificate
unless it shall have given the Agent prior written notice thereof. Grantor
shall not in any event change the location of any Collateral if such change
would cause the Security Interests in such Collateral to lapse or cease to be
perfected.
(B) Grantor will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, notification, document,
agreement or other paper and take any other action, (including, without
limitation, any filings of financing or continuation statements under the UCC or
filings under the Federal Intellectual Property Laws) that from time to time may
be reasonably necessary or desirable, or that the Agent may reasonably request,
in order to create, preserve, perfect, confirm or validate the Security
Interests or to enable the Agent and the Lenders to obtain the full benefits of
this Agreement, or to enable the Agent to exercise and enforce any of its
rights, powers and remedies hereunder with respect to any of the Collateral. To
the extent permitted by applicable law, Grantor hereby authorizes the Agent to
execute and file financing statements or continuation statements without
Grantor's signature appearing thereon. Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Grantor shall
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pay the costs of, or incidental to, any recording or filing of any financing
or continuation statements concerning the Collateral in which Grantor purports
to grant a Security Interest hereunder.
(C) If any Collateral is at any time in the possession or control of
any warehouseman, bailee or any of Grantor's agents or processors, Grantor shall
notify such warehouseman, bailee, agent or processor of the Security Interests
created hereby and to hold all such Collateral for the Agent's account subject
to the Agent's instructions.
(D) Grantor shall keep full and accurate books and records relating to
the Collateral in which Grantor purports to grant a Security Interest hereunder,
and stamp or otherwise mark such books and records in such manner as the Lenders
or the Agent may reasonably require in order to reflect the Security Interests.
(E) Grantor will immediately deliver and pledge each Instrument to the
Agent, appropriately endorsed to the Agent, provided that so long as a default
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of Grantor on its obligations under the Guaranty has occurred and is continuing.
Grantor may retain for collection in the ordinary course any Instruments
received by it in the ordinary course of business and the Agent shall, promptly
upon request of Grantor, make appropriate arrangements for making any other
Instrument pledged by Grantor available to it for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent deemed
appropriate to the Agent, against trust receipt or like document).
(F) Grantor shall use its best efforts to cause to be collected from
its account debtors, as and when due, any and all amounts owing under or on
account of each Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Account. Subject to the
rights of the Agent and the Lenders hereunder if a default of Grantor on it's
obligations under the Guaranty has occurred and is continuing, Grantor may allow
in the ordinary course of business as adjustments to amounts owing under its
Accounts (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which Grantor finds
appropriate in accordance with sound business judgment and (ii) a refund or
credit due as a result of returned or damaged merchandise, all in accordance
with Grantor's ordinary course of business consistent with its historical
collection practices. The costs and expenses (including, without limitation,
attorney's fees) of collection, whether incurred by Grantor or the Agent, shall
be borne by Grantor.
(G) Upon the occurrence and during the continuance of any default
under the Guaranty, Grantor will promptly notify (and Grantor hereby authorizes
the Agent so to notify) each account debtor in respect of any Account or
Instrument that such Collateral has been assigned to the Agent hereunder, and
that any payments due or to become due in respect of such Collateral are to be
made directly to the Agent or its designee.
(H) Without the prior written consent of the Lenders and the Agent,
Grantor will not sell, lease, exchange, assign or otherwise dispose of, or grant
any option with respect to,
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any Collateral except that, subject to the rights of the Agent and the Lenders
hereunder if a default of Grantor on it's obligations under the Guaranty has
occurred and is continuing, Grantor may sell, lease or exchange Inventory and
surplus or worn-out Equipment in the ordinary course of business, whereupon,
in the case of such a sale or exchange, the Security Interests created hereby
in such item (but not in any Proceeds arising from such sale or exchange)
shall cease immediately without any further action on the part of the Agent.
(I) No later than January 22, 1999, Grantor will cause the Agent to be
named as loss payee on each insurance policy covering risks relating to any of
its Inventory and Equipment. Grantor will deliver to the Agent, upon request of
the Agent, the insurance policies for such insurance.
(J) From time to time upon request by the Agent, Grantor shall, at its
cost and expense, cause to be delivered to the Lenders an opinion of counsel
satisfactory to the Agent as to such matters relating to the transactions
contemplated hereby as the Lenders may reasonably request.]
(K) Collateral Covenants Regarding Intellectual Property:
(1) Grantor shall notify the Agent immediately if it knows or has
reason to know that any application or registration relating to any
Trademark, Copyright or Patent which is material to the conduct of
Grantor's business may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding
in the PTO, the Copyright Office or any court) regarding Grantor's
ownership of any intellectual property which is material to the conduct of
Grantor s business, its right to register the same, or to keep and maintain
the same.
(2) In no event shall a Grantor, either itself or through any agent,
employee, licensee or designee, file an application for the registration of
any Trademark, Copyright or Patent with the PTO or any similar office or
agency in any other country or any political subdivision thereof, unless it
promptly informs the Agent, and, upon request of the Agent, executes and
delivers any and all agreements, instruments, filings, notifications,
documents, and papers as the Agent may request to evidence the Agent's
security interest in such intellectual property and the General
Intangibles, including, without limitation, the goodwill of Grantor,
relating thereto or represented thereby.
(3) Grantor will take all necessary and appropriate actions,
including, without limitation, in any proceeding before PTO, to maintain
and pursue each application (and to obtain the relevant registration) and
to maintain each registration of the Trademarks, Copyrights and Patents
which are material to the conduct of Grantor's business, including, without
limitation, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition cancellation proceedings.
(4) In the event that any of the Intellectual Property Collateral is
infringed, misappropriated or diluted by a third party, Grantor shall
notify the Agent promptly after it learns thereof and shall, if requested
by the Agent, promptly sue for infringement,
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misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions
as Grantor shall reasonably deem appropriate under the circumstances to
protect such Intellectual Property Collateral.
5. GENERAL AUTHORITY.
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Grantor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of Grantor, the Agent,
the Lenders or otherwise, for the sole use and benefit of the Agent and the
Lenders, but at Grantor's expense, to the extent permitted by law to exercise,
at any time and from time to time if a default of Grantor on it's obligations
under the Guaranty has occurred or is continuing, all or any of the following
powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Agent
were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Agent shall give Grantor not less than ten days' prior written
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notice of the time and place of any sale or other intended disposition of any of
the Collateral, except any Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. Grantor agrees that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the UCC.
6. REMEDIES UPON GRANTOR'S DEFAULT UNDER THE GUARANTEE.
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(A) If a default of Grantor on its obligations under the Guaranty has
occurred or is continuing, the Agent may exercise on behalf of the Lenders all
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, the Agent may,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, (i) apply cash, if any, then held by
it as Collateral as specified in Section 8 and (ii) if there shall be no such
cash or if such cash shall be insufficient to pay all the Secured Obligations in
full, sell the Collateral or any part thereof at public or private sale, for
cash, upon credit or for future delivery, and at such price or prices as the
Agent may deem satisfactory. The Agent or any Lender may be the purchaser of
any or all of the Collateral so sold at any public sale (or, if the Collateral
is of a type customarily sold in a recognized market or is of a type which is
the subject of widely distributed standard price quotations, at any private
sale). Grantor will execute and deliver such documents and take such
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other action as the Agent deems necessary or advisable in order that any such
sale may be made in compliance with law. Upon any such sale the Agent shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the Collateral
so sold to it absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of Grantor which may be waived,
and Grantor, to the extent permitted by law, hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under any law
now existing or hereafter adopted. The notice (if any) of such sale required
by Section 5 shall (1) in case of a public sale, state the time and place
fixed for such sale, and (2) in the case of a private sale, state the day
after which such sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or
places as the Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as
the Agent may determine. The Agent shall not be obligated to make any such
sale pursuant to any such notice. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same may
be so adjourned. In case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Agent until the selling price is paid by the purchaser thereof, but the Agent
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. The Agent, 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 and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under
this Agreement the Agent may (i) require Grantor to, and Grantor agrees that it
will, at its expense and upon the request of the Agent, forthwith assemble all
or any part of the Collateral as directed by the Agent and make it available at
a place designated by the Agent which is, in its opinion, reasonably convenient
to the Agent and Grantor, whether at the premises of Grantor or otherwise, (ii)
to the extent permitted by applicable law, enter, with or without process of law
and without breach of the peace, any premise where any of the Collateral is or
may be located, and without charge or liability to it seize and remove such
Collateral from such premises, (iii) have access to and use Grantor's books and
records relating to the Collateral and (iv) prior to the disposition of the
Collateral, store or transfer it without charge in or by means of any storage or
transportation facility owned or leased by Grantor, process, repair or
recondition it or otherwise prepare it for disposition in any manner and to the
extent the Agent deems appropriate and, in connection with such preparation and
disposition, use without charge any trademark, trade name, copyright, patent or
technical process used by Grantor.
7. LIMITATION ON DUTY OF THE AGENT IN RESPECT OF COLLATERAL.
--------------------------------------------------------
Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable
11
care in the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of
the act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by the Agent in good faith.
8. APPLICATION OF PROCEEDS.
-----------------------
Upon the occurrence and continuance of a default under the Guaranty,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied by the Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization,
-----
including reasonable compensation to agents and counsel for the Agent, and
all expenses, liabilities and advances incurred or made by the Agent in
connection therewith, and any other unreimbursed expenses for which the
Agent or any Lender is to be reimbursed pursuant to Section 11;
second, to the ratable payment of accrued but unpaid interest on the
------
Secured Obligations in accordance with the terms thereof;
third, to the ratable payment of unpaid principal of the Secured
-----
Obligations;
fourth, to the ratable payment of all other Secured Obligations, until
------
all Secured Obligations shall have been paid in full; and
finally, to payment to Grantor of any surplus then remaining from such
-------
proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
9. CONCERNING THE AGENT.
--------------------
(A) The Agent is authorized to take all such action as is provided to
be taken by it as the Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including,
without limitation, the timing and methods of realization upon the Collateral)
the Agent shall act or refrain from acting in accordance with written
instructions from the Lenders or, in the absence of such instructions, in
accordance with its discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by Grantor.
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10. APPOINTMENT OF CO-AGENTS.
------------------------
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint one or more other Persons, either to act
as co-agent or co-agents, jointly with the Agent, or to act as separate agent or
agents on behalf of the Lenders with such power and authority as may be
necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment (which may, in the discretion of the
Agent, include provisions for the protection of such co-agent or separate agent
similar to the provisions of Section 9).
11. EXPENSES.
--------
In the event that Grantor fails to comply with the provisions of the
Guaranty or this Agreement, such that the value of any Collateral or the
validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Agent if requested by
the Lenders may, but shall not be required to, effect such compliance on behalf
of Grantor, and Grantor shall reimburse the Agent for the costs thereof on
demand. All insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining, and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral, or in respect of
periodic appraisals and inspections of the Collateral to the extent the same may
be requested by the Lenders from time to time, or in respect of the sale or
other disposition thereof shall be borne and paid by Grantor; and if Grantor
fails to promptly pay any portion thereof when due, the Agent or any Lender may,
at its option, but shall not be required to, pay the same and charge Grantor's
account therefor, and Grantor agrees to reimburse the Agent or such Lender
therefor on demand. All sums so paid or incurred by the Agent or any Lender for
any of the foregoing and any and all other sums for which Grantor may become
liable hereunder and all costs and expenses (including attorneys' fees, legal
expenses and court costs) reasonably incurred by the Agent or any Lender in
enforcing or protecting the Security Interests or any of their rights or
remedies under this Agreement, shall be additional Secured Obligations
hereunder.
12. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
--------------------------------------------------------
Upon the repayment in full of all Secured Obligations under the
Guaranty, the Security Interests shall terminate and all rights to the
Collateral shall revert to Grantor. At any time and from time to time prior to
such termination of the Security Interests, the Agent may release any of the
Collateral. Upon any such termination of the Security Interests or release of
Collateral, the Agent will, at the expense of Grantor, execute and deliver to
Grantor such documents as the Grantor shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
13. NOTICES.
-------
All notices, communications and distributions hereunder shall be given
in accordance with Section 3.1 of the Guaranty.
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14. WAIVERS, NON-EXCLUSIVE REMEDIES.
-------------------------------
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Guaranty, the Guaranty or this
Agreement preclude any other or further exercise thereof or the exercise of any
other right. The rights in this Agreement and the Guaranty are cumulative and
are not exclusive of any other remedies provided by law.
15. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement is for the benefit of the Agent and the Lenders and
their successors and assigns, and in the event of an assignment of all or any of
the Secured Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on Grantor and its successors and assigns.
16. CHANGES IN WRITING.
------------------
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only in writing signed by the
Grantor and the Agent with the consent of the Lenders.
17. GOVERNING LAW.
-------------
ALL MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
18. CONSENT TO JURISDICTION.
-----------------------
GRANTOR, EACH OF THE LENDERS AND THE AGENT IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF (i) THE SUPREME COURT OF THE STATE OF NEW YORK, NEW
YORK COUNTY AND (ii) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. GRANTOR, EACH OF
THE LENDERS AND THE AGENT FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS,
NOTICE OR DOCUMENTS BY UNITED STATES REGISTERED MAIL TO SUCH PARTY'S RESPECTIVE
ADDRESS FOR NOTICES SET FORTH IN
14
SECTION 13 SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR
PROCEEDING IN NEW YORK WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED
TO JURISDICTION IN THIS SECTION 18. GRANTOR, EACH OF THE LENDERS AND THE AGENT
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF
ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY IN (a) THE SUPREME COURT OF THE STATE OF NEW
YORK, NEW YORK COUNTY AND (b) THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
19. SEVERABILITY.
------------
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the Lenders in order to
carry out the intentions of the parties hereto as nearly as may be possible; and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THERMATRIX, INC.
By: /s/ DANIEL S. TEDONE
-------------------------
Name: Daniel S. Tedone
Title: Chief Financial Officer
WEXFORD CAPITAL PARTNERS II, L.P.
By: Wexford Capital II, L.P., As General Partner
By: Wexford Capital Corp., As General Partner
By: /s/ ARTHUR AMRON
-------------------------
Name: Arthur Amron
Title: Vice President
WEXFORD OVERSEAS PARTNERS I, L.P.
By: Wexford Capital Overseas II, L.P., As
General Partner
By: Wexford Capital Limited, As General Partner
By: /s/ ARTHUR AMRON
-------------------------
Name: Arthur Amron
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By: Wexford Advisors LLC, As General Partner
By: /s/ ARTHUR AMRON
--------------------------
Name: Arthur Amron
Title: Vice President
16
WEXFORD SPECIAL SITUATIONS 1996, INSTITUTIONAL,
L.P.
By: Wexford Advisors LLC, As General Partner
By: /s/ ARTHUR AMRON
--------------------------
Name: Arthur Amron
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996 LIMITED
By: Wexford Advisors LLC, As Investment Manager
By: /s/ ARTHUR AMRON
--------------------------
Name: Arthur Amron
Title: Vice President
WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P.
By: Wexford Euris Advisors LLC, As General
Partner
By: /s/ ARTHUR AMRON
--------------------------
Name: Arthur Amron
Title: Vice President
WEXFORD MANAGEMENT LLC, As Agent
By: /s/ ARTHUR AMRON
--------------------------
Name: Arthur Amron
Title: Executive Vice President and General
Counsel
17