EXHIBIT 10.32
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("AGREEMENT") is made as of January 20, 1997, by
HYDROCARBON TECHNOLOGIES, INC., a Texas corporation, ("DEBTOR"), in favor of
BANK ONE, TEXAS, NATIONAL ASSOCIATION ("BANK"). Debtor hereby agrees with Bank
as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "BORROWER" shall mean ▇▇▇▇▇▇ Environmental Services,
Inc., a Delaware corporation.
(b) The term "CODE" shall mean the Uniform Commercial Code as in
effect in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(c) The term "COLLATERAL" shall mean all of the property set forth
below:
(i) All present and future accounts, chattel paper, contract
rights, documents, instruments, deposit accounts and general
intangibles (including any right to payment for goods sold or services
rendered arising out of the sale or delivery of personal property or
work done or labor performed by Debtor), now or hereafter owned, held,
or acquired by Debtor, together with any and all books of account,
customer lists and other records relating in any way to the foregoing
(including, without limitation, computer software, whether on tape,
disk, card, strip, cartridge or any other form), and in any case where
an account arises from the sale of goods, the interest of Debtor in
such goods.
(ii) All equipment and fixtures of whatsoever kind and character
now or hereafter possessed, held, acquired, leased or owned by Debtor
and used or usable in Debtor's business, together with all
replacements, accessories, additions, substitutions and accessions to
all of the foregoing, all records relating in any way to the foregoing
(including, without limitation, any computer software, whether on
tape, disk, card, strip, cartridge or any other form). To the extent
that the foregoing property is located on, attached to, annexed to,
related to, or used in connection with, or otherwise made a part of,
and is or shall become fixtures upon, real property, such real
property and the record owner thereof is described on EXHIBIT "A"
attached hereto and made a part hereof.
The term Collateral, as used herein, shall also include all PRODUCTS
and PROCEEDS of all of the foregoing (including without limitation,
insurance payable by reason of loss or damage to the foregoing property)
and any property, securities, guaranties or monies of Debtor which may at
any time come into the possession of Secured Party (as hereinafter
defined). The designation of proceeds does not authorize Debtor to sell,
transfer or otherwise convey any of the foregoing property except finished
goods intended for sale in the ordinary course of Debtor's business or as
otherwise provided herein.
(d) The term "INDEBTEDNESS" shall mean:
(i) that certain Letter Loan Agreement dated June 2, 1995 between
Borrower and Bank (the "LETTER LOAN AGREEMENT") including, without
limitation, all amounts owing pursuant to that certain $4,000,000.00
Revolving Line of Credit Promissory Note dated June 2, 1995 and that
certain $2,500,000.00 Advancing Line of Credit Promissory Note also
dated June 2, 1995, both of which notes have a maturity date of June
2, 1997 (collectively, the "NOTES"), (ii) that certain Master Lease
Agreement dated February 9, 1996 between Banc One Leasing Corporation,
as lessor ("ORIGINAL LESSOR"), and Borrower, as lessee, pursuant to
which equipment was to be leased from time to time by the attachment
thereto of one or more lease schedules (such lease agreement, together
with all lease schedules attached thereto herein called the "MASTER
LEASE AGREEMENT"), including specifically that certain lease schedule
no. 1000049223 between Borrower and the Original Lessor, pursuant to
which certain motor vehicles and equipment having a total cost of
$699,860.35 were leased, on a financing lease basis, by the Original
Lessor to Borrower, such lease term expiring on February 15, 2001
("LEASE SCHEDULE NO. 49223") and that certain lease schedule no.
1000049649 between Borrower and the Original Lessor pursuant to which
certain equipment having a total cost of $1,800,515.65 was leased, on
a financing lease basis, by the Original Lessor to Borrower, such
lease term expiring on March 15, 2003 ("LEASE SCHEDULE NO. 49649");
Lease Schedule No. 49223 having been assigned by the Original Lessor
to Banc One Texas Leasing Corporation pursuant to an Assignment and
▇▇▇▇ of Sale dated February 15, 1995 and Lease Schedule No. 49649
having been assigned by the Original Lessor to Banc One Texas Leasing
Corporation pursuant to an Assignment and ▇▇▇▇ of Sale dated March 15,
1996; Lease Schedule No. 49223 and Lease Schedule No. 49649 having
been further assigned by Banc One Texas Leasing Corporation to Bank
pursuant to an Assignment and ▇▇▇▇ of Sale dated January 10, 1997,
(iii) all other indebtedness, obligations and liabilities of Borrower
to Bank of any kind or character, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several or joint and several, and
regardless of whether such indebtedness, obligations and liabilities
may, prior to their acquisitions by Bank, be or have been payable to
or in favor of a third party and subsequently acquired by Bank (it
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being contemplated that Bank may make such acquisitions from third
parties), including without limitation all indebtedness, obligations
and liabilities of Borrower to Bank now existing or hereafter arising
by note, draft, acceptance, guaranty, endorsement, letter of credit,
assignment, purchase, overdraft, discount, indemnity agreement or
otherwise, (iv) all accrued but unpaid interest on any of the
indebtedness described in (i), (ii) and (iii) above, (v) all
obligations of Borrower to Bank under any documents evidencing,
securing, governing and/or pertaining to all or any part of the
indebtedness described in (i), (ii), (iii) and (iv) above, (vi) all
costs and expenses incurred by Bank in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i), (ii), (iii), (iv) and (v) above or the
protection or preservation of, or realization upon, the collateral
securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (vii)
all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii), (iv), (v)
and (vi) above.
(e) The term "LOAN DOCUMENTS" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness.
(f) The term "OBLIGATED PARTY" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(g) The term "SECURED PARTY" shall mean Bank, its successors and
assigns, including without limitation, any party to whom Bank, or its
successors or assigns, may assign its rights and interests under this
Agreement.
All words and phrases used herein which are expressly defined in Section 1.201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning specified
therein except to the extent such meaning is inconsistent with a definition in
Section 1.201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Debtor, for
value received, hereby grants to Secured Party a continuing security interest in
the Collateral.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and warrants
the following to Secured Party:
(a) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Debtor have been duly
authorized by all necessary corporate action of Debtor, to the extent
Debtor is a corporation, or by all necessary partnership action, to the
extent Debtor is a partnership.
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(b) ENFORCEABILITY. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Debtor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(c) OWNERSHIP AND LIENS. Debtor has good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement.
No dispute, right of setoff, counterclaim or defense exists with respect to
all or any part of the Collateral. Debtor has not executed any other
security agreement currently affecting the Collateral and no effective
financing statement or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording office except as may
have been executed or filed in favor of Secured Party.
(d) NO CONFLICTS OR CONSENTS. Neither the ownership, the intended
use of the Collateral by Debtor, the grant of the security interest by
Debtor to Secured Party herein nor the exercise by Secured Party of its
rights or remedies hereunder, will (i) conflict with any provision of (A)
any domestic or foreign law, statute, rule or regulation, (B) the articles
or certificate of incorporation, charter, bylaws or partnership agreement,
as the case may be, of Debtor, or (C) any agreement, judgment, license,
order or permit applicable to or binding upon Debtor, or (ii) result in or
require the creation of any lien, charge or encumbrance upon any assets or
properties of Debtor or of any person except as may be expressly
contemplated in the Loan Documents. Except as expressly contemplated in
the Loan Documents, no consent, approval, authorization or order of, and no
notice to or filing with, any court, governmental authority or third party
is required in connection with the grant by Debtor of the security interest
herein or the exercise by Secured Party of its rights and remedies
hereunder.
(e) SECURITY INTEREST. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance. This Agreement creates a
legal, valid and binding security interest in favor of Secured Party in the
Collateral securing the Indebtedness. Possession by Secured Party of all
certificates, instruments and cash constituting Collateral from time to
time and/or the filing of the financing statements delivered prior hereto
and/or concurrently herewith by Debtor to Secured Party will perfect and
establish the first priority of Secured Party's security interest hereunder
in the Collateral.
(f) LOCATION. Debtor's residence or chief executive office, as the
case may be, and the office where the records concerning the Collateral are
kept is located at its address set forth on the signature page hereof.
Except as specified elsewhere herein, all Collateral shall be kept at such
address and such other addresses as may be listed in SCHEDULE "B" attached
hereto and made a part hereof.
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(g) SOLVENCY OF DEBTOR. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Debtor at the time of the execution of this Agreement, (i)
Debtor is and will be solvent, (ii) the fair saleable value of Debtor's
assets exceeds and will continue to exceed Debtor's liabilities (both fixed
and contingent), (iii) Debtor is paying and will continue to be able to pay
its debts as they mature, and (iv) if Debtor is not an individual, Debtor
has and will have sufficient capital to carry on Debtor's businesses and
all businesses in which Debtor is about to engage.
(h) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed in
writing to Secured Party: (i) Debtor is conducting Debtor's businesses in
material compliance with all applicable federal, state and local laws,
statutes, ordinances, rules, regulations, orders, determinations and court
decisions, including without limitation, those pertaining to health or
environmental matters such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (collectively, together with any
subsequent amendments, hereinafter called "CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling
Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the
Hazardous Substance Waste Amendments of 1984 (collectively, together with
any subsequent amendments, hereinafter called "RCRA"), the Texas Water Code
and the Texas Solid Waste Disposal Act; (ii) none of the operations of
Debtor is the subject of a federal, state or local investigation evaluating
whether any material remedial action is needed to respond to a release or
disposal of any toxic or hazardous substance or solid waste into the
environment; (iii) Debtor has not filed any notice under any federal, state
or local law indicating that Debtor is responsible for the release into the
environment, the disposal on any premises in which Debtor is conducting its
businesses or the improper storage, of any material amount of any toxic or
hazardous substance or solid waste or that any such toxic or hazardous
substance or solid waste has been released, disposed of or is improperly
stored, upon any premise on which Debtor is conducting its businesses; and
(iv) Debtor otherwise does not have any known material contingent liability
in connection with the release into the environment, disposal or the
improper storage, of any such toxic or hazardous substance or solid waste.
The terms "HAZARDOUS SUBSTANCE" and "RELEASE", as used herein, shall have
the meanings specified in CERCLA, and the terms "SOLID WASTE" and
"DISPOSAL", as used herein, shall have the meanings specified in RCRA;
provided, however, that to the extent that the laws of the State of Texas
establish meanings for such terms which are broader than that specified in
either CERCLA or RCRA, such broader meanings shall apply.
(i) ACCOUNTS. Each account represents the valid and legally binding
indebtedness of a bona fide account debtor arising from the sale or lease
by Debtor of goods or the rendition by Debtor of services and is not
subject to contra accounts, setoffs, defenses or counterclaims by or
available to account debtors obligated on the accounts except as disclosed
by Debtor to Secured Party from time to time in writing. The amount shown
as to each account on Debtor's books is the true and undisputed amount
owing and
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unpaid thereon, subject only to discounts, allowances, rebates, credits and
adjustments to which the account debtor has a right and which have been
disclosed to Secured Party in writing.
4. AFFIRMATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) OWNERSHIP AND LIENS. Debtor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by
this Agreement and the security interests and other encumbrances expressly
permitted by the other Loan Documents. Debtor will not permit any dispute,
right of setoff, counterclaim or defense to exist with respect to all or
any part of the Collateral. Debtor will cause any financing statement or
other security instrument with respect to the Collateral to be terminated,
except as may exist or as may have been filed in favor of Secured Party.
Debtor will defend at its expense Secured Party's right, title and security
interest in and to the Collateral against the claims of any third party.
(b) FURTHER ASSURANCES. Debtor will from time to time at its expense
promptly execute and deliver all further instruments and documents and take
all further action necessary or appropriate or that Secured Party may
request in order (i) to perfect and protect the security interest created
or purported to be created hereby and the first priority of such security
interest, (ii) to enable Secured Party to exercise and enforce its rights
and remedies hereunder in respect of the Collateral, and (iii) to otherwise
effect the purposes of this Agreement, including without limitation: (A)
executing and filing such financing or continuation statements, or
amendments thereto; and (B) furnishing to Secured Party from time to time
statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral, all in reasonable
detail satisfactory to Bank.
(c) INSPECTION OF COLLATERAL. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect any of the
Collateral and the books and records of or relating to the Collateral at
any time during normal business hours, to make and take away photocopies,
photographs and printouts thereof and to write down and record any such
information.
(d) PAYMENT OF TAXES. Debtor (i) will timely pay all property and
other taxes, assessments and governmental charges or levies imposed upon
the Collateral or any part thereof, (ii) will timely pay all lawful claims
which, if unpaid, might become a lien or charge upon the Collateral or any
part thereof, and (iii) will maintain appropriate accruals and reserves for
all such liabilities in a timely fashion in accordance with generally
accepted accounting principles. Debtor may, however, delay paying or
discharging any
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such taxes, assessments, charges, claims or liabilities so long as the
validity thereof is contested in good faith by proper proceedings and
provided Debtor has set aside on Debtor's books adequate reserves therefor;
provided, however, Debtor understands and agrees that in the event of any
such delay in payment or discharge and upon Secured Party's written
request, Debtor will establish with Secured Party an escrow acceptable to
Secured Party adequate to cover the payment of such taxes, assessments and
governmental charges with interest, costs and penalties and a reasonable
additional sum to cover possible costs, interest and penalties (which
escrow shall be returned to Debtor upon payment of such taxes, assessments,
governmental charges, interests, costs and penalties or disbursed in
accordance with the resolution of the contest to the claimant) or furnish
Secured Party with an indemnity bond secured by a deposit in cash or other
security acceptable to Secured Party. Notwithstanding any other provision
contained in this Subsection, Secured Party may at its discretion exercise
its rights under Subsection 6(c) at any time to pay such taxes,
assessments, governmental charges, interest, costs and penalties.
(e) MORTGAGEE'S AND LANDLORD'S WAIVERS. Debtor shall cause each
mortgagee of real property owned by Debtor and each landlord of real
property leased by Debtor to execute and deliver agreements satisfactory in
form and substance to Secured Party by which such mortgagee or landlord
waives or subordinates any rights it may have in the Collateral.
(f) INSURANCE. Debtor will, at its own expense, maintain insurance
with respect to all Collateral which constitutes goods in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to Secured Party from time to time. If requested by Secured
Party, each policy for property damage insurance shall provide for all
losses to be paid directly to Secured Party. If requested by Secured
Party, each policy of insurance maintained by Debtor shall (i) name Debtor
and Secured Party as insured parties thereunder (without any representation
or warranty by or obligation upon Secured Party) as their interests may
appear, (ii) contain the agreement by the insurer that any loss thereunder
shall be payable to Secured Party notwithstanding any action, inaction or
breach of representation or warranty by Debtor, (iii) provide that there
shall be no recourse against Secured Party for payment of premiums or other
amounts with respect thereto, and (iv) provide that at least thirty (30)
days prior written notice of cancellation or of lapse shall be given to
Secured Party by the insurer. Debtor will, if requested by Secured Party,
deliver to Secured Party original or duplicate policies of such insurance
and, as often as Secured Party may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Debtor will
also, at the request of Secured Party, duly execute and deliver instruments
of assignment of such insurance policies and cause the respective insurers
to acknowledge notice of such assignment. All insurance payments in
respect of loss of or damage to any Collateral shall be paid to Secured
Party and applied as Secured Party in its sole discretion deems
appropriate.
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(g) ACCOUNTS AND GENERAL INTANGIBLES. Debtor will, except as
otherwise provided in Subsection 6(f), collect, at Debtor's own expense,
all amounts due or to become due under each of the accounts and general
intangibles. In connection with such collections, Debtor may and, at
Secured Party's direction, will take such action not otherwise forbidden by
Subsection 5(e) as Debtor or Secured Party may deem necessary or advisable
to enforce collection or performance of each of the accounts and general
intangibles. Debtor will also duly perform and cause to be performed all
of its obligations with respect to the goods or services, the sale or lease
or rendition of which gave rise or will give rise to each account and all
of its obligations to be performed under or with respect to the general
intangibles. Debtor also covenants and agrees to take any action and/or
execute any documents that Secured Party may request in order to comply
with the Federal Assignment of Claims Act, as amended.
5. NEGATIVE COVENANTS. Debtor will comply with the covenants contained
in this Section 5 at all times during the period of time this Agreement is
effective, unless Secured Party shall otherwise consent in writing.
(a) TRANSFER OR ENCUMBRANCE. Debtor will not (i) sell, assign (by
operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral, (ii) ▇▇▇▇▇ ▇ ▇▇▇▇ or security interest in
or execute, file or record any financing statement or other security
instrument with respect to the Collateral to any party other than Secured
Party, or (iii) deliver actual or constructive possession of any of the
Collateral to any party other than Secured Party, except for (A) sales and
leases of inventory in the ordinary course of business, and (B) the sale or
other disposal of any item of equipment which is worn out or obsolete and
which has been replaced by an item of equal suitability and value, owned by
Debtor and made subject to the security interest under this Agreement, but
which is otherwise free and clear of any lien, security interest,
encumbrance or adverse claim; provided, however, the exceptions permitted
in clauses (A) and (B) above shall automatically terminate upon the
occurrence of an Event of Default.
(b) IMPAIRMENT OF SECURITY INTEREST. Debtor will not take or fail to
take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
(c) POSSESSION OF COLLATERAL. Debtor will not cause or permit the
removal of any Collateral from its possession, control and risk of loss,
nor will Debtor cause or permit the removal of any Collateral from the
address on the signature page hereof and the addresses specified on
Schedule "B" to this Agreement other than (i) as permitted by Subsection
5(a), or (ii) in connection with the possession of any Collateral by
Secured Party or by its bailee.
(d) COMPROMISE OF COLLATERAL. Debtor will not adjust, settle,
compromise, amend or modify any Collateral, except an adjustment,
settlement, compromise,
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amendment or modification in good faith and in the ordinary course of
business; provided, however, this exception shall automatically terminate
upon the occurrence of an Event of Default or upon Secured Party's written
request. Debtor shall provide to Secured Party such information concerning
(i) any adjustment, settlement, compromise, amendment or modification of
any Collateral, and (ii) any claim asserted by any account debtor for
credit, allowance, adjustment, dispute, setoff or counterclaim, as Secured
Party may request from time to time.
(e) FINANCING STATEMENT FILINGS. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed where
Debtor maintains any Collateral, has its records concerning any Collateral
or has its residence or chief executive office, as the case may be.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change in the location of (i) any Collateral, (ii) any records
concerning any Collateral, or (iii) Debtor's residence or chief executive
office, as the case may be, to a jurisdiction other than as represented in
Subsection 3(f) unless Debtor shall have notified Secured Party in writing
of such change at least thirty (30) days prior to the effective date of
such change, and shall have first taken all action required by Secured
Party for the purpose of further perfecting or protecting the security
interest in favor of Secured Party in the Collateral. In any written
notice furnished pursuant to this Subsection, Debtor will expressly state
that the notice is required by this Agreement and contains facts that may
require additional filings of financing statements or other notices for the
purpose of continuing perfection of Secured Party's security interest in
the Collateral.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) ADDITIONAL FINANCING STATEMENTS FILINGS. Debtor hereby
authorizes Secured Party to file, without the signature of Debtor, one or
more financing or continuation statements, and amendments thereto, relating
to the Collateral. Debtor further agrees that a carbon, photographic or
other reproduction of this Security Agreement or any financing statement
describing any Collateral is sufficient as a financing statement and may be
filed in any jurisdiction Secured Party may deem appropriate.
(b) POWER OF ATTORNEY. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact, such power of attorney being coupled
with an interest, with full authority in the place and stead of Debtor and
in the name of Debtor or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured
Party may deem necessary or appropriate to accomplish the purposes of this
Agreement, including without limitation: (i) to obtain and adjust insurance
required by Secured Party hereunder; (ii) to demand, collect, ▇▇▇ for,
recover, compound, receive and give acquittance and receipts for moneys due
and to become due under or in respect of the Collateral; (iii) to receive,
endorse and collect any drafts or
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other instruments, documents and chattel paper in connection with clause
(i) or (ii) above; and (iv) to file any claims or take any action or
institute any proceedings which Secured Party may deem necessary or
appropriate for the collection and/or preservation of the Collateral or
otherwise to enforce the rights of Secured Party with respect to the
Collateral.
(c) PERFORMANCE BY SECURED PARTY. If Debtor fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor on demand.
(d) REQUEST FOR ENVIRONMENTAL INSPECTIONS. Upon Secured Party's
reasonable request from time to time, Debtor will obtain at Debtor's sole
expense an inspection or audit of Debtor's operations from an engineering
or consulting firm approved by Secured Party, indicating the presence or
absence of toxic or hazardous substances and solid wastes on any premises
in which Debtor is conducting its business; provided, however, Debtor will
be obligated to pay for the cost of any such inspection or audit no more
than one time in any twelve (12) month period unless Secured Party has
reason to believe that toxic or hazardous substances or solid wastes have
been dumped on any such premises. If Debtor fails to order or obtain an
inspection or audit within ten (10) days after Secured Party's request,
Secured Party may at its option order such inspection or audit, and Debtor
grants to Secured Party and its agents, employees, contractors and
consultants access to the premises in which it is conducting its business
and a license (which is coupled with an interest and is irrevocable) to
obtain inspections and audits. Debtor agrees to promptly provide Secured
Party with a copy of the results of any such inspection or audit received
by Debtor. The cost of such inspections and audits shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor on demand.
(e) DEBTOR'S RECEIPT OF PROCEEDS. All amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
accounts or general intangibles shall be received in trust for the benefit
of Secured Party hereunder and, upon request of Secured Party, shall be
segregated from other property of Debtor and shall be forthwith delivered
to Secured Party in the same form as so received (with any necessary
endorsement) and applied to the Indebtedness in such manner as Secured
Party deems appropriate in its sole discretion.
(f) NOTIFICATION OF ACCOUNT DEBTORS. Secured Party may at its
discretion from time to time notify any or all obligors under any accounts
or general intangibles (i) of Secured Party's security interest in such
accounts or general intangibles and direct such obligors to make payment of
all amounts due or to become due to Debtor thereunder directly to Secured
Party, and (ii) to verify the accounts or general intangibles with such
obligors. Secured Party shall have the right, at the expense of Debtor, to
enforce
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collection of any such accounts or general intangibles and to adjust,
settle or compromise the amount or payment thereof, in the same manner and
to the same extent as Debtor.
7. EVENTS OF DEFAULT. Each of the following constitutes an "Event of
Default" under this Agreement:
(a) FAILURE TO PAY INDEBTEDNESS. The failure, refusal or neglect of
Borrower to make any payment of principal or interest on the Indebtedness,
or any portion thereof, as the same shall become due and payable; or
(b) NON-PERFORMANCE OF COVENANTS. The failure of Borrower or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein or in any of the
other Loan Documents; or
(c) DEFAULT UNDER OTHER LOAN DOCUMENTS. The occurrence of an event
of default under any of the other Loan Documents; or
(d) FALSE REPRESENTATION. Any representation contained herein or in
any of the other Loan Documents made by Borrower or any Obligated Party is
false or misleading in any material respect; or
(e) DEFAULT TO THIRD PARTY. The occurrence of any event which
permits the acceleration of the maturity of any indebtedness owing by
Borrower or any Obligated Party to any third party under any agreement or
undertaking; or
(f) BANKRUPTCY OR INSOLVENCY. If Borrower or any Obligated Party:
(i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts as they become due;
or
(ii) generally is not paying its debts as such debts become due;
or
(iii) has a receiver or custodian appointed for, or take
possession of, all or substantially all of the assets of such party or
any of the Collateral, either in a proceeding brought by such party or
in a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within thirty (30)
days after the effective date thereof or such party consents to or
acquiesces in such appointment or possession; or
(iv) files a petition for relief under the United States
Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar laws (all of the foregoing
hereinafter collectively called "APPLICABLE BANKRUPTCY LAW") or an
involuntary petition for relief is filed against such party under any
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Applicable Bankruptcy Law and such involuntary petition is not
dismissed within thirty (30) days after the filing thereof, or an
order for relief naming such party is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; or
(v) fails to have discharged within a period of thirty (30) days
any attachment, sequestration or similar writ levied upon any property
of such party; or
(vi) fails to pay within thirty (30) days any final money
judgment against such party; or
(g) EXECUTION ON COLLATERAL. The Collateral or any portion thereof
is taken on execution or other process of law in any action against Debtor;
or
(h) ABANDONMENT. Debtor abandons the Collateral or any portion
thereof; or
(i) ACTION BY OTHER LIENHOLDER. The holder of any lien or security
interest on any of the assets of Debtor, including without limitation, the
Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(j) LIQUIDATION, DEATH AND RELATED EVENTS. If Borrower or any
Obligated Party is an entity, the liquidation, dissolution, merger or
consolidation of any such entity or, if Borrower or any Obligated Party is
an individual, the death or legal incapacity of any such individual.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.
(a) REMEDIES. Secured Party may from time to time at its
discretion, without limitation and without notice except as
expressly provided in any of the Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code
applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby agrees that it will at
its expense and upon request of Secured Party, assemble the Collateral
as directed
12
by Secured Party and make it available to Secured Party at a place to
be designated by Secured Party which is reasonably convenient to both
parties;
(iii) reduce its claim to judgment or foreclose or
otherwise enforce, in whole or in part, the security interest
granted hereunder by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office, on the
premises of Debtor or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale or other disposition of any
part of the Collateral shall not exhaust Secured Party's power of
sale, but sales or other dispositions may be made from time to time
until all of the Collateral has been sold or disposed of or until
the Indebtedness has been paid and performed in full), and at any
such sale or other disposition it shall not be necessary to exhibit
any of the Collateral;
(v) buy the Collateral, or any portion thereof, at any
public sale;
(vi) buy the Collateral, or any portion thereof, at any
private sale 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;
(vii) apply for the appointment of a receiver for the
Collateral, and Debtor hereby consents to any such appointment; and
(viii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured
Party is entitled to do so under the Code or otherwise.
Debtor agrees that in the event Debtor is entitled to receive any notice
under the Uniform Commercial Code, as exists in the state governing any
such notice, of the sale or other disposition of any Collateral, reasonable
notice shall be deemed given when such notice is deposited in a depository
receptacle under the care and custody of the United States Postal Service,
postage prepaid, at Debtor's address set forth on the signature page
hereof, five (5) days prior to the date of any public sale, or after which
a private sale, of any of such Collateral is to be held. Secured Party
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) APPLICATION OF PROCEEDS. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale or
13
other disposition of, collection from, or other realization upon, all or
any part of the Collateral as follows in such order and manner as Secured
Party may elect:
(i) to the repayment or reimbursement of the reasonable
costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by Secured Party in
connection with (A) the administration of the Loan Documents, (B)
the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (C)
the exercise or enforcement of any of the rights and remedies of
Secured Party hereunder;
(ii) to the payment or other satisfaction of any liens and
other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by
applicable law (including without limitation, Section 9.504(a)(3) of
the Code or any other applicable statutory provision); and
(vi) by delivery to Debtor or any other party lawfully
entitled to receive such cash or proceeds whether by direction of a
court of competent jurisdiction or otherwise.
(c) DEFICIENCY. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to which
Secured Party is legally entitled, Borrower and any party who guaranteed or
is otherwise obligated to pay all or any portion of the Indebtedness shall
be liable for the deficiency, together with interest thereon as provided in
the Loan Documents.
(d) NON-JUDICIAL REMEDIES. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any
legal right which might otherwise require Secured Party to enforce its
rights by judicial process. Debtor recognizes and concedes that
non-judicial remedies are consistent with the usage of trade, are
responsive to commercial necessity and are the result of a bargain at arm's
length. Nothing herein is intended to prevent Secured Party or Debtor from
resorting to judicial process at either party's option.
(e) OTHER RECOURSE. Debtor waives any right to require Secured Party
to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with
Debtor in any suit arising out of the
14
Indebtedness or any of the Loan Documents, or pursue any other remedy
available to Secured Party. Debtor further waives any and all notice of
acceptance of this Agreement and of the creation, modification,
rearrangement, renewal or extension of the Indebtedness. Debtor further
waives any defense arising by reason of any disability or other defense of
any third party or by reason of the cessation from any cause whatsoever of
the liability of any third party. Until all of the Indebtedness shall have
been paid in full, Debtor shall have no right of subrogation and Debtor
waives the right to enforce any remedy which Secured Party has or may
hereafter have against any third party, and waives any benefit of and any
right to participate in any other security whatsoever now or hereafter held
by Secured Party. Debtor authorizes Secured Party, and without notice or
demand and without any reservation of rights against Debtor and without
affecting Debtor's liability hereunder or on the Indebtedness to (i) take
or hold any other property of any type from any third party as security for
the Indebtedness, and exchange, enforce, waive and release any or all of
such other property, (ii) apply such other property and direct the order or
manner of sale thereof as Secured Party may in its discretion determine,
(iii) renew, extend, accelerate, modify, compromise, settle or release any
of the Indebtedness or other security for the Indebtedness, (iv) waive,
enforce or modify any of the provisions of any of the Loan Documents
executed by any third party, and (v) release or substitute any third party.
9. INDEMNITY. Debtor hereby indemnifies and agrees to hold harmless
Secured Party, and its officers, directors, employees, agents and
representatives (each an "INDEMNIFIED PERSON") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "CLAIMS") which may be imposed on, incurred by, or asserted
against, any Indemnified Person (whether or not caused by any Indemnified
Person's sole, concurrent or contributory negligence) arising in connection with
the Loan Documents, the Indebtedness or the Collateral (including without
limitation, the enforcement of the Loan Documents and the defense of any
Indemnified Person's actions and/or inactions in connection with the Loan
Documents), except to the limited extent the Claims against an Indemnified
Person are proximately caused by such Indemnified Person's gross negligence or
willful misconduct. If Debtor or any third party ever alleges such gross
negligence or willful misconduct by any Indemnified Person, the indemnification
provided for in this Section shall nonetheless be paid upon demand, subject to
later adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the alleged
gross negligence or willful misconduct. The indemnification provided for in
this Section shall survive the termination of this Agreement and shall extend
and continue to benefit each individual or entity who is or has at any time been
an Indemnified Person hereunder.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of Secured Party and Debtor with respect to the Collateral. If the parties
hereto are parties to any prior agreement, either written or oral, relating
to the Collateral, the terms of this
15
Agreement shall amend and supersede the terms of such prior agreements as
to transactions on or after the effective date of this Agreement, but all
security agreements, financing statements, guaranties, other contracts and
notices for the benefit of Secured Party shall continue in full force and
effect to secure the Indebtedness unless Secured Party specifically
releases its rights thereunder by separate release.
(b) AMENDMENT. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be
valid or effective unless the same is in writing and signed by the party
against whom it is sought to be enforced.
(c) ACTIONS BY SECURED PARTY. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i) any
renewal, extension, increase or modification with respect to the
Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Indebtedness. The taking of additional security
by Secured Party shall not release or impair the lien, security interest or
other security rights of Secured Party hereunder or affect the obligations
of Debtor hereunder.
(d) WAIVER BY SECURED PARTY. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay
by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be exercised
at any time. No waiver of any provision hereof or consent to any departure
by Debtor therefrom shall be effective unless the same shall be in writing
and signed by Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for which given
and to the extent therein specified. No notice to or demand on Debtor in
any case shall of itself entitle Debtor to any other or further notice or
demand in similar or other circumstances.
(e) COSTS AND EXPENSES. Debtor will upon demand pay to Secured Party
the amount of any and all costs and expenses (including without limitation,
attorneys' fees and expenses), which Secured Party may incur in connection
with (i) the transactions which give rise to the Loan Documents, (ii) the
preparation of this Agreement and the perfection and preservation of the
security interests granted under the Loan Documents, (iii) the
administration of the Loan Documents, (iv) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization
upon, the Collateral, (v) the exercise or enforcement of any of the rights
of Secured Party under the Loan Documents, or (vi) the failure by Debtor to
perform or observe any of the provisions hereof.
16
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL
LAWS, 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.
(g) VENUE. This Agreement has been entered into in the county in
Texas where Bank's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of
Texas shall have jurisdiction over any and all disputes arising under or
pertaining to this Agreement and venue for any such disputes shall be in
the county or judicial district where this Agreement has been executed and
delivered.
(h) SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend
credit to Borrower.
(j) NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
with proof of delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the
intended addressee at the address set forth on the signature page hereof or
to such different address as the addressee shall have designated by written
notice sent pursuant to the terms hereof and shall be deemed to have been
received either, in the case of personal delivery, at the time of personal
delivery, in the case of expedited delivery service, as of the date of
first attempted delivery at the address and in the manner provided herein,
or in the case of mail, upon deposit in a depository receptacle under the
care and custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any other
location within the continental United States by notice to the other party
of such new address at least thirty (30) days prior to the effective date
of such new address.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Debtor and the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and (iii) shall inure to the benefit of
Secured Party and its successors and assigns. Without limiting the
17
generality of the foregoing, Secured Party may pledge, assign or otherwise
transfer the Indebtedness and its rights under this Agreement and any of
the other Loan Documents to any other party. Debtor's rights and
obligations hereunder may not be assigned or otherwise transferred without
the prior written consent of Secured Party.
(l) TERMINATION. It is contemplated by the parties hereto that from
time to time there may be no outstanding Indebtedness, but notwithstanding
such occurrences, this Agreement shall remain valid and shall be in full
force and effect as to subsequent outstanding Indebtedness. Upon (i) the
satisfaction in full of the Indebtedness, (ii) the termination or
expiration of any commitment of Secured Party to extend credit to Borrower,
(iii) written request for the termination hereof delivered by Debtor to
Secured Party, and (iv) written release or termination delivered by Secured
Party to Debtor, this Agreement and the security interests created hereby
shall terminate. Upon termination of this Agreement and Debtor's written
request, Secured Party will, at Debtor's sole cost and expense, return to
Debtor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and execute and deliver
to Debtor such documents as Debtor shall reasonably request to evidence
such termination.
(m) CUMULATIVE RIGHTS. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any of
the other Loan Documents, and the exercise of one or more of such rights or
remedies shall not prejudice or impair the concurrent or subsequent
exercise of any other rights or remedies.
(n) GENDER AND NUMBER. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and words
in the plural number shall be held and construed to include the singular,
unless in each instance the context requires otherwise.
(o) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
18
EXECUTED as of the date first written above.
Debtor's Address: DEBTOR:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ TECHNOLOGIES, INC.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
By: /s/ W. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
Name: W. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Title: Vice President
---------------------------------------
Secured Party's Address:
Bank One, Texas, National Association
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
19
EXHIBIT "A"
TO
SECURITY AGREEMENT
DATED JANUARY __, 1997
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
HYDROCARBON TECHNOLOGIES, INC.
HYDROCARBON TECHNOLOGIES, INC. PHYSICAL LOCATIONS:
-------------------------------------------------
Austin Terminal
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Baton Rouge Terminal
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Carthage Yard
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Corsicana Oil Plant
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dallas Terminal
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Houston Terminal & Treatment Plant
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Little Rock Terminal
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
San Antonio Terminal
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Kilgore Treatment Plant
▇-▇
▇▇▇▇▇▇ ▇▇. at ▇▇▇. ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
A-2
SCHEDULE "B"
TO
SECURITY AGREEMENT
DATED JANUARY __, 1997
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
HYDROCARBON TECHNOLOGIES, INC.
The other addresses referenced in Subsection 3(f) are as follows:
[None]
B-1