<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): February 25, 1999
THERMATRIX INC.
(Exact name of Registrant as specified in its charter)
Commission File Number 0-20819
Delaware 94-2958515
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2025 Gateway Place, Suite 132 95110-1005
San Jose, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 453-0490
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On January 13, 1999, Thermatrix Inc., a Delaware corporation
("Thermatrix") acquired Wahlco Environmental Systems, Inc., a Delaware
corporation ("Wahlco") in a transaction whereby Wahlco was merged with and into
a wholly-owned subsidiary of Thermatrix (the "Merger"). In connection with the
Merger, Thermatrix agreed (i) to guaranty obligations (the "Thermatrix
Guaranty") of Wahlco arising from a non-committed line of credit with The Chase
Manhattan Bank (the "Chase Notes," which were subsequently purchased from The
Chase Manhattan Bank by Wexford and the Lenders on January 22, 1999), and a
Credit Agreement (the "1998 Credit Agreement") among Wahlco, Wexford Management
LLC ("Wexford") and several lenders affiliated with Wexford (the "Lenders"), and
(ii) to secure such obligations by granting a security interest in all existing
and future assets of Thermatrix (the "Original Security Agreement").
On February 25, 1999, Thermatrix, Wahlco, the Lenders and Wexford entered
into a Second Amended and Restated Credit Agreement (the "1999 Credit
Agreement") which amends and restates the 1998 Credit Agreement, the Thermatrix
Guaranty and the Chase Notes, and pursuant to which: (i) Thermatrix became a co-
obligor; (ii) the outstanding obligations (which include the obligations arising
under the Chase Notes and the Thermatrix Guaranty) are approximately $5.72
million and bear interest at a rate of 13% per annum payable monthly, with no
commitment by Wexford and the Lenders to advance any additional loans or
extensions of credit to Thermatrix or Wahlco; (iii) the outstanding principal
amount of the obligations will become due and payable six months from the date
thereof, provided that such due date may be extended an additional ninety days
for a fee of one hundred thousand dollars ($100,000); (iv) the Original Security
Agreement was amended and restated to confirm the security interest granted to
Wexford and the Lenders in Thermatrix's existing and future assets; (v)
Thermatrix issued to Wexford a net exercise Warrant exercisable for up to four
hundred fifty thousand (450,000) shares of Thermatrix Common Stock, with certain
registration rights thereon; (vi) Thermatrix's significant direct and indirect
subsidiaries in the U.S. and the U.K. guaranteed the obligations arising under
the 1999 Credit Agreement and secured such obligations by granting a security
interest in all of such subsidiaries' existing and future assets (including real
property owned by such subsidiaries); (vii) Thermatrix and Wahlco delivered a
General Release in favor of Wexford and certain other parties related to
Wexford.
<PAGE>
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS.
The following exhibits are filed as part of this Report, in accordance
with item 601 of Regulations S-K, where indicated.
Exhibit
Number Description
- ------ -----------
10.1 Second Amended and Restated Credit Agreement dated February 25, 1999
by and among Wahlco Environmental Systems, Inc., Thermatrix Inc.,
Wexford Capital Partners II, L.P., Wexford Overseas Partners I,
L.P., Wexford Special Situations 1996, L.P., Wexford Special
Situations 1996 Institutional, L.P., Wexford Special Situations 1996
Limited, Wexford-Euris Special Situations 1996, L.P. and Wexford
Management LLC, as Agent
10.2 General Release dated February 25, 1999 by and among Wahlco
Environmental Systems, Inc., Thermatrix Inc., Wexford Capital Partners
II, L.P., Wexford Overseas Partners I, L.P., Wexford Special
Situations 1996, L.P., Wexford Special Situations 1996 Institutional,
L.P., Wexford Special Situations 1996 Limited, Wexford-Euris Special
Situations 1996, L.P. and Wexford Management LLC, as Agent
10.3 Amended and Restated Guaranty dated February 25, 1999 by and among
Bachmann Companies, Inc., Wahlco Engineered Products Group, LTD.,
Wahlco, Inc., WES Property, LTD., Wahlco Engineered Products, Inc.,
Wahlco Engineered Products, Ltd., Pentney Engineering, LTD.,
Teddington Bellows (Holdings), LTD., Teddington Bellows, Ltd., Treste
Plant Hire, LTD., Thermatrix, LTD. and Wexford Management LLC, as
Agent
10.4 Mortgage, Security Agreement Assignment of Rents and Leases and
Fixture Filing dated February 25, 1999 by and between Wahlco
Engineered Products, Inc. and Wexford Management LLC, as Agent
10.5 Mortgage, Security Agreement Assignment of Rents and Leases and
Fixture Filing dated February 25, 1999 by and between Wahlco, Inc. and
Wexford Management LLC, as Agent
10.6 Promissory Note dated February 25, 1999 in the principal amount of
$5,720,585.64, delivered by Thermatrix Inc. and Wahlco Environmental
Systems, Inc. to Wexford Management LLC, as Agent
10.7 Registration Rights Agreement dated February 25, 1999 by and between
Thermatrix Inc. and Wexford Management LLC
10.8 Amended and Restated Security Agreement dated February 25, 1999 by and
among Wahlco Environmental Systems, Inc., Bachmann Companies, Inc.,
Wahlco, Inc., Wahlco Engineered Products, Inc. and Wexford Management
LLC, as Agent
10.9 Amended and Restated Security Agreement dated February 25, 1999 by and
between Thermatrix Inc., Wexford Capital Partners II, L.P., Wexford
Overseas Partners I, L.P., Wexford Special Situations 1996
Institutional, L.P., Wexford Special Situations 1996 Limited, Wexford-
Euris Special Situations 1996, L.P. and Wexford Management LLC, as
Agent
10.10 Form of U.K. Debenture entered into by and between Wexford Management
LLC and each of Pentney Engineering Limited, Teddington Bellows
(Holdings) LTD., Teddington Bellows Ltd., Thermatrix, LTD., Treste
Plant Hire, LTD., WES Property, LTD., Wahlco Engineered Products
Group, LTD. and Wahlco Engineered Products LTD., respectively
10.11 Stock Pledge Agreement dated February 25, 1999 by and among
Thermatrix Inc., Wahlco Environmental Systems, Inc., Bachmann
Companies, Inc., Wahlco Engineered Products Group LTD., Wahlco
Engineered Products LTD., Teddington Bellows (Holdings), LTD. and
Wexford Management LLC, as Agent
10.12 Warrant to purchase up to 450,000 shares of Common Stock of Thermatrix
Inc. issued to Wexford Management LLC on February 25, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THERMATRIX INC.
Date: March 11, 1999 By: /s/ Daniel S. Tedone
------------------------------
Daniel S. Tedone
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
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10.1 Second Amended and Restated Credit Agreement dated February 25, 1999
by and among Wahlco Environmental Systems, Inc., Thermatrix Inc.,
Wexford Capital Partners II, L.P., Wexford Overseas Partners I,
L.P., Wexford Special Situations 1996, L.P., Wexford Special
Situations 1996 Institutional, L.P., Wexford Special Situations 1996
Limited, Wexford-Euris Special Situations 1996, L.P. and Wexford
Management LLC, as Agent
10.2 General Release dated February 25, 1999 by and among Wahlco
Environmental Systems, Inc., Thermatrix Inc., Wexford Capital
Partners II, L.P., Wexford Overseas Partners I, L.P., Wexford
Special Situations 1996, L.P., Wexford Special Situations 1996
Institutional, L.P., Wexford Special Situations 1996 Limited,
Wexford-Euris Special Situations 1996, L.P. and Wexford Management
LLC, as Agent
10.3 Amended and Restated Guaranty dated February 25, 1999 by and among
Bachmann Companies, Inc., Wahlco Engineered Products Group, LTD.,
Wahlco, Inc., WES Property, LTD., Wahlco Engineered Products, Inc.,
Wahlco Engineered Products, Ltd., Pentney Engineering, LTD.,
Teddington Bellows (Holdings), LTD., Teddington Bellows Ltd., Treste
Plant Hire, LTD., Thermatrix, LTD. and Wexford Management LLC, as
Agent
10.4 Mortgage, Security Agreement Assignment of Rents and Leases and
Fixture Filing dated February 25, 1999 by and between Wahlco
Engineered Products, Inc. and Wexford Management LLC, as agent
10.5 Mortgage, Security Agreement Assignment of Rents and Leases and
Fixture Filing dated February 25, 1999 by and between Wahlco, Inc.
and Wexford Management LLC, as Agent
10.6 Promissory Note dated February 25, 1999 in the principal amount of
$5,720,585.64, delivered by Thermatrix Inc. and Wahlco Environmental
Systems, Inc. to Wexford Management LLC, as Agent
10.7 Registration Rights Agreement dated February 25, 1999 by and between
Thermatrix Inc. and Wexford Management LLC
10.8 Amended and Restated Security Agreement dated February 25, 1999 by
and among Wahlco Environmental Systems, Inc., Bachmann Companies,
Inc., Wahlco, Inc., Wahlco Engineered Products, Inc. and Wexford
Management LLC, as agent
10.9 Amended and Restated Security Agreement dated February 25, 1999 by
and between Thermatrix Inc., Wexford Capital Partners II, L.P.,
Wexford Overseas Partners I, L.P., Wexford Special Situations 1996
Institutional, L.P., Wexford Special Situations 1996 Limited,
Wexford-Euris Special Situations 1996, L.P. and Wexford Management
LLC, as Agent
10.10 Form of U.K. Debenture entered into by and between Wexford
Management LLC and each of Pentney Engineering Limited, Teddington
Bellow (Holdings) LTD., Teddington Bellows Ltd., Thermatrix, LTD.
Treste Plant Hire, LTD., WES Property, LTD., Wahlco Engineered
Products Group, LTD. and Wahlco Engineered Products LTD.,
respectively
10.11 Stock Pledge Agreement dated February 25, 1999 by and among
Thermatrix Inc., Wahlco Environmental Systems, Inc., Bachmann
Companies, Inc., Wahlco Engineered Products Group LTD., Teddington
Bellows (Holdings), Ltd. and Wexford Management LLC, as Agent
10.12 Warrant to purchase up to 450,000 shares of Common Stock of
Thermatrix Inc. issued to Wexford Management LLC on February 25,
1999
<PAGE>
Exhibit 10.1
Second Amended And Restated Credit Agreement
Dated as of February 25, 1999
among
Wahlco Environmental Systems, Inc.
and
Thermatrix Inc.
as Borrowers,
and
Wexford Capital Partners II, L.P.
Wexford Overseas Partners I, L.P.
Wexford Special Situations 1996, L.P.
Wexford Special Situations 1996 Institutional, L.P.
Wexford Special Situations 1996 Limited
Wexford-Euris Special Situations 1996, L.P.
as Lenders
and
Wexford Management LLC
as Agent for the Lenders
<PAGE>
Table of Contents
Article I
Definitions
Article II
Amount and Terms of Credit
<TABLE>
<S> <C> <C>
2.1. The Thermatrix Assumption ......................................................... 13
2.2. Wahlco Confirmation of Obligations ................................................ 13
2.3. The Loans ......................................................................... 13
2.4. Thermatrix Security Interest ...................................................... 13
2.5. Wahlco Security Interest .......................................................... 14
2.6. Guaranty .......................................................................... 14
2.7. Issuance of Warrants .............................................................. 14
2.8. Subordination Agreement ........................................................... 14
2.9. Optional Prepayment ............................................................... 14
2.10. Mandatory Prepayment .............................................................. 14
2.11. Application of Mandatory Prepayments .............................................. 15
2.12. Payments .......................................................................... 15
2.13. Receipt of Payments ............................................................... 16
2.14. Indemnity ......................................................................... 16
2.15. Access ............................................................................ 16
2.16. Taxes ............................................................................. 16
Article III
Representations and Warranties
3.1. Corporate Existence: Compliance with Law .......................................... 18
3.2. Subsidiaries ...................................................................... 18
3.3. Corporate Power: Authorization: Enforceable Obligations ........................... 18
3.4. Owned Real Property ............................................................... 19
3.5. No Material Adverse Change ........................................................ 19
3.6. Financial Statements .............................................................. 19
3.7. Ownership of Property: Liens ..................................................... 20
3.8. No Default ........................................................................ 20
3.9. Burdensome Restrictions ........................................................... 20
3.10. Labor Matters ..................................................................... 20
3.11. Taxes ............................................................................. 20
3.12. ERISA ............................................................................. 21
3.13. No Litigation ..................................................................... 21
3.14. Patents, Trademarks, Copyrights and Licenses ...................................... 21
3.15. Liens ............................................................................. 22
</TABLE>
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<TABLE>
<S> <C> <C>
3.16. Business Locations: Agent for Process ............................................. 22
3.17. Brokers ........................................................................... 22
3.18. Trade Relations ................................................................... 22
3.19. Senior Obligations ................................................................ 22
3.20. No Power of Attorney .............................................................. 22
Article IV
Conditions Precedent to Effectiveness
4.1. Conditions to Loan ................................................................ 22
Article V
Financial Statements and Information
5.1. Reports and Notices ............................................................... 24
5.2. Communication with Accountants .................................................... 24
Article VI
Affirmative Covenants
6.1. Maintenance of Existence and Conduct of Business .................................. 25
6.2. Information Covenants ............................................................. 25
6.3. Payment of Obligations and Charges and Filing of Returns and Reports .............. 28
6.4. Books and Records ................................................................. 29
6.5. Litigation ........................................................................ 29
6.6. Compliance with Law ............................................................... 29
6.7. Maintenance of Insurance .......................................................... 29
6.8. Additional Security ............................................................... 30
6.9. Elimination of Liens .............................................................. 30
Article VII
Negative Covenants
7.1. Mergers Etc. ...................................................................... 30
7.2. Investments: Loans and Advances ................................................... 31
7.3. Indebtedness ...................................................................... 32
7.4. Limitation on Modifications of Indebtedness; Cancellation of Indebtedness ......... 33
7.5. Maintenance of Business ........................................................... 33
7.6. Guaranteed Indebtedness ........................................................... 33
7.7. Hedging Transactions .............................................................. 34
7.8. Restricted Payments ............................................................... 34
7.9. ERISA ............................................................................. 34
7.10. Limitations on Transactions with Affiliates ....................................... 34
</TABLE>
<PAGE>
Article VIII
Term
<TABLE>
<S> <C> <C>
8.1. Survival of Obligations Upon Termination of Financing Arrangement ................. 34
Article IX
Events Of Default: Rights And Remedies
9.1. Events of Default ................................................................. 35
9.2. Remedies .......................................................................... 37
9.3. Waivers by Borrowers .............................................................. 37
9.4. Other Remedies .................................................................... 37
Article X
Miscellaneous
10.1. Complete Agreement: Modification of Agreement; Assignment by Lenders ............. 38
10.2. Fees and Expenses ................................................................ 38
10.3. No Waiver by Lender .............................................................. 39
10.4. Agency Provisions ................................................................ 40
10.5. Remedies ......................................................................... 41
10.6. WAIVER OF JURY TRIAL ............................................................. 41
10.7. Severability ..................................................................... 41
10.8. Parties .......................................................................... 41
10.9. Conflict of Terms ................................................................ 41
10.10. Authorized Signature ............................................................. 41
10.11. GOVERNING LAW .................................................................... 41
10.12. CONSENT TO JURISDICTION .......................................................... 42
10.13. Notices .......................................................................... 42
10.14. Consent of Agent ................................................................. 44
10.15. Sophisticated Borrowers .......................................................... 44
10.16. WAIVERS BY BORROWERS ............................................................. 44
10.17. Survival ......................................................................... 45
10.18. Section Titles ................................................................... 45
10.19. Counterparts ..................................................................... 45
</TABLE>
<PAGE>
Index of Exhibits and Schedules
Exhibit A Environmental Laws
Exhibit B Form of General Release
Exhibit C Form of Guaranty
Exhibit D Form of Mortgage
Exhibit E Form of Note
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Wahlco Security Agreement
Exhibit H Form of Thermatrix Security Agreement
Exhibit I Form of UK Security Agreement
Exhibit J Form of Stock Pledge Agreement
Exhibit K Form of Subordination Agreement
Exhibit L Form of Warrant
Exhibit M Form of Opinion
Exhibit N Form of Officers' Certificate
Exhibit O Form of Compliance Certificate
Exhibit P Ferguson Transaction Memorandum
Schedules
Schedule 1.5 Business Payables of Wahlco
Borrowers' Disclosure Letter
Schedule 1.68 Existing Liens
Schedule 3.2 Significant Subsidiaries
Schedule 3.4 Owned Real Property
Schedule 3.7 Leased Real Property
Schedule 3.16 Business Locations: Agent for Process
Schedule 6.7 Insurance
Schedule 7.2 Existing Investments
Schedule 7.3 Existing Indebtedness
Schedule 10.10 Authorized Signatures
Schedule 3(B) License Agreements Prohibiting Security
Interest
<PAGE>
Second Amended And Restated Credit Agreement, dated as of February 25,
1999 (the "Credit Agreement"), among Wahlco Environmental Systems, Inc., a
Delaware corporation ("Wahlco") and Thermatrix Inc., a Delaware corporation
("Thermatrix", and together with Wahlco, the "Borrowers") 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 administrative and collateral agent for the Lenders (the "Agent").
Recitals
A. Wahlco, the Agent and the Lenders are party 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 in the total principal
amount of $1,571,232.88.
B. Wahlco also has borrowed funds through a non-committed line of
credit with The Chase Manhattan Bank ("Chase"), arranged, guaranteed and fully
collateralized by the Lenders (the "Chase Facility") and is obligated to repay
amounts owing under note numbers: 10 in the principal amount of $150,000, 11 in
the principal amount of $3,125,000, and 12 in the principal amount of $100,000
(the "Chase Notes"), issued to Chase by the Company under the Chase Facility.
C. On January 13, 1999, 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 merged with and into Wahlco (the "Merger"), and Wahlco became
a wholly owned subsidiary of Thermatrix at the effective time of the Merger (the
"Effective Time").
D. In connection with the Merger, Thermatrix agreed to guaranty to
the Lenders and the Agent the obligations of Wahlco to the Lenders and to Chase
under the 1998 Credit Agreement and the Chase Facility (the "Thermatrix
Guaranty") and to grant to the Lenders a security interest in all existing and
future Assets of Thermatrix (the "Original Thermatrix Security Agreement").
E. On January 22, 1999, the Agent, on behalf of the Lenders,
purchased the Chase Notes from Chase, including the right to receive all accrued
and unpaid interest thereon.
F. The parties now wish to replace the Thermatrix Guaranty, the 1998
Credit Agreement and the Chase Notes by amending and restating all of the terms
thereof in this Credit Agreement, pursuant to which Thermatrix will become a co-
obligor with Wahlco (who shall remain jointly and severally liable) for all of
such obligations.
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G. As a further condition to the Lenders' execution and delivery of
this Credit Agreement, Thermatrix has agreed to amend and restate the Original
Thermatrix Security Agreement to confirm its grant to the Lenders of a security
interest in all existing and future Assets of Thermatrix (the "Thermatrix
Security Agreement"), Wahlco has agreed to amend and restate the Original Wahlco
Security Agreement to confirm its grant to the Lenders of a security interest in
all existing and future Assets of Wahlco (the "Wahlco Security Agreement"), and
Thermatrix and Wahlco have agreed to cause their Significant Subsidiaries to
enter into the Guaranty and to grant and/or to cause the Significant
Subsidiaries to grant to the Lenders additional security interests and mortgages
in all existing and future Assets of the Borrowers and the Significant
Subsidiaries.
Now, Therefore, all of the parties hereto agree that the 1998 Credit
Agreement, the Chase Notes and the Thermatrix Guaranty are hereby amended and
restated in their entirety upon the following terms and conditions:
Article I
Definitions
In addition to the defined terms appearing above, capitalized terms
used in this Credit Agreement shall have the following respective meanings when
used herein:
1.1. Intentionally Left Blank.
1.2. "Affiliate" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, 5% or more of the Stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, or (iii) each of such Person's officers,
directors, joint venturers and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
1.3. "Ancillary Agreements" shall mean all those agreements as to
which Borrowers, the Lenders or the Agent is a party or a beneficiary on the
Closing Date with respect to any of the transactions contemplated by the Loan
Documents; provided that the Merger Agreement and the documents executed in
connection with the transactions contemplated thereby are not Ancillary
Agreements.
1.4. "Assets" means all of the assets of the Borrowers and the
Significant Subsidiaries as of and from time to time after the Closing Date.
1.5. "Asset Restoration Amount" shall have the meaning set forth in
Section 2.10(c).
1.6. "Asset Sale" means the sale, transfer or other disposition, to
the extent consummated after the Closing Date, by the Borrower or any of the
Significant Subsidiaries to
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any Person other than the Borrower or any of its wholly owned subsidiaries of
any Asset of the Borrower or such Subsidiary, except for (a) transactions
included in the definition of Net Financing Proceeds and (b) sales of inventory
in the ordinary course of business.
1.7. "Borrowers" shall mean Wahlco Environmental Systems, Inc., a
Delaware corporation having an office at 3600 West Segerstrom Avenue, Santa Ana,
California 92704-6495 and Thermatrix Inc., a Delaware corporation having an
office at 308 North Peters Road, Suite 100, Knoxville, TN 37922.
1.8. "Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
1.9. "Capital Expenditures" shall mean all payments for any fixed
assets or improvements or for replacements, substitutions or additions thereto,
that have a useful life of more than one year and which are required to be
capitalized under GAAP.
1.10. "Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or otherwise
be disclosed as such in a note to such balance sheet, other than, in the case of
a Borrower or a Subsidiary, any such lease under which a Borrower or such
Subsidiary is the lessor.
1.11. "Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
1.12. "Cash" means currency or a credit balance in an Account.
1.13. "Cash Equivalents" shall have the meaning assigned to it in
Section 7.2 hereof.
1.14. "Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including, without limitation,
PBGC) taxes, levies, assessments, charges, liens, claims or encumbrances, as
well as, in each case, all liabilities (including, without limitation, penalties
and interest) that may arise with respect thereto, that are imposed in
connection with or otherwise relate to (i) the Collateral, (ii) the Obligations,
(iii) either Borrowers' or any of their respective Subsidiaries' employees,
payroll, income and profits or gross receipts, (iv) either Borrowers' or any of
their respective Subsidiaries' ownership or use of any of its Assets, or (v) any
other aspect of either Borrowers' or any of the Subsidiaries' business.
1.15. "Chase" means The Chase Manhattan Bank.
1.16. "Chase Facility" has the meaning set forth in recital paragraph
B.
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1.17. "Chase Notes" has the meaning set forth in recital paragraph B.
1.18. "Closing Date" shall mean February 25, 1999 or such later date
as all of the conditions to effectiveness set forth in Section 4.1 hereof have
been satisfied or waived.
1.19. "Code" shall mean the Uniform Commercial Code of the
jurisdiction with respect to which such term is used, as in effect from time to
time.
1.20. "Collateral" shall mean the collateral covered by the Security
Agreements, the Mortgages and the Pledged Collateral covered by the Stock Pledge
Agreements (as such term is defined therein).
1.21. "Collateral Documents" shall mean the Security Agreements, the
Mortgages and the Stock Pledge Agreement.
1.22. "Commission" means the Securities and Exchange Commission or
any successor thereto.
1.23. "Commitment Termination Date" shall mean the Closing Date.
1.24. "Compensation" shall mean, with respect to any Person, all
payments and accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments and
accruals, profit sharing arrangements, payments in respect of stock option or
phantom stock option or similar arrangements, stock appreciation rights or
similar rights, incentive payments, pension or employment benefit contributions
or similar payments, made by Borrowers to or accrued for the account of such
Person or otherwise for the direct or indirect benefit of such Person.
1.25. "Credit Agreement" shall mean this Second Amended and Restated
Credit Agreement, and all amendments, modifications and supplements hereto and
any appendices, exhibits or schedules to any of the foregoing, and shall refer
to this Credit Agreement as the same may be in effect at the time such reference
becomes operative.
1.26. "Default" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
1.27. "Effective Time" shall have the meaning set forth in recital
paragraph C.
1.28. "Environmental Laws" shall mean any and all federal, State,
local and foreign statutes, laws (including case law), regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, whether now or hereafter in effect, relating to human health, the
environment or to emissions, discharges, migrations or releases of pollutants,
contaminants, Hazardous Substances or wastes (including solid wastes) into the
environment, including ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, generation, processing, distribution,
use, treatment, storage, disposal, transport or handling of
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<PAGE>
pollutants, contaminants, Hazardous Substances or wastes (including solid
wastes) or the clean-up or other remediation thereof, including, without
limitation, as listed on Exhibit A hereto.
1.29. "Environmental Liabilities" means all liabilities, whether
vested or unvested, contingent or fixed, actual or potential, known or unknown,
arising from or in connection with any actual or asserted Release or other
violation of any Environmental Law by any Loan Party.
1.30. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
1.31. "Event of Default" shall have the meaning assigned to it in
Section 9.1 hereof.
1.32. "Extension Fee" shall have the meaning set forth in Section
1.56.
1.33. "Financials" shall mean the financial statements referred to in
Section 3.6 hereof.
1.34. "Financing Proceeds" means the Cash or Cash Equivalents (other
than Net Cash Proceeds) received by either Borrower or any Subsidiary, directly
or indirectly, from any financing transaction of whatever kind or nature,
including without limitation from any incurrence of Indebtedness from any
mortgage or pledge of an Asset or interest therein (including any transaction
which is the substantial equivalent of a mortgage or pledge), from any lease to
a third party and a pledge of the lease payments due thereunder to secure
Indebtedness, from any joint venture arrangement, from any exchange of Assets
and a sale of the Assets received in such exchange, and any arrangement or
technique whereby either Borrower and its Subsidiaries obtains Cash in respect
of an Asset, net of direct costs associated therewith. Financing Proceeds shall
not include any amounts received by Borrowers or any Subsidiary in respect of
(a) the Loans, (b) transactions between any of either Borrower and its wholly
owned Subsidiaries, (c) up to $1.5 million of subordinated or unsecured
Indebtedness of either Borrower or any Subsidiary or (d) any sale of Stock of,
or any equity interest in, either Borrower or any Subsidiary.
1.35. "Fiscal Year" shall mean the calendar year. Subsequent changes
of the fiscal year of either Borrower shall not change the term "Fiscal Year,"
unless the Agent shall consent in writing to such changes.
1.36. "GAAP" shall mean generally accepted accounting principal in
the United States of America as in effect from time to time.
1.37. "General Release" shall mean the general release, dated
February 25, 1999, substantially in the form of Exhibit B hereto.
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1.38. "Governmental Authority" shall mean any nation or government,
any state or other policy subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
1.39. "Guaranteed Indebtedness" shall mean as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
1.40. "Guarantor" shall mean each of parties identified as a
"Guarantor" in the Guaranty.
1.41. "Guaranty" shall mean the Guaranty, dated as of the date hereof
and substantially in the form of Exhibit C hereto, by the Guarantors in favor of
the Lenders and the Agent.
1.42. "Hazardous Materials" means all pollutants, contaminants or
chemical, industrial, hazardous or toxic materials, substances, constituents or
wastes, including, without limitation, asbestos, or asbestos-containing
materials, polychlorinated biphenyls and petroleum, oil, or petroleum or oil
products, derivatives or constituents, including, without limitation, crude oil
or any fraction thereof, or any other material, waste, chemical, substance or
constituent subject to regulation under any Environmental Law.
1.43. "Indebtedness" of any Person shall mean (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Capital Lease Obligations,
(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not
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assumed or become liable for the payment of such Indebtedness, (vii) the
Obligations, and (viii) all liabilities under Title IV of ERISA.
1.44. "Initial Interest Payment" shall have the meaning set forth in
Section 2.12(b).
1.45. "Inventory" shall mean any and all now owned or hereafter
acquired inventory, goods, merchandise, and other tangible personal property
intended for sale or lease, in the custody or possession, actual or
constructive, of either Borrower or any of the Significant Subsidiaries, or in
transit to either Borrower or any of the Significant Subsidiaries, including
such inventory as is on consignment to third parties, leased to customers of
either Borrower or any of the Significant Subsidiaries, or otherwise temporarily
out of the custody or possession of either Borrower or any of the Significant
Subsidiaries.
1.46. "IRC" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto.
1.47. "IRS" shall mean the Internal Revenue Service, or any successor
thereto.
1.48. "Leased Real Property" shall mean each parcel of real property
and any interest therein (together with any structures, improvements, easements
and other rights on or appurtenant thereto) that either Borrower or any
Subsidiary occupies, uses or otherwise has rights to pursuant to a lease,
license, occupancy agreement or other agreement, each accurately identified and
described on Schedule 3.7 of the Disclosure Letter.
1.49. "Lenders" shall mean the initial Lenders defined in the
Preamble, and adding or substituting any assignees or alternate lender or
lenders the Lenders may from time to time nominate by written notice to the
Borrowers in accordance with Section 10.1(b).
1.50. "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 Code or comparable law of any
jurisdiction).
1.51. "Loans" shall mean the sum of (i) borrowings previously made
under the 1998 Credit Agreement or the Chase Facility in the amount of
$4,946,232.88, (ii) the obligation in respect of the Initial Interest Payment in
the amount of $70,433.40, (iii) the obligation in respect of the payables of
Wahlco listed on Schedule 1.51 hereto in the amount of $84,747.03 (iv) the
obligation in respect of the transaction fee in the amount of $100,000 (the
"Transaction Fee"), (v) the obligation in respect of the expense reimbursement
payment in the amount of $325,000, and (vi) the obligation in respect of all
accrued and unpaid interest due and payable under the 1998 Credit Agreement and
the Chase Notes in the amount of $194,172.33, all of which are now outstanding
principal amounts hereunder as of the date hereof and are collectively
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evidenced by the Note issued and delivered under the terms and conditions of
this Credit Agreement.
1.52. "Loan Documents" shall mean this Credit Agreement, the Note,
the Guaranty, the Collateral Documents, the Registration Rights Agreement, the
Warrant, those other Ancillary Agreements as to which the Lenders or the Agent
is a party or a beneficiary on the Closing Date, and all other agreements,
instruments, documents and certificates, including, without limitation, pledges,
powers of attorney, consents, assignments, contracts, notices, and all other
written matter whether heretofore, now or hereafter executed by or on behalf of
either Borrower or any of their respective Affiliates, or any employee of either
Borrower or any of their respective Affiliates, and delivered to the Agent or
any Lender in connection with this Credit Agreement or the transactions
contemplated hereby, and all amendments or supplements to any of the foregoing.
1.53. "Loan Party" shall mean each of the Borrowers and/or each
Significant Subsidiary.
1.54. "Loss Proceeds" shall have the meaning set forth in 2.10(c).
1.55. "Material Adverse Effect" shall mean material adverse effect on
(i) the condition (financial or otherwise), operations, performance, properties,
Assets, business or prospects of the Borrowers and the Significant Subsidiaries
taken as a whole, (ii) Borrowers' and the Significant Subsidiaries' collective
ability to pay or perform the Obligations in accordance with the terms thereof
or (iii) the Liens on the Collateral or the priority of any such Lien.
1.56. "Maturity Date" shall mean August 24, 1999, or if Borrowers
shall have provided notice to the Agent in writing at least three business days
before such time, and shall have paid a fee of $100,000 (the "Extension Fee"),
November 22, 1999.
1.57. "Merger", "Merger Sub" and "Merger Agreement" shall have the
meanings set forth in recital paragraph C.
1.58. "Mortgages" means the mortgages or deeds of trust, security
agreements and fixture filings creating and evidencing a Lien on each parcel of
Owned Real Property described therein dated as of the date thereof and made by
the owner of the applicable Owned Real Property for the benefit of the Agent, as
mortgagee, assignee and secured party, as the same may at any time be amended or
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof, substantially in the form of the Mortgage attached as
Exhibit D hereto.
1.59. "1998 Credit Agreement" shall have the meaning set forth in
recital paragraph A.
1.60. "Net Cash Proceeds" means with respect to any Asset Sale or
multiple Asset Sales to one Person or a group of related Persons, any aggregate
payments of Cash or Cash Equivalents in excess of $1,000.00 received by either
Borrower and/or any Subsidiary, as the
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case may be, from any such Asset Sales, net of direct expenses of such sales,
net of taxes (including income taxes and transfer taxes) and net of repayment of
Indebtedness or Capital Leases in each case secured by a Lien on the Asset
subject to such Asset Sale; provided, however, that with respect to taxes,
expenses shall only include taxes to the extent that taxes are payable in cash
with respect to the current year; and provided, further, that Net Cash Proceeds
shall not include any amounts or items included in the definition of Financing
Proceeds or Net Financing Proceeds; and provided, further, that no sales
commissions or other fees shall be paid to any Affiliate of either Borrower or
any Subsidiary.
1.61. "Net Financing Proceeds" means Financing Proceeds, net of
direct expenses (including underwriting discounts and commissions, and other
costs and expenses directly associated therewith paid to any unaffiliated third
party) of the transaction and net of taxes (including income taxes) paid or
payable in cash with respect to the current year as a result of the transaction
generating such Financing Proceeds.
1.62. "Note" shall mean the promissory note, substantially in the
form of Exhibit E hereto, evidencing the obligations of the Borrowers hereunder.
1.63. "Obligations" shall mean all loans, advances, debts,
liabilities, and other obligations for monetary amounts (whether or not such
amounts are liquidated, contingent or otherwise determinable) owing by either
Borrower or any of their respective Subsidiaries or all of them to the Agent or
any Lender, or any Subsidiary or Affiliate of the Agent or a Lender, and all
covenants, duties and obligations regarding such amounts, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or other
instrument, arising under this Credit Agreement or any of the other Loan
Documents, whether at maturity or by prepayment, acceleration, declaration of
default or otherwise, including, without limitation, the principal amount of the
Loans, as well as all interest thereon (including all amounts owed in respect of
interest that accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of any Loan
Party), and all charges, costs, expenses, attorneys' fees and any other sum
chargeable to either Borrower or any or all of their respective Subsidiaries
under any of the Loan Documents.
1.64. "Original Thermatrix Security Agreement" shall have the meaning
set forth in recital paragraph D.
1.65. "Original Wahlco Security Agreement" shall have the meaning set
forth in Section 1.78.
1.66. "Overdue Rate" shall have the meaning set forth in Section
2.12(b).
1.67. "Owned Real Property" shall mean each parcel of real property
and any interest therein (together with any structures, improvements, easements
and other rights on or appurtenant thereto owned by either Borrower or any
Subsidiary) owned by either Borrower or any Subsidiary, identified and described
on Schedule 3.4 of the Disclosure Letter.
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1.68. "Permitted Encumbrances" shall mean the following encumbrances:
(i) Liens for taxes or assessments or other governmental charges or levies,
either not yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of this Credit Agreement; (ii) pledges or deposits
securing obligations under workmen's compensation, 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 either Borrower or any of
their respective Subsidiaries is a party as lessee made in the ordinary course
of business; (iv) deposits securing public or statutory obligations of either
Borrower or any of their respective Subsidiaries; (v) deposits securing or in
lieu of surety, appeal or customs bonds in proceedings to which either Borrower
or any of their respective Subsidiaries is a party, (vi) Liens (1) upon or in
any equipment acquired or held by Borrowers 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; (vii) leases or
subleases and licenses and sublicenses granted to others in the ordinary course
of business, and any interest or title of a lessor or licensor under any such
lease or license, in each case which do not have or could not reasonably be
expected to have an Material Adverse Effect; (viii) Liens on assets (including
the proceeds thereof and accessions thereto) that existed at the time such
assets were acquired by Borrowers; provided such Liens are not granted in
contemplation of or in connection with the acquisition of such asset by
Borrowers; (ix) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
existing as of the date hereof affecting real property; provided that the same
do not have or could not reasonably be expected to have a Material Adverse
Effect; (x) 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; (xi) 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; (xii) 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; and (xiii) Liens existing on the date
hereof set forth in Schedule 1.68 of the Disclosure Letter.
1.69. "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
1.70. "Plan" shall mean, with respect to either Borrower or any ERISA
Affiliate, at any time, an employee benefit plan, as defined in Section 3(3) of
ERISA, which either Borrower or any of their respective Subsidiaries maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.
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1.71. "Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated the date hereof, between the Agent and Thermatrix,
substantially in the form of Exhibit F hereto, as it may be amended from time to
time.
1.72. "Release" means the intentional or unintentional spilling,
leaking, disposing, discharging, emitting, depositing, injecting, leaching,
escaping, or any other release or threatened release, however defined, of any
Hazardous Materials, except in compliance with all applicable Environmental
Laws.
1.73. "Reserves" shall mean such reserves for doubtful accounts,
returns, allowances and the like as may be established by either Borrower or any
Subsidiary or as may otherwise be required in accordance with GAAP.
1.74. "Responsible Officer" shall mean the Chief Executive, Chief
Operating or Chief Financial Officer of Thermatrix or Wahlco, as applicable.
1.75. "Restricted Lease" shall mean, as at any date, any lease of
property (whether real, personal or mixed) other than Capital Leases.
1.76. "Restricted Payment" shall mean (i) the declaration of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or Assets in respect of either Borrower's
Stock or (ii) any payment on account of the purchase, redemption or other
retirement of either Borrower's Stock or any other payment or distribution made
in respect thereof, either directly or indirectly.
1.77. "SEC Documents" means each report or filing made by either
Borrower with the Commission.
1.78. "Security Agreements" shall mean the Wahlco Security Agreement,
dated February 25, 1999, attached as Exhibit G hereto, which amends and restates
the Security Agreement dated as of July 25, 1995, between Wahlco and WESAC, as
amended by the First Amendment thereto (the "Original Wahlco Security
Agreement"), the Thermatrix Security Agreement, dated as of February 25, 1999,
attached as Exhibit H hereto, which amends and restates the Original Thermatrix
Security Agreement, and the Debentures, each dated as of February 25, 1999, a
form of which is attached as Exhibit I hereto (the "UK Security Agreement").
1.79. "Significant Subsidiaries" shall mean the entities set forth on
Schedule 3.2.
1.80. "Stock" shall mean all shares, options, warrants, general or
limited partnership interests, participations or other equivalents (regardless
of how designated) of or in a corporation, partnership or equivalent entity
whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended).
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1.81. "Stock Pledge Agreement" shall mean the Stock Pledge Agreement,
dated February 25, 1999, attached hereto as Exhibit J, which amends and restates
the stock pledge agreement dated as of July 25, 1995, between Wahlco and WESAC,
as amended by the First Amendment thereto dated January 30, 1998.
1.82. "Subordination Agreement" shall mean the Agreement, dated
February 25, 1999, between the Agent and Venture, substantially in the form of
Exhibit K hereto.
1.83. "Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50%.
1.84. "Transaction Fee" shall have the meaning set forth in Section
1.51.
1.85. "Thermatrix Guaranty" shall have the meaning set forth in
recital paragraph D.
1.86. "Thermatrix Security Agreement" shall have the meaning set
forth in recital paragraph G.
1.87. "Venture" shall mean the Venture Banking Group, a division of
Cupertino National Bank
1.88. "Wahlco Security Agreement" shall have the meaning set forth in
recital paragraph G.
1.89. "Warrant" means a warrant to purchase 450,000 shares of
Thermatrix common stock, par value $.001 per share substantially in the form
attached hereto as Exhibit L.
1.90. Accounting Terms. Any accounting term used in this Credit
----------------
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given such term in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise specifically provided
herein, in accordance with GAAP consistently applied. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. All other undefined terms
contained in this Credit Agreement shall, unless the context indicates
otherwise, have the meanings provided for by the Code as in effect in the State
of New York to the extent the same are used or defined therein. The words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Credit Agreement as a whole, including the Exhibits and Schedules hereto,
as the
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same may from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Credit Agreement.
1.91. Gender. Wherever from the context it appears appropriate, each
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term stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
Article II
Amount and Terms of Credit
2.1. The Thermatrix Assumption. Effective upon the execution and
-------------------------
delivery of this Credit Agreement, Thermatrix hereby assumes and agrees to
perform, pay, discharge and comply with, as a joint and several obligor with
Wahlco, all of the covenants, conditions, agreements, terms, obligations and
restrictions to be performed or complied with on the part of Wahlco under (a)
the 1998 Credit Agreement and (b) the Chase Notes (in each case as amended and
restated and now set forth in this Credit Agreement) and (c) all other
Obligations under this Credit Agreement now existing or hereafter arising, and
agrees to pay and perform such obligations in accordance with the terms hereof.
2.2. Wahlco Confirmation of Obligations. Wahlco acknowledges,
----------------------------------
agrees and confirms that notwithstanding the agreements of Thermatrix under
Section 2.1, Wahlco remains fully liable for, and shall hereafter be a joint and
several obligor with Thermatrix of, all of the obligations under (a) the 1998
Credit Agreement and (b) the Chase Notes (in each case as amended and restated
and now set forth in this Credit Agreement), and (c) all other Obligations under
this Credit Agreement now existing or hereafter arising, and agrees to pay and
perform such obligations in accordance with the terms hereof.
2.3. The Loans. Upon the terms and subject to the conditions
---------
hereof, the Lenders shall cancel any notes representing obligations under the
1998 Credit Agreement and the Chase Notes as of the Closing Date, which loans,
together with the other Obligations described in Section 1.51 hereof, shall be
represented from and after the Closing Date by the Note. The Agent shall
deliver such canceled Notes to the Borrowers on the Closing Date and shall
deliver the canceled Chase Notes to the Borrowers promptly after the Agent
receives the Chase Notes from Chase in accordance with the terms of the Note
Purchase Agreement dated January 22, 1999 between the Agent and Chase.
2.4. Thermatrix Security Interest. To secure its prompt payment
----------------------------
and performance to the Agent and the Lenders of the Obligations, on the Closing
Date, (a) Thermatrix shall execute and deliver to the Agent the Thermatrix
Security Agreement, (b) Thermatrix shall execute and deliver to the Agent and
cause the Significant Subsidiaries that are party thereto to execute and deliver
to the Agent the UK Security Agreements and (c) Thermatrix shall execute and
deliver to the Agent the Stock Pledge Agreement, granting to the Agent and the
Lenders, a continuing security interest and Lien in all of the present and
future property of
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Thermatrix and its Significant Subsidiaries, each effective upon the execution
and delivery of this Credit Agreement.
2.5. Wahlco Security Interest. To secure prompt payment and
------------------------
performance to the Agent and the Lenders of the Obligations, on the Closing
Date, (a) Wahlco shall execute and deliver to the Agent the Wahlco Security
Agreement, (b) Wahlco shall cause the Significant Subsidiaries that are party
thereto to execute and deliver to the Agent the UK Security Agreement and the
Mortgages and (c) Wahlco shall execute and deliver to the Agent and cause the
Significant Subsidiaries that are party thereto to execute and deliver to the
Agent the Stock Pledge Agreement, granting to the Agent and the Lenders, a
continuing security interest and Lien in all of the present and future property
of Wahlco and its Significant Subsidiaries, each effective upon the execution
and delivery of this Credit Agreement
2.6. Guaranty. On the Closing Date, the Borrowers shall cause each
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Significant Subsidiary to execute and deliver to the Agent the Guaranty,
guaranteeing the Obligations of the Borrowers hereunder, effective upon the
execution and delivery of this Credit Agreement.
2.7. Issuance of Warrant. On the Closing Date, Thermatrix shall
-------------------
execute and deliver the Registration Rights Agreement and issue the Warrant to
the Agent on behalf of the Lenders, effective upon the execution and delivery of
this Credit Agreement.
2.8. Subordination Agreement. On the Closing Date, Venture and the
-----------------------
Agent shall enter into the Subordination Agreement, effective upon the execution
and delivery of this Credit Agreement.
2.9. Optional Prepayment. Borrowers shall have the right at any time
-------------------
to prepay the Loans.
2.10. Mandatory Prepayment. (a) At any time that the Borrowers
--------------------
and/or any Subsidiary shall have received Net Cash Proceeds that, together with
all other Net Cash Proceeds previously received by Borrowers and/or any
Subsidiary and not remitted to the Agent, equal or exceed $25,000, the Borrowers
shall immediately remit to the Agent an amount equal to 100% of all such Net
Cash Proceeds; provided, however, that with respect to any Net Cash Proceeds
from any damage to, or loss, destruction or condemnation of Assets, Section
2.10(c) will govern.
(b) Immediately upon receipt by either Borrower and/or any
Significant Subsidiary of any Financing Proceeds, the Borrowers shall remit to
the Agent an amount equal to 100% of the Net Financing Proceeds.
(c) As promptly as practicable, but in any event within two Business
Days of the date of receipt by either Borrower and/or any Significant
Subsidiaries of any proceeds due to damage to, or loss, destruction or
condemnation of Assets net of actual out-of-pocket costs of recovery
(collectively, "Loss Proceeds"), the Borrower shall remit to the Agent an
amount equal to 100% of such Loss Proceeds, excluding such portion, if any, of
such proceeds (such portion, the "Asset Restoration Amount") that the Borrowers
represent to the Agent in writing will be
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used within 90 days of receipt of such Loss Proceeds (or such longer period as
may be consented to by the Agent) for rebuilding, repairing or replacing the
damaged, destroyed or condemned Assets with productive assets of a kind then
used or usable in the business of Borrowers and their Subsidiaries; provided,
however, that if such property constituted Collateral, any such replacement
property shall be made subject to the Lien of the Security Documents; and
provided further that if such proceeds are not put to such use within such 90-
day period, the Borrower shall remit to the Agent an amount equal to 100% of
such Loss Proceeds not so utilized.
(d) As promptly as possible, but in any event within two Business
Days following receipt by either Borrower and/or any Significant Subsidiary of
any tax refund which is not required to be promptly applied by the Borrower
and/or any of its Subsidiaries to the payment of future tax liabilities, the
Borrower shall remit to the Agent an amount equal to 100% of the aggregate
amount of such tax refunds in excess of $100,000.
2.11. Application of Mandatory Prepayments. Prepayments under
------------------------------------
Section 2.9 and 2.10 shall be applied without penalty or premium, in the
following manner: first, to any unpaid fees and expenses due to the Agent or
Lenders hereunder, second to accrued and unpaid interest on the Loans and last
to the outstanding principal amount of the Loans.
2.12. Payments. The Obligations shall be payable as follows: (a)
--------
Principal. Subject to the terms of subsection 2.9 and 2.10 hereof, all
- ---------
principal shall be due and payable upon the earliest of (a) the occurrence of an
Event of Default in consequence of which the Agent elects to accelerate the
maturity and payment of the Obligations, or (b) the Maturity Date.
(b) Interest. The unpaid principal balance of the Loans shall bear
--------
interest at the rate of 13% per annum until maturity, and any Obligation not
paid when due shall bear interest at the rate of 16% per annum (the "Overdue
Rate"), in either case based upon a year of 365 days for actual days elapsed.
Interest shall be payable monthly in advance. The amount of the initial
interest payment for the period from the Closing Date through March 31, 1999 in
the amount of $70,433.40 (the "Initial Interest Payment") will be included in
outstanding principal amount of the Loans represented by the Note as of the
Closing Date.
(c) Costs, Fees and Charges. Costs, fees and Charges payable
-----------------------
pursuant to this Agreement shall be payable by Borrowers as and when provided in
Section 10.2 hereof, to the Agent.
(d) Other Obligations. The balance of the Obligations requiring the
-----------------
payment of money, if any, shall be payable by Borrower to the Agent as and when
provided in this Credit Agreement or any Loan Document, or on demand, whichever
is later.
(e) No Right of Set Off. The Borrowers shall have no right to set off
-------------------
any amounts owed, under this Credit Agreement against any amounts, if any, owed
or claimed to be owed, now or in the future to either of the Borrowers or any
Subsidiary, Affiliate or other person by the Agent or any Lender or any of their
Affiliates resulting from any claims, rights, damages, demands, causes of action
or liabilities of any nature whatsoever, known or unknown, contingent or fixed,
whether due or to become due, that any Borrower has had, now has or may have at
any
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<PAGE>
future time by reason of any cause, matter or thing whatsoever, directly or
indirectly, including, without limitation, relating to the Merger Agreement or
the transactions contemplated thereby. Borrowers jointly and severally agree
that, as of the date of this Credit Agreement, their obligations under this
Credit Agreement are not subject to defenses against the Agent or the Lenders
other than defenses that may arise under this Credit Agreement or any other Loan
Document. Borrowers further jointly and severally agree that their obligations
under this Credit Agreement shall not be subject to any counterclaims against
the Agent or the Lenders of any kind except a compulsory counterclaim; provided,
however, that notwithstanding the foregoing, nothing contained in this Credit
Agreement shall be construed as a waiver of Thermatrix's right to raise claims
or seek damages or other remedies, if any, arising under the Merger Agreement.
2.13. Receipt of Payments. Borrowers shall make each payment under
-------------------
this Credit Agreement not later than 3:00 p.m. (New York City time) on the day
when due in lawful money of the United States of America in immediately
available funds to Lenders' depository bank as designated by the Agent on behalf
of the Lenders from time to time for deposit in Lenders' depository account. For
purposes only of computing interest hereunder, all payments shall be applied by
Lenders on the day payment has been credited by Lenders' depository bank to
Lenders' account in immediately available funds.
2.14. Indemnity. Borrowers shall indemnify and hold Lenders and
---------
the Agent harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable attorneys' fees and disbursements, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by any of them as the result of either of them having entered into any
of the Loan Documents or extended credit hereunder; provided, however, that
Borrowers shall not be liable for such indemnification to any Lender or the
Agent to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from such Lender's or the Agent's gross negligence
or willful misconduct.
2.15. Access. The Agent, the Lenders and any of their officers,
------
employees and/or agents shall have the right, exercisable as frequently as the
Agent or the Lenders reasonably determine to be appropriate, during normal
business hours (or at such other times as may reasonably be requested by the
Agent and the Lenders), to inspect the properties and facilities of Borrowers
and the Subsidiaries and to inspect, audit and make extracts from all of
Borrowers' and such Subsidiaries' records, files and books of account. Borrowers
shall deliver any document or instrument reasonably necessary for the Agent and
the Lenders, as any of them may reasonably request, to obtain records from any
service bureau maintaining records for Borrowers or their respective
Subsidiaries, and shall maintain duplicate records or supporting documentation
on paper or other media, including, without limitation, computer tapes and discs
owned by Borrowers and their respective Subsidiaries. Each Borrower shall
instruct its and their respective Subsidiaries' banking and other financial
institutions to make available to the Agent and the Lenders such information and
records as the Agent and Lenders may reasonably request.
2.16. Taxes. (a) Any Lender that is organized in a jurisdiction
-----
other than the United States and that expects to receive a payment under this
Credit Agreement (including,
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<PAGE>
initially, Wexford Overseas Partners I and Wexford Special Situations 1996
Limited) (each a "Non-U.S. Lender") shall provide a properly completed IRS Form
W-8 (or any applicable substitute or successor form) to the Borrowers and the
Agent. In addition, each Non-U.S. Lender that is a partnership shall cause the
partners of such Non-U.S. Lender, in accordance with applicable Treasury
Regulations promulgated pursuant to the IRC, to provide a properly completed IRS
Form W-8 or Form W-9 (or, in each case, any applicable substitute or successor
form), as appropriate, to the Borrowers and the Agent.
(b) The Agent, the Lenders and the Borrowers agree that interest
payments made under this Credit Agreement and received by Non-U.S. Lenders are,
as of the date hereof, eligible for the "portfolio interest exception" set forth
under IRC Section 871(h) provided that (1) each such Non-U.S. Lender satisfies
the documentation requirements set forth in Section 2.16(a) above, (2) no Non-
U.S. Lender is a "10-percent shareholder" within the meaning of IRC Section
871(h)(3) and each Non-U.S. Lender hereby represents that it is not such a
shareholder, (3) no Non-U.S. Lender is a controlled foreign corporation which is
related to the Borrowers (within the meaning of IRC Section 864(d)(4)) and each
Non-U.S. Lender hereby represents that it does not have such status, and (4) no
Non-U.S. Lender is considered to be a bank where this Credit Agreement would
constitute an extension of credit made pursuant to a loan agreement entered into
in the ordinary course of its trade or business within the meaning of IRC
Section 881(c)(3)(A) and each Non-U.S. Lender hereby represents that it does not
have such status.
(c) The Borrower shall maintain a registry, in accordance with United
States Treasury Regulation Section 5f.103-1(c)(1) and (2), evidencing its
obligation to pay principal and interest to the Lender pursuant to the Loan
Agreement. Such registry shall represent the record of ownership and right to
receive principal and interest pursuant to the Credit Agreement and the Notes.
Subject to the other restrictions and limitations of this Credit Agreement and
the Notes, each Lender shall (in accordance with Section 10.1(b) of this Credit
Agreement) notify the Borrowers in writing of any transfer or assignment of the
right to receive principal and interest under this Credit Agreement and the
Notes and such transfer or assignment shall be effected by the Borrower only
through an appropriate entry in the registry. In the event of any such
transfer, the Borrowers hereby covenant to make the appropriate entry in the
registry.
Article III
Representations and Warranties
To induce each Lender to make the Loans, as herein provided for, except as
set forth in the Disclosure Letter, Borrowers make the representations and
warranties to Lenders set forth in 3.1, 3.2, 3.3 and 3.4 hereof, and Thermatrix
makes the representations and warranties to Lenders set forth in Sections 3.5
through 3.23, each and all of which shall be true and correct as of the date
hereof, and shall survive the execution and delivery of this Credit Agreement;
provided,
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<PAGE>
however, that with respect to representations and warranties regarding Wahlco
and its direct or indirect Subsidiaries, such representations and warranties are
to the knowledge of Borrowers.
3.1. Corporate Existence: Compliance with Law. Each Borrower and
----------------------------------------
each Significant Subsidiary (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state or other jurisdiction
of its incorporation or organization; (ii) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification (except for jurisdictions in which such failure to so qualify or
to be in good standing could not reasonably be expected to have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now, heretofore and proposed to be conducted; (iv) has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct except for such licenses, permits, consents or approvals
as to which the failure to obtain could not reasonably be expected to have a
Material Adverse Effect; (v) is in compliance with its certificate or articles
of incorporation and by-laws or other constitutive documents; and (vi) is in
compliance with all applicable provisions of law where the failure to comply
would have a Material Adverse Effect.
3.2. Subsidiaries. Each of the Significant Subsidiaries is
------------
disclosed on Schedule 3.2.
3.3. Corporate Power: Authorization: Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Borrowers and the Significant
Subsidiaries of the Loan Documents, Ancillary Agreements and all instruments and
documents to be delivered by Borrowers and the Significant Subsidiaries, to the
extent they are parties thereto, hereunder and thereunder and the creation of
all Liens provided for herein and therein: (i) are within Borrowers' and the
Significant Subsidiaries' corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of any
provision of Borrowers' or the Significant Subsidiaries' respective certificates
or articles of incorporation or by-laws or other constitutive documents; (iv)
will not violate any law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in the
material breach or termination of, constitute a material default under or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which Borrowers or any of the
Significant Subsidiaries is a party or by which Borrowers or any of the
Significant Subsidiaries or any of their property is bound; (vi) will not result
in the creation or imposition of any Lien upon any of the property of Borrowers
or any of the Significant Subsidiaries other than those in favor of the Agent
and the Lenders, all pursuant to the Loan Documents; and (vii) do not require
the consent or approval of any Governmental Authority or any other Person. At
or prior to the Closing Date, each of the Loan Documents shall have been duly
executed and delivered for the benefit of or on behalf of Borrowers or the
Significant Subsidiaries, as the case may be, and each shall then constitute a
legal, valid and binding obligation of each Borrower or the Significant
Subsidiaries, to the extent they are parties thereto, enforceable against them
in
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<PAGE>
accordance with its terms except (i) as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally, and (ii) as such enforceability may be
limited by general principles of equity, regardless of whether asserted in a
proceeding in equity or law.
3.4. Owned Real Property. As indicated on Schedule 3.4 of the
-------------------
Disclosure Letter, one of the Borrowers or a Significant Subsidiary owns and
holds good and marketable fee simple title to each parcel of Owned Real
Property.
3.5. No Material Adverse Change. Since January 13, 1999, there has
--------------------------
not been any change in the condition (financial or otherwise), operations,
performance, properties, Assets, business or prospects of Wahlco and the
Significant Subsidiaries, taken as a whole, has had, or could reasonably be
expected to have, a Material Adverse Effect.
3.6. Financial Statements. (a) All of the following balance
--------------------
sheets and statements of income, retained earnings and cash flows of Thermatrix,
copies of which have been furnished to Lenders prior to the date of this Credit
Agreement, have been, except as noted therein, prepared in conformity with GAAP
consistently applied throughout the periods involved and present fairly,
respectively, the consolidated financial position of Thermatrix in each case at
the dates thereof, and the results of operations and cash flows for the periods
then ended (as to the unaudited interim financial statements, subject to normal
year-end audit adjustments):
(i) the unaudited consolidated balance sheet of Thermatrix at
November 30, 1998, and the balance sheet, consolidated statements of
income, retained earnings and cash flows for the nine months ending
September 30, 1998 as set forth in the Thermatrix Quarterly Report on Form
10Q for the period ended September 30, 1998; and
(ii) the audited consolidated balance sheet of Thermatrix as at
December 31, 1997, and the related consolidated statements of income,
retained earnings and cash flows for the year then ended with the opinion
thereon of Arthur Andersen & Co., LLP.
(b) Thermatrix, as of September 30, 1998 had no obligations,
contingent liabilities or liabilities for Charges, long-term leases or unusual
forward or long-term commitments which are not reflected in the consolidated
financial statements of Thermatrix and which would have a Material Adverse
Effect.
(c) There has been no change in the business, Assets, operations,
prospects or financial or other condition of Thermatrix since September 30, 1998
that has or could reasonably be expected to have a Material Adverse Effect (it
being understood that, as of the Closing Date, this representation and warranty
shall be subject to the fact that Thermatrix shall have incurred the Obligations
hereunder). No dividends or other distributions have been declared, paid or
made upon any shares of Stock of Thermatrix, nor have any shares of Stock of
Thermatrix been redeemed, retired, purchased or otherwise acquired for value by
Thermatrix since September 30, 1998.
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<PAGE>
3.7. Ownership of Property: Liens. Thermatrix has a good, valid and
----------------------------
marketable leasehold estate, as tenant in each parcel of Leased Real Property
pursuant to the leases described on Schedule 3.7 of the Disclosure Letter. In
addition, Thermatrix owns and holds good and marketable title to, or valid
leasehold interests in, all of its other properties and Assets. None of the
properties and Assets of Thermatrix, including, without limitation, the Leased
Real Property, is subject to any Liens, except (i) Permitted Encumbrances and
(ii) from and after the Closing Date, the Lien in favor of the Agent and the
Lenders pursuant to the Collateral Documents; and Thermatrix has duly effected
all recordings, filings and other actions necessary to establish, protect and
perfect Thermatrix's right, title and interest in and to all such property
except where the failure to have received such documents or effected such
actions could not reasonably be expected to, in the aggregate, have a Material
Adverse Effect. Thermatrix does not own or lease or otherwise have rights or
interests to or in any real property other than the Leased Real Property.
3.8. No Default. Thermatrix is not in default and no event has
----------
occurred and no event exists which constitutes, or which with the passage of
time or the giving of notice or both would constitute a default in the payment
of any Indebtedness to any Person for money borrowed. To Thermatrix's
knowledge, no third party in default, under or with respect to any contract,
agreement, lease or other instrument to which it is a party, except for any
default which (either individually or collectively with other defaults arising
out of the same event or events) could not reasonably be expected to have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
3.9. Burdensome Restrictions. No contract, lease, agreement or
-----------------------
other instrument to which Thermatrix is a party or is bound and no provision of
applicable law or governmental regulation has a Material Adverse Effect, or
insofar as Thermatrix can reasonably foresee, could reasonably be expected to
have a Material Adverse Effect.
3.10. Labor Matters. There are no strikes or other labor disputes
-------------
against Thermatrix pending or, to Thermatrix's knowledge, threatened which,
would have a Material Adverse Effect. All payments due from Thermatrix on
account of employee health and welfare insurance which would have a Material
Adverse Effect if not paid have been paid or accrued as a liability on the books
of Thermatrix. Thermatrix has no obligation under any collective bargaining
agreement. There are no complaints or charges against Thermatrix pending or
threatened to be filed with any federal, state, local or foreign court,
governmental agency or arbitrator based on, arising out of in connection with,
or otherwise relating to the employment or termination of employment by
Thermatrix which could reasonably be expected to have a Material Adverse Effect.
3.11. Taxes. All material federal, state, local and foreign tax
-----
returns, reports and statements required to be filed by Thermatrix have been
filed with the appropriate Governmental Authority and all Charges and other
impositions shown thereon to be due and payable have been paid prior to the date
on which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof, or any such fine, penalty, interest, late charge or loss has
been paid. Thermatrix has paid when due and payable all Charges required to be
paid by it. Proper and
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<PAGE>
accurate amounts have been withheld by Thermatrix from their respective
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. Thermatrix is not currently being audited by
the IRS or any other applicable Governmental Authority. Thermatrix has not
agreed or has been requested to make any adjustment under IRC Section 481(a) by
reason of a change in accounting method or otherwise. Thermatrix has no any
obligation under any written or other tax sharing agreement.
3.12. ERISA. Thermatrix has no Plan subject to regulation under
-----
ERISA except for its 401(k) plan.
3.13. No Litigation. No action, claim or proceeding is now pending
-------------
or, to the knowledge of Thermatrix, threatened against Thermatrix at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators, which
could reasonably be expected to have a Material Adverse Effect, nor to the
knowledge of Thermatrix does a state of facts exist which is reasonably likely
to give rise to such proceedings. None of the matters set forth therein
questions the validity of any of the Loan Documents or any action taken or to be
taken pursuant thereto, or would have either individually or in the aggregate a
Material Adverse Effect.
3.14. Patents, Trademarks, Copyrights and Licenses. (i)
--------------------------------------------
Thermatrix owns all material licenses, patents, patent applications, copyrights,
service marks, trademarks, trademark applications, and trade names necessary to
continue to conduct their business as heretofore conducted by them, now
conducted by them and proposed to be conducted by them. To the best of its
knowledge, Thermatrix conducts its business without infringement or claim of
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others, except where
such infringement or claim of infringement could not reasonably have a Material
Adverse Effect. To Thermatrix's knowledge, there is no infringement or claim of
infringement by others of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
Thermatrix.
(ii) Thermatrix has conducted a preliminary review of its products
and internal computer systems to identify the systems that could be
affected by the Year 2000 issue. Thermatrix believes its products and most
of its management information systems are already Year 2000 compliant.
However, its existing accounting system is not. Thermatrix plans to
upgrade to a Year 2000 compliant version of its accounting system by the
end of 1999 and does not anticipate that the cost of such a conversion will
be material. While Thermatrix currently expects the Year 2000 issue will
not pose significant operational problems, failure to fully identify all
Year 2000 dependencies in Thermatrix's systems could have a Material
Adverse Effect. In addition, Thermatrix cannot be sure that systems of
other companies on which the Company relies will be
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<PAGE>
converted in a timely manner. The failure of other companies to convert
systems on which Thermatrix relies may have a Material Adverse Effect.
3.15. Liens. Except for Permitted Encumbrances, the Liens granted
-----
to the Agent by Thermatrix for the benefit of the Lenders pursuant to the
Collateral Documents will at the Closing Date be fully perfected Liens subject
only to Permitted Encumbrances in and to the Collateral described therein.
Thermatrix is not obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
other Person.
3.16. Business Locations: Agent for Process. The chief executive
-------------------------------------
office and other places of business of Borrowers are as listed on Schedule 3.16
of the Disclosure Letter. During the preceding one-year period, Thermatrix has
not had an office, place of business or agent for service of process other than
as listed thereon.
3.17. Brokers. There are no claims for brokerage commissions,
-------
finder's fees or investment banking fees in connection with the transactions
contemplated by this Credit Agreement.
3.18. Trade Relations. There exists no actual or threatened
---------------
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Thermatrix and any customer or any group of
customers of Thermatrix, the absence of whose purchases individually or in the
aggregate would likely have a Material Adverse Effect, or with any material
supplier of Thermatrix. There exists no present condition or state of facts or
circumstances which would have a Material Adverse Effect or prevent Thermatrix
from conducting its business after the consummation of the transaction
contemplated by this Agreement in substantially the same manner in which it has
heretofore been conducted.
3.19. Senior Obligations. The Obligations for the payment of money
------------------
of Thermatrix under this Credit Agreement and the other Loan Documents rank
senior in right of payment to all other obligations for the payment of borrowed
money of Thermatrix.
3.20. No Power of Attorney. Thermatrix has not granted power of
--------------------
attorney to any Person that would allow such Person to sign or file any
financing statement, mortgage, indenture, document, agreement or other
instrument that grants or creates a Lien on any Collateral owned by Thermatrix,
nor, since the Effective Time, has any other Loan Party granted any such power
of attorney with respect to any other Collateral.
Article IV
Conditions Precedent to Effectiveness
4.1. Conditions to Loan. Notwithstanding any other provision of
------------------
this Agreement and without affecting in any manner the rights of the Agent or
any Lender hereunder, Borrowers shall have no rights under this Agreement (but
shall have all applicable obligations hereunder), and no Lender shall be
obligated to make any Loan hereunder, unless:
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(a) Each of the representations and warranties of each Borrower in
this Credit Agreement shall be true and correct in all respects as of the date
hereof and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of such time, other than
representations and warranties that speak as of a specific date or time (which
need only be true and correct in all respects as of such date or time);
(b) Borrowers and each Loan Party shall have performed and complied
with each agreement, covenant and obligation required to be performed or
complied with by them under this Credit Agreement or any other Loan Document at
or prior to the Closing Date;
(c) Borrowers shall have delivered to the Agent, in form and
substance satisfactory to the Agent and each Lender and (unless otherwise
indicated, each dated the Closing Date):
(i) The Note payable to the order of the Agent, duly executed by
Borrowers;
(ii) A favorable opinion of Wilson Sonsini Goodrich & Rosati,
counsel to the Borrowers, in form and substance satisfactory to the Agent
and its counsel substantially in the form set forth in Exhibit M;
(iii) Resolutions of the board of directors of each Loan Party,
certified by the Secretary or Assistant Secretary of such Loan Party, as of
the Closing Date, to be duly adopted and in full force and effect on such
date, authorizing (i) the consummation of each of the transactions
contemplated by the Loan Documents and (ii) specific officers of each
Borrower to execute and deliver this Agreement and the other Loan
Documents;
(iv) Governmental certificates, dated the most recent practicable
date prior to the Closing Date, showing that each Loan Party is organized
and in good standing in the jurisdiction of its organization and is
qualified as a foreign corporation and in good standing in all other
jurisdictions in which it is qualified to transact business;
(v) The Security Agreements, duly executed by the parties thereto,
together with an opinion of local counsel with respect thereto, in form and
substance satisfactory to the Agent and its counsel;
(vi) The Stock Pledge Agreement, duly executed by the parties
thereto and each Subsidiary owning Stock of other Subsidiaries or either
Borrower;
(vii) The Mortgages, duly executed by the owners of the Owned Real
Property, together with an opinion of local counsel with respect thereto,
in form and substance satisfactory to the Agent and its counsel;
(viii) The Guaranty, duly executed by the Significant Subsidiaries;
(ix) The Warrant, duly executed and issued by Thermatrix;
(x) The Registration Rights Agreement, duly executed by Thermatrix;
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<PAGE>
(xi) The Acknowledgment;
(xii) The Subordination Agreement, duly executed by the parties
thereto;
(xiii) The General Release, duly executed by the Borrowers;
(xiv) Evidence in form and substance satisfactory to the Agent that
the Agent has been named as loss payee on each of the insurance policies
set forth in Schedule 6.7 of the Disclosure Letter;
(xv) Each document (including without limitation, any Uniform
Commercial Code financing statement) required by this Agreement, any Loan
Document or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create, in favor of the Agent, a
perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the
filing, registration or recordation thereof is so required or requested,
and the Agent shall have received an acknowledgment copy, or other evidence
satisfactory to it, of each such filing, registration or recordation and
satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
(xvi) A certificate substantially in the form of Exhibit N hereto of
the chief executive officer and chief financial officer of each Borrower,
satisfactory in form and substance to the Agent, stating that all of the
representations and warranties of the Loan Parties contained herein or in
any of the Loan Documents are correct on and as of the Closing Date as
though made on and as of such date, and no event has occurred and is
continuing, or would result from the Loans, which constitutes or would
constitute a Default or an Event of Default; and
(xvii) Such additional information and materials as the Agent may
reasonably request, including, without limitation, copies of any debt
agreement, security agreements and other material contracts; and
Article V
Financial Statements and Information
5.1. Reports and Notices. Borrowers covenant and agree that they
-------------------
shall promptly deliver to the Agent the financial statements and reports
required to be delivered hereby. Borrowers also agree to provide the Agent with
such other financial information concerning Borrowers' results of operations and
financial condition as Lender may reasonably request from time to time.
5.2. Communication with Accountants. Borrowers authorize the Agent
------------------------------
and the Lenders to communicate directly with their independent certified public
accountants and tax advisors and authorizes those accountants to disclose to the
Agent or any Lender any and all financial statements and other supporting
financial documents and schedules including copies of
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any management letter with respect to the business, financial condition and
other affairs of either Borrower and any of their respective Subsidiaries.
Article VI
Affirmative Covenants
Borrowers covenant and agree that, unless the Lenders shall otherwise
consent in writing, from and after the date hereof and until all of the
Obligations hereunder have been satisfied:
6.1. Maintenance of Existence and Conduct of Business. Each
------------------------------------------------
Borrower shall, and shall cause each Significant Subsidiary to: (a) at all times
maintain, preserve and protect all of its material trademarks and trade names,
and preserve all the remainder of its property, in use or useful in the conduct
of its business and keep the same in good repair, working order and condition
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all needful and proper repairs, renewals and replacements,
betterments and improvements thereto consistent with applicable industry
practices, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, except where the failure to
do so could not reasonably be expected to have a Material Adverse Effect; (b)
transact business only in such names used as of the date hereof, or such other
names as either Borrower or any Significant Subsidiary shall specify to Lender
in writing not less than ten days prior to the first date such name is used by
either Borrower or any Significant Subsidiary; and (c) preserve its
relationships with clients, suppliers, distributors, licensors, licensees, and
others having business dealings with it, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
6.2. Information Covenants. The Borrowers will furnish to the
---------------------
Agent:
(a) Monthly Reports. As soon as available and in any event within
---------------
25 days after the end of each fiscal month of the Borrowers, commencing with the
fiscal month ending February 28, 1999 the consolidated statement of operations,
consolidated balance sheet, and consolidated statements of cash flow of the
Borrowers and their respective Subsidiaries for each such fiscal month.
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 45 days after the end of each of the first three fiscal quarters of
the Borrowers in each Fiscal Year, the consolidated balance sheet of the
Borrowers and their respective Subsidiaries as at the end of such fiscal quarter
and the related consolidated statements of operations, stockholders' equity and
cash flows of the Borrowers and their respective Subsidiaries for such fiscal
quarter and for the period commencing at the end of the previous Fiscal Year and
ending with the end of such fiscal quarter, in each case setting forth in
comparative form the consolidated figures for the corresponding period in the
immediately preceding Fiscal Year, and duly certified by a senior financial
officer of each of the Borrowers as (i) fairly presenting, in all material
respects, subject to normal year-end audit adjustments and inclusion of
footnotes, the consolidated financial condition, results of operations and cash
flows of the Borrowers and their
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respective Subsidiaries for such fiscal quarter and (ii) having been prepared in
accordance with generally accepted accounting principles in effect for such
fiscal quarter covered thereby and consistently applied.
(c) Annual Financial Statements. As soon as available and in any
---------------------------
event within 90 days after the close of each Fiscal Year, the consolidated
balance sheet of the Borrowers and their respective Subsidiaries as at the end
of such Fiscal Year and the related consolidated statements of operations,
stockholders' equity and cash flows of the Borrowers and their respective
Subsidiaries for such Fiscal Year, in each case setting forth in comparative
form the consolidated figures for the immediately preceding Fiscal Year, audited
by independent accountants of recognized national standing reasonably acceptable
to the Agent together with:
(i) an opinion of independent accountants of recognized
national standing (A) to the effect that such financial statements have
been prepared in accordance with generally accepted accounting principles
in effect for the Fiscal Year covered thereby and consistently applied and
(B) that is not limited as to the scope of the audit or qualified as to the
status of the Borrowers and their respective Subsidiaries as a going
concern or otherwise qualified in any manner not reasonably acceptable to
the Agent; and
(ii) management's discussion and analysis of the important
operational and financial developments of the Borrowers and their
respective Subsidiaries during such Fiscal Year;
provided that the delivery of Thermatrix's Annual Report on Form 10-K shall
satisfy the requirement set forth in this Section 6.2(c).
(d) Compliance Certificate. At the time of delivery of the
----------------------
consolidated financial statements of the Borrowers and their respective
Subsidiaries provided for in this Section 6.2, a compliance certificate of the
Borrowers, in substantially the form of Exhibit O hereto, duly certified by a
Senior Financial Officer thereof, (i) stating that, to the best of such Senior
Financial Officer's knowledge after due inquiry, no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
that the Borrowers have taken and propose to take with respect thereto, and (ii)
setting forth a description in reasonable detail of all of the changes, if any,
from GAAP in the generally accepted accounting principles applied in the
preparation of such financial statements.
(e) Auditor's Reports. Promptly upon receipt thereof, copies of all
-----------------
"management letters" or other written reports submitted to any of the Borrowers
or any of the Significant Subsidiaries by Arthur Andersen or any other
independent accountants of the Borrowers or any of their respective Subsidiaries
in connection with each annual, interim or special audit of its financial
statements made by such accountants (including, without limitation, any comment
letter submitted by such accountants to management of any such Borrower or any
such Subsidiary in connection with their annual audit and any reports addressing
internal accounting controls of any such Borrower or any such Subsidiary
submitted by such
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<PAGE>
accountants), and all responses of the management of any such Borrower or such
Subsidiary thereto.
(f) SEC and Other Reports. Promptly upon transmission or receipt
---------------------
thereof, (i) copies of any filing and registrations with, and any reports or
notices to or from, the Securities and Exchange Commission or any successor
agency thereto, and copies of all financial statements, proxy statements,
notices and reports that any Borrower or any of their Subsidiaries shall send to
any holder of Indebtedness owed by any Borrower or any Significant Subsidiary
pursuant to the terms of the documentation governing such Indebtedness or to any
trustee, agent or other representative therefor and (ii) copies of all press
releases and other statements made available by any Borrower or any of their
respective Subsidiaries to the public.
(g) Notice of Default, Etc. Promptly, and in any event within three
----------------------
Business Days after any Responsible Officer of either Borrower obtains knowledge
thereof, notice of the occurrence of (i) each Default or Event of Default, or
any event, development or occurrence that, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect,
setting forth in reasonable detail the nature of such Default or Event of
Default or event, development or occurrence and the action that the Borrowers
have taken and propose to take with respect thereto, (ii) any actual or
threatened revocation, termination, cancellation, denial or impairment of, or
refusal to renew or extend, or modification or other change to, any consent or
approval of any Governmental Authority necessary or desirable for any Borrower
or any Significant Subsidiary to own or lease and operate their respective
property and Assets or to conduct their respective businesses as conducted or as
proposed to be conducted, in each case that could reasonably be expected to have
a Material Adverse Effect and (iii) a change of control or any change in the
members of the board of directors of, or any material change in the management
of Thermatrix.
(h) Mandatory Prepayment. Promptly, and in any event three Business
--------------------
after any Responsible Officer of either Borrower obtains knowledge thereof, but
in no event later than three Business Days prior to such event, notice of the
intent of either Borrower or any Subsidiary to engage in any event or
transaction that would require mandatory prepayment of the Obligations in
accordance with Section 2.10 hereof.
(i) Environmental Matters. Promptly and in any event within three
---------------------
Business Days after any Responsible Officer of either Borrower obtains knowledge
thereof, notice of the occurrence of one or more of the following:
(i) any pending or threatened claim that could reasonably be
expected to result in an Environmental Liability against any Borrower
or any of their respective Subsidiaries or any of the property owned
or operated by any such Borrower or any such Subsidiary;
(ii) any condition or occurrence on or arising from any
property owned or operated by any Borrower or any of their respective
Subsidiaries that (A) results or is alleged to have resulted in
noncompliance by such Borrower or any such Subsidiary with any
applicable Environmental Law or (B) could reasonably be
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<PAGE>
expected to form the basis of any Environmental Liability against such
Borrower or any such Subsidiary or any of their respective property;
and
(iii) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
property owned or operated by any Borrower or any of their respective
Subsidiaries as required by any Environmental Law or any Governmental
Authority.
All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence, removal or remedial action and such
Borrower's or such Subsidiary's response thereto. In addition, the Borrowers
will provide the Agent with copies of all reports, notices and written
information to and from the United States Environmental Protection Agency or any
state or local agency responsible for environmental matters, all communications
with any Person (other than its attorneys) relating to any Environmental Action
of which notice is required to be given pursuant to this subsection (i), and
such detailed reports of any such Environmental Action as the Agent may from
time to time reasonably request.
(j) Indebtedness Documents. Promptly after the occurrence thereof or
----------------------
the request therefor, copies of any amendment, waiver or other modification of
the terms of any of the Indebtedness of any Borrower or any of their respective
Subsidiaries outstanding in an aggregate amount of at least $100,000, or any
notice of default delivered thereunder.
(k) Requested Information. With reasonable promptness, such other
---------------------
information and documents relating to the condition (financial or otherwise),
business, operations, results of operations, performance, property, Assets or
liabilities of any Borrower or any Significant Subsidiary as may from time to
time be reasonably requested by the Agent.
6.3. Payment of Obligations and Charges and Filing of Returns and
------------------------------------------------------------
Reports. (a) Each Borrower shall, and shall cause each of their respective
- -------
Subsidiaries to pay and discharge or cause to be paid and discharged promptly
all Charges. In addition, each Borrower shall, and shall cause each of its
Subsidiaries to, properly file all required returns and reports (including,
without limitation, tax returns and reports) that arise out of or are otherwise
related to the imposition and payment of any Charges.
(b) Borrowers and their respective Subsidiaries may in good
faith contest, by proper legal actions or proceedings, the validity or amount of
any Charges, provided that at the time of commencement of any such action or
proceeding, and during the pendency thereof (i) no Default or Event of Default
shall have occurred; (ii) adequate Reserves with respect thereto are maintained
on the books of Borrowers or such Subsidiary, in accordance with GAAP; (iii)
such contest operates to suspend collection of the contested Charges or claims
and is maintained and prosecuted continuously with diligence; (iv) none of the
Collateral would be subject to forfeiture or loss or any Lien by reason of the
institution or prosecution of such contest; (v) no Lien shall exist for such
Charges or claims during such action or proceeding; (vi) such Borrower or such
Subsidiary shall promptly pay or discharge such contested Charges and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Lender evidence acceptable to Lender of such compliance, payment or
discharge, if such contest is
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terminated or discontinued adversely to such Borrower or such Subsidiary; and
(vii) neither the Agent nor any Lender has advised such Borrower in writing that
it reasonably believes that nonpayment or nondischarge thereof would have a
Material Adverse Effect.
6.4. Books and Records. Each Borrower shall, and shall cause each
-----------------
Significant Subsidiary to, keep adequate records and books of account with
respect to its business activities, in which proper entries, reflecting all of
their financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financials referred to in Section 3.6(a) hereof.
6.5. Litigation. Each Borrower shall notify the Agent in writing,
----------
promptly upon a Responsible Officer learning thereof, of any litigation
commenced against either Borrower and/or any of the Subsidiaries, and of the
institution against any of them of any suit or administrative proceeding that
could reasonably be expected to have a Material Adverse Effect.
6.6. Compliance with Law. (a) Each of the Borrowers will and will
-------------------
cause each of their respective Subsidiaries to (i) comply in all material
respects with all requirements of law to which each of them and their respective
property and Assets are subject and all applicable restrictions imposed on each
of them and their property and Assets are subject and all applicable
restrictions imposed on each of them and their property and Assets by any
Governmental Authority (including, without limitation, ERISA and all
Environmental Laws) except to the extent that such non-compliance could
reasonably be expected to have a Material Adverse Effect, and (ii) obtain and
maintain in effect all consents or approvals of any Governmental Authority that
are necessary (A) to own or lease and operate their respective property and
Assets to conduct their respective businesses as presently conducted, except
where and to the extent that the failure to obtain or maintain in effect any
such consents or approvals of any Governmental Authority, either individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect, or (B) for the due execution, delivery, recordation, filing or
performance by any Loan Party or any of the other Loan Documents to which it is
or is to be a party, or for the consummation of the transactions contemplated
hereby.
(b) None of the Borrowers nor any of their respective Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment storage, release or disposal of hazardous materials
on any property now or hereafter owned or operated by such Borrower or any such
Subsidiary, or transport or permit the transportation of Hazardous Materials to
or from any such property, except in compliance with all applicable
Environmental Laws and reasonably required in connection with the operation, use
and maintenance of any such property in the ordinary course of such Borrower's
or any such Subsidiary's business.
6.7. Maintenance of Insurance. (a) Each of the Borrowers will and
------------------------
will cause each of their respective Subsidiaries to maintain property, liability
and other insurance with respect to themselves and their respective Assets with
the insurer, having the deductibles and covering the matters described on
Schedule 6.7 of the Disclosure Letter, or such additional insurance as may
otherwise be required by applicable law, or by the Mortgages, including, without
limitation, workers' compensation insurance, liability insurance, casualty
insurance and
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<PAGE>
business interruption insurance. The Agent shall be named as a loss payee on
each such insurance policy.
(b) At least 30 days prior to the expiration of each existing
insurance policy, the Borrowers shall deliver a certificate of such insurance
(with a true copy of each applicable policy) required to be maintained in
accordance with subsection (a) of this Section 6.7 (or the underlying policies,
in the case of blanket insurance) to the Agent, with premiums paid, evidencing
the effectiveness thereof together with a report summarizing all insurance
coverage maintained by the Borrowers and the Significant Subsidiaries,
specifying therein the type, carrier, amount, deductibles and co-insurance
requirements and expiration date thereof and containing such additional
information as the Agent may from time to time reasonably request. In no event,
and whether or not a default or Event of Default hereunder has occurred, shall
the Agent or any Lender, by the fact of approving, accepting or obtaining such
insurance, incur any liability for the amount of such insurance, the form or
legal sufficiency of insurance contracts, solvency of insurers or payment of
losses by insurers or otherwise, and the Borrowers hereby expressly assume full
responsibility therefor and liability, if any, thereunder.
6.8. Additional Security. If requested by the Agent, each Borrower
-------------------
shall and shall cause any Subsidiary designated by the Agent to enter into a
security agreement and/or one or more mortgages for the benefit of the Agent,
pursuant to which security agreement and mortgages such Subsidiary shall grant
the Agent a security interest subject only to Permitted Encumbrances in
substantially all of such Subsidiary's real and personal property Assets. In
connection therewith, if the Agent shall so request, such Subsidiary shall
execute and deliver security agreements, mortgages and such further documents
and instruments and make such filings as the Agent shall request to enable the
Agent to perfect its security interest and Liens in such Subsidiary's Assets.
6.9. Elimination of Liens. Borrowers covenant and agree to use
--------------------
their best efforts to remove or cause to be removed, as soon as practicable
after the date hereof, each UCC-1 financing statement that exists as of the date
hereof with respect to either Borrower or any Subsidiary that was filed in
connection with Indebtedness of any such Loan Party which is no longer
outstanding as of the date hereof.
Article VII
Negative Covenants
Borrowers covenant and agree that, without the Agent's prior written
consent, from and after the date hereof and until all of the Obligations
hereunder have been satisfied:
7.1. Mergers, Etc. Neither of the Borrowers shall nor shall they
------------
permit any Subsidiary to directly or indirectly, by operation of law or
otherwise, merge with, consolidate with, acquire all or substantially all of the
Assets or Stock of, or otherwise combine with, any Person, or form any
Subsidiary, to wind up, liquidate or dissolve itself (or suffer any liquidation
or dissolution), to enter into any transaction or merger or consolidation, or to
convey, sell, lease or sublease (as lessor or sublessor), transfer or otherwise
dispose of, whether in one transaction
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<PAGE>
or a series of related transactions, all or substantially all of its business,
property or Assets, or the Stock of any Subsidiary, whether now owned or
hereafter acquired (or agree to do any of the foregoing at any future time), or
to purchase or otherwise acquire, whether in one transaction or a series of
related transactions, substantially all of the property, Assets or business of
any other Person (or agree to do any of the foregoing at any future time);
provided, however, that for the purposes of this Section 7.1, the Subsidiaries
of Borrowers shall not be included in the definition of Person; and provided,
further, that Thermatrix may engage in the transaction with Ferguson
International, Inc. described in the memorandum, dated February 23, 1999,
attached hereto as Exhibit P.
7.2. Investments: Loans and Advances. Except as otherwise permitted
-------------------------------
by Section 7.3 or 7.4 hereof, neither Borrower shall and shall not permit any
Subsidiary to make any investment in, or make or accrue loans or advances of
money to any Person, through the direct or indirect holding of securities or
otherwise other than advances to employees and vendors in the ordinary course of
business consistent with past practice and not in excess of $10,000 with respect
to employees, and $100,000 with respect to vendors; provided, however, that
Borrowers and their respective Subsidiaries may make and own investments in (i)
direct obligation of the United States of America (including obligations issued
or held in book-entry form on the books of the Department of the Treasury of the
United States of America) or obligations the timely payment of the principal of,
or interest on, which are fully guaranteed by the United States of America; (ii)
obligations, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following: Export-Import Bank of the United States,
Federal Housing Administration or other agency or instrumentality of the United
States; (iii) repurchase agreements with financial institutions or savings and
loan associations having a combined capital surplus of at least $500,000,000
fully secured by collateral security described in clauses (i) or (ii) of this
definition and continuously having a market value of at least equal to the
amount so invested; (iv) interest-bearing demand or time deposits (including
certificates of deposit) which are either (i) insured by the Federal Deposit
Insurance Corporation, or (ii) held in banks and savings and loan associations,
having general obligations rated at least "AA" or equivalent by S&P or Moody's,
or if not so rated, secured at all times, in the manner and to the extent
provided by law, by collateral security described in clauses (i) or (ii) of this
definition, of a market value of no less than the amount of moneys so invested;
(v) commercial paper rated (on the date of acquisition thereof at least A-l or
P-l or equivalent by S&P or Moody's, respectively (or an equivalent rating by
another nationally recognized credit rating agency of similar standing if
neither of such corporations is then in the business of rating commercial
paper), maturing not more than 90 days from the date of creation thereof; and
(f) any corporate evidence of indebtedness rated at least "A-" or equivalent by
S&P or Moody's, maturing not more than 90 days from the date of creation thereof
(the investments described in the preceding clauses (i)-(v) being hereinafter
referred to as "Cash Equivalents") (vii) any investments, loans, or advances of
money ("Investments") permitted by Thermatrix's investment policy, as amended
from time to time, provided that such investment policy (and any such amendment
thereto) has been approved by the Agent; (viii) Investments consisting of the
endorsement of negotiable instrument for deposit or collection or similar
transaction in the ordinary course of business; (ix) Investments (whether
consisting of the purchase or securities, loans, capital contribution, or
otherwise) of Thermatrix in or to Subsidiaries and of Subsidiaries in or to
other Subsidiaries or in or to
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<PAGE>
Thermatrix; (x) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business; (xi) Investments pursuant
to or arising under currency agreements or interest rate agreements entered into
in the ordinary course of business; (xii) Investments consisting of notes
receivable of, or prepaid royalties and other credit extensions, to customers
and suppliers who are not Affiliates, in the ordinary course of business; (xiii)
deposit accounts of Thermatrix; and (xiv) Investments existing on the Closing
Date set forth on Schedule 7.2 of the Disclosure Letter. Notwithstanding the
foregoing, Wahlco Engineered Products Ltd. has pledged certain cash described in
Schedule 1.68 of the Disclosure Letter to London International and Mercantile,
Ltd., which pledge shall not be deemed a breach of this Section 7.2; provided,
however, that no further pledges may be made to London International and
Mercantile, Ltd. without the consent of the Agent.
7.3. Indebtedness. (a) Except as otherwise expressly permitted by
------------
this Section 7.3 or by any other section of this Credit Agreement, neither
Borrower shall, nor shall it permit any of their respective Subsidiaries to,
create, incur, assume or permit to exist any Indebtedness, except (i)
Indebtedness secured by Liens permitted under Section 7.3(b) hereof, (ii) the
Obligations, (iii) all deferred taxes, (iv) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to the extent they
are permitted to remain unfunded under applicable law, (v) Indebtedness of
Subsidiaries created under the Guaranty; (vi) Indebtedness existing on the
Closing Date set forth on Schedule 7.3 of the Disclosure Letter; (vii)
Indebtedness to with respect to surety bonds and similar obligations incurred in
the ordinary cause of business; (viii) Indebtedness of Thermatrix to any
Subsidiary, and Indebtedness of any Subsidiary to Thermatrix or any other
Subsidiary; (ix) Indebtedness secured by Permitted Encumbrances; (x) Capital
leases or indebtedness incurred solely to purchase equipment which is not in
excess of the lesser of the purchase price of such equipment or the fair market
value of such equipment on the date of acquisition; and (xi) extensions,
refinancings, modifications, amendments and restatements of any of items of
Permitted Indebtedness above, provided that the principal amount thereof is not
increased.
(b) Borrowers shall not and shall not permit any Subsidiary to
create or permit any Lien on any of its properties or Assets or suffer to exist
under the Uniform Commercial Code or any similar law or statute of any
jurisdiction, a financing statement (or the equivalent thereof) that names such
Borrower or any of its Subsidiaries as debtor, to sign or suffer to exist any
security agreement authorizing any secured party thereunder to file such
financing statement (or the equivalent thereof), to sell any of its property or
assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable with
recourse to income, except: (a) presently existing or hereafter created Liens in
favor of the Agent or any Lender, and (b) Permitted Encumbrances.
(c) Except as otherwise expressly permitted by Section 7.3(b)
hereof or in conformity with the provisions of Section 2.10(c) hereof, neither
Borrower shall nor shall it permit any Subsidiary to sell or transfer, either
with or without recourse, any Assets, of any nature whatsoever, in respect of
which a Lien is granted or to be granted pursuant to any Loan
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Document, except sales or transfers (i) of inventory in the ordinary course of
business, (ii) of licenses and similar arrangements for the use of Assets in the
ordinary course of business, (iii) of worn-out or obsolete equipment or (iv)
sales or transfers otherwise permitted under this Section 7, or engage in any
sale-leaseback or similar transaction involving any of such Assets (other than
sale-leaseback of equipment owned by Borrower or any of its Subsidiaries for
less than 90 days, provided that such sale-leaseback transaction was entered
into with the intent of financing such equipment with a third party lessor).
7.4. Limitation on Modifications of Indebtedness; Cancellation of
------------------------------------------------------------
Indebtedness. Neither Borrower shall nor shall it permit any of its
- ------------
Subsidiaries (a) to amend, modify or otherwise change (or permit the amendment,
modification or other change in any manner of) any of the provisions of any
Indebtedness of such Borrower or any of its Subsidiaries or of any instrument or
agreement (including, without limitation, any purchase agreement, indenture,
loan agreement or security agreement) relating to any such Indebtedness if such
amendment, modification or change would shorten the final maturity or average
life to maturity of, or require any payment to be made earlier than the date
originally scheduled on, such Indebtedness, would increase the interest rate
applicable to such Indebtedness, or would change the subordination provision, if
any, of such Indebtedness, or would otherwise be adverse to the issuer of such
Indebtedness in any respect, (b) except for the Loans and the other Obligations
of the Borrowers and their respective Subsidiaries under or in respect of the
Loan Documents, to make any voluntary or optional payment, prepayment,
redemption or other acquisition for value of any Indebtedness of any Borrower or
any of its Subsidiaries (including, without limitation, by way of depositing
money or securities with the trustee therefore before the date required for the
purpose of paying any portion of such Indebtedness when due), or to refund,
refinance, replace or exchange any other Indebtedness for any such Indebtedness,
or to make any prepayment, redemption or repurchase of any outstanding
Indebtedness a result of any Asset Sale, change of control, issuance and sale of
debt or equity securities or similar event, or give any notice with respect to
any of the foregoing. Neither Borrower shall nor shall it permit any Subsidiary
to cancel any claim or debt owing to it, except for reasonable consideration and
in the ordinary course of business.
7.5. Maintenance of Business. Neither Borrower shall nor shall it
-----------------------
permit any Subsidiary to engage in any business other than the business
currently engaged in by such Borrower or such Subsidiary on the Closing Date or
any businesses incidental or reasonably related thereto.
7.6. Guaranteed Indebtedness. Neither Borrower shall nor shall it
-----------------------
permit any Subsidiary to incur any Guaranteed Indebtedness (excluding the
Guaranteed Indebtedness pursuant to the Guaranty) except (i) by endorsement of
instruments or items of payment for deposit to the general account of such
Borrower or such Subsidiary, and (ii) for Guaranteed Indebtedness incurred for
the benefit of such Borrower or any Subsidiary if the primary obligation is
permitted by this Credit Agreement.
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<PAGE>
7.7. Hedging Transactions. Neither Borrower shall nor shall it
--------------------
permit any of their respective Subsidiaries to engage in any speculative
interest rate hedging swaps, caps or similar derivatives transaction other than
currency hedging in the ordinary course of business.
7.8. Restricted Payments. Neither Borrower shall nor shall it
-------------------
permit any Subsidiary to make any Restricted Payments nor shall Borrowers permit
any Subsidiary to make such payments with respect to Borrowers' Stock; provided,
that (i) Thermatrix may declare and make any dividend payment or other
distribution payable in its equity securities and any Subsidiary may make
distributions to Thermatrix or other Subsidiaries, (ii) Thermatrix or its
Subsidiaries may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
therefor.
7.9. ERISA. Neither Borrower nor any of their respective
-----
Subsidiaries shall establish or become obligated to any new Plan; provided,
however, that any of the Subsidiaries may become obligated under the existing
Plan.
7.10. Limitations on Transactions with Affiliates. Neither Borrower
-------------------------------------------
will nor will it permit any of its Subsidiaries to directly or indirectly enter
into, renew, extend or engage in any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease, transfer
or exchange of property or assets of any kind or the rendering of services of
any kind) with any of its Affiliates, except upon fair and reasonable terms no
less favorable to such or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate thereof
except that for the purposes of this Section 7.10, "Affiliate" shall not include
Subsidiaries of Borrowers.
Article VIII
Term
8.1. Survival of Obligations Upon Termination of Financing
-----------------------------------------------------
Arrangement. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Credit Agreement shall in any way affect or
impair the powers, obligations, duties, rights and liabilities of Borrowers or
the rights of the Agent or any Lender relating to any transaction or event
occurring prior to such termination. Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations contained in the Loan Documents shall survive
such termination or cancellation and shall continue in full force and effect
until such time as all of the Obligations have become paid in full in accordance
with the terms of the agreements creating such Obligations, at which time the
same shall terminate.
Article IX
Events of Default: Rights and Remedies
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<PAGE>
9.1. Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) (i) Borrowers shall fail to make any payment of principal
of or interest on the Loans or any of the other Obligations when due and payable
or declared due and payable, or (ii) any other Loan Party shall fail to make any
payment (other than principal or interest) owing under any other Loan Document
within 10 days of the date such other payment is due and payable.
(b) Borrowers shall fail or neglect to perform, keep or
observe any of the provisions of Section 6 or 7 of this Credit Agreement and in
the case of a failure to perform, keep or observe any provision of Sections 6.1,
6.2(b),(c),(d),(e),(k), 6.3, 6.4, 6.5, and 6.7, such failure shall continue
unremedied for 30 days, and in the case of sections 6.2(a),(f),(g) and 6.8, such
failure shall continue unremedied for 10 days, in each case following such
failure.
(c) Borrowers shall fail or neglect to perform, keep or
observe any other provision of this Credit Agreement or of any of the other Loan
Documents, or any other Loan Party shall fail or neglect to perform, keep or
observe any of the provisions of any other Loan Document and, unless some other
cure period is specified, in which case such other cure period shall apply, such
failure shall continue unremedied for 30 days, in each case following such
failure.
(d) A default shall occur under any other agreement, document
or instrument to which any Loan Party is a party or by which any Loan Party or
any Loan Party's property is bound, and such default (i) involves the failure to
make any payment (whether of principal, interest or otherwise) due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) in
respect of any Indebtedness of any Loan Party in excess of $100,000, or (ii)
causes (or permits (with or without notice, lapse or time or both) any holder of
such Indebtedness or a trustee to cause) such Indebtedness or a portion thereof,
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment.
(e) Any representation or warranty herein or in any Loan
Document or in any written statement pursuant thereto or hereto, report,
financial statement or certificate made or delivered to the Agent or any Lender
by any Loan Party shall be untrue or incorrect in any material respect, as of
the date when made or deemed made (including those made or deemed made.
(f) Assets of the Loan Parties having an aggregate value in
excess of $10,000 shall be attached, seized, levied upon or subjected to a writ
or distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Loan Party; provided,
however, if such seizure, levy or other similar process results from a fact,
circumstance or occurrence that (x) existed with respect to Wahlco or any of its
Subsidiaries before the Effective Time, (y) of which Thermatrix became aware
since the Effective Time and (z) the Borrowers have used their best efforts,
since the Effective Time, to prevent, then so long as (1) the Borrowers continue
to use their best efforts to halt or reverse such attachment, seizure, levy or
other similar process, and (2) such seizure, levy or other similar process could
not
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<PAGE>
reasonably be expected to cause or result in a Material Adverse Effect, such
attachment, seizure, levy or other similar process shall not constitute an Event
of Default hereunder; or any Person other than any Loan Party shall apply for
the appointment of a receiver, trustee or custodian for any of the Assets of any
Loan Party; or Thermatrix shall at any time, or any other Loan Party shall after
the Effective Time, have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced (and not
dismissed within 60 days) against any Loan Party in a court having competent
jurisdiction seeking a decree or order in respect of such Loan Party (i) under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of such Loan Party or of my substantial part
of its or their properties, or (iii) ordering the winding-up or liquidation of
the affairs of such Loan Party.
(h) Any Loan Party shall (i) file a petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of either Borrower or such Loan Party or of any substantial part of
its properties, (iii) fail generality to pay its debts as such debts become due,
or (iv) take any corporate action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $50,000 in the
aggregate shall be rendered against either Borrower or any of their respective
Subsidiaries and the same shall not be (i) fully covered by insurance in
accordance with Section 6.7 hereof, or (ii) vacated, stayed, bonded, paid or
discharged for a period of fifteen days.
(j) Any Collateral Document or any material provision thereof
shall for any reason cease to be valid or enforceable in accordance with its
terms, or any security interest created under any Collateral Document shall
cease to be a valid and perfected security interest or Lien subject only to
Permitted Encumbrances (except as otherwise stated therein) in any of the
Collateral purported to be covered thereby; provided, however that the
Collateral affected by such defect or lapse of such security interest shall have
an aggregate value of at least $250,000.
(k) any consent or approval of any Governmental Authority
necessary in order to permit any Borrower or any of its Subsidiaries to fully
own or lease and operate their respective property and assets or to properly
conduct their respective businesses shall cease to be in effect or such Borrower
or such Subsidiary shall cease to have the full intended benefit thereof or
rights thereunder, unless the revocation, termination, cancellation, denial,
impairment or
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<PAGE>
modification of such consent or approval, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
provided, however, that if the loss of such consent or approval results from a
fact, circumstance or occurrence that (x) existed with respect to Wahlco or any
of its Subsidiaries before the Effective Time, (y) of which Thermatrix became
aware since the Effective Time and (z) the Borrowers have used their best
efforts, since the Effective Time, to prevent, then so long as (1) the Borrowers
continue to use their best efforts to remedy such occurrence or circumstance and
(2) such occurrence or circumstance could not reasonably be expected to cause or
result in a Material Adverse Effect, then no such fact, circumstance or
occurrence, or combination or further development thereof, shall constitute an
Event of Default hereunder.
9.2. Remedies. If any Event of Default shall have occurred, the
--------
Agent may declare all Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower; provided, however, that upon the occurrence of an Event of Default
specified in Section 9.1(f), (g) or (h) hereof, the Obligations shall become due
and payable without declaration, notice or demand by the Agent.
9.3. Waivers by Borrowers. Except as otherwise provided for in this
--------------------
Credit Agreement and applicable law, upon the occurrence of an Event of Default,
Borrowers waive (i) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by the Agent or any
Lender on which either Borrower may in any way be liable and hereby ratifies and
confirms whatever the Agent or such Lender may do in this regard, (ii) all
rights to notice and a hearing prior to the Agent or such Lender's taking
possession or control of, or to the Agent or such Lender's replevy, attachment
or levy upon, the Collateral or any bond or security which might be required by
any court prior to allowing Lender to exercise any of its remedies, and (iii)
the benefit of all valuation, appraisal and exemption laws. Borrowers
acknowledge that it has been advised by counsel of its choice with respect to
this Credit Agreement, the other Loan Documents and the transactions evidenced
by this Credit Agreement and the other Loan Documents.
9.4. Other Remedies. If one or more Defaults or Events of Default
--------------
shall occur and be continuing, and irrespective of whether the Loans have become
or have been declared immediately due and payable under Section 9.2, the Agent
may proceed to protect and enforce the rights of the Lenders by an action at
law, suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained wherein or in any of the other Loan
Documents, or for an injunction against a violation of any of the terms hereof
or thereof or in aid of the exercise of any power granted hereby or thereby or
by applicable law or otherwise.
Article X
Miscellaneous
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10.1. Complete Agreement: Modification of Agreement; Assignment by
------------------------------------------------------------
Lenders. (a) The Loan Documents constitute the complete agreement between the
- -------
parties with respect to the subject matter hereof and may not be modified,
altered or amended except by an agreement in writing signed by both Borrowers,
the Agent and each Lender in accordance with Section 10.1(d) hereof. Borrowers
may not sell, assign or transfer any of the Loan Documents or any portion
thereof, including, without limitation, Borrowers' rights, title, interests,
remedies, powers and duties hereunder or thereunder.
(b) No Lender shall assign or otherwise transfer all or any
portion of the Note to any Person, other than any Affiliate of the Lenders or
the Agent, without the advance written consent of Borrowers. In the event any
Lender assigns or otherwise transfers all or any part of any Note (including an
assignment or transfer to an Affiliate of the Lenders or the Agent), such Lender
shall provide written notice of such assignment or transfer to the Borrowers and
the Borrowers shall register such transfer or assignment in accordance with
Section 2.16(c) and, upon the request of such Lender, issue new notes to
effectuate such assignment or transfer.
(c) No amendment or waiver of any provision of this Credit
Agreement or the Note or any other Loan Document, nor consent to any departure
by Borrowers therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
10.2. Fees and Expenses. (a) Thermatrix shall pay all reasonable
-----------------
out-of-pocket expenses of the Agent and the Lenders in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its counsel and advisors retained in connection with the Loan Documents
and the transactions contemplated thereby and advice in connection therewith)
provided, however that such expenses and fees shall not exceed $325,000.
Thermatrix shall separately pay, in accordance with any provision in any of the
other the Loan Documents, the costs and expenses associated with the of taking
and perfecting the security interests being granted thereby, and such expenses
shall not be included in the up to $325,000 expense cap provided that such
expenses were incurred on or before March 19, 1999. If, at any time or times,
regardless of the existence of an Event of Default (except with respect to
paragraphs (iii) and (iv), which shall be subject to an Event of Default having
occurred and be continuing), the Agent or any Lender shall employ in-house and
outside counsel or other advisors for advice or other representation or shall
incur reasonable legal or other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with respect
to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights hereunder or
thereunder initiated at the request of either Borrower;
(ii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by the Agent, a Lender, either Borrower, any Subsidiary
or any other Person) in any way
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<PAGE>
relating to the Collateral, any of the Loan Documents or any other
agreements to be executed or delivered in connection herewith;
(iii) any attempt to enforce any rights of any Lender against either
Borrower, any Subsidiary or any other Person, that may be obligated to any
Lender by virtue of any of the Loan Documents; or
(iv) any attempt to verify, protect, collect, sell, liquidate or
otherwise dispose of the collateral;
then, and in any such event, the attorneys' and other parties' fees arising from
such services, including those of any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section 10.2 shall be payable, on demand, by Borrowers to the
Agent and shall be additional Obligations secured under this Credit Agreement
and the other Loan Documents and the up to $325,000 expense limitation set forth
above shall not apply to any such fees and expenses. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees of in-house counsel, paralegal fees, costs and expenses; accountants' and
investment bankers' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses, court reporter fees, costs and expenses;
long distance telephone charges; air express charges, telegram charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal services.
(b) The Agent and the Lenders hereby acknowledge that,
notwithstanding anything to the contrary in Section 6.16 and 8.3(b) of the
Merger Agreement, and in consideration of the Lenders' and Agent's agreement to
enter into this Credit Agreement, at the Effective Time, Thermatrix paid, or
caused Wahlco to be reimbursed for, expenses incurred by Wahlco in connection
with the Merger in the amount of $300,000, exclusive of the $50,000 fee paid to
Hera, LLC, and the Agent and the Lenders further acknowledge that such
reimbursement did not reduce the Initial Payment (as defined in the Merger
Agreement). Borrowers acknowledge and agree that nothing in this Section 10.2(b)
shall be construed to reduce or mitigate the Borrower's Obligations hereunder,
including, without limitation, the Obligation for the expense reimbursement set
forth in Section 10.2(a) hereof.
10.3. No Waiver by Lender. The failure of the Agent or any Lender,
-------------------
at any time or times, to require strict performance by any Loan Party of any
provision of this Credit Agreement and any of the other Loan Documents shall not
waive, affect or diminish any right of the Agent or any Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
the Agent or any Lender of an Event of Default by any Loan Party under the Loan
Documents shall not suspend, waive or affect any other Event of Default by any
Loan Party under this Credit Agreement and any of the other Loan Documents
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of any Loan Party contained in this Credit Agreement or any of
the other Loan Documents and no Event of Default by either
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<PAGE>
Borrower under this Credit Agreement and no defaults by any Loan Party under any
of the other Loan Documents shall be deemed to have been suspended or waived by
the Agent or any Lender, unless such suspension or waiver is by an instrument in
writing signed by an officer of the Agent and directed to such Loan Party
specifying such suspension or waiver.
10.4. Agency Provisions. (a) Appointment. Each of the Lenders
----------------- -----------
hereby appoints Wexford Management LLC as its lawful agent and attorney-in-fact,
with full power of substitution, for all purposes under this Credit Agreement,
the Note and each of the other Loan Document. This appointment is coupled with
an interest, and the Borrowers as well as the Lenders will rely upon the
irrevocable nature of such appointment. Each of the Lenders also agrees to each
of the provisions of each of the other Loan Documents applicable to the Lenders
and governing the relative rights and obligations among the Lenders or between
the Lenders and the Agent, as if each Lender was a signatory to such Loan
Document.
(b) Acceptance of Appointment. The Agent hereby accepts such
-------------------------
appointment, and agrees to exercise the powers granted hereunder and pursuant to
the Loan Documents with the same degree of care it would use if the entire risks
and rewards were for its own account.
(c) Application of Funds. In the event any monies received
--------------------
from the Borrowers directly or pursuant to any Loan Document is in an amount
insufficient to pay all sums due to every Lender, the Agent shall first apply
the sum received to its own out-of-pocket costs reasonably reimbursable under
the terms of the Loan Documents, and shall pay the balance to the Lenders pro
rata in accordance with the amounts then due and owing to each of them.
(d) Agent's Liability. The Agent shall not be liable, except
-----------------
for its own gross negligence or willful misconduct, and except with respect to
claims based upon such negligence or misconduct, that are successfully asserted
against the Agent, the Borrowers and the Lenders shall severally indemnify and
hold harmless the Agent, and any Person acting as the successor to the Agent,
from and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
or in connection with the Agent's good faith acceptance of or performance of its
duties and obligations under this Credit Agreement and/or the Loan Documents.
The Agent shall be under no duty to institute any suit, or to take any remedial
procedures or to enter any appearance or in any way defend any suit in which it
may be made a defendant hereunder until it shall be indemnified as provided
herein. The Agent may act pursuant to the advice of counsel with respect to any
matter relating to this Credit Agreement and/or the Loan Documents, and shall
not be liable for any action taken or omitted in accordance with such advice.
(e) Resignation of Agent. The Agent (or any successor Agent)
--------------------
may at any time resign as such by delivering to the Lenders at least fifteen
days' written notice of such resignation. Within fifteen days after the giving
of such notice, the Agent shall effect a transfer of all funds still held in
such Agent's possession to any successor Agent jointly designated by the Lenders
in writing, or in the event no such successor has been designated within such
fifteen day period, to any court of competent jurisdiction, whereupon the Agent
shall be discharged of and from any and all further obligations arising in
connection with this Credit Agreement and/or the
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<PAGE>
Loan Documents. The Agent's sole responsibility following the delivery of a
notice of resignation and prior to the delivery of the funds still under the
Agent's control to a successor Agent or to a court of competent jurisdiction
shall be to safeguard such funds until delivery thereof as aforesaid or pursuant
to a joint written disposition instruction by all other parties hereto or a
final order of a court of competent jurisdiction.
10.5. Remedies. The rights and remedies of the Agent and each
--------
Lender under this Credit Agreement shall be cumulative and nonexclusive of any
other rights and remedies which the Agent or any Lender may have under any other
agreement, including without limitation, the Loan Documents, by operation of law
or otherwise. Recourse to the Collateral shall not be required.
10.6. WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO
--------------------
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THE LOAN DOCUMENTS.
10.7. Severability. Wherever possible, each provision of this Credit
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Credit Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Credit Agreement.
10.8. Parties. This Credit Agreement and the other Loan Documents
-------
shall be binding upon, and inure to the benefit of the successor of Borrowers,
the Agent and the Lender and the assigns, transferees and endorsees of each
Lender.
10.9. Conflict of Terms. Except as otherwise provided in this
-----------------
Credit Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Credit Agreement, if any provision contained in
this Credit Agreement is in conflict with, or inconsistent with, any provision
in any of the other Loan Documents, the provision contained in this Credit
Agreement shall govern and control.
10.10. Authorized Signature. Until Lender shall be notified by
--------------------
Borrowers to the contrary, the signature upon any document or instrument
delivered pursuant hereto of an officer of either Borrower listed in Section
10.10 of the Disclosure Letter shall bind Borrowers and be deemed to be the act
of such Borrower affixed pursuant to and in accordance with resolutions duly
adopted by such Borrower's Board of Directors.
10.11. 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)
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<PAGE>
THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
10.12. CONSENT TO JURISDICTION. EACH BORROWER, EACH OF THEIR
-----------------------
SUBSIDIARIES, 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. EACH BORROWER,
EACH OF THEIR SUBSIDIARIES, 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
SECTION 10.13 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 10.12. EACH BORROWER, EACH OF THEIR SUBSIDIARIES,
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. BORROWERS ACKNOWLEDGE ON THEIR OWN
BEHALF AND ON BEHALF OF EACH OF THE SUBSIDIARIES, THAT IN ANY ACTION OR
PROCEEDING TO ENFORCE PAYMENT OF THE OBLIGATIONS OR ANY OTHER RIGHT OF THE AGENT
OR THE LENDERS UNDER THIS CREDIT AGREEMENT, THEY WAIVE THE RIGHT TO ASSERT ANY
COUNTERCLAIM OF ANY KIND OTHER THAN A COMPULSORY COUNTERCLAIM.
10.13. Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Credit Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return receipt requested,
postage prepaid, or telecopied and confirmed by telecopy answerback addressed as
follows:
(a) If to the Lenders or to the Agent, at:
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Wexford Management
LLC 411 West Putnam Avenue
Greenwich, Connecticut 06830
Telephone: (203) 862-7000
Attention: Arthur H. Amron
Facsimile: (203) 862-7312
and
Attention: Jay L. Maymudes
Facsimile: (203) 862-7350
With a copy to:
Howard, Smith & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telephone: (212) 841-1000
Facsimile: (212) 841-1010
(b) If to Borrowers, at:
Thermatrix Inc.
308 N. Peters Road, Suite 100
Knoxville, Tennessee 37922
Attention: Edward E. Greene
Telephone: (423) 539-9603
Facsimile: (423) 670-4091
With a copy to
Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road
Palo Alto, CA 94304
Michael J. Danaher, Esq.
Attention: Andrew Hirsch, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely
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<PAGE>
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
10.14. Consent of Agent. Whenever the consent of the Agent is
----------------
required for the taking of any action by any party under this Credit Agreement
or any other Loan Document, the Agent may give or withhold such consent as the
Agent determine in its sole and absolution discretion.
10.15. Sophisticated Borrowers. The parties acknowledge that this
-----------------------
Agreement was initially prepared by the Agent and the Lenders and that all
parties have read and negotiated the language used in this Agreement. The
parties agree that, because all of them participated in the negotiating and
drafting of this Agreement, no rule of construction shall apply to this
Agreement which construes ambiguous language in favor of or against any party by
reason of that party's role in drafting this Agreement. The parties acknowledge
and agree that both parties were represented and had the advice of independent
counsel prior to reaching agreement on any of the terms of this Agreement.
10.16. WAIVERS BY BORROWERS. EACH BORROWER WAIVES (i) TO THE
--------------------
FULLEST EXTENT PROVIDED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY (WHICH
LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS
OR THE COLLATERAL; (ii) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN,
PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON
PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY
OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,
CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY THE AGENT OR ANY LENDER ON
WHICH ANY BORROWER OR ANY SUBSIDIARY MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER THE AGENT OR ANY LENDER MAY DO IN THIS REGARD;
(iii) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, NOTICE PRIOR TO TAKING
POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING THE AGENT TO EXERCISE ANY OF LENDERS'
REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
AND (v) NOTICE OF ACCEPTANCE HEREOF, EACH BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDERS' ENTERING INTO THIS
AGREEMENT AND THAT LENDERS ARE RELYING UPON THE FOREGOING WAIVERS IN THEIR
FUTURE DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND REPRESENTS THAT IT
HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS
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<PAGE>
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.17. Survival. The representations and warranties of Borrowers in
--------
this Credit Agreement shall survive the execution, delivery and acceptance
hereof by the parties hereto and the closing of the transactions described
herein or related hereto.
10.18. Section Titles. The Section titles and Table of Contents
--------------
contained in this Credit Agreement are and shall be without substantive meaning
or content of any kind whatsoever and are not a part of the agreement between
the parties hereto.
10.19. Counterparts. This Credit Agreement may be executed in any
------------
number of separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
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<PAGE>
In Witness Whereof, this Credit Agreement has been duly executed as of
the date first written above.
Wahlco Environmental Systems, Inc.
By: /s/ Daniel S. Tedone
--------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and Chief
Financial Officer
Thermatrix Inc.
By: /s/ Daniel S. Tedone
--------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and 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
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<PAGE>
Wexford Special Situations 1996, L.P.
By: Wexford Advisors LLC, As General Partner
By: /s/ Arthur Amron
--------------------------------
Name: Arthur Amron
Title: Vice President
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
-47-
<PAGE>
Wexford Management LLC, As Agent
By: /s/ Arthur Amron
--------------------------------
Name: Arthur Amron
Title: Senior Vice President and General
Counsel
-48-
<PAGE>
EXHIBIT 10.2
Execution Copy
General Release
This Release is being executed by each of the undersigned in
connection with the Second Amended and Restated Credit Agreement, dated February
25, 1999, among the undersigned, Wexford Management LLC, as Agent ("Wexford"),
and the lenders (the "Lenders") named therein (the "Credit Agreement"). The
execution and delivery of this Release is a material condition to the execution
and delivery of the Credit Agreement by Wexford and the Lenders.
(1) The undersigned hereby:
(a) irrevocably and unconditionally release Wexford, each of the
Lenders, Greyhawke Capital Advisors, LCC ("Greyhawke"), and each of their
respective Affiliates, and each of their present and former officers, members,
directors, employees and agents, including without limitation, Mark L. Plaumann,
in his capacity as a member of Greyhawke, his individual capacity and his
capacity as a director of Wahlco Environmental Systems, Inc. ("Wahlco"), and
each of their predecessors in interest, successors, heirs and assigns
(collectively, the "Releasees"), from any and all claims, rights, damages,
demands, causes of action or liabilities of any nature whatsoever, known or
unknown, contingent or fixed, whether due or to become due, that the undersigned
have had, now have or may have at any future time by reason of any cause, matter
or thing whatsoever, directly or indirectly, related to any action taken or
omitted to be taken by such Persons through the date of this Release, in each
case, relating to Wahlco or the Agreement and Plan of Merger, dated November 9,
1998, among the undersigned and TMX Acquisition Sub I, Inc., a wholly-owned
subsidiary of Thermatrix Inc. (the "Merger Agreement"), the transactions
contemplated thereby or related thereto or any duties or obligations related
thereto or owed thereunder (collectively, the "Claims"); and
(b) covenant not to sue Releasees with respect to any and all Claims.
(2) The following terms have the meanings set forth in this Section 2:
(a) "Affiliate" means any person that directly, or indirectly through
one or more intermediaries controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of
a Person means the power, direct or indirect, to direct or cause the direction
of management and policies of such Person whether by contract or otherwise and,
in any event and without limitation of the previous sentence, any Person owning
ten percent or more of the voting securities of another Person shall be deemed
to control that Person.
(b) "Person" means any person, corporation, limited liability
company, limited liability partnership, partnership, joint venture, or other
entity.
<PAGE>
3. Nothing in this Release shall be construed as a waiver of the
undersigneds' right to raise any claims and seek any damages permitted pursuant
to the terms of the Credit Agreement against the Agent and the Lenders related
to any action taken or omitted to be taken by the Lenders or the Agents after
the date of this Release.
4. The undersigned hereby expressly waive all the benefits under
Section 1542 of the Civil Code of California, as well as under any other
statutes, legal decisions, or common law principals of similar effect. The
undersigned, and each of them, acknowledge that they understand Section 1542,
which has been explained to them by their counsel. Section 1542 reads as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS AGREEMENT WITH THE DEBTOR.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Release as of
this 25th day of February, 1999.
Wahlco Environmental Systems, Inc.
By: /s/ Daniel S. Tedone
---------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and Chief
Financial Officer
Thermatrix Inc.
By: /s/ Daniel S. Tedone
---------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and Chief
Financial Officer
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On February 25, 1999, before me personally came ____________________,
to me known, who, being by me duly sworn, did depose and say that he resides at
________________________________; that he is the ______________ of Wahlco
Environmental Systems, Inc., the company described in and which executed the
foregoing instrument; and that he signed his name thereto under authority
granted by the operating agreement of said company.
_________________________________
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On February 25, 1999, before me personally came ____________________,
to me known, who, being by me duly sworn, did depose and say that he resides at
________________________________; that he is the _________ of Thermatrix Inc.
the company described in and which executed the foregoing instrument; and that
he signed his name thereto under authority granted by the operating agreement of
said company.
_________________________________
Notary Public
<PAGE>
EXHIBIT 10.3
Execution Copy
Amended and Restated Guaranty, dated as of February 25, 1999
(the "Guaranty"), by each of the Guarantors identified as
such on the signature pages hereof (individually a
"Guarantor" and collectively the "Guarantors"), for and in
favor of 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").
------------------------------------------------------------
Whereas, on January 13, 1999, pursuant to an Agreement and Plan of
Merger, dated November 9, 1998 (the "Merger Agreement"), among Wahlco
Environmental Systems, Inc. ("Wahlco"), Thermatrix Inc. ("Thermatrix") and TMX
Acquisition Sub I, Inc., a wholly owned subsidiary of Thermatrix ("Merger Sub"),
Merger Sub merged with and into Wahlco (the "Merger") and Wahlco became a wholly
owned subsidiary of Thermatrix at the effective time of the Merger;
Whereas, concurrently with the execution and delivery hereof,
Thermatrix and Wahlco (the "Borrowers") are entering into a Second Amended and
Restated Credit Agreement, dated as of the date hereof, with the Lenders and the
Agent (as the same may hereafter be modified, extended, replaced or otherwise
amended, the "Credit Agreement"), pursuant to which the Borrowers shall be
jointly and severally liable for the payment and performance of all of the
Obligations to the Lenders and the Agent set forth therein and in the other Loan
Documents (as such terms are defined in the Credit Agreement) (all of such
Obligations, the "Liabilities");
Whereas, each Guarantor is a direct and/or indirect subsidiary of the
Borrowers;
Whereas, it is a condition to the effectiveness of the Credit
Agreement that the Guarantors guaranty the payment and performance of the
Liabilities to the Lenders and the Agent; and
Whereas, each of the Guarantors will receive substantial direct and
indirect benefits from the Lenders and the Agent entering into the Credit
Agreement;
Now Therefore, the parties agree as follows:
Each Guarantor hereby unconditionally guarantees, jointly and
severally, to the Lenders and the Agent the full and punctual payment and
performance (whether at stated maturity, by acceleration or otherwise) of the
Liabilities. Upon failure by the Borrowers to pay any such amount when due, the
Guarantors shall pay the amount not paid on demand.
<PAGE>
Each Guarantor agrees that this Guaranty is a guaranty of payment and
performance, and not of collection, and that this Guaranty shall in all respects
be a continuing, absolute and unconditional guaranty, and shall remain in full
force and effect, notwithstanding, without limitation, the dissolution or
insolvency of either Borrower or any Guarantor or that at any time or from time
to time all of the Liabilities may have been paid in full, or any and all
modifications, extensions or renewals of any of the Liabilities, any and all
interest on any of the foregoing, and any and all expenses paid or incurred by
the Agent in endeavoring to collect any of the foregoing and in enforcing this
Guaranty (including attorneys' and paralegals' fees and expenses); and all of
the agreements and obligations of the Guarantors under this Guaranty shall
remain fully in effect until all of the Liabilities (including any
modifications, extensions or renewals of any thereof) and all such interest and
expenses shall have been paid in full.
The Guarantors further agree that if at any time all or any part of
any payment theretofore applied by the Agent to any of the Liabilities is or
must be rescinded or returned by the Agent for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of either
Borrower), the Liabilities shall, for the purposes such payment is of this
Guaranty, to the extent that is or must be rescinded or returned, be deemed to
have continued in existence, notwithstanding such application by the Agent, and
this Guaranty shall continue to be effective or be reinstated, as the case may
be, as to the Liabilities, all as though such application by the Agent had not
been made.
This Guaranty shall remain in full force and effect and continue to be
effective even if any petition is filed by or against any Borrower or Guarantor
for liquidation or reorganization, or any Borrower or Guarantor becomes
insolvent or makes an assignment for the benefit of creditors or a receiver or
trustee is appointed for all or any significant part of any Borrower's or
Guarantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any Lender, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Liabilities shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned. To such end, the obligations of each of the
Guarantors hereunder shall be limited to an aggregate amount equal to the
largest amount that would not render such Grantor's obligations hereunder
subject to avoidance under Section 548 (or any other section) of the United
States Bankruptcy Code or any comparable provisions of any applicable state law.
The Agent may, from time to time, whether before or after any
discontinuance of this Guaranty, in its sole discretion and without notice to
the Guarantors, take any or all of the following actions: (a) retain or obtain
a security interest in any property to secure any of the Liabilities or any
obligation hereunder; (b) retain or obtain the primary or secondary obligation
of any obligor or obligors, in addition to the Guarantors, with respect to any
of the Liabilities; (c) extend or renew for one or more periods (whether or not
longer than the original period), modify, alter or exchange any of the
Liabilities or any document or instrument with respect thereto or extend or
waive the time for any of the Guarantors', the Borrowers' or other Person's
performance of, or compliance with, any term, covenant or agreement on its part
to be performed
-2-
<PAGE>
or observed under the Loan Documents, or waive such performance or compliance or
consent to a failure of, or departure from, such performance or compliance; (d)
release, waive or compromise any obligation of Thermatrix hereunder or any
obligation of any nature of any other obligor primarily or secondarily obligated
with respect to any of the Liabilities; (e) release its security interest in, or
surrender, release or permit any substitution or exchange for, all or any part
of any property now or hereafter securing any of the Liabilities or any
obligation hereunder, or extend or renew for one or more periods (whether or not
longer than the original period) or release, waive, compromise, alter or
exchange any obligations of any nature of any obligor with respect to any such
property; and (f) resort to the Guarantors for payment of any of the
Liabilities, whether or not the Agent shall have resorted to the Borrowers or to
any property of the Borrowers or any other Person securing any of the
Liabilities or any obligation hereunder or shall have proceeded against any
other obligor primarily or secondarily obligated with respect to any of the
Liabilities.
Any amounts received by the Agent from whatever source on account of
the Liabilities may be applied by the Agent toward the payment of such of the
Liabilities, and in such order of application, as the Agent may from time to
time elect; and, notwithstanding any payments made by or for the account of the
Guarantors pursuant to this Guaranty, the Guarantors shall not be subrogated to
any rights of the Agent until such time as the Agent shall have received payment
of the full amount of all of the Liabilities and of all of the obligations of
the Guarantors hereunder. The Guarantors further agree that nothing contained
herein or otherwise shall prevent the Agent from pursuing concurrently or
successively all rights and remedies available to it at law and/or in equity or
under any of the documents evidencing the Liabilities and the exercise of any of
its rights or remedies shall not constitute a discharge of the Guarantors'
obligations hereunder, it being the purpose and intent of the Guarantors that
their obligations hereunder shall be absolute, independent and unconditional
under any and all circumstances whatsoever.
Each of the Guarantors hereby expressly waives: (a) notice of the
acceptance by the Agent and the Lenders of this Guaranty; (b) notice of the
existence or creation or non-payment of all or any of the Liabilities; (c)
presentment, demand, notice of dishonor, protest, notice of protest and all
other notices whatsoever; (d) any defense, right of set-off or other claim which
such Guarantor may have against the Borrowers or may have against the Agent or
the Lenders; (e) all diligence in collection or protection of or realization
upon the Liabilities or any thereof, any obligation hereunder, or any security
for or guaranty of any of the foregoing; and (f) any failure by the Agent or any
Lender to inform the Guarantors of any facts the Agent or such Lender may now or
hereafter know about the Borrowers and the Liabilities, it being understood and
agreed that the Agent and the Lenders have no duty so to inform and that the
Guarantors are fully responsible for being and remaining informed by the
Borrowers of all circumstances bearing on the existence or creation, or the risk
of nonpayment or nonperformance of the Liabilities.
In addition to the foregoing, each of the Guarantors waives, and
agrees that it shall not at any time insist upon, plead or in any manner
whatever claim or take the benefit or advantage of, any appraisal, valuation,
stay, extension, marshaling of assets or redemption laws, or exemption, whether
now or at any time hereafter in force, which may delay, prevent or
-3-
<PAGE>
otherwise affect the performance by the Guarantors of their obligations under,
or the enforcement by the Agent or the Lenders of, this Guaranty and the benefit
of all provisions of law which are or might be in conflict with the terms of
this Guaranty. Each of the Guarantors represents, warrants and jointly and
severally agrees that, as of the date of this Guaranty, its obligations under
this Guaranty are not subject to any offsets or defenses against the Agent or
the Lenders or the Borrowers of any kind. Each of the Guarantors further jointly
and severally agrees that its obligations under this Guaranty shall not be
subject to any counterclaims, offsets or defenses against the Agent or the
Lenders or against the Borrowers of any kind which may arise in the future.
Notwithstanding the immediately preceding paragraph, but without
limiting or affecting any of the Agent's or the Lenders' rights or remedies of
any kind whatsoever, the Agent shall endeavor to notify the Guarantors of Events
of Default under the Credit Agreement which are or have become, in the Agent's
determination, the basis upon which to exercise the rights or remedies provided
therein. The requirement of notification set forth in this paragraph represents
a non-binding statement of principle only, and is not intended to impose any
affirmative duty upon the Agent, nor shall the requirement of notification be
construed to create or support any claim, right of action, counterclaim,
crossclaim or defense of any kind whatsoever, nor shall the requirement of
notification impair or in any way affect any of the Agent's rights, benefits or
remedies.
The Agent and each Lender may, from time to time, without notice to
the Guarantors, assign or transfer any or all of the Liabilities or any interest
therein and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, the Liabilities shall be and remain the
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Liabilities or of any interest
therein shall, to the extent of the interest of such assignee or transferee in
the Liabilities, be entitled to the benefits of this Guaranty to the same extent
as if such assignee or transferee were the Agent or such Lender; provided,
however, that, unless the Agent shall otherwise consent in writing, the Agent
shall have an unimpaired right, prior and superior to that of any such assignee
or transferee, to enforce this Guaranty, for the benefit of the Agent and the
Lenders, as to those of the Liabilities which the Agent have not been assigned
or transferred.
No delay in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by the Agent or any Lender of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy; nor shall any modification or waiver of
any of the provisions of this Guaranty be binding upon the Agent or any Lender,
except as expressly set forth in a writing duly signed and delivered by the
Agent or such Lender. No action of the Agent or any Lender permitted hereunder
shall in any way affect or impair the rights of the Agent or such Lender and the
obligations of the Guarantors under this Guaranty.
This Guaranty shall be continuing and shall not be discharged,
impaired or affected by (a) the power or authority or lack thereof of the
Borrowers to incur the Liabilities; (b) the lack of the genuineness, validity,
regularity, enforceability of, or any future amendment of, or change in, this
Guaranty, any other Loan Document, or any other agreement, document or
instrument to which the Borrowers and/or the Guarantors is or are or may become
a party; (c)
-4-
<PAGE>
any claims or defenses whatsoever that the Borrowers or anyone else may or might
have to the payment or performance of the Liabilities; (d) the existence or non-
existence of the Borrowers or any subsidiary or affiliate as a legal entity; (e)
the transfer by the Borrowers or any subsidiary or affiliate of all or any part
of the collateral described in the documents securing the Liabilities; (f) any
right of offset, counterclaim or defense (other than payment in full and
performance in full of all of the Liabilities in accordance with the terms of
the documents evidencing and securing the Liabilities) that any Guarantor may or
might have to its undertakings, liabilities and obligations hereunder; (g) the
absence of any action to enforce this Guaranty or any other Loan Document or the
waiver or consent by the Agent or the Lenders with respect to any of the
provisions hereof or thereof; (h) the existence, value or condition of, or
failure to perfect its Lien against, any security for the Liabilities, or any
action, or the absence of any action, by the Agent or the Lenders in respect
thereof (including, without limitation, the release of any such security); or
(i) any other action or circumstances which might otherwise constitute a legal
or equitable discharge or defense of a surety or guarantor, each and every such
defense being hereby waived by the Guarantors to the fullest extent permitted by
law.
Each Guarantor further expressly waives all rights it may have now or
in the future under any statute, or at common law, or at law or in equity, or
otherwise, to compel the Agent or any Lender to proceed in respect of the
Liabilities against the Borrowers or any other party or against any security for
the payment and performance of the Liabilities before proceeding against, or as
a condition to proceeding against, any Guarantor. Each Guarantor agrees that any
notice or directive given at any time to the Agent or the Lenders that is
inconsistent with the waiver in the immediately preceding sentence shall be null
and void and may be ignored by the Agent and the Lenders, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Guaranty for the reason that such pleading or introduction would be at variance
with the written terms of this Guaranty. It is agreed between each Guarantor and
the Agent and the Lenders that all of the waivers set forth in this Guaranty are
of the essence of the transactions contemplated by the Loan Documents and that,
but for this Guaranty and such waivers, the Agent and the Lenders would decline
to enter into the Loan Documents.
This Guaranty shall be binding upon the Guarantors and upon their
successors and permitted assigns and shall inure to the benefit of the Agent and
the Lenders and their successors and assigns. All references herein to the
Borrowers shall be deemed to include their respective successors and assigns,
whether immediate or remote. If more than one party shall execute this Guaranty,
the term "undersigned" as used herein shall mean all parties executing this
Guaranty and each of them, and all such parties shall be jointly and severally
obligated hereunder. In addition and notwithstanding anything to the contrary
contained in this Guaranty, the obligations of the Guarantors with respect to
the Liabilities shall be joint and several with any other party that shall now
or hereafter execute a guaranty of any of the Liabilities pursuant to a guaranty
separate from this Guaranty. Notwithstanding the foregoing, no Guarantor may
assign or delegate any of its rights, obligations or liabilities hereunder.
All notices required or permitted to be given hereunder shall be in
writing and shall be either personally delivered or sent by United States
certified or registered mail, return receipt requested, addressed, if to a
Guarantor, to such Guarantor c/o Thermatrix at the address
-5-
<PAGE>
for notices to Thermatrix set forth in the Credit Agreement, or at such other
address as such Guarantor hereafter notifies the Agent and the Lenders as herein
provided and, if to the Agent or the Lenders, at their address for notices under
the Credit Agreement or at such other address as the Agent or such Lender
hereafter notifies the Guarantor as herein provided. Notices shall be deemed
received on the earlier of (i) the date noted on the return receipt as delivered
if mail delivery of the notice is successful; (ii) the last date of attempted
delivery, as noted by the United States Postal Service on the envelope
containing the notice, if mail delivery is unsuccessful; or (iii) the date of
actual delivery if personally delivered.
Each Guarantor agrees, upon the written request of the Agent, to
execute and deliver to the Agent and the Lenders, from time to time, any
additional instruments or documents reasonably considered necessary by the Agent
to cause this Guaranty to be, become or remain valid and effective in accordance
with its terms.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
EACH GUARANTOR AND THE AGENT AND THE LENDERS CONSENTS FOR THEMSELVES
AND IN RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY,
TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE STATE OF
NEW YORK WITH RESPECT TO ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE
ARISING UNDER THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
GUARANTOR FURTHER CONSENTS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE
NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. EACH GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT ITS ADDRESS
FOR NOTICES PURSUANT HERETO, IN CONNECTION WITH ANY OF THE AFORESAID PROCEEDINGS
IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. EACH GUARANTOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE NOW OR IN THE FUTURE
TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN
THE COURTS REFERRED TO ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT TO
SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR
OTHERWISE PROCEED AGAINST EACH GUARANTOR IN ANY JURISDICTION.
EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER
-6-
<PAGE>
OR IN CONNECTION WITH, THIS AGREEMENT OR THE GUARANTY, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT
OR EITHER GUARANTOR IN CONNECTION HEREWITH. EACH GUARANTOR ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT ENTERING INTO THIS
AGREEMENT.
This Guaranty, together with the other Loan Documents, constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements relating to a guaranty of the loans and
advances and other obligations under the Loan Documents and/or the Liabilities
and may not be amended or supplemented except by a writing signed by the Agent,
the Lenders and each Guarantor to be charged thereby.
In the event that any one or more of the provisions contained in this
Guaranty shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision or provisions in every other respect and the remaining provisions of
this Guaranty shall not be in any way impaired.
This Guaranty may be executed in any number of counterparts, all of
which shall individually and collectively constitute one agreement.
-7-
<PAGE>
In witness whereof, each of the undersigned has caused this Guaranty
to be duly executed by its authorized officer as of the day and year first above
written.
Guarantors
Bachmann Companies, Inc.
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President & Chief
Financial Officer
Wahlco Engineered Products Group, LTD. (2625927)
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
-----------------------------------
Name: Edward E. Greene
Title: Director
Wahlco, Inc.
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and Chief
Financial Officer
WES Property, LTD. (2690271)
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
----------------------------------
Name: Edward E. Greene
Title: Director
-8-
<PAGE>
Wahlco Engineered Products, Inc.
By: /s/ Daniel S. Tedone
---------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President &
Chief Financial Officer
By: /s/ Edward E. Greene
---------------------------------
Name: Edward E. Greene
Title: Director and Secretary
Wahlco Engineered Products, Ltd. (526365)
By: /s/ Daniel S. Tedone
--------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
---------------------------------
Name: Edward E. Greene
Title: Director
Pentney Engineering, LTD. (2625925)
By: /s/ Daniel S. Tedone
---------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
---------------------------------
Name: Edward E. Greene
Title: Director
Teddington Bellows (Holdings), LTD. (830610)
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
--------------------------------------
Name: Edward E. Greene
Title: Director
-9-
<PAGE>
Teddington Bellows (213069)
By: /s/ Daniel S. Tedone
--------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
--------------------------------
Name: Edward E. Greene
Title: Director
Treste Plant Hire, LTD. (2631345)
By: /s/ Daniel S. Tedone
--------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
--------------------------------
Name: Edward E. Greene
Title: Director
Thermatrix, LTD. (2847272)
By: /s/ John T. Schofield
--------------------------------
Name: John T. Schofield
Title: Director
By: /s/ Joseph W. Sutton
--------------------------------
Name: Joseph W. Sutton
Title: Director
Accepted and agreed as of
the date first written above:
Wexford Management LLC, as Agent
By: /s/ Arthur Amron
-------------------------------
Name: Arthur Amron
Title: Senior Vice President
and General Counsel
-10-
<PAGE>
EXHIBIT 10.4
================================================================================
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND LEASES AND FIXTURE FILING
by
WAHLCO ENGINEERED PRODUCTS INC.,
Mortgagor,
to
each of the Lenders identified on Annex 1 hereto,
Mortgagee,
================================================================================
This instrument was prepared by the
attorney listed below, in consultation
with counsel in the State, and after
recording should be returned to:
HOWARD, SMITH & LEVIN LLP
1330 Avenue of the Americas
New York, New York 10019
Attention: Andrew Baraff, Esq.
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.1. Terms Defined in Credit Agreement....................... 5
SECTION 1.2. Terms Defined in This Mortgage.......................... 6
SECTION 1.3. Terms Defined in Uniform Commercial Code................ 10
SECTION 1.4. Rules of Interpretation................................. 10
ARTICLE II
COVENANTS AND AGREEMENTS OF MORTGAGOR
SECTION 2.1. Payment of Secured Obligations.......................... 11
SECTION 2.2. Further Assurances...................................... 11
SECTION 2.3. Care of the Mortgaged Property.......................... 12
(a) Operation and Maintenance.................................... 12
(b) Repair and Replacement....................................... 12
(c) Use.......................................................... 12
SECTION 2.4. Compliance With Laws and Payment of Impositions......... 12
SECTION 2.5. Insurance and Casualty.................................. 12
(a) Required Insurance........................................... 12
(b) Form......................................................... 13
(c) Notice of Loss............................................... 13
(d) No Separate Insurance........................................ 13
(e) Assignment of Policies On Foreclosure........................ 13
SECTION 2.6. Condemnation............................................ 14
(a) Notice of Loss.............................................. 14
(b) Protection of Mortgaged Property............................ 14
SECTION 2.7. Application of Insurance Proceeds and Condemnation
Proceeds............................................... 14
(a) Proceeds Payable to Mortgagee................................ 14
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(b) Prosecution of Claim for Loss................................ 15
SECTION 2.8. Transfer Restrictions................................... 15
SECTION 2.9. Mortgagee's Right to Perform............................ 15
SECTION 2.10. Subrogation............................................. 15
SECTION 2.11. Inspection of Mortgaged Property........................ 16
SECTION 2.12. Certain Tax Law Changes................................. 16
SECTION 2.13. Future Advances......................................... 16
SECTION 2.14. Covenants in Loan Documents............................. 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. ......................................................... 17
(a) Title........................................................ 17
(b) Chain of Title............................................... 17
SECTION 3.2. Valid Lien and Security Interest........................ 17
ARTICLE IV
SECURITY AGREEMENT AND FIXTURE FILING
SECTION 4.1. Security Agreement...................................... 18
(a) Grant of Security Interest................................... 18
(b) Remedies..................................................... 18
SECTION 4.2. Fixture Filing.......................................... 18
SECTION 4.3. Security Deposit Collateral............................. 19
SECTION 4.4. Additional Covenants.................................... 19
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ARTICLE V
ASSIGNMENTS OF RENTS AND LEASES
SECTION 5.1. Assignment of Rents and Leases.......................... 19
(a) Assignment of Rents.......................................... 19
(b) License to Collect Rents..................................... 19
(c) Termination of License Upon Event of Default................. 20
(d) Direction to Tenants......................................... 20
(e) No Release of Tenants........................................ 20
(f) No Liability of Mortgagee.................................... 20
(g) No Existing Leases........................................... 21
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Defaults...................................... 21
SECTION 6.2. Remedies................................................ 21
(a) General...................................................... 21
(b) Foreclosure.................................................. 22
(c) Mortgagee May Bid............................................ 22
(d) Acceleration of Secured Obligations.......................... 22
SECTION 6.3. Possession of Property.................................. 23
(a) Mortgagor to Vacate Property................................. 23
(b) Payment for Use and Occupancy................................ 23
SECTION 6.4. Appointment of Receiver................................. 24
SECTION 6.5. Waiver of Stay, Extension, Moratorium and Marshalling
Laws and Equity of Redemption.......................... 24
SECTION 6.6. Mortgagee Authorized to Execute Documents............... 24
SECTION 6.7. Collateral Situated in More than One County............. 25
SECTION 6.8. Collateral in Other States.............................. 25
SECTION 6.9. Application of Proceeds................................. 25
SECTION 6.10. Setoff.................................................. 26
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SECTION 6.11. Receipt a Sufficient Discharge to Purchaser............. 26
SECTION 6.12. Sale a Bar Against Mortgagor............................ 26
SECTION 6.13. Remedies Cumulative; Waiver............................. 26
SECTION 6.14. No Liability of Mortgagees.............................. 27
ARTICLE VII
CONCERNING MORTGAGEE
SECTION 7.1. [Intentionally Omitted]................................. 27
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Termination; Defeasance................................. 27
SECTION 8.2. Rights Cumulative; Waivers.............................. 28
SECTION 8.3. Fees and Expenses....................................... 28
SECTION 8.4. Indemnification......................................... 28
(a) Indemnity.................................................... 28
(b) Third-Party Beneficiaries.................................... 29
SECTION 8.5. Notices................................................. 29
SECTION 8.6. Amendment and Waiver.................................... 30
SECTION 8.7. Expenses of Mortgagor's Agreements and Duties........... 30
SECTION 8.8. Mortgagee's Right to Use Agents and to Act in Name
of Mortgagor........................................... 30
SECTION 8.9. No Compensation or Expense.............................. 30
SECTION 8.10. Limitation of Obligations with Respect to Mortgaged
Property............................................... 31
(a) Reasonable Care.............................................. 31
(b) No Obligations............................................... 31
SECTION 8.11. Time of the Essence..................................... 31
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SECTION 8.12. Inconsistency with Loan Documents....................... 31
SECTION 8.13. Severability............................................ 31
SECTION 8.14. Headings................................................ 32
SECTION 8.15. Assignment; Benefit..................................... 32
SECTION 8.16. GOVERNING LAW........................................... 32
SECTION 8.17. WAIVER OF JURY TRIAL.................................... 32
SECTION 8.18. CONSENT TO JURISDICTION................................. 33
SECTION 8.19. Limitation on Interest Payable.......................... 33
SECTION 8.20. Covenants To Run With the Land.......................... 34
SECTION 8.21. No Merger............................................... 34
SECTION 8.22. Relationship............................................ 34
ARTICLE IX
ENVIRONMENTAL MATTERS
SECTION 9.1. Notice of Environmental Matters......................... 35
(a) Delivery of Notice........................................... 35
(b) Contents of Notice........................................... 35
SECTION 9.2. Obligations of Mortgagor................................ 35
ARTICLE X
LOCAL JURISDICTION PROVISIONS
SECTION 10.1. Mortgage Covenants........................................ 35
SECTION 10.2. Statutory Conditions...................................... 35
SECTION 10.3. No Waiver................................................. 36
SECTION 10.4. Written Agreement......................................... 36
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SECTION 10.5. Open-End Mortgage......................................... 36
SECTION 10.6. Information Under Uniform Commercial Code................. 36
SECTION 10.7. Notice Pursuant to 18-A M.R.S.A. (S) 5-508................ 37
SECTION 10.8 Authority of Wexford Management, LLC...................... 38
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EXHIBITS
EXHIBIT A - DESCRIPTION OF LAND
EXHIBIT B - MATERIAL AGREEMENTS
EXHIBIT C - PERMITTED ENCUMBRANCES
EXHIBIT D - INFORMATION FOR FINANCING STATEMENTS
<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND LEASES AND FIXTURE FILING
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES AND
FIXTURE FILING (this "Mortgage"), dated as of February 25, 1999, is given by
--------
WAHLCO ENGINEERED PRODUCTS INC., a Maine corporation (together with its
successors and permitted assigns, "Mortgagor"), to WEXFORD MANAGEMENT LLC, a
---------
Connecticut limited liability company (together with its successors and
permitted assigns, the "Agent"), and to each of the Lenders (as hereinafter
-----
defined).
BACKGROUND:
A. On January 13, 1999, pursuant to an Agreement and Plan of Merger,
dated November 9, 1998 (the "Merger Agreement"), among Wahlco Environmental
----------------
Systems, Inc. ("Wahlco"), Thermatrix Inc. ("Thermatrix") and TMX Acquisition Sub
------ ----------
I, Inc., a wholly-owned subsidiary of Thermatrix ("Merger Sub"), Merger Sub
----------
merged with and into Wahlco (the "Merger"), and Wahlco became a wholly-owned
------
subsidiary of Thermatrix at the effective time of the Merger (the "Effective
---------
Date").
- ----
B. Concurrently with the execution and delivery hereof, Wahlco and
Thermatrix (the "Borrowers") are entering into a Second Amended and Restated
---------
Credit Agreement, dated as of the date hereof, with the Lenders and the Agent
(as the same may hereafter be modified, extended, replaced or otherwise amended,
the "Credit Agreement"), pursuant to which the Borrowers shall be jointly and
----------------
severally liable for the payment and performance of all of the obligations and
liabilities to the Lenders and the Agent set forth therein and in the other Loan
Documents (as hereinafter defined).
C. Prior to the Merger, Mortgagor was, and after the Merger Mortgagor
remains, a subsidiary of Wahlco.
D. Concurrently with the execution and delivery of the Credit
Agreement, Mortgagor is executing and delivering the Guarantee (as hereinafter
defined) to the Agent and the Lenders.
E. It is a condition to the effectiveness of the Credit Agreement
that, among other things, Mortgagor execute and deliver this Mortgage granting
to the Agent and each of the Lenders (together, "Mortgagee") the liens and
---------
security interests in the collateral described herein, all as set forth in the
Credit Agreement.
F. Mortgagor will receive substantial direct and indirect benefits
from the Lenders and the Mortgagee entering into the Credit Agreement.
<PAGE>
GRANT OF LIEN:
NOW THEREFORE, to secure the full and timely payment and performance
of all of the Secured Obligations (as hereinafter defined), Mortgagor hereby
irrevocably grants, bargains, sells, mortgages, warrants, aliens, devises,
releases, hypothecates, pledges, transfers and conveys to each Mortgagee, as
tenants in common, and to the extent the same constitutes Personal Property (as
hereinafter defined) grants to each Mortgagee, as tenants in common, a security
interest in, forever, any and all the following (collectively, the "Mortgaged
---------
Property"):
- --------
A. Land. The land described on Exhibit A, together with all and
---- ---------
singular the tenements, rights, easements, hereditaments, rights of way,
privileges, liberties, appendages and appurtenances now or hereafter belonging
or in any way appertaining to such land (including, without limitation, all
rights relating to storm and sanitary sewer, water, gas, electric, railway and
telephone services); all estate, claim, demand, right, title or interest of
Mortgagor in and to any street, road, highway, or alley (vacated or otherwise)
adjoining such land or any part thereof; and all Mortgagor's right, title and
interest, if any, in and to any strips and gores belonging, adjacent or
pertaining to such land (collectively, the "Land").
----
B. Improvements and Fixtures. All buildings, structures,
-------------------------
replacements, fixtures and fittings and other improvements and property of every
kind and description now or hereafter affixed or attached to the Land, including
water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone
and other utility facilities, parking areas, roads, driveways, walks and other
site improvements together with all estate, right, title and interest, if any,
of Mortgagor in, to or under all equipment, appliances, machinery, tools,
accessories, apparatus, building or construction materials, and other articles
of any kind or nature whatsoever affixed or attached to the Land, including all
motors, boilers, engines, pumps, compressors, tanks and similar devices, all
heating, electrical, lighting, power, plumbing, air conditioning, refrigeration,
ventilation and mechanical equipment, all pipes, ducts, conduits, cables and
other transmission devices and equipment, and all elevators, escalators, lifts,
walls, partitions, doors, windows and other equipment and property affixed to
the Land that is real estate or real property or fixtures under applicable law
of the State (as hereinafter defined) (collectively, the "Improvements", and
------------
together with the Land, the "Property").
--------
C. Minerals and Related Rights. All of Mortgagor's right, title and
---------------------------
interest in, to and under all rights, royalties and profits with respect to all
minerals, coal, oil and gas and other substances of any kind or character on or
underlying the Land, together with all water and water rights (whether riparian,
appropriative, or otherwise and whether or not appurtenant).
D. Air and Development Rights. All of Mortgagor's right, title and
--------------------------
interest in, to and under all air rights, development rights or credits, zoning
rights or other similar
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<PAGE>
rights or interests which benefit or are appurtenant to the Property.
E. Parking Rights. All estate, right, title, interest and other
--------------
claim of Mortgagor, if any, with respect to any parking facilities located other
than on the Property and used or intended to be used in connection with the
operation, ownership or use of the Property, any and all replacements and
substitutions for the same, and any other parking rights, easements, covenants
and other interests in parking facilities acquired by Mortgagor for the use of
tenants or occupants of the Improvements.
F. Tangible Property. All building materials, goods, construction
-----------------
materials, appliances (including, without limitation, stoves, ranges, ovens,
disposals, refrigerators, water fountains, water coolers, fans, heaters,
dishwashers, clothes washers and dryers, water heaters, hood and fan
combinations, kitchen equipment, laundry equipment, kitchen cabinets and other
similar equipment), stocks, beds, mattresses, bedding and linens, supplies,
blinds, window shades, drapes, carpets, floor coverings, office equipment,
trees, timber, crops, growing plants and shrubberies, control devices, equipment
and machinery (including window cleaning, building cleaning, swimming pool,
recreational, monitoring, garbage, pest control and other equipment), motor
vehicles, tools, furnishings, furniture, lighting, all nonstructural additions
to the Property and all other tangible property of any kind or character,
together with all replacements thereof, located on or in or used in connection
with the complete and comfortable use, enjoyment, occupation, operation,
development and maintenance of the Property, regardless of whether or not
located on or in the Property or located elsewhere for purposes of storage,
fabrication or otherwise, exclusive of any of the foregoing items leased by
Mortgagor or owned by tenants (other than Mortgagor) of portions of the Property
(collectively, the "Tangible Property").
-----------------
G. Material Agreements. All estate, right, title and interest of
-------------------
Mortgagor in, to or under all contracts and agreements (including those, if any,
described on Exhibit B) and all title insurance policies, guarantees and
---------
warranties and other contracts and agreements including any agreements taken by
Mortgagor by assignment, now or hereafter relating to the Property, including
all water, sanitary and storm sewer, drainage, electricity, steam, gas,
telephone and other utility supply and service contracts (collectively,
"Material Agreements").
- --------------------
H. Leases and Rents. All Leases (as hereinafter defined), now or
----------------
hereafter in effect for the use, possession or occupancy of the Property or any
part thereof, and all estate, right, title and interest of Mortgagor in and to
any and all rents, profits, issues, royalties, revenues and other benefits
derived from the sale or lease of the Property or any other portion of the
Mortgaged Property or from or under any of the Leases (collectively, "Rents").
-----
I. Security Deposit Collateral. All cash, securities, letters of
---------------------------
credit, guarantees, surety bonds and similar instruments (collectively, the
"Security Deposit
----------------
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<PAGE>
Collateral") from time to time delivered to Mortgagor as security for the
- ----------
performance of any tenant under a Lease, but excluding any Security Deposit
Collateral which, by its terms, is unassignable or may not be pledged or
transferred.
J. Intangibles. All goodwill, trademarks, trade names, option
-----------
rights, purchase contracts, books and records and general intangibles of
Mortgagor relating to the Property and all accounts, contract rights,
instruments, chattel paper and other rights of Mortgagor for the payment of
money for property sold or lent, for services rendered, for money lent, or for
advances or deposits made, and any other intangible property of Mortgagor
relating to the Property, but specifically excluding rights of Mortgagor in, to
and under any Material Agreements (collectively, the "Intangibles").
-----------
K. Plans. All plans and specifications, designs, drawings and other
-----
information, materials and matters heretofore or hereafter prepared relating to
the Property.
L. Permits. All licenses, authorizations, certificates, variances,
-------
consents, approvals and other permits now or hereafter relating to the Property
(collectively, the "Permits"), excluding from the grant under this Granting
-------
Clause (but not from the definition of the term "Permits" for the other purposes
hereof) Permits that cannot be transferred or encumbered by Mortgagor without
causing a default thereunder or a termination thereof.
M. Leases of Furniture, Furnishings and Equipment. All right, title
----------------------------------------------
and interest of Mortgagor as lessee in, to and under any leases of furniture,
furnishings and equipment now or hereafter installed in or at any time used in
connection with the Property.
N. Condemnation Proceeds. All Condemnation Proceeds (as hereinafter
---------------------
defined).
O. Insurance Proceeds. All Insurance Proceeds (as hereinafter
------------------
defined).
P. Awards. All rights and interests of Mortgagor against others,
------
including adjoining property owners and governmental entities arising out of
damage to the Mortgaged Property, including damage due to environmental injury
or release of Hazardous Materials (as hereinafter defined).
Q. Further Interests. All greater or additional estate, right, title
-----------------
and interest of Mortgagor in, to or under any of the Mortgaged Property
hereafter acquired by Mortgagor, and all right, title and interest of Mortgagor
in, to, under or derived from all extensions, improvements, betterments,
renewals, substitutions and replacements of, and additions and appurtenances to,
any of the Mortgaged Property hereafter acquired by or released to Mortgagor
(including any Mortgaged Property acquired by Mortgagor by foreclosure or deed
in lieu of foreclosure pursuant to the terms of any mortgage note held by
Mortgagor) or
-4-
<PAGE>
constructed or located on, or attached to, the Property, in each case,
immediately upon such acquisition, release, construction, location or
attachment, without any further conveyance, mortgage, assignment or other act by
Mortgagor; and all right, title and interest of Mortgagor in, to, under or
derived from all other property and rights which by any instrument executed by
Mortgagor or any Person on its behalf are otherwise subjected to the lien of
this Mortgage.
R. Proceeds. All proceeds of any voluntary or involuntary conversion
--------
of any of the foregoing into cash or other property, including, without
limitation, proceeds of insurance and condemnation awards and liquidated claims.
S. Other Property. All other property and rights of Mortgagor of
--------------
every kind and character relating to and used in connection with the Mortgaged
Property, and all proceeds and products of any of the foregoing; provided, that
--------
the Mortgaged Property shall not include (i) any property, rights or licenses to
the extent the granting of a Lien thereon would be contrary to applicable law or
(ii) any rights under any license agreement where such license agreement would
be terminable by the counterparty thereto if Mortgagor's interest therein were
subject to the security interest created hereby (but only to the extent such
right to terminate is enforceable under applicable law). Each such license
agreement existing on the date hereof is set forth in Schedule 3(b) of the
Disclosure Letter.
TO HAVE AND TO HOLD the Mortgaged Property unto each Mortgagee, and
its successors and assigns, forever, under and subject to the terms and
conditions of the Credit Agreement and this Mortgage, for the security and
enforcement of the prompt and complete payment, performance and observance when
due of all of the Secured Obligations.
PROVIDED ALWAYS that this Mortgage is upon the express condition that
the Mortgaged Property shall be released from the lien of this Mortgage in the
manner and at the time provided in Section 8.1 of this Mortgage.
MORTGAGOR FURTHER COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS:
ARTICLE I
DEFINITIONS
SECTION 1.1. Terms Defined in Credit Agreement. The following terms,
---------------------------------
and all other terms defined in the Credit Agreement and not otherwise defined
herein, have, as
-5-
<PAGE>
used herein, the respective meanings provided for in the Credit Agreement:
Affiliate
Business Days
Collateral
Disclosure Letter
Liens
Loans
Loan Documents
Loan Party
Material Adverse Effect
Note
Overdue Rate
Person
Required Lenders
Responsible Officer
Subsidiary
SECTION 1.2. Terms Defined in This Mortgage. The following terms, as
------------------------------
used herein, have the following meanings:
"Bankruptcy Code" means the United States Bankruptcy Code, Title 11 of
---------------
the United States Code, (S) 101 et seq., as amended from time to time.
"Casualty" means any damage to, destruction or loss of or other
--------
casualty with respect to any of the Mortgaged Property.
"Condemnation" means any actual or threatened condemnation, taking or
------------
exercise of the power of eminent domain or similar action or proceeding.
"Condemnation Proceeds" means, at any time, any award or payment paid
---------------------
or payable by reason of any Condemnation, whether from the exercise of the right
of Condemnation or any transfer made in lieu thereof or any injury to or
decrease in value of any property in connection with a Condemnation, including
all amounts paid pursuant to any agreement with any condemning authority that
has been made in settlement of any proceeding relating to a Condemnation and any
interest earned on such award, payment or amounts, less the reasonable costs and
expenses (including reasonable attorneys' fees and expenses) of Mortgagor and
Mortgagee in collecting such award payment or amounts, which costs and expenses
shall be paid out of such award, payment or amounts.
"Credit Agreement" is defined in Recital Paragraph B.
----------------
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<PAGE>
"Effective Date" is defined in Recital Paragraph A.
--------------
"Event of Default" is defined in Section 6.1.
----------------
"Flood Zone" is defined in Section 3.5.
----------
"Guarantee" means the Amended and Restated Guaranty, dated as of the
---------
date hereof, by Mortgagor (among others) to Mortgagee, as the same may hereafter
be modified, extended, replaced or otherwise amended.
"Impositions" means all taxes (including real estate taxes and sales
-----------
and use taxes), assessments (including all assessments for public improvements
or benefits, whether or not commenced or completed prior to the date hereof),
water, sewer or other rents, rates and charges, excises, levies, license fees,
permit fees, inspection fees and other authorization fees and other charges, in
each case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character (including all interest and penalties thereon),
which at any time may be assessed, levied, confirmed or imposed on or in respect
of, or be a Lien upon, (i) the Mortgaged Property or any interest therein, (ii)
any occupancy, use or possession of, or activity conducted on, the Mortgaged
Property, (iii) the Rents from the Mortgaged Property or the use or occupancy
thereof, or (iv) the Secured Obligations, but excluding income, excess profits,
franchise, capital stock, estate, inheritance, succession, gift or similar taxes
of Mortgagor or Mortgagee, except to the extent that such taxes of Mortgagor or
Mortgagee are imposed in whole or in part in lieu of, or as a substitute for,
any taxes which are or would otherwise be Impositions.
"Improvements" is defined in Granting Clause B.
------------
"Indemnified Party" means, with respect to a Person entitled to the
-----------------
benefit of an indemnity, such Person's officers, directors, shareholders,
partners, members, employees, agents and representatives.
"Insurance Policies" means the insurance policies and coverages
------------------
required to be maintained by Mortgagor pursuant to Section 2.5.
"Insurance Proceeds" means, at any time, (x) all proceeds or payments
------------------
to which Mortgagor may be or become entitled under any of the Insurance Policies
and any and all unearned premiums accrued, accruing or to accrue under any
Insurance Policies and all proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, plus any interest earned
on such proceeds, payments or amounts, less (y) the reasonable costs and
expenses of Mortgagor and Mortgagee in collecting such proceeds, payments or
amounts, which costs and expenses shall be paid out of such proceeds, payments
or amounts.
-7-
<PAGE>
"Insurance Requirements" means all provisions of the Insurance
----------------------
Policies, all requirements of the issuer of any of the Insurance Policies and
all orders, rules, regulations and any other requirements of the National Board
of Fire Underwriters (or any other body exercising similar functions) binding
upon Mortgagor or applicable to the Mortgaged Property, any adjoining vaults,
sidewalks, parking areas or driveways or any use or condition thereof.
"Intangibles" is defined in Granting Clause J.
-----------
"Land" is defined in Granting Clause A.
----
"Lease" means any lease, tenancy, subtenancy, license, franchise,
-----
concession or other use or occupancy agreement relating to the Property,
together with any guarantee of the obligations of the landlord or the tenant
thereunder, or any occupancy or right to possession under Section 365 of the
Bankruptcy Code in the event of the rejection of any of the foregoing by the
landlord or its trustee pursuant to such Section; "landlord" means the landlord,
sublandlord, lessor, sublessor, franchisor or other grantor of a right of use or
occupancy under a Lease and any guarantor of its obligations thereunder; and
"tenant" means the tenant, subtenant, lessee, sublessee, licensee, franchisee,
concessionaire or other occupant under a Lease and any guarantor of its
obligations thereunder.
"Legal Requirements" means all provisions of all laws, statutes,
------------------
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, directions and requirements of, restrictions by, and agreements
with, Federal, State or local governmental bodies, agencies or officials, now or
hereafter applicable to the Mortgaged Property or any part thereof or any use or
condition thereof.
"Lenders" means those parties identified as a "Lender" on Annex 1
-------
hereto.
"Loss" is defined in Section 8.4.
----
"Material Agreements" is defined in Granting Clause G.
-------------------
"Mortgage" is defined in the Preamble.
--------
"Mortgaged Property" is defined in the Preamble to the Grant of Lien.
------------------
"Mortgagee" means the Agent and the Lenders, or any of them, as the
---------
context may require.
"Mortgagor" is defined in the Preamble.
---------
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"Other Mortgaged Properties" means the Mortgaged Property described in
--------------------------
one or more of the Other Mortgages.
"Other Mortgages" means those certain Mortgage, Security Agreement and
---------------
Assignment of Rents and Leases, if any, and those certain Deed of Trust,
Security Agreement and Assignment of Rents and Leases, if any, or other similar
agreements, granted from time to time by Mortgagor to Mortgagee concurrently
herewith or otherwise pursuant to the Credit Agreement with respect to
collateral not described in this Mortgage, as the same may hereafter be
modified, extended, replaced or otherwise amended.
"Permits" is defined in Granting Clause L.
-------
"Permitted Encumbrances" means those matters described on Exhibit C
----------------------
hereto.
"Personal Property" means all of the items described in the definition
-----------------
of Mortgaged Property that constitute personal property under the Uniform
Commercial Code or other applicable law (including common law) of the State.
"Property" is defined in Granting Clause B.
--------
"Receiver" means any receiver, trustee liquidator, conservator,
--------
custodian or similar Person.
"Rents" are defined in Granting Clause H.
-----
"Secured Obligations" means all of the Liabilities of Mortgagor to the
-------------------
Mortgagee (or any of them) under and as defined in the Guarantee, including:
(i) all loans, advances, debts, liabilities, and other obligations
for monetary amounts (whether or not such amounts are liquidated, contingent or
otherwise determinable) owing by either Wahlco or Thermatrix or any of their
respective Subsidiaries or all of them to any Mortgagee, or any Subsidiary or
Affiliate of any Mortgagee, and all covenants, duties and obligations regarding
such amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement or other instrument, arising under the Credit Agreement
or any of the other Loan Documents, whether at maturity or by prepayment,
acceleration, declaration of default or otherwise, including, without
limitation, the principal amount of the Loans, as well as all interest thereon
(including all amounts owed in respect of interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any Loan Party), and all charges, costs,
expenses, attorneys' fees and any other sum chargeable to either Wahlco or
Thermatrix or any or all of their respective Subsidiaries under any of the Loan
Documents,
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(ii) all other amounts payable by Mortgagor hereunder (including all
amounts owed in respect of interest that accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any of Mortgagor, Wahlco or Thermatrix),
(iii) all Contingent Obligations of Mortgagor and all Future Advances
made to or for the account of Mortgagor, as set forth and referenced in Section
10.5 hereof, and
(iv) any renewals or extensions of any of the foregoing.
"Security Agreement" means the Amended and Restated Security
------------------
Agreement, dated as of the date hereof, among Wahlco Environmental Systems,
Inc., each Subsidiary party thereto and Wexford Management LLC.
"Security Deposit Collateral" is defined in Granting Clause I.
---------------------------
"State" means the State of Maine.
-----
"Tangible Property" is defined in Granting Clause F.
-----------------
"Thermatrix" is defined in Background Paragraph A.
----------
"Unavoidable Delays" means delays due to acts of God, governmental
------------------
restrictions, enemy actions, civil commotion, fire, casualty, strikes, shortages
of supplies or labor or other causes beyond the reasonable control of Mortgagor,
but lack of funds shall not be a cause beyond the reasonable control of
Mortgagor.
"Uniform Commercial Code" means the Uniform Commercial Code of the
-----------------------
State as in effect from time to time.
"Unmatured Default" means an event which but for the lapse of time or
-----------------
the giving of notice, or both, would constitute a Default or an Event of Default
hereunder or under any other Loan Document.
"Wahlco" is defined in Background Paragraph A.
------
SECTION 1.3. Terms Defined in Uniform Commercial Code. Unless
----------------------------------------
otherwise defined herein or in the Credit Agreement, or unless the context
otherwise requires, when used in this Mortgage, terms defined in the Uniform
Commercial Code have the same meanings.
SECTION 1.4. Rules of Interpretation. In this Mortgage, unless
-----------------------
otherwise
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<PAGE>
specified, (i) singular words include the plural and plural words include the
singular, (ii) words that include a number of constituent parts, things or
elements, including the terms "Land", "Improvements," "Property" and "Mortgaged
Property" (and each element thereof) shall be construed as referring separately
to each constituent part, thing or element thereof, as well as to all of such
constituent parts, things or elements as a whole, (iii) words importing any
gender include the other gender, (iv) references to any Person include such
Person's successors and assigns and, in the case of an individual, the word
"successor" includes such Person's heirs, devisees, legatees, executors,
administrators and personal representatives, (v) references to any statute or
other law include all applicable rules, regulations and orders adopted or made
thereunder and all statutes or other laws amending, consolidating or replacing
the statute or law referred to, (vi) the words "include" and "including," and
words of similar import, shall be deemed to be followed by the words ", without
limitation," (vii) the words "hereto," "herein," "hereof," and "hereunder," and
words of similar import, refer to this Mortgage in its entirety, (viii) unless
otherwise specified, references to Articles, Sections, Exhibits, Schedules,
paragraphs and clauses are to the Articles, Sections, Exhibits, Schedules,
paragraphs and clauses of this Mortgage, (ix) the Exhibits and Schedules to this
Mortgage are incorporated herein by reference, (x) the titles and headings of
Articles, Sections, Exhibits, Schedules, paragraphs and clauses are inserted as
a matter of convenience and shall not affect the construction of this Mortgage
and (xi) unless otherwise specified, references to this Mortgage and to any
other Loan Document include all amendments, modifications, supplements,
consolidations, replacements, extensions and renewals thereof from time to time.
ARTICLE II
Covenants and Agreements of Mortgagor
To protect the security of this Mortgage, so long as this Mortgage is
in effect, Mortgagor further covenants and agrees with Mortgagee as follows:
SECTION 2.1. Payment of Secured Obligations. Mortgagor shall duly and
------------------------------
punctually pay and perform all of the Secured Obligations in accordance with the
terms thereof and hereof, as if each of the same was set forth at length herein.
SECTION 2.2. Further Assurances. At the request of Mortgagee,
------------------
Mortgagor shall, at Mortgagor's sole cost and expense (a) promptly correct any
defect or error which may be discovered in this Mortgage or any financing
statement or other document relating hereto, (b) promptly execute, acknowledge,
deliver, record and re-record, register and re-register, and file and re-file
this Mortgage and any financing statements or other documents or instruments
which Mortgagee may require from time to time, all in form and substance
reasonably satisfactory to Mortgagee, in order (i) to effectuate, complete,
perfect, continue or preserve the Lien and priority of this Mortgage as a
perfected mortgage lien and security interest on the Mortgaged Property, or (ii)
to effectuate, complete, perfect, continue or preserve any right,
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<PAGE>
power or privilege granted to Mortgagee hereunder, and (c) pay all filing,
registration and recording taxes, fees, dues, imposts, assessments and charges
in connection with the execution, delivery, filing, registration or recording of
any of the foregoing.
SECTION 2.3. Care of the Mortgaged Property.
------------------------------
(a) Operation and Maintenance. Mortgagor (i) shall not cause or
-------------------------
permit the Mortgaged Property to be injured, wasted, disfigured or damaged or to
deteriorate (except for reasonable wear and tear and obsolescence) and (ii)
shall maintain and preserve all of the Mortgaged Property in good repair,
working order and condition (taking into consideration ordinary wear and tear)
and from time to time make, or cause to be made, all repairs, renewals and
replacements, betterments and improvements thereto reasonably necessary,
consistent with applicable industry practices, so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times, in each case except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(b) Repair and Replacement. Mortgagor shall not remove, demolish or
----------------------
materially alter any of the Mortgaged Property. Whether or not it shall have
received or otherwise be entitled to receive any Insurance Proceeds or
Condemnation Proceeds under the Credit Agreement, Mortgagor shall promptly
repair, replace and rebuild any part of the Mortgaged Property which may be
damaged or destroyed by any Casualty (including any casualty for which insurance
was not obtained or obtainable) or which may be affected by any Condemnation,
and shall complete and pay for, within a reasonable time, any structure at any
time in the process of construction or repair on the Property, all in a
commercially reasonable manner reasonably satisfactory to Mortgagee, unless the
failure to repair, replace or rebuild the same could not reasonably be expected
to have a Material Adverse Effect.
(c) Use. Mortgagor shall not, without the prior written consent of
---
Mortgagee, which will not be unreasonably withheld, initiate, join in or consent
to any restrictive covenant, zoning ordinance, or other public or private
restrictions, limiting or defining the uses which may be made of the Property or
any part thereof.
SECTION 2.4. Compliance With Laws and Payment of Impositions.
-----------------------------------------------
Contests. Except to the extent provided otherwise in the Credit Agreement,
- --------
Mortgagor shall (i) at all times comply with, and shall cause the Mortgaged
Property at all times to comply with, all applicable Legal Requirements and
Insurance Requirements; and (ii) promptly pay all Impositions and all charges
for utilities and other services to the Mortgaged Property on or before the date
on which the same shall become due and payable.
SECTION 2.5. Insurance and Casualty.
----------------------
(a) Required Insurance. During the term of this Mortgage, Mortgagor
------------------
shall
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<PAGE>
maintain, or cause to be maintained (including by one or more blanket and/or
umbrella policies which meet the requirements of this Section), the property and
liability insurance with respect to the Mortgaged Property described in Schedule
3(b) of the Disclosure Letter.
(b) Form. All insurance required by this Mortgage shall be taken out
----
and maintained with an insurer, shall have such deductibles, and shall otherwise
be in form and substance, as required by the Credit Agreement. In addition,
each such policy shall name Mortgagee as an additional insured and loss payee
and shall contain standard clauses waiving all rights of subrogation against
Mortgagee and requiring that all Insurance Proceeds resulting from any claim be
paid to Mortgagee, notwithstanding (i) any act or negligence of either Mortgagor
or its agents or employees which might, absent such agreement, result in a
forfeiture of all or part of such insurance payment, (ii) the occupation or use
of the Mortgaged Property or any part thereof for purposes more hazardous than
permitted by the terms of such policy, (iii) any foreclosure or other action or
proceeding taken pursuant to the Mortgage or (iv) any change in title to or
ownership of the Mortgaged Property or any part thereof. Each policy shall
contain an undertaking by the insurer that such policy shall not be modified
without at least thirty (30) days' prior notice to, and the prior written
consent of, Mortgagee.
(c) Notice of Loss. If a Casualty occurs, Mortgagor shall immediately
--------------
take such action or cause such action to be taken as may be reasonably necessary
or appropriate to protect the remaining Mortgaged Property. Mortgagor will also
give Mortgagee prompt notice of any material damage to or destruction of any of
the Mortgaged Property and in case of loss covered by policies of insurance,
Mortgagee is hereby authorized to make proof of loss if not made promptly by
Mortgagor. Any reasonable expenses incurred by Mortgagee in the collection of
the proceeds of such policies of insurance, together with interest thereon from
date of any such expense at the Overdue Rate (or such lesser rate of interest as
may be the maximum not prohibited by applicable law), shall be added to and
become part of the Secured Obligations and shall be reimbursed to Mortgagee
immediately upon demand.
(d) No Separate Insurance. Mortgagor shall not take out separate
---------------------
insurance concurrent in form or contributing in the event of loss with that
required to be maintained hereunder unless Mortgagee is named as an additional
insured thereon under a standard mortgagee clause reasonably acceptable to
Mortgagee and each such policy is otherwise in form and substance reasonably
acceptable to Mortgagee. Mortgagor shall notify Mortgagee at least 30 days
prior to the date that any such separate insurance is to be taken out and, if
such insurance is permitted by Mortgagee, shall promptly deliver to Mortgagee a
copy of the policy or policies of such insurance.
(e) Assignment of Policies On Foreclosure. In the event of the
-------------------------------------
foreclosure of this Mortgage, or other transfer of title to the Mortgaged
Property, or any part thereof, by foreclosure sale, or by power of sale, or deed
in lieu of foreclosure, the purchaser of the Mortgaged Property, or such part
thereof, shall succeed to all of each Mortgagor's rights with
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<PAGE>
respect to the Mortgaged Property, including any rights to unexpired, unearned
or returnable insurance premiums, subject to limitations on the assignment of
blanket policies, but limited to such rights as relate to the Mortgaged Property
or such part thereof. If Mortgagee acquires title to the Mortgaged Property, or
any part thereof, in any manner, it shall thereupon (as between each Mortgagor
and Mortgagee) become the sole and absolute owner of the insurance policies, and
all proceeds payable thereunder with respect to the Mortgaged Property with the
sole right to collect and retain all unearned or returnable premiums thereon
with respect to the Mortgaged Property, or such part thereof, if any.
SECTION 2.6. Condemnation.
------------
(a) Notice of Loss. In the event of any Condemnation or the
--------------
commencement of any proceedings or negotiations that might result in a
Condemnation, Mortgagor shall give notice thereof to Mortgagee, generally
describing the nature and extent of such Condemnation or the nature of such
proceedings or negotiations and the nature and extent of the proposed
Condemnation, as the case may be.
(b) Protection of Mortgaged Property. If a Condemnation occurs,
--------------------------------
Mortgagor shall immediately take such action or cause such action to be taken as
may be reasonably necessary or appropriate to protect the remaining Mortgaged
Property.
SECTION 2.7. Application of Insurance Proceeds and Condemnation
--------------------------------------------------
Proceeds.
- --------
(a) Proceeds Payable to Mortgagee. Notwithstanding any Casualty or
-----------------------------
Condemnation, Mortgagor shall continue to pay the Secured Obligations at the
time and in the manner provided for in the Loan Documents and this Mortgage, and
the Secured Obligations shall not be reduced until any Insurance Proceeds or
Condemnation Proceeds shall have been actually received and applied by Mortgagee
to the discharge of the Secured Obligations. Except as expressly provided in
the Credit Agreement, Mortgagee may apply the entire amount of any Insurance
Proceeds or Condemnation Proceeds to the discharge of the Secured Obligations
whether or not then due and payable in such priority and proportions as
Mortgagee in its discretion shall deem proper. If the Mortgaged Property is
sold, through foreclosure or otherwise, prior to the receipt by Mortgagee of
such Insurance Proceeds or Condemnation Proceeds, Mortgagee shall have the
right, whether or not a deficiency judgment on any Loan Document shall have been
sought, recovered or denied, to receive such Insurance Proceeds or Condemnation
Proceeds, or a portion thereof sufficient to pay the Secured Obligations,
whichever is less.
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<PAGE>
(b) Prosecution of Claim for Loss. If a Casualty or a Condemnation
-----------------------------
shall occur, Mortgagor shall file and prosecute its claim or claims for any such
Insurance Proceeds or Condemnation Proceeds in good faith and with due diligence
and cause the same to be collected and paid over to Mortgagee, and hereby
irrevocably authorizes and empowers Mortgagee, in the name of Mortgagor or
otherwise to collect and receipt for any such Insurance Proceeds or Condemnation
Proceeds and to adjust any insurance claims and to file and prosecute such claim
or claims, and although it is hereby expressly agreed that the same shall not be
necessary in any event, Mortgagor shall, upon demand of Mortgagee, make, execute
and deliver any and all assignments and other instruments sufficient for the
purpose of assigning any such Insurance Proceeds or Condemnation Proceeds to
Mortgagee, free and clear of any Liens whatsoever. Mortgagor hereby irrevocably
appoints Mortgagee as Mortgagor's attorney-in-fact for each such purpose (which
appointment is coupled with an interest) and authorizes any Person to act upon
the foregoing appointment.
SECTION 2.8. Transfer Restrictions. Except as expressly permitted by
---------------------
the Credit Agreement, Mortgagor shall not further mortgage, hypothecate, pledge
or suffer to exist any Lien on, or sell, transfer, convey or lease, all or any
part of the Mortgaged Property (or any interest therein).
SECTION 2.9. Mortgagee's Right to Perform. If Mortgagor shall fail to
----------------------------
pay or perform any of the Secured Obligations, then Mortgagee, upon ten (10)
days' prior notice to Mortgagor may, but shall not be obligated to, make (or
cause to be made) any such payment or perform (or cause to be performed) any
such Secured Obligation of Mortgagor, in any form and manner deemed reasonably
appropriate by Mortgagee as agent or attorney-in-fact of Mortgagor, and any
amount so paid or extended, plus reimbursement to Mortgagee for its reasonable
out-of-pocket and other expenses, including legal expenses, for each matter for
which it acts under this Mortgage, shall be added to the Secured Obligations and
shall be repaid to Mortgagee upon demand. By way of illustration and not in
limitation of the foregoing, Mortgagee may, but need not, make payments of
principal, interest or other charges on any obligations secured by any Permitted
Encumbrance or other Lien or charge; purchase, discharge, compromise or settle
any tax Lien or any other Lien, encumbrance, suit, proceeding, title or claim
thereof; pay any premium owing on any insurance policy covering the Mortgaged
Property; or redeem from any tax sale or forfeiture affecting the Property or
contest any tax or assessment. In making any payment or securing any
performance relating to any such obligation of Mortgagor hereunder or
thereunder, Mortgagee, so long as it acts in good faith, shall be the sole judge
of the legality, validity and amount of any Lien or encumbrance and of all other
matters necessary to be determined in satisfaction thereof. No such action of
Mortgagee shall be considered as a waiver of any right accruing to it on account
of the occurrence of any default on the part of Mortgagor under this Mortgage,
any Event of Default or any default or event of default under any other Loan
Document.
SECTION 2.10. Subrogation. To the extent that Mortgagee, after the
-----------
date
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<PAGE>
hereof, pays pursuant to the terms of this Mortgage, the Credit Agreement or any
other Loan Document any sum due under any provision of law or any instrument or
document creating any Lien prior or superior to the Lien of this Mortgage,
Mortgagee shall have and be entitled to a Lien on the Mortgaged Property equal
in priority to that discharged, and Mortgagee shall be subrogated to, and
receive and enjoy all rights and Liens possessed, held or enjoyed by the holder
of such Lien, which shall remain in existence for the benefit of Mortgagee to
secure the amount expended by Mortgagee on account of or in connection with such
Lien. Mortgagee shall be subrogated, notwithstanding their release of record, to
mortgages, trust deeds, superior titles, vendor's Liens, Liens, charges,
encumbrances, rights and equities on the Property to the extent that any
obligation under any thereof is paid or discharged by Mortgagee.
SECTION 2.11. Inspection of Mortgaged Property. Mortgagor shall
--------------------------------
permit Mortgagee and Mortgagee's agents, as frequently as Mortgagee reasonably
determines to be appropriate, during normal business hours (or at such other
times as may be reasonably be requested by Mortgagee), to enter upon the
Property for the purpose of inspecting and/or appraising the Mortgaged Property
and all books, records and documents of Mortgagor relating thereto, and for the
purpose of performing any of the acts that Mortgagee is authorized to perform
under the terms of any of the Loan Documents; provided, that Mortgagee shall
--------
have no duty to make such inspections and shall not incur any liability or
obligation for making or not making inspections. In exercising the foregoing
rights, Mortgagee shall use reasonable efforts to minimize any disruption of
Mortgagor's operations and shall be subject to Mortgagor's reasonable security
and operating measures.
SECTION 2.12. Certain Tax Law Changes. In the event of the passage
-----------------------
after the date of this Mortgage of any law deducting from the value of real
property, for the purpose of taxation, amounts in respect of any lien thereon or
changing in any way the laws for the taxation of mortgages or debts secured by
mortgages for state or local purposes or the manner of the collection of any
such taxes, and in any such event imposing a tax, either directly or indirectly,
on this Mortgage, Mortgagor shall pay such tax on or before the later of the
date the same is due and the tenth day after Mortgagor obtains actual knowledge
of the same.
SECTION 2.13. Future Advances. All future advances under this
---------------
Mortgage or under any other agreements at any time made between Mortgagor and
Mortgagee shall have the same priority as if the future advance was made on the
date that this Mortgage was recorded. Notice is hereby given that the Secured
Obligations may increase as a result of any defaults hereunder by Mortgagor due
to, for example, and without limitation, unpaid interest or late charges, unpaid
Impositions or insurance premiums or other charges which Mortgagee elects to
advance, defaults under Leases that Mortgagee elects to cure, attorneys' fees or
costs incurred in enforcing the Loan Documents or other expenses. Except as
otherwise provided in the Credit Agreement, interest shall be payable on any
future advances at the Overdue Rate.
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<PAGE>
SECTION 2.14. Covenants in Loan Documents. Mortgagor shall also
---------------------------
comply with all other covenants and obligations (a) which either Wahlco or
Thermatrix is obligated under the Credit Agreement to cause Mortgagor to comply
with, and (b) set forth in the Security Agreement, as if each of the same was
set forth at length herein as the direct obligation of Mortgagor hereunder.
ARTICLE III
Representations and Warranties
Mortgagor represents and warrants to and agrees with the Secured
Parties as follows:
SECTION 3.1.
(a) Title. Mortgagor owns and will at all times own good and
-----
marketable fee simple title to the Property, and good and valid title to the
balance of the Mortgaged Property, in each case free and clear of all Liens,
other than the Lien and security interests created by this Mortgage and any
Permitted Encumbrances.
(b) Chain of Title. Mortgagor acquired title to the Property under
--------------
the name Bachman Properties, Inc. Bachman Properties, Inc. merged into and with
Bachman Industries, Inc. on or about June, 28, 1990. Bachman Industries Inc.
--------------
thereafter changed its name to Wahlco Engineered Products, Inc.
SECTION 3.2. Valid Lien and Security Interest. This Mortgage creates
-------------------------------
(a) a valid and enforceable lien on the Property under the laws of the State in
favor of Mortgagee as security for the Secured Obligations, and (b) a valid and
enforceable security interest in the Personal Property under the laws of the
State in favor of Mortgagee as security for the Secured Obligations. All
necessary actions have been taken to establish a duly perfected first priority
lien and security interest in favor of Mortgagee in respect of Mortgagor's
interest in the Mortgaged Property (other than only the recording of this
Mortgage in the appropriate land records therefor), including, if required under
State law, the filing of record of financing statements in the appropriate form,
properly describing the Personal Property, duly executed by Mortgagor, in the
offices listed on Exhibit D hereto and the payment of all taxes and filing fees
---------
in connection therewith. The description of the Personal Property set forth in
such financing statements is sufficient to perfect a security interest in those
items of Personal Property in which a security interest may be perfected by the
filing of a financing statement under the Uniform Commercial Code. No further
or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary, except as provided under applicable law with
respect to the filing of continuation statements. No mortgage, deed of trust or
similar instrument and no financing statement or other similar document has been
signed, recorded or
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<PAGE>
filed covering Mortgagor's right, title or interest in or to any Mortgaged
Property, other than (a) those naming Mortgagee as mortgagee or secured party
thereunder and (b) those creating Permitted Encumbrances.
ARTICLE IV
Security Agreement and Fixture Filing
SECTION 4.1. Security Agreement.
------------------
(a) Grant of Security Interest. To the extent that the Mortgaged
--------------------------
Property includes Personal Property under applicable State law, this Mortgage
shall also be construed as a security agreement and the grant to the Mortgagee,
of a security interest in such Personal Property under the Uniform Commercial
Code.
(b) Remedies. If an Event of Default shall occur, Mortgagee may
--------
exercise from time to time and at any time any rights and remedies available to
it under applicable law upon default in the payment of indebtedness, including,
without limitation, any right or remedy available to it as a secured party under
the Uniform Commercial Code. Mortgagor shall, promptly upon request by
Mortgagee, assemble the Mortgaged Property, or any portion thereof generally
described in such request, and make the same available to Mortgagee at such
place or places designated by Mortgagee and reasonably convenient to Mortgagee
and Mortgagor. If Mortgagee elects to proceed under the Uniform Commercial Code
to dispose of all or any portion of the Mortgaged Property, Mortgagee, at its
option, may give Mortgagor notice of the time and place of any public sale of
any such property, or of the date after which any sale or other disposition
thereof is to be made, by sending notice by registered or certified first class
mail, postage prepaid, to Mortgagor at least ten (10) days prior to the time of
the sale or other disposition. If any notice of any proposed sale, assignment
or transfer by Mortgagee of any portion of the Collateral or any interest
therein is required by law, Mortgagor conclusively agrees that, unless any
longer period shall then be required by the Uniform Commercial Code, ten (10)
days' notice to Mortgagor of the date, time and place (and, in the case of a
sale, the terms) thereof is reasonable. Mortgagee may, at its option, appoint
any other Person as the agent of Mortgagee for the purpose of disposition of the
Personal Property in accordance with the Uniform Commercial Code. Mortgagor
acknowledges and agrees that a disposition of the Personal Property in
accordance with Mortgagee's rights and remedies in respect of the Personal
Property as provided in this Section is a commercially reasonable disposition
thereof.
SECTION 4.2. Fixture Filing. To the extent that the Mortgaged
--------------
Property includes items of Personal Property that are or are to become fixtures
under applicable law, and to the extent permitted under applicable law, the
filing of this Mortgage in the land records of the county in which such
Mortgaged Property is located shall also operate from the time of
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<PAGE>
fixture filing with respect to such Mortgaged Property, the information required
for the purpose of such fixture filing being as set forth in this Mortgage.
SECTION 4.3. Security Deposit Collateral. So long as no Event of
---------------------------
Default shall have occurred and shall be continuing, Mortgagor shall have the
exclusive right, as between Mortgagor and Mortgagee, to apply, draw, make
demand, sue for, or amend any Security Deposit Collateral or waive or release
any party from its obligations under or in respect of any Security Deposit
Collateral. If an Event of Default shall occur and shall be continuing,
Mortgagee shall (at its option) have the exclusive right, as between Mortgagor
and Mortgagee, upon notice to Mortgagor, to apply, draw, make demand, sue for,
or amend any Security Deposit Collateral.
SECTION 4.4. Additional Covenants. All other covenants and
--------------------
obligations of Mortgagor contained herein relating to the Mortgaged Property
(including those incorporated by reference under Section 2.14 hereof) shall be
deemed to apply to the Personal Property whether or not expressly referred to in
this Article IV, as if the same were the direct obligation of Mortgagor set
forth at length herein.
ARTICLE V
Assignments of Rents and Leases
SECTION 5.1. Assignment of Rents and Leases.
------------------------------
(a) Assignment of Rents. Mortgagor hereby presently, absolutely and
-------------------
irrevocably assigns to Mortgagee, subject to the license of Mortgagor under
subsection (b) of this Section, all Leases and the Rents, and Mortgagee and, if
a Receiver has been appointed under this Mortgage, such Receiver, shall have the
absolute, immediate and continuing right, subject to mandatory provisions of
applicable law, to collect and receive all Rents now or hereafter, including
during any period of redemption, accruing with respect to the Property. The
Lien on the Leases and the Rents made under Granting Clause H hereof shall be in
addition to and subject to the foregoing assignment. At the request of
Mortgagee or such Receiver, Mortgagor shall promptly execute, acknowledge,
deliver, record, register and file any additional general assignment of the
Leases or specific assignment of any Lease which Mortgagee or such Receiver may
require from time to time (all in form and substance reasonably satisfactory to
Mortgagee and such Receiver) to effectuate, complete, perfect, continue or
preserve this assignment of the Leases and the Rents and the Lien upon the
Leases and the Rents made under Granting Clause H.
(b) License to Collect Rents. As long as no Event of Default has
------------------------
occurred, Mortgagor shall have the right under a license granted hereby, subject
to subsection (c) of this Section, to collect the Rents upon the due date
thereof, but not prior to such due date.
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<PAGE>
(c) Termination of License Upon Event of Default. If an Event of
--------------------------------------------
Default shall occur, the license granted under subsection (b) of this Section
shall immediately and automatically terminate, without the necessity of any
action by any Person, and Mortgagee and any Receiver appointed under this
Mortgage shall have the right to exercise the rights and remedies provided under
this Mortgage or otherwise under applicable law. If an Event of Default shall
occur, upon demand by the Person exercising the rights under this Section,
Mortgagor shall promptly pay to such Person all security deposits under the
Leases and all Rents allocable to any period after the occurrence of such Event
of Default. Subject to any applicable Legal Requirement, any Rents received
hereunder by the Person exercising the rights under this Section shall be
promptly paid to Mortgagee, and any Rents received hereunder by Mortgagee shall
be applied and disbursed as provided in Section 6.9; provided that, subject to
any applicable requirement of law, any security deposits actually received by
Mortgagee shall be held, applied and disbursed as provided in the applicable
Leases.
(d) Direction to Tenants. Upon the occurrence of an Event of Default,
--------------------
Mortgagor shall, at the direction of Mortgagee, further authorize and direct, in
writing, the tenant under each Lease to pay directly to, or as directed by,
Mortgagee all Rents accruing or due under its Lease without proof to the tenant
of the occurrence and continuance of such Event of Default. Mortgagor hereby
authorizes the tenant under each Lease to rely upon and comply with any notice
or demand from Mortgagee for payment of Rents to Mortgagee and Mortgagor shall
have no claim against any tenant for Rents paid by such tenant to Mortgagee
pursuant to such notice or demand.
(e) No Release of Tenants. Neither this Mortgage nor any action or
---------------------
inaction on the part of Mortgagee shall release any tenant under any lease, any
guarantor of any Lease or Mortgagor from any of their respective obligations
under the Leases or constitute an assumption of any such obligation on the part
of Mortgagee. No action or failure to act on the part of Mortgagor shall
adversely affect or limit the rights of Mortgagee under this Mortgage or,
through this Mortgage, under the Leases.
(f) No Liability of Mortgagee. Neither the acceptance hereof nor the
-------------------------
exercise of the rights and remedies hereunder nor any other action on the part
of Mortgagee or any Person exercising the rights of Mortgagee hereunder shall be
construed to (i) be an assumption by Mortgagee or any such Person or to
otherwise make Mortgagee or such Person liable or responsible for the
performance of any of the obligations of Mortgagor under or with respect to the
Leases or for any Rent, security deposit or other amount delivered to Mortgagor;
provided that Mortgagee or any such Person exercising the rights of Mortgagee
shall be accountable as provided in subsection (c) of this Section for any
Rents, security deposits or other amounts actually received by Mortgagee or such
Person, as the case may be; or (ii) obligate Mortgagee or any such Person to
take any action under or with respect to the Leases or with respect to the
Mortgaged Property, to incur any expense or perform or discharge any
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duty or obligation under or with respect to the Leases or with respect to the
Mortgaged Property, to appear in or defend any action or proceeding relating to
the Leases or the Mortgaged Property, to constitute Mortgagee as a mortgagee in
possession (unless Mortgagee actually enters and takes possession of the
Mortgaged Property), or to be liable in any way for any injury or damage to
person or property sustained by any Person in or about the Mortgaged Property,
other than to the extent caused by the willful misconduct or gross negligence of
Mortgagee or any Person exercising the rights of Mortgagee hereunder.
(g) No Existing Leases. Mortgagor represents and warrants that as of
------------------
the date hereof, no Leases exist with respect to the Mortgaged Property.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Defaults. The following shall be an Event of
------------------
Default hereunder (an "Event of Default"): any Event of Default by or with
----------------
respect to Mortgagor, either Borrower or any other Loan Party under and as
defined in the Credit Agreement or any other Loan Document.
SECTION 6.2. Remedies.
--------
(a) General. If an Event of Default shall occur and shall be
-------
continuing, Mortgagee, with or without entry onto the Property, shall have the
following rights:
(i) to immediately foreclose this Mortgage and the lien
hereof;
(ii) to sell Mortgagor's right, title and interest in and
to the Mortgaged Property, as a whole or in separate parcels, at one or
more public sales, at such time and place and upon such terms and
conditions as may be required or permitted by applicable law. Such power
shall not be exhausted until the Secured Obligations have been paid in
full. Mortgagee may execute and deliver to the purchaser or purchasers at
any sale a sufficient conveyance of the Mortgaged Property sold thereby
divesting Mortgagor of all right, title or interest that it may have in and
to such Mortgaged Property and vesting the same in the purchaser or
purchasers at such sale or sales, free of the security interest and lien of
this Mortgage and free of all rights of redemption in Mortgagor;
(iii) to take such steps to protect and enforce its rights
and the lien of this Mortgage whether by action, suit or proceeding in
equity or at law for the
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specific performance of any provision in the Loan Documents, or in aid of
the execution of any power granted in this Mortgage, or for any foreclosure
hereunder, or for the enforcement of any other appropriate legal or
equitable remedy Mortgagee shall elect;
(iv) to apply for the appointment of a Receiver for the
Mortgaged Property in accordance with Section 6.4; and
(v) to take all such other steps and to assert and
exercise all such other rights and remedies as shall be permitted by
applicable law.
(b) Foreclosure. This Mortgage may be foreclosed once against all or
-----------
successively against any part or parts of the Mortgaged Property as Mortgagee
may elect. This Mortgage and the right of foreclosure hereunder shall not be
impaired or exhausted by one or any foreclosure or by one or any sale, and may
be foreclosed successively and in parts, until all of the Mortgaged Property
has been foreclosed against and sold. The purchase money proceeds or avails of
any foreclosure or sale after default and any other sums which then may be held
by Mortgagee under this Mortgage shall be applied as provided in Section 6.9
hereof.
(c) Mortgagee May Bid. In connection with any such foreclosure or
-----------------
sale, Mortgagee may bid for and acquire Mortgagor's interest in the Mortgaged
Property or any part thereof and in lieu of paying cash therefor, may make
settlement for the purchase price by crediting upon the Secured Obligations the
net sale price after deducting therefrom the amounts referred to in clause
"first" of Section 6.9. Mortgagee may adjourn from time to time any sale by it
to be made under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales, and,
Mortgagee, without further notice or publication, may make such sale at the time
and place to which the same shall be so adjourned.
(d) Acceleration of Secured Obligations. In the event of any sale
-----------------------------------
made under or by virtue of this Article, the entire principal of, interest and
other amounts in respect of the Secured Obligations, if not previously due and
payable, shall, at the option of Mortgagee, immediately become due and payable,
anything in this Mortgage to the contrary notwithstanding.
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SECTION 6.3. Possession of Property.
----------------------
(a) Mortgagor to Vacate Property. Mortgagor hereby waives, if an
----------------------------
Event of Default shall occur and shall be continuing, all right to the
possession and Rents of the Property, and Mortgagor hereby expressly authorizes
and empowers Mortgagee, upon such occurrence and continuation, for the purpose
of protecting and preserving the Property and the interest of Mortgagee therein,
and to the extent permitted by law, (i) to enter upon and take possession of the
Property, to remove and exclude Mortgagor and its agents and servants wholly
therefrom, by summary proceeding, ejectment or other legal proceeding, and to
take possession of all books, records and accounts relating thereto, and
Mortgagor agrees to surrender possession of the Property and of such books,
records and accounts to Mortgagee on demand and (ii) with or without the entry
upon or taking possession of the Property, to hold, operate, manage, repair and
maintain the Mortgaged Property and to collect and receive all Rents derived
from the Property, and after deducting therefrom all reasonable costs, expenses
and liabilities (including reasonable attorneys' fees and expenses) incurred by
Mortgagee in collecting the same and in using, managing, preserving and
controlling the Property for the purpose of protecting and preserving the
Mortgaged Property and the interest of Mortgagee therein, and otherwise in
exercising Mortgagee's rights hereunder, including all amounts necessary to pay
Impositions and reasonable other charges in connection with the Property, as
well as reasonable compensation for Mortgagee's agents and employees, and to
apply the remainder as set forth in Section 6.9. Without limiting any other
right or remedy of Mortgagee pursuant to any other provision of this Mortgage or
the Credit Agreement, upon or at any time after the filing of a suit to
foreclose this Mortgage, the court in which such suit is filed shall have full
power to enter an order placing Mortgagee in possession of the Property with the
same power granted to a Receiver pursuant to the applicable Sections of this
Mortgage and with all other rights and privileges of a mortgagee-in-possession
under applicable State law. All such costs, expenses and liabilities incurred
by Mortgagee shall be Secured Obligations.
(b) Payment for Use and Occupancy. Following an Event of Default and
-----------------------------
the exercise by Mortgagee of its remedies hereunder, if at any time Mortgagee
shall have (and shall exercise) the right, following such summary proceeding,
ejectment or other proceeding pursuant to Section 6.3(a), to exclude Mortgagor
from all or any part of the Property and Mortgagor shall fail to vacate all or
such portion of the Property, then, Mortgagor shall pay the fair and reasonable
rental value for the use and occupancy of the Property or any portion thereof
that is being occupied by Mortgagor for such period and, upon default of any
such payment Mortgagor may be evicted by any summary action or proceeding for
the recovery of possession of such portion of the Property for nonpayment of
rent, however designated.
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SECTION 6.4. Appointment of Receiver. If an Event of Default shall
-----------------------
occur and shall be continuing, Mortgagee shall, to the fullest extent permitted
by law, and without regard to the adequacy or value of any security for the
Secured Obligations or the solvency of Mortgagor, or the occupancy of the
Property or any part thereof as a homestead, and without the requirement of any
bond, be entitled to the appointment of a Receiver for all or any part of the
Mortgaged Property and all Rents therefrom (the inclusion in this Mortgage of
the provisions for the appointment of a Receiver and the assignment of Rents
being an express condition upon which Mortgagee agreed to execute the Credit
Agreement and to accept this Mortgage), whether or not such receivership is
incidental to a proposed sale of the Mortgaged Property or otherwise, and, to
the fullest extent permitted by law, Mortgagor hereby consents to the
appointment of such a Receiver and will not oppose any such appointment.
SECTION 6.5. Waiver of Stay, Extension, Moratorium and Marshalling
-----------------------------------------------------
Laws and Equity of Redemption. To the maximum extent permitted by law,
- -----------------------------
Mortgagor shall not at any time insist upon, or plead, or in any manner whatever
claim or take any benefit or advantage of any applicable present or future stay,
extension or moratorium law, which may affect observance or performance of the
provisions of this Mortgage; nor claim, take or insist upon any benefit or
advantage of any present or future law providing for the valuation or appraisal
of, or rights of marshalling with respect to, the Mortgaged Property or any
portion thereof prior to or in connection with any sale or sales thereof which
may be made under or by virtue of this Mortgage; and Mortgagor, to the extent
that it lawfully may, hereby waives all benefit or advantage of any such law or
laws. Mortgagor, for itself and all who may claim under it, hereby waives, to
the maximum extent permitted by applicable law, any and all rights and equities
of redemption from sale under the power of sale created hereunder or from sale
under any order or decree of foreclosure of this Mortgage and (if an Event of
Default shall occur) all notice or notices of seizure, and all right to have the
Mortgaged Property marshalled upon any foreclosure hereof. Mortgagee shall not
be obligated to pursue or exhaust its rights or remedies as against any other
part of the Mortgaged Property and Mortgagor hereby waives any right or claim of
right to have Mortgagee proceed against any portion of the Mortgage Property in
any particular order.
SECTION 6.6. Mortgagee Authorized to Execute Documents. Mortgagor
-----------------------------------------
irrevocably appoints Mortgagee the true and lawful attorney of Mortgagor (which
appointment is coupled with an interest and shall be irrevocable), in its name
and stead and on its behalf, for the purpose of effectuating any sale,
assignment, transfer or delivery for the enforcement hereof, whether pursuant to
power of sale, foreclosure or otherwise, to execute and deliver all deeds, bills
of sale, assignments, releases and other instruments as Mortgagee may consider
necessary or appropriate, with full power of substitution, Mortgagor hereby
ratifying and confirming all that its said attorney or any substitute shall
lawfully do by virtue hereof. Nevertheless, if so requested by Mortgagee or any
purchaser, Mortgagor will immediately ratify and confirm, without any cost or
charge therefor, any such sale, assignment, transfer or delivery by executing
and delivering to the grantee or such purchaser all such proper deeds,
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bills of sale, assignments, releases and other instruments as may be designated
in any such request.
SECTION 6.7. Collateral Situated in More than One County. If the
-------------------------------------------
Mortgaged Property is situated in two or more counties in the State, or in two
judicial districts of the same county, Mortgagee shall have the full power to
select in which county or counties, or in which judicial district or districts,
the sale of the Mortgaged Property is to be made, and Mortgagee's selection
shall be binding upon Mortgagor and shall permit the sale of the whole to be
made in any of the counties or judicial districts in which part of the Mortgaged
Property is located. Mortgagor hereby waives any right it might otherwise have
or assert to object to foreclosure, through the use of a single Mortgage, upon
all of the Mortgaged Property in the State.
SECTION 6.8. Collateral in Other States. Mortgagor acknowledges and
--------------------------
agrees that the Other Mortgaged Properties may be located in states other than
the State, and Mortgagor therefore waives and relinquishes any and all rights it
may have, whether at law or equity, to require Mortgagee to proceed to enforce
or exercise any rights, powers and remedies that Mortgagee or any trustee may
have under this Mortgage and the Other Mortgages in any particular manner, in
any particular order, or in any particular state or other jurisdiction. Without
limiting the generality of the foregoing, (a) Mortgagee shall not be precluded
from or restricted in exercising any of its rights and remedies hereunder due to
the prior or concurrent exercise by Mortgagee or any trustee of any of its
rights and remedies under any Other Mortgage, (b) neither Mortgagee nor any
trustee shall be precluded from or restricted in exercising any of its rights
and remedies under any Other Mortgage due to the prior or concurrent exercise by
Mortgagee of any of its rights and remedies hereunder, and (c) neither Mortgagee
nor any trustee shall be required to exercise or enforce any of its rights and
remedies under any Other Mortgage before or concurrently with the exercise by
Mortgagee of any of its rights and remedies hereunder. Mortgagor further agrees
that any particular proceeding, including foreclosure through court action (in a
state or federal court) or power of sale, may be brought and prosecuted in the
local or federal courts of any one or more of the states in which any of the
Mortgaged Property and the Other Mortgaged Properties may be located, without
regard to the fact that any one or more prior or contemporaneous proceedings
have been instituted elsewhere with respect to the same or any other portion of
the Mortgaged Properties or the Other Mortgaged Properties.
SECTION 6.9. Application of Proceeds. Following the occurrence of an
-----------------------
Event of Default, any proceeds of any of the Mortgaged Property shall be applied
first, to the costs and expenses of the Mortgagees payable pursuant to
-----
the Credit Agreement and this Mortgage,
second, to the payment of all other Secured Obligations other than
------
principal and
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interest,
third, to interest accrued and unpaid on the Secured Obligations, on a
-----
pro rata basis among the Mortgagees determined by the amount of interest
accrued and unpaid on the Secured Obligations of each Mortgagee,
fourth, to the satisfaction of the principal amount of the Secured
------
Obligations, on a pro rata basis among the Mortgagees determined by
principal amount of the Secured Obligations of each Mortgagee then
outstanding, and
fifth, the remainder, if any, to Mortgagor or such other Person as may
-----
entitled thereto by law.
Mortgagor shall remain liable for any deficiency.
SECTION 6.10. Setoff. To the fullest extent permitted by applicable
------
law, at any time while an Event of Default has occurred and is continuing, any
and all deposits (including all account balances, whether provisional or final
and whether or not collected or available) and any other Secured Obligations at
any time held or owing by the Mortgagees to or for the credit or account of
Mortgagor, except accounts with respect to which Mortgagor is a trustee or an
escrow agent in respect of bona fide third parties, may be offset and applied
toward the payment of the Secured Obligations owing to such Mortgagee, whether
or not the Secured Obligations, or any part thereof, shall then be due.
SECTION 6.11. Receipt a Sufficient Discharge to Purchaser. Upon any
-------------------------------------------
sale of the Mortgaged Property or any part thereof or any interest therein,
whether pursuant to power of sale, foreclosure or otherwise, the receipt by
Mortgagee or the officer making the sale under judicial proceedings of the
purchase money therefor shall be a sufficient discharge to the purchaser for
such purchase money, and such purchaser shall not be obligated to see to the
application thereof.
SECTION 6.12. Sale a Bar Against Mortgagor. Any sale of the
----------------------------
Mortgaged Property or any part thereof or any interest therein under or by
virtue of this Mortgage, whether pursuant to power of sale, foreclosure or
otherwise, shall forever be a bar against Mortgagor.
SECTION 6.13. Remedies Cumulative; Waiver. No remedy or right of
---------------------------
Mortgagee hereunder, under the Credit Agreement, or any other Loan Document or
otherwise, or available under applicable law, shall be exclusive of any other
right or remedy, but each such remedy or right shall be in addition to every
other remedy or right now or hereafter existing at law or in equity under any
such document or under applicable law. No delay in the exercise of, or omission
to exercise, any remedy or right accruing on any default or Event of
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<PAGE>
Default shall impair any such remedy or right or be construed to be a waiver of
any such default or Event of Default or an acquiescence therein, nor shall it
affect any subsequent default or Event of Default of the same or a different
nature. Every such remedy or right may be exercised concurrently or
independently, and when and as often as may be deemed proper by Mortgagee. All
obligations of Mortgagor, and all rights, powers and remedies of Mortgagee
expressed herein, shall be in addition to, and not in limitation of, those
provided by law or in the Credit Agreement, any other Loan Document or any other
written instrument relating to any of the Secured Obligations or any security
therefor. Any and all covenants of Mortgagor in this Mortgage may from time to
time, by instrument in writing signed by Mortgagee, be waived to such extent and
in such manner as Mortgagee may desire, but no such waiver will ever affect or
impair the rights of Mortgagee hereunder, except to the extent specifically
stated in such written instrument.
SECTION 6.14. No Liability of Mortgagees. Notwithstanding anything
--------------------------
contained in this Mortgage, this Mortgage is only intended as security for the
Secured Obligations and the Mortgagees shall not be obligated to perform or
discharge, and does not hereby undertake to perform or discharge, any
obligation, duty or liability of Mortgagor with respect to any of the Mortgaged
Property. Unless and until a Mortgagee takes actual possession of the Mortgaged
Property, either through foreclosure, the taking of a deed in lieu thereof or
otherwise, the Mortgagees shall not have responsibility for the control, care,
management or repair of the Mortgaged Property nor shall such Mortgagee be
responsible or liable for any negligence in the management, operation, upkeep,
repair or control of the Mortgaged Property resulting in loss or injury or death
to any licensee, employee, tenant or stranger or other Person. Mortgagor shall
indemnify and hold harmless the Mortgagees from and against any and all loss,
cost and liability incurred by Mortgagee in connection with any of the foregoing
which are not the responsibility of the Mortgagees in accordance with this
Section; provided, however, that Mortgagor shall not be liable for such
--------
indemnification to any Mortgagee to the extent that any such suit, action,
proceeding, claim, damage, loss, liability or expense results from such
Mortgagee's gross negligence or willful misconduct.
ARTICLE VII Concerning Mortgagee
SECTION 7.1. [Intentionally Omitted]
ARTICLE VIII
Miscellaneous
SECTION 8.1. Termination; Defeasance. This Mortgage and the security
-----------------------
interests created hereby shall terminate when the Secured Obligations due and to
become due
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shall have been paid or performed in full. Upon termination, Mortgagee shall
execute and deliver to Mortgagor an appropriate release and such other documents
reasonably required by Mortgagor, and shall turn over to Mortgagor any of the
Mortgaged Property and any other files, documents or material held by Mortgagee.
Mortgagor shall pay Mortgagee's reasonable expenses (including attorneys' fees
and expenses) in connection with the termination hereof and any transfer of such
property.
SECTION 8.2. Rights Cumulative; Waivers. To the fullest extent
--------------------------
permitted by law, the rights and remedies of the Mortgagees under this Mortgage
and the other Loan Documents shall be cumulative. The exercise, failure to
exercise or delay in exercising any right or remedy by any of the Mortgagees
shall not prevent any of them from exercising any other right or remedy or
exercising such right or remedy at a later time.
SECTION 8.3. Fees and Expenses. Subject to Section 10.2 of the
-----------------
Credit Agreement (to the extent applicable), Mortgagor shall pay upon demand all
fees and expenses (including reasonable attorneys' fees and expenses) incurred
by Mortgagee in connection with (a) the administration of this Mortgage and any
amendment or modification hereof, (b) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Mortgaged
Property or (c) the failure by Mortgagor to perform or observe any of the
provisions hereof and the exercise or enforcement of any of the rights of, and
collection of amounts due to, the Mortgagees hereunder.
SECTION 8.4. Indemnification.
---------------
(a) Indemnity. Mortgagor shall protect, indemnify and hold harmless
---------
each Mortgagee and each of its Indemnified Parties from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs,
fees, charges and expenses (including reasonable attorneys' fees and expenses
and further including in connection with the enforcement of this indemnity)
(each, a "Loss") imposed upon or incurred by or asserted against any such
----
Mortgagee or Indemnified Party by reason of (i) any accident, injury or death of
persons or loss of or damage to property occurring on or about the Property or
any part thereof; (ii) any use or nonuse of the Property or any part thereof;
(iii) any failure on the part of Mortgagor to perform or comply with any of the
terms of this Mortgage (including with respect to environmental matters under
Article IX of this Mortgage); (iv) the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; (v) any negligent or tortious act or omission on
the part of Mortgagor or any of its agents, employees, contractors, licensees,
lessees or invitees; (vi) any contest of any Legal Requirement, Imposition or
other matter or (vii) any other matter or thing arising from or attributable to
Mortgagor's interest in the Mortgaged Property and/or receipt of any income
therefrom, other than Losses resulting from Mortgagee's gross negligence or
willful misconduct, as determined by a court of competent jurisdiction. If any
action, suit or proceeding is brought against Mortgagee or any Indemnified Party
by reason of
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any such occurrence, Mortgagor, upon such Person's request, will at Mortgagor's
expense resist and defend such action, suit or proceeding or will cause the same
to be resisted and defended by counsel for the insurer of the liability or by
counsel approved by such Person. Any amounts payable to any Mortgagee or any
Indemnified Party pursuant to the indemnity contained in this Section shall be
due within ten (10) days after demand therefor, and if not paid when due shall
bear interest at the Overdue Rate from and including the date due to the date of
payment by Mortgagor; and all such amounts, together with all such interest,
shall be deemed part of the Secured Obligations secured by this Mortgage. The
indemnity set forth in this Section shall survive the repayment in full of the
Secured Obligations and the release of any and all liens of Mortgagee, the
transfer of any and all right, title and interest in and to the Mortgaged
Property, or any part thereof, to any Person and the satisfaction of the Secured
Obligations.
(b) Third-Party Beneficiaries. Each Indemnified Party shall be a
-------------------------
third-party beneficiary hereof and shall be entitled to, and to enforce, all of
the rights, benefits and protections afforded herein to an Indemnified Party, as
if such Indemnified Party were a party hereto.
SECTION 8.5. Notices. All notices and other communications provided
-------
to any party in connection with this Mortgage shall be given and effective as
follows:
(a) If to the Lenders or to Mortgagee, at:
Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Telephone: (203) 862-7000
Attention: Arthur H. Amron
Facsimile: (203) 862-7312
and
Attention: Jay L. Maymudes
Facsimile: (203) 862-7350
With a copy to:
Howard, Smith & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telephone: (212) 841-1000
Facsimile: (212) 841-1010
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<PAGE>
(b) If to Mortgagor, at:
c/o Thermatrix Inc.
308 N. Peters Road, Suite 100
Knoxville, Tennessee 37922
Attention: Edward E. Greene
Telephone: (423) 539-9603
Facsimile: (423) 670-4091
With a copy to
Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road
Palo Alto, CA 94304
Attention: Michael J. Danaher, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
SECTION 8.6. Amendment and Waiver. Except as otherwise provided
--------------------
herein, this Mortgage may be amended, and observance of any term of this
Mortgage may be waived, with (and only with) the written consent of Mortgagor
and Mortgagee.
SECTION 8.7. Expenses of Mortgagor's Agreements and Duties. The
---------------------------------------------
terms, conditions, covenants and agreements to be observed or performed by
Mortgagor under this Mortgage shall be observed or performed by it at its sole
cost and expense.
SECTION 8.8. Mortgagee's Right to Use Agents and to Act in Name of
-----------------------------------------------------
Mortgagor. Mortgagee may exercise its rights and remedies under this Mortgage
- ---------
through the Agent or any other agent or designee and, in the exercise thereof,
Mortgagee or any such other Person may act in its own name or in the name and on
behalf of Mortgagor.
SECTION 8.9. No Compensation or Expense. Mortgagee may exercise its
--------------------------
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<PAGE>
rights and remedies under this Mortgage (a) without payment of any rent, license
fee or compensation of any kind to Mortgagor and (b) for the account, and at the
expense, of Mortgagor.
SECTION 8.10. Limitation of Obligations with Respect to Mortgaged
---------------------------------------------------
Property.
- --------
(a) Reasonable Care. Mortgagee shall have any duty or liability to
---------------
protect or preserve any Mortgaged Property or to preserve rights pertaining
thereto other than the duty to use reasonable care in the custody and
preservation of any Mortgaged Property in its actual possession. Mortgagee
shall be deemed to have exercised reasonable care in the custody and
preservation of any Mortgaged Property in its possession if such Mortgaged
Property is accorded treatment substantially equal to that which Mortgagee
accords its own like property. Mortgagee shall be relieved of all
responsibility for any Mortgaged Property in its possession upon surrendering
it, or tendering surrender of it, to Mortgagor.
(b) No Obligations. Nothing contained in this Mortgage shall be
--------------
construed as requiring or obligating Mortgagee, and no Mortgagee shall be
required, or obligated, to (i) make any demand, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or file any
claim or notice or take any action, with respect to any Mortgaged Property or
the monies due or to become due thereunder or in connection therewith, (ii)
ascertain or take action with respect to calls, conversions, exchanges,
maturities, tenders, offers or other matters relating to any Mortgaged Property,
whether or not any Mortgagee has or is deemed to have knowledge or notice
thereof, (iii) take any necessary steps to preserve rights against any prior
parties with respect to any Mortgaged Property or (iv) notify Mortgagor or any
other Person of any decline in the value of any Mortgaged Property.
SECTION 8.11. Time of the Essence. Time is of the essence with
-------------------
respect to the various obligations of Mortgagor and rights and remedies of
Mortgagee under this Mortgage.
SECTION 8.12. Inconsistency with Loan Documents. Mortgagor and
---------------------------------
Mortgagee are parties to the Security Agreement. If any term or provision
hereof with respect to any Mortgaged Property hereunder which is Personal
Property and which is the subject of and covered by the Security Agreement is
inconsistent with any term or provision of the Security Agreement, then such
term or provision of the Security Agreement shall govern and control with
respect to such Personal Property to the extent of such inconsistency.
SECTION 8.13. Severability. If any provision of this Mortgage shall
------------
be invalid, illegal or unenforceable in any jurisdiction, the remaining
provisions shall continue to be valid and enforceable and such provision shall
continue to be valid and enforceable in any other jurisdiction.
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<PAGE>
SECTION 8.14. Headings. The headings of the Sections and subsections
--------
are for convenience and shall not affect the meaning of this Mortgage.
SECTION 8.15. Assignment; Benefit. Mortgagor may not sell, convey,
------------------
assign, transfer or otherwise dispose of all or any portion of its rights and
obligations under this Mortgage. Each Mortgagee may assign all or any part of
its rights under this Mortgage as provided in the Credit Agreement. Mortgagor
and Mortgagee, and their permitted successors and assigns shall be bound by this
Mortgage. They (and their Indemnified Parties) shall be the only persons
entitled to its benefits.
SECTION 8.16. GOVERNING LAW. THIS MORTGAGE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
NOTWITHSTANDING THE FOREGOING, (A) MATTERS RESPECTING TITLE TO THE MORTGAGED
PROPERTY AND THE CREATION, PERFECTION, PRIORITY AND FORECLOSURE OF LIENS ON, AND
SECURITY INTERESTS IN, THE MORTGAGED PROPERTY SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE WITHOUT
GIVING EFFECT TO THE CONFLICTS-OF-LAW RULES AND PRINCIPLES OF THE STATE; (B)
MORTGAGOR AGREES THAT WHETHER OR NOT DEFICIENCY JUDGMENTS ARE AVAILABLE UNDER
THE LAWS OF THE STATE AFTER A FORECLOSURE OR SALE (JUDICIAL OR NONJUDICIAL) OF
THE MORTGAGED PROPERTY, OR ANY PORTION THEREOF, OR ANY OTHER REALIZATION THEREON
BY MORTGAGEE, MORTGAGEE SHALL HAVE THE RIGHT, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, TO SEEK SUCH A DEFICIENCY JUDGMENT AGAINST MORTGAGOR IN OTHER
STATES OR FOREIGN JURISDICTIONS; AND (C) MORTGAGOR AGREES THAT, TO THE EXTENT
MORTGAGEE OBTAINS A DEFICIENCY JUDGMENT IN ANY OTHER STATE OR FOREIGN
JURISDICTION THEN, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH PARTY
SHALL HAVE THE RIGHT TO ENFORCE SUCH JUDGMENT IN THE STATE, AS WELL AS IN OTHER
STATES OR FOREIGN JURISDICTIONS.
SECTION 8.17. WAIVER OF JURY TRIAL. MORTGAGOR HEREBY KNOWINGLY,
--------------------
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
MORTGAGEE OR MORTGAGOR IN CONNECTION HEREWITH. MORTGAGOR ACKNOWLEDGES AND
AGREES THAT IT HAS
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<PAGE>
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH NOTE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR MORTGAGEE ENTERING INTO THIS MORTGAGE.
SECTION 8.18. CONSENT TO JURISDICTION. EACH OF THE MORTGAGOR AND
-----------------------
MORTGAGEE IRREVOCABLY SUBMITS TO THE NON-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 MORTGAGE OR ANY
TRANSACTION CONTEMPLATED HEREBY. EACH OF THE MORTGAGOR AND MORTGAGEE 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 SECTION 8.5 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. EACH OF THE MORTGAGOR AND MORTGAGEE IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION,
SUIT OR PROCEEDING ARISING OUT OF THIS MORTGAGE 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 (OR IN ANY COURT DESCRIBED BELOW) HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. MORTGAGOR ACKNOWLEDGES THAT IN ANY ACTION OR PROCEEDING TO ENFORCE
PAYMENT OF THE SECURED OBLIGATIONS OR ANY OTHER RIGHT OF THE MORTGAGEE OR THE
LENDERS UNDER THIS MORTGAGE, IT WAIVES THE RIGHT TO ASSERT ANY COUNTERCLAIM OF
ANY KIND OTHER THAN A COMPULSORY COUNTERCLAIM. NOTWITHSTANDING THE FOREGOING,
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY
MANNER PERMITTED BY STATE LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED
AGAINST MORTGAGOR OR OTHERWISE TO FORECLOSE THIS MORTGAGE OR EXERCISE ANY OTHER
REMEDIES HEREUNDER IN ANY APPROPRIATE STATE COURT OR FEDERAL COURT IN THE STATE.
SECTION 8.19. Limitation on Interest Payable. It is the intention of
------------------------------
the parties to conform strictly to the usury laws, whether State or federal,
that are applicable to the
-33-
<PAGE>
transaction of which this Mortgage is a part. All agreements between Mortgagor
and Mortgagee whether now existing or hereafter arising and whether oral or
written, are hereby expressly limited so that in no contingency or event
whatsoever shall the amount paid or agreed to be paid by Mortgagor for the use,
forbearance or detention of the money to be loaned under the Credit Agreement or
any Loan Document, or for the payment or performance of any covenant or
obligation contained herein or in the Credit Agreement or any related document
or other Loan Document, exceed the maximum amount permissible under applicable
federal or state usury laws. If under any circumstances whatsoever fulfillment
of any such provision, at the time performance of such provision shall be due,
shall involve exceeding the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the limit of such validity. If
under any circumstances Mortgagor shall have paid an amount deemed interest by
applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable usury laws shall be applied to the
reduction of the principal amount owing in respect of the Secured Obligations
and not to the payment of interest, or if such excessive interest exceeds the
unpaid balance of principal and any other amounts due hereunder, the excess
shall be refunded to Mortgagor. All sums paid or agreed to be paid for the use,
forbearance or detention of the principal under any extension of credit by
Mortgagee shall, to the extent permitted by applicable law, and to the extent
necessary to preclude exceeding the limit of validity prescribed by law, be
amortized, prorated, allocated and spread from the date of this Mortgage until
payment in full of the Secured Obligations so that the actual rate of interest
on account of such principal amounts is uniform throughout the term hereof.
SECTION 8.20. Covenants To Run With the Land. All of the grants,
------------------------------
covenants, terms, provisions and conditions in this Mortgage shall run with the
Land and shall apply to, and bind the successors and assigns of Mortgagor. If
there shall be more than one mortgagor, the covenants and warranties hereof
shall be joint and several.
SECTION 8.21. No Merger. The rights and estate created by this
---------
Mortgage shall not, under any circumstances, be held to have merged into any
other estate or interest now owned or hereafter acquired by Mortgagee unless
Mortgagee shall have consented to such merger in writing.
SECTION 8.22. Relationship. The relationship of Mortgagee to
------------
Mortgagor hereunder is strictly and solely that of mortgagor and mortgagee and
nothing contained in this Mortgage, or any other document or instrument now
existing and delivered in connection therewith or otherwise in connection with
the Secured Obligations is intended to create, or shall in any event or under
any circumstance be construed as creating a partnership, joint venture, tenancy-
in-common, joint tenancy or other relationship of any nature whatsoever between
Mortgagee and Mortgagor other than as mortgagee and mortgagor.
-34-
<PAGE>
ARTICLE IX
Environmental Matters
SECTION 9.1. Notice of Environmental Matters.
-------------------------------
(a) Delivery of Notice. Mortgagor shall notify Mortgagee promptly
------------------
after, and in any event within three (3) Business Days after, any Responsible
Officer of Mortgagor obtains knowledge of one or more of the matters described
in Section 6.2(i) of the Credit Agreement with respect to the Property or
Mortgagor, as if the same was a direct obligation of Mortgagor set forth at
length herein.
(b) Contents of Notice. All such notices shall comply with the
------------------
requirements of such Section. In addition, Mortgagor shall provide Mortgagee
with copies of all communications between Mortgagor and any Person required by
or otherwise relating to any of the matters described in such Section.
SECTION 9.2. Obligations of Mortgagor. Mortgagor hereby covenants to
------------------------
comply with, and to cause its officers, directors, shareholders, partners,
agents, servants and employees and each tenant of the Property to comply with,
all of the obligations applicable to Mortgagor, the Property and each such
tenant with respect to the Property set forth in Section 6.6(b) of the Credit
Agreement, as if each of the same was a direct obligation of Mortgagor set forth
at length herein.
ARTICLE X
Local Jurisdiction Provisions
Notwithstanding anything to the contrary set forth elsewhere in this
Mortgage:
SECTION 10.1. Mortgage Covenants. The Mortgaged Property is granted,
------------------
mortgaged and conveyed WITH MORTGAGE COVENANTS.
SECTION 10.2. Statutory Conditions. This Mortgage is given upon the
--------------------
STATUTORY CONDITION, which is incorporated herein by reference, for breach of
which Mortgagee shall have the right to foreclose this Mortgage under any legal
method of foreclosure in existence at the time or now existing, or under any
other applicable law, including, without limitation, the STATUTORY POWER OF
SALE, which is expressly incorporated herein by reference, to the extent
authorized or allowed by any present or future law of the State of Maine. In
connection therewith, Mortgagor acknowledges that this Mortgage secures a loan
or loans for business and commercial purposes and that this Mortgage is given
primarily for a business, commercial or agricultural purpose. In the event of a
conflict between the STATUTORY CONDITION and the terms and provisions of this
-35-
<PAGE>
Mortgage, the terms and provisions of this Mortgage shall control, to the extent
permitted by Maine law.
SECTION 10.3. No Waiver. Mortgagor agrees for itself, its successor
---------
and assigns, that the acceptance, before the expiration of the right of
redemption and after the commencement of foreclosure proceedings of this
Mortgage, of insurance proceeds, eminent domain awards, rents or anything else
of value to be applied on or to the Secured Obligations by Mortgagee or any
person or party holding under Mortgagee shall not constitute a waiver of such
foreclosure, and this agreement by Mortgagor shall be that agreement referred to
in 14 M.R.S.A. (S) 6204, as amended, as necessary to prevent such waiver of
foreclosure. This agreement by Mortgagor is intended to apply to the acceptance
and such applications of any such insurance proceeds, eminent domain awards,
rents and other sums or anything else of value, whether the same shall be
accepted from, or for the account of, Mortgagor or from any other sources
whatsoever by Mortgagee or by any person or party holding under Mortgagee at any
time or times in the future while any portion of the Secured Obligations shall
remain outstanding.
SECTION 10.4. Written Agreement. Mortgagor is hereby notified and
-----------------
hereby confirms and acknowledges that, pursuant to 10 M.R.S.A. (S) 1146(2), to
the extent applicable, in order to maintain an action against Mortgagee with
respect to a promise, contract or agreement to lend money, extend credit,
forbear from collection of a debt or make any other accommodation for the
repayment of a debt for more than $250,000, such promise, contract or agreement
(or some memorandum or note thereof) must be both (a) in writing and (b) signed
by Mortgagee.
SECTION 10.5. Open-End Mortgage. This Mortgage is an open-end
-----------------
mortgage that secures existing indebtedness, "Future Advances" "Protective
Advances" and "Contingent Obligations" as such terms are defined in 33 M.R.S.A.
(S) 505. The maximum aggregate amount of Contingent Obligations secured by this
Mortgage shall not at any time exceed the total amount of $10,000,000. The
maximum aggregate amount of all debts or obligations secured by this Mortgage,
including Future Advances, but excluding Contingent Obligations and Protective
Advances, shall not at any time exceed the total amount of $10,000,000. The
future advances secured hereby shall be made to or for the account of Mortgagor
and may be made pursuant to promissory notes, line of credit agreements or other
instruments evidencing such future advances that may be hereafter executed and
delivered by Mortgagor to Mortgagee. In the event that any notice described in
subsections 5(a) and 5(b) of 33 M.R.S.A. (S) 505 is recorded or is received by
Mortgagee, any commitment, agreement or obligation to make future advances to or
for the benefit of Mortgagor shall immediately cease.
SECTION 10.6. Information Under Uniform Commercial Code. This
-----------------------------------------
instrument constitutes a financing statement under Article 9 the Maine Uniform
Commercial Code covering the Personal Property and fixtures included within the
Mortgaged Property and
-36-
<PAGE>
described in this Mortgage. The debtor is Mortgagor and the secured parties are
Mortgagees. The mailing address of the secured party (Mortgagee) from which
information concerning the security interest may be obtained is as follows:
Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Telephone: (203) 862-7000
Attention: Arthur H. Amron
Facsimile: (203) 862-7312
and
Attention: Jay L. Maymudes
Facsimile: (203) 862-7350
and the mailing address of the debtor (Mortgagor), is as follows:
c/o Thermatrix Inc.
308 N. Peters Road, Suite 100
Knoxville, Tennessee 37922
Attention: Edward E. Greene
Telephone: (423) 539-9603
Facsimile: (423) 670-4091
SECTION 10.7. Notice Pursuant to 18-A M.R.S.A. (S) 5-508. Pursuant to
------------------------------------------
various provisions and Sections of this Mortgage, Mortgagor has appointed
Mortgagee as its Attorney-in-fact. To the extent that such appointments by
Mortgagor constitute the granting of a Durable Power of Attorney within the
meaning of 18-A M.R.S.A. (S) 5-508, the following (to the extent applicable)
shall apply:
Notice to the Principal (Mortgagor): As the "Principal", you are using
this Durable Power of Attorney to grant power to another person (called the
"Agent" or "Attorney-in-fact") to make decisions about your money, property or
both and to use your money, property or both on your behalf. If this written
Durable Power of Attorney does not limit the powers that you give your Agent,
your Agent will have broad and sweeping powers to sell or otherwise dispose of
your property and spend your money without advance notice to you or approved by
you. Under this document, your Agent will continue to have these powers after
you become incapacitated, and you may also choose to authorize your Agent to use
these powers before you become incapacitated. The powers that you give your
Agent are explained more fully in the Maine Revised Statutes, Title 18-A,
Sections 5-501 to 5-508, and in Maine case law. You have the right to revoke or
take back this Durable Power of Attorney at any time as long as you are of sound
mind. If there is anything about this Durable Power of
-37-
<PAGE>
Attorney that you do not understand, you should ask a lawyer to explain it to
you.
Notice to the Agent (Mortgagee): As the "Agent" or "Attorney-in-fact",
you are given power under this Durable Power of Attorney to make decisions about
the money, property or both belonging to the Principal and to spend the
Principal's money, property or both on that person's behalf in accordance with
the terms of this Durable Power of Attorney. This Durable Power of Attorney is
only valid if the Principal is of sound mind when the Principal signs it. As the
Agent, you are under a duty (called a "fiduciary duty") to observe the standards
observed by a prudent person dealing with the property of another. The duty is
explained more fully in the Maine Revised Statutes, Title 18-A, sections 5-501
to 5-508 and 7-302 and in Maine case law. As the Agent, you are not entitled to
use the money or property for your own benefit or to make gifts to yourself or
others unless the Durable Power of Attorney specifically gives you the authority
to do so. As the Agent, your authority under this Durable Power of Attorney will
end when the Principal dies and you will not have the authority to administer
the estate unless you are authorized to do so in accordance with the Maine
Probate Code. If you violate your fiduciary duty under this Durable Power of
Attorney, you may be liable for damages and may be subject to criminal
prosecution. If there is anything about this Durable Power of Attorney or your
duties under it that you do not understand, you should ask a lawyer to explain
it to you.
Notwithstanding the foregoing, nothing in this Section 10.7 shall
expand any of the rights or powers granted by Mortgagor to Mortgagee pursuant to
any "power of attorney" set forth elsewhere in this Mortgage.
SECTION 10.8 Authority of Wexford Management, LLC. By acceptance
------------------------------------
hereof, each of the Mortgagees acknowledges and confirms to Mortgagor that,
pursuant to the Credit Agreement, it has designated Wexford Management LLC as
its Agent for the purpose of giving all consents and approvals under this
Mortgage on such Mortgagee's behalf.
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<PAGE>
IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this
Mortgage as of the date first written above.
WAHLCO ENGINEERED PRODUCTS,
INC.
By: /s/ Daniel S. Tedone
---------------------------
Name: Daniel S. Tedone
Title: Executive Vice President
& Chief Financial Officer
Attest:
________________________
Name:
Title:
-39-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On February 25, 1999, personally appeared the above-named
Daniel S. Tedone as Executive Vice President and Chief Financial Officer of
Wahlco Engineered Products, Inc., and acknowledged the foregoing instrument to
be his/her free act and deed in his/her said capacity and the free act and deed
of said Corporation.
Before me,
/s/ Catherine Jones
-------------------------------
Notary Public
Type or Print Name:
Catherine Jones
-------------------------------
Notary Public, State of New York
No. 01J05088551
Qualified in New York County
Commission Expires 11/17/1999.
-40-
<PAGE>
Annex-1
Wexford Capital Partners II, L.P., a Delaware limited partnership,
Wexford Overseas Partners I, L.P., a Delaware 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,
Wexford-Euris Special Situations 1996, L.P., a Delaware limited partnership,
and their respective successors and assigns.
Annex-1
<PAGE>
EXHIBIT A
to Mortgage
DESCRIPTION OF LAND
29 Lexington Street
Lewiston, ME 04240
described more particularly as follows:
Those two (2) certain parcels conveyed to Mortgagor by deed from Bachmann
Holdings Company, f/k/a Bachmann Industries, Inc., dated July 1, 1985, and
recorded in the Androscoggin County Registry of Deeds, Book 2019, Page 237, and
described as follows:
A certain lot or parcel of land, with any buildings thereon, situated in the
City of Lewiston, Androscoggin County, State of Maine, bounded and described as
follows:
BEGINNING at a point on the southwesterly line of Lexington Street, said point
being five hundred ten and seventeen hundredths (510.17) feet northwesterly from
a monument at the westerly corner of the intersection of Lexington Street and
Westminster Street; thence North 36E44' 35" West along the southwesterly line of
said Lexington Street a distance of three hundred fifty (350) feet; thence South
58E 28' 05" West a distance of three hundred fifty and sixty-six hundredths
(350.66) feet; thence South 38 50' 06" East a distance of three hundred
eighty-two and ten hundredths (382.10) feet; thence North 53 15' 25" East a
distance of three hundred thirty-five and twenty-six hundredths (335.26) foot to
the point of beginning.
Meaning and intending to describe Lot Number thirteen (13) shown on plan
entitled "Revision #1 Lewiston Industrial Park" (Sheet P-1) recorded at the
Androscoggin County Registry of Deeds Office, in Plan Book 28, Pages 47-48.
Also another certain lot or parcel of land situated in the City of Lewiston,
Androscoggin County, State of Maine, bounded and described as follows:
A-1
<PAGE>
BEGINNING at a set iron rod located at the southeasterly corner of land conveyed
to Lewiston Industrial Park, Inc. by Francis J. Sabalauckas by deed dated July
19, 1983 and recorded in the Androscoggin County Registry of Deeds Book 1658,
Page 245; said iron rod being located North 51E 56' 49" East one hundred eighty
and no hundredths (180.00) feet from an iron pipe marking the apparent northerly
corner of land presently owned by Roland A. Caron (see deed recorded in Book
1277, Page 139, Androscoggin County Registry of Deeds); thence northeasterly one
thousand one hundred sixty one feet, more or less, (1,161) by land now or
formerly of the Lewiston Industrial Park, Inc., to the southwesterly line of Lot
#13 as shown on "Revision #1 Lewiston Industrial Park," Sheet P-1, recorded in
Plan Book 28, Page 47, said Lot #13 being presently occupied by Brachmann
Industries (see deed to Tuboflex, Inc., Book 1358, Page 176); thence North
38E50' 06" West three hundred sixty feet, more or less, (360'1) on the
southwesterly line of said Lot #13 to a point on the northwesterly line
described in said Sabalauckas deed (Book 1341, Page 258) said point being on the
southeasterly line of Dominique E. Bilodeau et al (see Book 981, Page 377 and
Book 1485, Page 164); thence south 53E34' 27" West twelve hundred forty-three
and seventy-three hundredths (1243.73) feet by the southeasterly line of said
Bilodeau to a set iron pipe; thence South 50E 26' East four hundred four and
eighty-two hundredths (404.82) feet by remaining land of Francis J. Sabalauckas
to the set iron rod at the point of beginning.
Tax Parcel No.: 00010885
A-2
<PAGE>
EXHIBIT B
to Mortgage
MATERIAL AGREEMENTS
None.
B-1
<PAGE>
EXHIBIT C
to Mortgage
PERMITTED ENCUMBRANCES
1. Liens created or permitted by the Credit Agreement.
2. Zoning laws and regulations.
3. Any charges, liens or encumbrances existing as of the Effective
Date.
C-1
<PAGE>
Exhibit D
to Mortgage
INFORMATION FOR FINANCING STATEMENTS
Chief Executive Office: 29 Lexington Street
Lewiston, ME 04240
Principal Place of Business: 29 Lexington Street
Lewiston, ME 04240
Location of Each Required Filing Office:
1. Secretary of State of Maine
2. Androscoggin County, State of Maine
D-1
<PAGE>
EXHIBIT 10.5
===============================================================================
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND LEASES AND FIXTURE FILING
by
WAHLCO, INC.,
Mortgagor,
to
WEXFORD MANAGEMENT LLC,
Mortgagee,
for the benefit of the Lenders described herein
===============================================================================
This instrument was prepared by the
attorney listed below, in
consultation with counsel in the
State, and after recording should
be returned to:
HOWARD, SMITH & LEVIN LLP
1330 Avenue of the Americas
New York, New York 10019
Attention: Andrew Baraff, Esq.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C>
SECTION 1.1. Terms Defined in Credit Agreement.......................... 5
SECTION 1.2. Terms Defined in This Mortgage............................. 6
SECTION 1.3. Terms Defined in Uniform Commercial Code................... 10
SECTION 1.4. Rules of Interpretation.................................... 10
ARTICLE II
COVENANTS AND AGREEMENTS OF MORTGAGOR
SECTION 2.1. Payment of Secured Obligations............................. 11
SECTION 2.2. Further Assurances......................................... 11
SECTION 2.3. Care of the Mortgaged Property............................. 11
(a) Operation and Maintenance........................................ 11
(b) Repair and Replacement........................................... 12
(c) Use.............................................................. 12
SECTION 2.4. Compliance With Laws and Payment of Impositions............ 12
SECTION 2.5. Insurance and Casualty..................................... 12
(a) Required Insurance............................................... 12
(b) Form............................................................. 12
(c) Notice of Loss................................................... 13
(d) No Separate Insurance............................................ 13
(e) Assignment of Policies On Foreclosure............................ 13
SECTION 2.6. Condemnation............................................... 13
(a) Notice of Loss................................................... 13
(b) Protection of Mortgaged Property................................. 13
SECTION 2.7. Application of Insurance Proceeds and Condemnation Proceeds 14
(a) Proceeds Payable to Mortgagee.................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(b) Prosecution of Claim for Loss..................................... 14
SECTION 2.8. Transfer Restrictions....................................... 14
SECTION 2.9. Mortgagee's Right to Perform................................ 14
SECTION 2.10. Subrogation................................................. 15
SECTION 2.11. Inspection of Mortgaged Property............................ 15
SECTION 2.12. Certain Tax Law Changes..................................... 15
SECTION 2.13. Future Advances............................................. 16
(a) Future Advances................................................... 16
(b) Future Advances................................................... 16
(c) Maximum Secured Amount............................................ 16
SECTION 2.14. Covenants in Loan Documents................................. 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Title....................................................... 16
SECTION 3.2. Valid Lien and Security Interest............................ 16
ARTICLE IV
SECURITY AGREEMENT AND FIXTURE FILING
SECTION 4.1. Security Agreement.......................................... 17
(a) Grant of Security Interest........................................ 17
(b) Remedies.......................................................... 17
SECTION 4.2. Fixture Filing.............................................. 18
SECTION 4.3. Security Deposit Collateral................................. 18
SECTION 4.4. Additional Covenants........................................ 18
</TABLE>
<PAGE>
<TABLE>
ARTICLE V
ASSIGNMENTS OF RENTS AND LEASES
<S> <C>
SECTION 5.1. Assignment of Rents and Leases.............................. 19
(a) Assignment of Rents............................................... 19
(b) License to Collect Rents.......................................... 19
(c) Termination of License Upon Event of Default...................... 19
(d) Direction to Tenants.............................................. 20
(e) No Release of Tenants............................................. 20
(f) No Liability of Mortgagee......................................... 20
(g) No Existing Leases................................................ 20
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Defaults.......................................... 20
SECTION 6.2. Remedies.................................................... 21
(a) General........................................................... 21
(b) Foreclosure....................................................... 21
(c) Mortgagee May Bid................................................. 22
(d) Acceleration of Secured Obligations............................... 22
SECTION 6.3. Possession of Property...................................... 22
(a) Mortgagor to Vacate Property...................................... 22
(b) Payment for Use and Occupancy..................................... 23
SECTION 6.4. Appointment of Receiver..................................... 23
SECTION 6.5. Waiver of Stay, Extension, Moratorium and
Marshalling Laws and Equity of Redemption................... 23
SECTION 6.6. Mortgagee Authorized to Execute Documents................... 23
SECTION 6.7. Collateral Situated in More than One County................. 24
SECTION 6.8. Collateral in Other States.................................. 24
SECTION 6.9. Application of Proceeds..................................... 25
SECTION 6.10. Setoff...................................................... 25
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.11. Receipt a Sufficient Discharge to Purchaser................. 25
SECTION 6.12. Sale a Bar Against Mortgagor................................ 25
SECTION 6.13. Remedies Cumulative; Waiver................................. 25
SECTION 6.14. No Liability of Secured Parties............................. 26
ARTICLE VII
CONCERNING MORTGAGEE
SECTION 7.1. [Intentionally Omitted]..................................... 26
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Termination; Defeasance..................................... 27
SECTION 8.2. Rights Cumulative; Waivers.................................. 27
SECTION 8.3. Fees and Expenses........................................... 27
SECTION 8.4. Indemnification............................................. 27
(a) Indemnity......................................................... 27
(b) Third-Party Beneficiaries......................................... 28
SECTION 8.5. Notices..................................................... 28
SECTION 8.6. Amendment and Waiver........................................ 29
SECTION 8.7. Expenses of Mortgagor's Agreements and Duties............... 29
SECTION 8.8. Mortgagee's Right to Use Agents and to Act in Name
of Mortgagor................................................ 30
SECTION 8.9. No Compensation or Expense.................................. 30
SECTION 8.10. Limitation of Obligations with Respect to Mortgaged Property 30
(a) Reasonable Care................................................... 30
(b) No Obligations.................................................... 30
SECTION 8.11. Time of the Essence......................................... 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 8.12. Inconsistency with Loan Documents........................... 30
SECTION 8.13. Severability................................................ 31
SECTION 8.14. Headings.................................................... 31
SECTION 8.15. Assignment; Benefit......................................... 31
SECTION 8.16. GOVERNING LAW............................................... 31
SECTION 8.17. WAIVER OF JURY TRIAL........................................ 31
SECTION 8.18. CONSENT TO JURISDICTION..................................... 32
SECTION 8.19. Limitation on Interest Payable.............................. 33
SECTION 8.20. Covenants To Run With the Land.............................. 33
SECTION 8.21. No Merger................................................... 33
SECTION 8.22. Relationship................................................ 33
ARTICLE IX
ENVIRONMENTAL MATTERS
SECTION 9.1. Notice of Environmental Matters............................. 34
(a) Delivery of Notice................................................ 34
(b) Contents of Notice................................................ 34
SECTION 9.2. Obligations of Mortgagor.................................... 34
EXHIBITS
EXHIBIT A - DESCRIPTION OF LAND
EXHIBIT B - MATERIAL AGREEMENTS
EXHIBIT C - PERMITTED ENCUMRANCES
EXHIBIT D - INFORMATION FOR FINANCING STATEMENTS
</TABLE>
<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND LEASES AND FIXTURE FILING
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES AND
FIXTURE FILING (this "Mortgage"), dated as of February 25, 1999, is given by
--------
WAHLCO INC., a California corporation (together with its successors and
permitted assigns, "Mortgagor"), to WEXFORD MANAGEMENT LLC, a Connecticut
---------
limited liability company (together with its successors and permitted assigns,
"Mortgagee"), for the benefit of the Lenders (as hereinafter defined).
---------
BACKGROUND:
A. On January 13, 1999, pursuant to an Agreement and Plan of Merger,
dated November 9, 1998 (the "Merger Agreement"), among Wahlco Environmental
----------------
Systems, Inc. ("Wahlco"), Thermatrix Inc. ("Thermatrix") and TMX Acquisition Sub
------ ----------
I, Inc., a wholly-owned subsidiary of Thermatrix ("Merger Sub"), Merger Sub
----------
merged with and into Wahlco (the "Merger"), and Wahlco became a wholly-owned
------
subsidiary of Thermatrix at the effective time of the Merger (the "Effective
---------
Date").
- ----
B. Concurrently with the execution and delivery hereof, Wahlco and
Thermatrix (the "Borrowers") are entering into a Second Amended and Restated
---------
Credit Agreement, dated as of the date hereof, with the Lenders and the
Mortgagee (as the same may hereafter be modified, extended, replaced or
otherwise amended, the "Credit Agreement"), pursuant to which the Borrowers
----------------
shall be jointly and severally liable for the payment and performance of all of
the obligations and liabilities to the Lenders and the Mortgagee set forth
therein and in the other Loan Documents (as hereinafter defined).
C. Prior to the Merger, Mortgagor was, and after the Merger
Mortgagor remains, a subsidiary of Wahlco.
D. Concurrently with the execution and delivery of the Credit
Agreement, Mortgagor is executing and delivering the Guarantee (as hereinafter
defined) to Mortgagee and the Lenders.
E. It is a condition to the effectiveness of the Credit Agreement
that, among other things, Mortgagor execute and deliver this Mortgage granting
to Mortgagee, for the benefit of the Lenders, the liens and security interests
in the collateral described herein, all as set forth in the Credit Agreement.
F. Mortgagor will receive substantial direct and indirect benefits
from the Lenders and the Mortgagee entering into the Credit Agreement.
<PAGE>
GRANT OF LIEN:
NOW THEREFORE, to secure the full and timely payment and performance
of all of the Secured Obligations (as hereinafter defined), Mortgagor hereby
irrevocably grants, bargains, sells, mortgages, warrants, aliens, devises,
releases, hypothecates, pledges, transfers and conveys to Mortgagee, as agent
and representative of, and for the equal and ratable benefit of, the Lenders,
and to the extent the same constitutes Personal Property (as hereinafter
defined) grants to Mortgagee, a security interest in, forever, any and all the
following (collectively, the "Mortgaged Property"):
------------------
A. Land. The land described on Exhibit A, together with all and
---- ---------
singular the tenements, rights, easements, hereditaments, rights of way,
privileges, liberties, appendages and appurtenances now or hereafter belonging
or in any way appertaining to such land (including, without limitation, all
rights relating to storm and sanitary sewer, water, gas, electric, railway and
telephone services); all estate, claim, demand, right, title or interest of
Mortgagor in and to any street, road, highway, or alley (vacated or otherwise)
adjoining such land or any part thereof; and all Mortgagor's right, title and
interest, if any, in and to any strips and gores belonging, adjacent or
pertaining to such land (collectively, the "Land").
----
B. Improvements and Fixtures. All buildings, structures,
-------------------------
replacements, fixtures and fittings and other improvements and property of every
kind and description now or hereafter affixed or attached to the Land, including
water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone
and other utility facilities, parking areas, roads, driveways, walks and other
site improvements together with all estate, right, title and interest, if any,
of Mortgagor in, to or under all equipment, appliances, machinery, tools,
accessories, apparatus, building or construction materials, and other articles
of any kind or nature whatsoever affixed or attached to the Land, including all
motors, boilers, engines, pumps, compressors, tanks and similar devices, all
heating, electrical, lighting, power, plumbing, air conditioning, refrigeration,
ventilation and mechanical equipment, all pipes, ducts, conduits, cables and
other transmission devices and equipment, and all elevators, escalators, lifts,
walls, partitions, doors, windows and other equipment and property affixed to
the Land that is real estate or real property or fixtures under applicable law
of the State (as hereinafter defined) (collectively, the "Improvements", and
------------
together with the Land, the "Property").
--------
C. Minerals and Related Rights. All of Mortgagor's right, title and
---------------------------
interest in, to and under all rights, royalties and profits with respect to all
minerals, coal, oil and gas and other substances of any kind or character on or
underlying the Land, together with all water and water rights (whether riparian,
appropriative, or otherwise and whether or not appurtenant).
D. Air and Development Rights. All of Mortgagor's right, title and
--------------------------
interest in, to and under all air rights, development rights or credits, zoning
rights or other similar rights or interests which benefit or are appurtenant to
the Property.
-2-
<PAGE>
E. Parking Rights. All estate, right, title, interest and other
--------------
claim of Mortgagor, if any, with respect to any parking facilities located other
than on the Property and used or intended to be used in connection with the
operation, ownership or use of the Property, any and all replacements and
substitutions for the same, and any other parking rights, easements, covenants
and other interests in parking facilities acquired by Mortgagor for the use of
tenants or occupants of the Improvements.
F. Tangible Property. All building materials, goods, construction
-----------------
materials, appliances (including, without limitation, stoves, ranges, ovens,
disposals, refrigerators, water fountains, water coolers, fans, heaters,
dishwashers, clothes washers and dryers, water heaters, hood and fan
combinations, kitchen equipment, laundry equipment, kitchen cabinets and other
similar equipment), stocks, beds, mattresses, bedding and linens, supplies,
blinds, window shades, drapes, carpets, floor coverings, office equipment,
trees, timber, crops, growing plants and shrubberies, control devices, equipment
and machinery (including window cleaning, building cleaning, swimming pool,
recreational, monitoring, garbage, pest control and other equipment), motor
vehicles, tools, furnishings, furniture, lighting, all nonstructural additions
to the Property and all other tangible property of any kind or character,
together with all replacements thereof, located on or in or used in connection
with the complete and comfortable use, enjoyment, occupation, operation,
development and maintenance of the Property, regardless of whether or not
located on or in the Property or located elsewhere for purposes of storage,
fabrication or otherwise, exclusive of any of the foregoing items leased by
Mortgagor or owned by tenants (other than Mortgagor) of portions of the Property
(collectively, the "Tangible Property").
-----------------
G. Material Agreements. All estate, right, title and interest of
-------------------
Mortgagor in, to or under all contracts and agreements (including those, if any,
described on Exhibit B) and all title insurance policies, guarantees and
---------
warranties and other contracts and agreements including any agreements taken by
Mortgagor by assignment, now or hereafter relating to the Property, including
all water, sanitary and storm sewer, drainage, electricity, steam, gas,
telephone and other utility supply and service contracts (collectively,
"Material Agreements").
-------------------
H. Leases and Rents. All Leases (as hereinafter defined), now or
----------------
hereafter in effect for the use, possession or occupancy of the Property or any
part thereof, and all estate, right, title and interest of Mortgagor in and to
any and all rents, profits, issues, royalties, revenues and other benefits
derived from the sale or lease of the Property or any other portion of the
Mortgaged Property or from or under any of the Leases (collectively, "Rents").
-----
I. Security Deposit Collateral. All cash, securities, letters of
---------------------------
credit, guarantees, surety bonds and similar instruments (collectively, the
"Security Deposit Collateral") from time to time delivered to Mortgagor as
---------------------------
security for the performance of any tenant under a Lease, but excluding any
Security Deposit Collateral which, by its terms, is unassignable or may not be
pledged or transferred.
-3-
<PAGE>
J. Intangibles. All goodwill, trademarks, trade names, option
-----------
rights, purchase contracts, books and records and general intangibles of
Mortgagor relating to the Property and all accounts, contract rights,
instruments, chattel paper and other rights of Mortgagor for the payment of
money for property sold or lent, for services rendered, for money lent, or for
advances or deposits made, and any other intangible property of Mortgagor
relating to the Property, but specifically excluding rights of Mortgagor in, to
and under any Material Agreements (collectively, the "Intangibles").
-----------
K. Plans. All plans and specifications, designs, drawings and other
-----
information, materials and matters heretofore or hereafter prepared relating to
the Property.
L. Permits. All licenses, authorizations, certificates, variances,
-------
consents, approvals and other permits now or hereafter relating to the Property
(collectively, the "Permits"), excluding from the grant under this Granting
-------
Clause (but not from the definition of the term "Permits" for the other purposes
hereof) Permits that cannot be transferred or encumbered by Mortgagor without
causing a default thereunder or a termination thereof.
M. Leases of Furniture, Furnishings and Equipment. All right, title
----------------------------------------------
and interest of Mortgagor as lessee in, to and under any leases of furniture,
furnishings and equipment now or hereafter installed in or at any time used in
connection with the Property.
N. Condemnation Proceeds. All Condemnation Proceeds (as hereinafter
---------------------
defined).
O. Insurance Proceeds. All Insurance Proceeds (as hereinafter
------------------
defined).
P. Awards. All rights and interests of Mortgagor against others,
------
including adjoining property owners and governmental entities arising out of
damage to the Mortgaged Property, including damage due to environmental injury
or release of Hazardous Materials (as hereinafter defined).
Q. Further Interests. All greater or additional estate, right, title
-----------------
and interest of Mortgagor in, to or under any of the Mortgaged Property
hereafter acquired by Mortgagor, and all right, title and interest of Mortgagor
in, to, under or derived from all extensions, improvements, betterments,
renewals, substitutions and replacements of, and additions and appurtenances to,
any of the Mortgaged Property hereafter acquired by or released to Mortgagor
(including any Mortgaged Property acquired by Mortgagor by foreclosure or deed
in lieu of foreclosure pursuant to the terms of any mortgage note held by
Mortgagor) or constructed or located on, or attached to, the Property, in each
case, immediately upon such acquisition, release, construction, location or
attachment, without any further conveyance, mortgage, assignment or other act by
Mortgagor; and all right, title and interest of Mortgagor in, to, under or
derived from all other property and rights which by any instrument executed by
Mortgagor or any Person on its behalf are otherwise subjected to the lien of
this Mortgage.
-4-
<PAGE>
R. Proceeds. All proceeds of any voluntary or involuntary conversion
--------
of any of the foregoing into cash or other property, including, without
limitation, proceeds of insurance and condemnation awards and liquidated claims.
S. Other Property. All other property and rights of Mortgagor of
--------------
every kind and character relating to and used in connection with the Mortgaged
Property, and all proceeds and products of any of the foregoing; provided, that
--------
the Mortgaged Property shall not include (i) any property, rights or licenses to
the extent the granting of a Lien thereon would be contrary to applicable law or
(ii) any rights under any license agreement where such license agreement would
be terminable by the counterparty thereto if Mortgagor's interest therein were
subject to the security interest created hereby (but only to the extent such
right to terminate is enforceable under applicable law). Each such license
agreement existing on the date hereof is set forth in Schedule 3(b) of the
Disclosure Letter.
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, and its
successors and assigns, forever, under and subject to the terms and conditions
of the Credit Agreement and this Mortgage, for the benefit of the Secured
Parties and for the security and enforcement of the prompt and complete payment,
performance and observance when due of all of the Secured Obligations.
PROVIDED ALWAYS that this Mortgage is upon the express condition that
the Mortgaged Property shall be released from the lien of this Mortgage in the
manner and at the time provided in Section 8.1 of this Mortgage.
MORTGAGOR FURTHER COVENANTS AND AGREES WITH
MORTGAGEE AS FOLLOWS:
ARTICLE I
DEFINITIONS
SECTION 1.1. Terms Defined in Credit Agreement. The following terms,
---------------------------------
and all other terms defined in the Credit Agreement and not otherwise defined
herein, have, as used herein, the respective meanings provided for in the Credit
Agreement:
Affiliate
Business Days
Collateral
Disclosure Letter
Liens
Loans
-5-
<PAGE>
Loan Documents
Loan Party
Material Adverse Effect
Note
Overdue Rate
Person
Required Lenders
Responsible Officer
Subsidiary
SECTION 1.2. Terms Defined in This Mortgage. The following terms, as
------------------------------
used herein, have the following meanings:
"Bankruptcy Code" means the United States Bankruptcy Code, Title 11 of
---------------
the United States Code, (S) 101 et seq., as amended from time to time.
"Casualty" means any damage to, destruction or loss of or other
--------
casualty with respect to any of the Mortgaged Property.
"Condemnation" means any actual or threatened condemnation, taking or
------------
exercise of the power of eminent domain or similar action or proceeding.
"Condemnation Proceeds" means, at any time, any award or payment paid
---------------------
or payable by reason of any Condemnation, whether from the exercise of the right
of Condemnation or any transfer made in lieu thereof or any injury to or
decrease in value of any property in connection with a Condemnation, including
all amounts paid pursuant to any agreement with any condemning authority that
has been made in settlement of any proceeding relating to a Condemnation and any
interest earned on such award, payment or amounts, less the reasonable costs and
expenses (including reasonable attorneys' fees and expenses) of Mortgagor and
Mortgagee in collecting such award payment or amounts, which costs and expenses
shall be paid out of such award, payment or amounts.
"Credit Agreement" is defined in Recital Paragraph B.
----------------
"Effective Date" is defined in Recital Paragraph A.
--------------
"Event of Default" is defined in Section 6.1.
----------------
"Flood Zone" is defined in Section 3.5.
----------
"Guarantee" means the Amended and Restated Guaranty, dated as of the
---------
date hereof, by Mortgagor (among others) to Mortgagee and the Lenders, as the
same may hereafter be modified, extended, replaced or otherwise amended.
-6-
<PAGE>
"Impositions" means all taxes (including real estate taxes and sales
-----------
and use taxes), assessments (including all assessments for public improvements
or benefits, whether or not commenced or completed prior to the date hereof),
water, sewer or other rents, rates and charges, excises, levies, license fees,
permit fees, inspection fees and other authorization fees and other charges, in
each case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character (including all interest and penalties thereon),
which at any time may be assessed, levied, confirmed or imposed on or in respect
of, or be a Lien upon, (i) the Mortgaged Property or any interest therein, (ii)
any occupancy, use or possession of, or activity conducted on, the Mortgaged
Property, (iii) the Rents from the Mortgaged Property or the use or occupancy
thereof, or (iv) the Secured Obligations, but excluding income, excess profits,
franchise, capital stock, estate, inheritance, succession, gift or similar taxes
of Mortgagor or Mortgagee, except to the extent that such taxes of Mortgagor or
Mortgagee are imposed in whole or in part in lieu of, or as a substitute for,
any taxes which are or would otherwise be Impositions.
"Improvements" is defined in Granting Clause B.
------------
"Indemnified Party" means, with respect to a Person entitled to the
-----------------
benefit of an indemnity, such Person's officers, directors, shareholders,
partners, members, employees, agents and representatives.
"Insurance Policies" means the insurance policies and coverages
------------------
required to be maintained by Mortgagor pursuant to Section 2.5.
"Insurance Proceeds" means, at any time, (x) all proceeds or payments
------------------
to which Mortgagor may be or become entitled under any of the Insurance Policies
and any and all unearned premiums accrued, accruing or to accrue under any
Insurance Policies and all proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, plus any interest earned
on such proceeds, payments or amounts, less (y) the reasonable costs and
expenses of Mortgagor and Mortgagee in collecting such proceeds, payments or
amounts, which costs and expenses shall be paid out of such proceeds, payments
or amounts.
"Insurance Requirements" means all provisions of the Insurance
----------------------
Policies, all requirements of the issuer of any of the Insurance Policies and
all orders, rules, regulations and any other requirements of the National Board
of Fire Underwriters (or any other body exercising similar functions) binding
upon Mortgagor or applicable to the Mortgaged Property, any adjoining vaults,
sidewalks, parking areas or driveways or any use or condition thereof.
"Intangibles" is defined in Granting Clause J.
-----------
"Land" is defined in Granting Clause A.
----
"Lease" means any lease, tenancy, subtenancy, license, franchise,
-----
concession or
-7-
<PAGE>
other use or occupancy agreement relating to the Property, together with any
guarantee of the obligations of the landlord or the tenant thereunder, or any
occupancy or right to possession under Section 365 of the Bankruptcy Code in the
event of the rejection of any of the foregoing by the landlord or its trustee
pursuant to such Section; "landlord" means the landlord, sublandlord, lessor,
sublessor, franchisor or other grantor of a right of use or occupancy under a
Lease and any guarantor of its obligations thereunder; and "tenant" means the
tenant, subtenant, lessee, sublessee, licensee, franchisee, concessionaire or
other occupant under a Lease and any guarantor of its obligations thereunder.
"Legal Requirements" means all provisions of all laws, statutes,
------------------
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, directions and requirements of, restrictions by, and agreements
with, Federal, State or local governmental bodies, agencies or officials, now or
hereafter applicable to the Mortgaged Property or any part thereof or any use or
condition thereof.
"Lenders" means Wexford Capital Partners II, L.P., a Delaware limited
-------
partnership, Wexford Overseas Partners I, L.P., a Delaware 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, and
their respective successors and assigns.
"Loss" is defined in Section 8.4.
----
"Material Agreements" is defined in Granting Clause G.
-------------------
"Mortgage" is defined in the Preamble.
--------
"Mortgaged Property" is defined in the Preamble to the Grant of Lien.
------------------
"Mortgagee" is defined in the Preamble.
---------
"Mortgagor" is defined in the Preamble.
---------
"Other Mortgaged Properties" means the Mortgaged Property described in
--------------------------
one or more of the Other Mortgages.
"Other Mortgages" means those certain Mortgage, Security Agreement and
---------------
Assignment of Rents and Leases, if any, and those certain Deed of Trust,
Security Agreement and Assignment of Rents and Leases, if any, or other similar
agreements, granted from time to time by Mortgagor to Mortgagee concurrently
herewith or otherwise pursuant to the Credit Agreement with respect to
collateral not described in this Mortgage, as the same may hereafter be
modified, extended, replaced or otherwise amended.
-8-
<PAGE>
"Permits" is defined in Granting Clause L.
-------
"Permitted Encumbrances" means those matters described on Exhibit C
----------------------
hereto.
"Personal Property" means all of the items described in the definition
-----------------
of Mortgaged Property that constitute personal property under the Uniform
Commercial Code or other applicable law (including common law) of the State.
"Property" is defined in Granting Clause B.
--------
"Receiver" means any receiver, trustee liquidator, conservator,
--------
custodian or similar Person.
"Rents" are defined in Granting Clause H.
-----
"Secured Obligations" means all of the Liabilities of Mortgagor to the
-------------------
Secured Parties (or any of them) under and as defined in the Guarantee,
including:
(i) all loans, advances, debts, liabilities, and other obligations
for monetary amounts (whether or not such amounts are liquidated, contingent or
otherwise determinable) owing by either Wahlco or Thermatrix or any of their
respective Subsidiaries or all of them to Mortgagee or any Lender, or any
Subsidiary or Affiliate of Mortgagee or a Lender, and all covenants, duties and
obligations regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other instrument, arising
under the Credit Agreement or any of the other Loan Documents, whether at
maturity or by prepayment, acceleration, declaration of default or otherwise,
including, without limitation, the principal amount of the Loans, as well as all
interest thereon (including all amounts owed in respect of interest that accrues
after the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of any Loan Party), and all charges,
costs, expenses, attorneys' fees and any other sum chargeable to either Wahlco
or Thermatrix or any or all of their respective Subsidiaries under any of the
Loan Documents,
(ii) all other amounts payable by Mortgagor hereunder (including all
amounts owed in respect of interest that accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any of Mortgagor, Wahlco or Thermatrix), and
(iii) any renewals or extensions of any of the foregoing.
"Secured Parties" means, collectively, the Lenders and Mortgagee.
---------------
"Security Agreement" means the Amended and Restated Security
------------------
Agreement, dated as of the date hereof, among Wahlco Environmental Systems,
Inc., each Subsidiary party thereto and Wexford Management LLC.
-9-
<PAGE>
"Security Deposit Collateral" is defined in Granting Clause I.
---------------------------
"State" means the State of Illinois.
-----
"Tangible Property" is defined in Granting Clause F.
-----------------
"Thermatrix" is defined in Background Paragraph A.
----------
"Unavoidable Delays" means delays due to acts of God, governmental
------------------
restrictions, enemy actions, civil commotion, fire, casualty, strikes, shortages
of supplies or labor or other causes beyond the reasonable control of Mortgagor,
but lack of funds shall not be a cause beyond the reasonable control of
Mortgagor.
"Uniform Commercial Code" means the Uniform Commercial Code of the
-----------------------
State as in effect from time to time.
"Unmatured Default" means an event which but for the lapse of time or
-----------------
the giving of notice, or both, would constitute a Default or an Event of Default
hereunder or under any other Loan Document.
"Wahlco" is defined in Background Paragraph A.
------
SECTION 1.3. Terms Defined in Uniform Commercial Code. Unless
----------------------------------------
otherwise defined herein or in the Credit Agreement, or unless the context
otherwise requires, when used in this Mortgage, terms defined in the Uniform
Commercial Code have the same meanings.
SECTION 1.4. Rules of Interpretation. In this Mortgage, unless
-----------------------
otherwise specified, (i) singular words include the plural and plural words
include the singular, (ii) words that include a number of constituent parts,
things or elements, including the terms "Land", "Improvements," "Property" and
"Mortgaged Property" (and each element thereof) shall be construed as referring
separately to each constituent part, thing or element thereof, as well as to all
of such constituent parts, things or elements as a whole, (iii) words importing
any gender include the other gender, (iv) references to any Person include such
Person's successors and assigns and, in the case of an individual, the word
"successor" includes such Person's heirs, devisees, legatees, executors,
administrators and personal representatives, (v) references to any statute or
other law include all applicable rules, regulations and orders adopted or made
thereunder and all statutes or other laws amending, consolidating or replacing
the statute or law referred to, (vi) the words "include" and "including," and
words of similar import, shall be deemed to be followed by the words ", without
limitation," (vii) the words "hereto," "herein," "hereof," and "hereunder," and
words of similar import, refer to this Mortgage in its entirety, (viii) unless
otherwise specified, references to Articles, Sections, Exhibits, Schedules,
paragraphs and clauses are to the Articles, Sections, Exhibits, Schedules,
-10-
<PAGE>
paragraphs and clauses of this Mortgage, (ix) the Exhibits and Schedules to this
Mortgage are incorporated herein by reference, (x) the titles and headings of
Articles, Sections, Exhibits, Schedules, paragraphs and clauses are inserted as
a matter of convenience and shall not affect the construction of this Mortgage
and (xi) unless otherwise specified, references to this Mortgage and to any
other Loan Document include all amendments, modifications, supplements,
consolidations, replacements, extensions and renewals thereof from time to time.
ARTICLE II
COVENANTS AND AGREEMENTS OF MORTGAGOR
To protect the security of this Mortgage, so long as this Mortgage is
in effect, Mortgagor further covenants and agrees with Mortgagee as follows:
SECTION 2.1. Payment of Secured Obligations. Mortgagor shall duly
------------------------------
and punctually pay and perform all of the Secured Obligations in accordance with
the terms thereof and hereof, as if each of the same was set forth at length
herein. The Secured Obligations have been incurred for business purposes only.
SECTION 2.2. Further Assurances. At the request of Mortgagee,
------------------
Mortgagor shall, at Mortgagor's sole cost and expense (a) promptly correct any
defect or error which may be discovered in this Mortgage or any financing
statement or other document relating hereto, (b) promptly execute, acknowledge,
deliver, record and re-record, register and re-register, and file and re-file
this Mortgage and any financing statements or other documents or instruments
which Mortgagee may require from time to time, all in form and substance
reasonably satisfactory to Mortgagee, in order (i) to effectuate, complete,
perfect, continue or preserve the Lien and priority of this Mortgage as a
perfected mortgage lien and security interest on the Mortgaged Property, or (ii)
to effectuate, complete, perfect, continue or preserve any right, power or
privilege granted to Mortgagee hereunder, and (c) pay all filing, registration
and recording taxes, fees, dues, imposts, assessments and charges in connection
with the execution, delivery, filing, registration or recording of any of the
foregoing.
SECTION 2.3. Care of the Mortgaged Property.
------------------------------
(a) Operation and Maintenance. Mortgagor (i) shall not cause or
-------------------------
permit the Mortgaged Property to be injured, wasted, disfigured or damaged or to
deteriorate (except for reasonable wear and tear and obsolescence) and (ii)
shall maintain and preserve all of the Mortgaged Property in good repair,
working order and condition (taking into consideration ordinary wear and tear)
and from time to time make, or cause to be made, all repairs, renewals and
replacements, betterments and improvements thereto reasonably necessary,
consistent with applicable industry practices, so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times, in each case except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
-11-
<PAGE>
(b) Repair and Replacement. Mortgagor shall not remove, demolish or
----------------------
materially alter any of the Mortgaged Property. Whether or not it shall have
received or otherwise be entitled to receive any Insurance Proceeds or
Condemnation Proceeds under the Credit Agreement, Mortgagor shall promptly
repair, replace and rebuild any part of the Mortgaged Property which may be
damaged or destroyed by any Casualty (including any casualty for which insurance
was not obtained or obtainable) or which may be affected by any Condemnation,
and shall complete and pay for, within a reasonable time, any structure at any
time in the process of construction or repair on the Property, all in a
commercially reasonable manner reasonably satisfactory to Mortgagee, unless the
failure to repair, replace or rebuild the same could not reasonably be expected
to have a Material Adverse Effect.
(c) Use. Mortgagor shall not, without the prior written consent of
---
Mortgagee, which will not be unreasonably withheld, initiate, join in or consent
to any restrictive covenant, zoning ordinance, or other public or private
restrictions, limiting or defining the uses which may be made of the Property or
any part thereof.
SECTION 2.4. Compliance With Laws and Payment of Impositions.
-----------------------------------------------
Contests. Except to the extent provided otherwise in the Credit Agreement,
- --------
Mortgagor shall (i) at all times comply with, and shall cause the Mortgaged
Property at all times to comply with, all applicable Legal Requirements and
Insurance Requirements; and (ii) promptly pay all Impositions and all charges
for utilities and other services to the Mortgaged Property on or before the date
on which the same shall become due and payable.
SECTION 2.5. Insurance and Casualty.
----------------------
(a) Required Insurance. During the term of this Mortgage, Mortgagor
------------------
shall maintain, or cause to be maintained (including by one or more blanket
and/or umbrella policies which meet the requirements of this Section), the
property and liability insurance with respect to the Mortgaged Property
described in Schedule 3(b) of the Disclosure Letter.
(b) Form. All insurance required by this Mortgage shall be taken out
----
and maintained with an insurer, shall have such deductibles, and shall otherwise
be in form and substance, as required by the Credit Agreement. In addition, each
such policy shall name Mortgagee as an additional insured and loss payee and
shall contain standard clauses waiving all rights of subrogation against
Mortgagee and requiring that all Insurance Proceeds resulting from any claim be
paid to Mortgagee, notwithstanding (i) any act or negligence of either Mortgagor
or its agents or employees which might, absent such agreement, result in a
forfeiture of all or part of such insurance payment, (ii) the occupation or use
of the Mortgaged Property or any part thereof for purposes more hazardous than
permitted by the terms of such policy, (iii) any foreclosure or other action or
proceeding taken pursuant to the Mortgage or (iv) any change in title to or
ownership of the Mortgaged Property or any part thereof. Each policy shall
contain an undertaking by the insurer that such policy shall not be modified
without at least thirty (30) days' prior notice to, and the prior written
consent of, Mortgagee.
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<PAGE>
(c) Notice of Loss. If a Casualty occurs, Mortgagor shall immediately
--------------
take such action or cause such action to be taken as may be reasonably necessary
or appropriate to protect the remaining Mortgaged Property. Mortgagor will also
give Mortgagee prompt notice of any material damage to or destruction of any of
the Mortgaged Property and in case of loss covered by policies of insurance,
Mortgagee is hereby authorized to make proof of loss if not made promptly by
Mortgagor. Any reasonable expenses incurred by Mortgagee in the collection of
the proceeds of such policies of insurance, together with interest thereon from
date of any such expense at the Overdue Rate (or such lesser rate of interest as
may be the maximum not prohibited by applicable law), shall be added to and
become part of the Secured Obligations and shall be reimbursed to Mortgagee
immediately upon demand.
(d) No Separate Insurance. Mortgagor shall not take out separate
---------------------
insurance concurrent in form or contributing in the event of loss with that
required to be maintained hereunder unless Mortgagee is named as an additional
insured thereon under a standard mortgagee clause reasonably acceptable to
Mortgagee and each such policy is otherwise in form and substance reasonably
acceptable to Mortgagee. Mortgagor shall notify Mortgagee at least 30 days prior
to the date that any such separate insurance is to be taken out and, if such
insurance is permitted by Mortgagee, shall promptly deliver to Mortgagee a copy
of the policy or policies of such insurance.
(e) Assignment of Policies On Foreclosure. In the event of the
-------------------------------------
foreclosure of this Mortgage, or other transfer of title to the Mortgaged
Property, or any part thereof, by foreclosure sale, or by power of sale, or deed
in lieu of foreclosure, the purchaser of the Mortgaged Property, or such part
thereof, shall succeed to all of each Mortgagor's rights with respect to the
Mortgaged Property, including any rights to unexpired, unearned or returnable
insurance premiums, subject to limitations on the assignment of blanket
policies, but limited to such rights as relate to the Mortgaged Property or such
part thereof. If Mortgagee acquires title to the Mortgaged Property, or any part
thereof, in any manner, it shall thereupon (as between each Mortgagor and
Mortgagee) become the sole and absolute owner of the insurance policies, and all
proceeds payable thereunder with respect to the Mortgaged Property with the sole
right to collect and retain all unearned or returnable premiums thereon with
respect to the Mortgaged Property, or such part thereof, if any.
SECTION 2.6. Condemnation.
------------
(a) Notice of Loss. In the event of any Condemnation or the
--------------
commencement of any proceedings or negotiations that might result in a
Condemnation, Mortgagor shall give notice thereof to Mortgagee, generally
describing the nature and extent of such Condemnation or the nature of such
proceedings or negotiations and the nature and extent of the proposed
Condemnation, as the case may be.
(b) Protection of Mortgaged Property. If a Condemnation occurs,
--------------------------------
Mortgagor shall immediately take such action or cause such action to be taken as
may be reasonably necessary or appropriate to protect the remaining Mortgaged
Property.
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<PAGE>
SECTION 2.7. Application of Insurance Proceeds and Condemnation
--------------------------------------------------
Proceeds.
- --------
(a) Proceeds Payable to Mortgagee. Notwithstanding any Casualty or
-----------------------------
Condemnation, Mortgagor shall continue to pay the Secured Obligations at the
time and in the manner provided for in the Loan Documents and this Mortgage, and
the Secured Obligations shall not be reduced until any Insurance Proceeds or
Condemnation Proceeds shall have been actually received and applied by Mortgagee
to the discharge of the Secured Obligations. Except as expressly provided in the
Credit Agreement, Mortgagee may apply the entire amount of any Insurance
Proceeds or Condemnation Proceeds to the discharge of the Secured Obligations
whether or not then due and payable in such priority and proportions as
Mortgagee in its discretion shall deem proper. If the Mortgaged Property is
sold, through foreclosure or otherwise, prior to the receipt by Mortgagee of
such Insurance Proceeds or Condemnation Proceeds, Mortgagee shall have the
right, whether or not a deficiency judgment on any Loan Document shall have been
sought, recovered or denied, to receive such Insurance Proceeds or Condemnation
Proceeds, or a portion thereof sufficient to pay the Secured Obligations,
whichever is less.
(b) Prosecution of Claim for Loss. If a Casualty or a Condemnation
-----------------------------
shall occur, Mortgagor shall file and prosecute its claim or claims for any such
Insurance Proceeds or Condemnation Proceeds in good faith and with due diligence
and cause the same to be collected and paid over to Mortgagee, and hereby
irrevocably authorizes and empowers Mortgagee, in the name of Mortgagor or
otherwise to collect and receipt for any such Insurance Proceeds or Condemnation
Proceeds and to adjust any insurance claims and to file and prosecute such claim
or claims, and although it is hereby expressly agreed that the same shall not be
necessary in any event, Mortgagor shall, upon demand of Mortgagee, make, execute
and deliver any and all assignments and other instruments sufficient for the
purpose of assigning any such Insurance Proceeds or Condemnation Proceeds to
Mortgagee, free and clear of any Liens whatsoever. Mortgagor hereby irrevocably
appoints Mortgagee as Mortgagor's attorney-in-fact for each such purpose (which
appointment is coupled with an interest) and authorizes any Person to act upon
the foregoing appointment.
SECTION 2.8. Transfer Restrictions. Except as expressly permitted by
---------------------
the Credit Agreement, Mortgagor shall not further mortgage, hypothecate, pledge
or suffer to exist any Lien on, or sell, transfer, convey or lease, all or any
part of the Mortgaged Property (or any interest therein).
SECTION 2.9. Mortgagee's Right to Perform. If Mortgagor shall
----------------------------
fail to pay or perform any of the Secured Obligations, then Mortgagee, upon ten
(10) days' prior notice to Mortgagor may, but shall not be obligated to, make
(or cause to be made) any such payment or perform (or cause to be performed) any
such Secured Obligation of Mortgagor, in any form and manner deemed reasonably
appropriate by Mortgagee as agent or attorney-in-fact of Mortgagor, and any
amount so paid or extended, plus reimbursement to Mortgagee for its
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<PAGE>
reasonable out-of-pocket and other expenses, including legal expenses, for each
matter for which it acts under this Mortgage, shall be added to the Secured
Obligations and shall be repaid to Mortgagee upon demand. By way of illustration
and not in limitation of the foregoing, Mortgagee may, but need not, make
payments of principal, interest or other charges on any obligations secured by
any Permitted Encumbrance or other Lien or charge; purchase, discharge,
compromise or settle any tax Lien or any other Lien, encumbrance, suit,
proceeding, title or claim thereof; pay any premium owing on any insurance
policy covering the Mortgaged Property; or redeem from any tax sale or
forfeiture affecting the Property or contest any tax or assessment. In making
any payment or securing any performance relating to any such obligation of
Mortgagor hereunder or thereunder, Mortgagee, so long as it acts in good faith,
shall be the sole judge of the legality, validity and amount of any Lien or
encumbrance and of all other matters necessary to be determined in satisfaction
thereof. No such action of Mortgagee shall be considered as a waiver of any
right accruing to it on account of the occurrence of any default on the part of
Mortgagor under this Mortgage, any Event of Default or any default or event of
default under any other Loan Document.
SECTION 2.10. Subrogation. To the extent that Mortgagee, after the
-----------
date hereof, pays pursuant to the terms of this Mortgage, the Credit Agreement
or any other Loan Document any sum due under any provision of law or any
instrument or document creating any Lien prior or superior to the Lien of this
Mortgage, Mortgagee shall have and be entitled to a Lien on the Mortgaged
Property equal in priority to that discharged, and Mortgagee shall be subrogated
to, and receive and enjoy all rights and Liens possessed, held or enjoyed by the
holder of such Lien, which shall remain in existence for the benefit of
Mortgagee to secure the amount expended by Mortgagee on account of or in
connection with such Lien. Mortgagee shall be subrogated, notwithstanding their
release of record, to mortgages, trust deeds, superior titles, vendor's Liens,
Liens, charges, encumbrances, rights and equities on the Property to the extent
that any obligation under any thereof is paid or discharged by Mortgagee.
SECTION 2.11. Inspection of Mortgaged Property. Mortgagor shall
--------------------------------
permit Mortgagee and Mortgagee's agents, as frequently as Mortgagee reasonably
determines to be appropriate, during normal business hours (or at such other
times as may be reasonably be requested by Mortgagee), to enter upon the
Property for the purpose of inspecting and/or appraising the Mortgaged Property
and all books, records and documents of Mortgagor relating thereto, and for the
purpose of performing any of the acts that Mortgagee is authorized to perform
under the terms of any of the Loan Documents; provided, that Mortgagee shall
--------
have no duty to make such inspections and shall not incur any liability or
obligation for making or not making inspections. In exercising the foregoing
rights, Mortgagee shall use reasonable efforts to minimize any disruption of
Mortgagor's operations and shall be subject to Mortgagor's reasonable security
and operating measures.
SECTION 2.12. Certain Tax Law Changes. In the event of the passage
-----------------------
after the date of this Mortgage of any law deducting from the value of real
property, for the purpose of taxation, amounts in respect of any lien thereon or
changing in any way the laws for the
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<PAGE>
taxation of mortgages or debts secured by mortgages for state or local purposes
or the manner of the collection of any such taxes, and in any such event
imposing a tax, either directly or indirectly, on this Mortgage, Mortgagor shall
pay such tax on or before the later of the date the same is due and the tenth
day after Mortgagor obtains actual knowledge of the same.
SECTION 2.13. Future Advances.
---------------
(a) Future Advances. All future advances under this Mortgage or under
---------------
any other agreements at any time made between Mortgagor and Mortgagee shall have
the same priority as if the future advance was made on the date that this
Mortgage was recorded. Notice is hereby given that the Secured Obligations may
increase as a result of any defaults hereunder by Mortgagor due to, for example,
and without limitation, unpaid interest or late charges, unpaid Impositions or
insurance premiums or other charges which Mortgagee elects to advance, defaults
under Leases that Mortgagee elects to cure, attorneys' fees or costs incurred in
enforcing the Loan Documents or other expenses. Except as otherwise provided in
the Credit Agreement, interest shall be payable on any future advances at the
Overdue Rate.
(b) Maximum Secured Amount. It is expressly understood and agreed
----------------------
that the total amount of the Secured Obligations secured hereby will in no event
exceed Two Hundred percent (200%) of (i) the total face amounts of the Note;
plus (ii) the total interest which may hereafter accrue under the Note on such
face amount; plus (iii) any fees, costs or expenses which may be payable
hereunder or under the Guarantee.
SECTION 2.14. Covenants in Loan Documents. Mortgagor shall also
---------------------------
comply with all other covenants and obligations (a) which either Wahlco or
Thermatrix is obligated under the Credit Agreement to cause Mortgagor to comply
with, and (b) set forth in the Security Agreement, as if each of the same was
set forth at length herein as the direct obligation of Mortgagor hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Mortgagor represents and warrants to and agrees with the Secured
Parties as follows:
SECTION 3.1. Title. Mortgagor owns and will at all times own good
-----
and marketable fee simple title to the Property, and good and valid title to the
balance of the Mortgaged Property, in each case free and clear of all Liens,
other than the Lien and security interests created by this Mortgage and any
Permitted Encumbrances.
SECTION 3.2. Valid Lien and Security Interest. This Mortgage
--------------------------------
creates (a) a valid and enforceable lien on the Property under the laws of the
State in favor of Mortgagee for the benefit of the Secured Parties as security
for the Secured Obligations, and (b) a valid and
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<PAGE>
enforceable security interest in the Personal Property under the laws of the
State in favor of Mortgagee for the benefit of the Secured Parties as security
for the Secured Obligations. All necessary actions have been taken to establish
a duly perfected first priority lien and security interest in favor of Mortgagee
in respect of Mortgagor's interest in the Mortgaged Property (other than only
the recording of this Mortgage in the appropriate land records therefor),
including, if required under State law, the filing of record of financing
statements in the appropriate form, properly describing the Personal Property,
duly executed by Mortgagor, in the offices listed on Exhibit D hereto and the
---------
payment of all taxes and filing fees in connection therewith. The description of
the Personal Property set forth in such financing statements is sufficient to
perfect a security interest in those items of Personal Property in which a
security interest may be perfected by the filing of a financing statement under
the Uniform Commercial Code. No further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary, except as
provided under applicable law with respect to the filing of continuation
statements. No mortgage, deed of trust or similar instrument and no financing
statement or other similar document has been signed, recorded or filed covering
Mortgagor's right, title or interest in or to any Mortgaged Property, other than
(a) those naming Mortgagee as mortgagee or secured party thereunder and (b)
those creating Permitted Encumbrances.
ARTICLE IV
SECURITY AGREEMENT AND FIXTURE FILING
SECTION 4.1. Security Agreement.
------------------
(a) Grant of Security Interest. To the extent that the Mortgaged
--------------------------
Property includes Personal Property under applicable State law, this Mortgage
shall also be construed as a security agreement and the grant to the Mortgagee,
for the benefit of the Lenders, of a security interest in such Personal Property
under the Uniform Commercial Code.
(b) Remedies. If an Event of Default shall occur, Mortgagee may
--------
exercise from time to time and at any time any rights and remedies available to
it under applicable law upon default in the payment of indebtedness, including,
without limitation, any right or remedy available to it as a secured party under
the Uniform Commercial Code. Mortgagor shall, promptly upon request by
Mortgagee, assemble the Mortgaged Property, or any portion thereof generally
described in such request, and make the same available to Mortgagee at such
place or places designated by Mortgagee and reasonably convenient to Mortgagee
and Mortgagor. If Mortgagee elects to proceed under the Uniform Commercial Code
to dispose of all or any portion of the Mortgaged Property, Mortgagee, at its
option, may give Mortgagor notice of the time and place of any public sale of
any such property, or of the date after which any sale or other disposition
thereof is to be made, by sending notice by registered or certified first class
mail, postage prepaid, to Mortgagor at least ten (10) days prior to the time of
the sale or other disposition. If any notice of any proposed sale, assignment or
transfer by Mortgagee of any portion of the Collateral or any interest therein
is required by law, Mortgagor conclusively agrees that, unless any longer period
shall then be required by the
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<PAGE>
Uniform Commercial Code, ten (10) days' notice to Mortgagor of the date, time
and place (and, in the case of a sale, the terms) thereof is reasonable.
Mortgagee may, at its option, appoint any other Person as the agent of Mortgagee
for the purpose of disposition of the Personal Property in accordance with the
Uniform Commercial Code. Mortgagor acknowledges and agrees that a disposition of
the Personal Property in accordance with Mortgagee's rights and remedies in
respect of the Personal Property as provided in this Section is a commercially
reasonable disposition thereof.
SECTION 4.2. Fixture Filing. To the extent that the Mortgaged
--------------
Property includes items of Personal Property that are or are to become fixtures
under applicable law, and to the extent permitted under applicable law, the
filing of this Mortgage in the land records of the county in which such
Mortgaged Property is located shall also operate from the time of filing as a
fixture filing with respect to such Mortgaged Property, the information required
for the purpose of such fixture filing being as set forth in this Mortgage.
SECTION 4.3. Security Deposit Collateral. So long as no Event of
---------------------------
Default shall have occurred and shall be continuing, Mortgagor shall have the
exclusive right, as between Mortgagor and Mortgagee (and the Lenders), to apply,
draw, make demand, sue for, or amend any Security Deposit Collateral or waive or
release any party from its obligations under or in respect of any Security
Deposit Collateral. If an Event of Default shall occur and shall be continuing,
Mortgagee shall (at its option) have the exclusive right, as between Mortgagor
and Mortgagee, upon notice to Mortgagor, to apply, draw, make demand, sue for,
or amend any Security Deposit Collateral.
SECTION 4.4. Additional Covenants. All other covenants and
--------------------
obligations of Mortgagor contained herein relating to the Mortgaged Property
(including those incorporated by reference under Section 2.14 hereof) shall be
deemed to apply to the Personal Property whether or not expressly referred to in
this Article IV, as if the same were the direct obligation of Mortgagor set
forth at length herein.
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<PAGE>
ARTICLE V
ASSIGNMENTS OF RENTS AND LEASES
SECTION 5.1. Assignment of Rents and Leases.
------------------------------
(a) Assignment of Rents. Mortgagor hereby presently, absolutely and
-------------------
irrevocably assigns to Mortgagee, for the benefit of the Lenders, subject to the
license of Mortgagor under subsection (b) of this Section, all Leases and the
Rents, and Mortgagee and, if a Receiver has been appointed under this Mortgage,
such Receiver, shall have the absolute, immediate and continuing right, subject
to mandatory provisions of applicable law, to collect and receive all Rents now
or hereafter, including during any period of redemption, accruing with respect
to the Property. The Lien on the Leases and the Rents made under Granting Clause
H hereof shall be in addition to and subject to the foregoing assignment. At the
request of Mortgagee or such Receiver, Mortgagor shall promptly execute,
acknowledge, deliver, record, register and file any additional general
assignment of the Leases or specific assignment of any Lease which Mortgagee or
such Receiver may require from time to time (all in form and substance
reasonably satisfactory to Mortgagee and such Receiver) to effectuate, complete,
perfect, continue or preserve this assignment of the Leases and the Rents and
the Lien upon the Leases and the Rents made under Granting Clause H.
(b) License to Collect Rents. As long as no Event of Default has
------------------------
occurred, Mortgagor shall have the right under a license granted hereby, subject
to subsection (c) of this Section, to collect the Rents upon the due date
thereof, but not prior to such due date.
(c) Termination of License Upon Event of Default. If an Event of
--------------------------------------------
Default shall occur, the license granted under subsection (b) of this Section
shall immediately and automatically terminate, without the necessity of any
action by any Person, and Mortgagee and any Receiver appointed under this
Mortgage shall have the right to exercise the rights and remedies provided under
this Mortgage or otherwise under applicable law. If an Event of Default shall
occur, upon demand by the Person exercising the rights under this Section,
Mortgagor shall promptly pay to such Person all security deposits under the
Leases and all Rents allocable to any period after the occurrence of such Event
of Default. Subject to any applicable Legal Requirement, any Rents received
hereunder by the Person exercising the rights under this Section shall be
promptly paid to Mortgagee, and any Rents received hereunder by Mortgagee shall
be applied and disbursed as provided in Section 6.9; provided that, subject to
any applicable requirement of law, any security deposits actually received by
Mortgagee shall be held, applied and disbursed as provided in the applicable
Leases.
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<PAGE>
(d) Direction to Tenants. Upon the occurrence of an Event of Default,
--------------------
Mortgagor shall, at the direction of Mortgagee, further authorize and direct, in
writing, the tenant under each Lease to pay directly to, or as directed by,
Mortgagee all Rents accruing or due under its Lease without proof to the tenant
of the occurrence and continuance of such Event of Default. Mortgagor hereby
authorizes the tenant under each Lease to rely upon and comply with any notice
or demand from Mortgagee for payment of Rents to Mortgagee and Mortgagor shall
have no claim against any tenant for Rents paid by such tenant to Mortgagee
pursuant to such notice or demand.
(e) No Release of Tenants. Neither this Mortgage nor any action or
---------------------
inaction on the part of Mortgagee shall release any tenant under any lease, any
guarantor of any Lease or Mortgagor from any of their respective obligations
under the Leases or constitute an assumption of any such obligation on the part
of Mortgagee. No action or failure to act on the part of Mortgagor shall
adversely affect or limit the rights of Mortgagee under this Mortgage or,
through this Mortgage, under the Leases.
(f) No Liability of Mortgagee. Neither the acceptance hereof nor the
-------------------------
exercise of the rights and remedies hereunder nor any other action on the part
of Mortgagee or any Person exercising the rights of Mortgagee hereunder shall be
construed to (i) be an assumption by Mortgagee or any such Person or to
otherwise make Mortgagee or such Person liable or responsible for the
performance of any of the obligations of Mortgagor under or with respect to the
Leases or for any Rent, security deposit or other amount delivered to Mortgagor;
provided that Mortgagee or any such Person exercising the rights of Mortgagee
shall be accountable as provided in subsection (c) of this Section for any
Rents, security deposits or other amounts actually received by Mortgagee or such
Person, as the case may be; or (ii) obligate Mortgagee or any such Person to
take any action under or with respect to the Leases or with respect to the
Mortgaged Property, to incur any expense or perform or discharge any duty or
obligation under or with respect to the Leases or with respect to the Mortgaged
Property, to appear in or defend any action or proceeding relating to the Leases
or the Mortgaged Property, to constitute Mortgagee as a mortgagee in possession
(unless Mortgagee actually enters and takes possession of the Mortgaged
Property), or to be liable in any way for any injury or damage to person or
property sustained by any Person in or about the Mortgaged Property, other than
to the extent caused by the willful misconduct or gross negligence of Mortgagee
or any Person exercising the rights of Mortgagee hereunder.
(g) No Existing Leases. Mortgagor represents and warrants that as of
------------------
the date hereof, no Leases exist with respect to the Mortgaged Property.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Defaults. The following shall be an Event of
------------------
Default hereunder (an "Event of Default"): any Event of Default by or with
respect to
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<PAGE>
respect to Mortgagor, either Borrower or any other Loan Party under and as
defined in the Credit Agreement or any other Loan Document.
SECTION 6.2. Remedies.
(a) General. If an Event of Default shall occur and shall be
-------
continuing, Mortgagee, with or without entry onto the Property, shall have the
following rights:
(i) to immediately foreclose this Mortgage and the lien
hereof;
(ii) to sell Mortgagor's right, title and interest in and
to the Mortgaged Property, as a whole or in separate parcels, at one or
more public sales, at such time and place and upon such terms and
conditions as may be required or permitted by applicable law. Such power
shall not be exhausted until the Secured Obligations have been paid in
full. Mortgagee may execute and deliver to the purchaser or purchasers at
any sale a sufficient conveyance of the Mortgaged Property sold thereby
divesting Mortgagor of all right, title or interest that it may have in and
to such Mortgaged Property and vesting the same in the purchaser or
purchasers at such sale or sales, free of the security interest and lien of
this Mortgage and free of all rights of redemption in Mortgagor;
(iii) to take such steps to protect and enforce its rights
and the lien of this Mortgage whether by action, suit or proceeding in
equity or at law for the specific performance of any provision in the Loan
Documents, or in aid of the execution of any power granted in this
Mortgage, or for any foreclosure hereunder, or for the enforcement of any
other appropriate legal or equitable remedy Mortgagee shall elect;
(iv) to apply for the appointment of a Receiver for the
Mortgaged Property in accordance with Section 6.4; and
(v) to take all such other steps and to assert and
exercise all such other rights and remedies as shall be permitted by
applicable law.
(b) Foreclosure. This Mortgage may be foreclosed once against
-----------
all or successively against any part or parts of the Mortgaged Property as
Mortgagee may elect. This Mortgage and the right of foreclosure hereunder shall
not be impaired or exhausted by one or any foreclosure or by one or any sale,
and may be foreclosed successively and in parts, until all of the Mortgaged
Property has been foreclosed against and sold. The purchase money proceeds or
avails of any foreclosure or sale after default and any other sums which then
may be held by Mortgagee under this Mortgage shall be applied as provided in
Section 6.9 hereof.
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<PAGE>
(c) Mortgagee May Bid. In connection with any such foreclosure or
-----------------
sale, Mortgagee may bid for and acquire Mortgagor's interest in the Mortgaged
Property or any part thereof and in lieu of paying cash therefor, may make
settlement for the purchase price by crediting upon the Secured Obligations the
net sale price after deducting therefrom the amounts referred to in clause
"first" of Section 6.9. Mortgagee may adjourn from time to time any sale by it
to be made under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales, and,
Mortgagee, without further notice or publication, may make such sale at the time
and place to which the same shall be so adjourned.
(d) Acceleration of Secured Obligations. In the event of any sale
-----------------------------------
made under or by virtue of this Article, the entire principal of, interest and
other amounts in respect of the Secured Obligations, if not previously due and
payable, shall, at the option of Mortgagee, immediately become due and payable,
anything in this Mortgage to the contrary notwithstanding.
SECTION 6.3. Possession of Property.
----------------------
(a) Mortgagor to Vacate Property. Mortgagor hereby waives, if an
----------------------------
Event of Default shall occur and shall be continuing, all right to the
possession and Rents of the Property, and Mortgagor hereby expressly authorizes
and empowers Mortgagee, upon such occurrence and continuation, for the purpose
of protecting and preserving the Property and the interest of Mortgagee therein,
and to the extent permitted by law, (i) to enter upon and take possession of the
Property, to remove and exclude Mortgagor and its agents and servants wholly
therefrom, by summary proceeding, ejectment or other legal proceeding, and to
take possession of all books, records and accounts relating thereto, and
Mortgagor agrees to surrender possession of the Property and of such books,
records and accounts to Mortgagee on demand and (ii) with or without the entry
upon or taking possession of the Property, to hold, operate, manage, repair and
maintain the Mortgaged Property and to collect and receive all Rents derived
from the Property, and after deducting therefrom all reasonable costs, expenses
and liabilities (including reasonable attorneys' fees and expenses) incurred by
Mortgagee in collecting the same and in using, managing, preserving and
controlling the Property for the purpose of protecting and preserving the
Mortgaged Property and the interest of Mortgagee therein, and otherwise in
exercising Mortgagee's rights hereunder, including all amounts necessary to pay
Impositions and reasonable other charges in connection with the Property, as
well as reasonable compensation for Mortgagee's agents and employees, and to
apply the remainder as set forth in Section 6.9. Without limiting any other
right or remedy of Mortgagee pursuant to any other provision of this Mortgage or
the Credit Agreement, upon or at any time after the filing of a suit to
foreclose this Mortgage, the court in which such suit is filed shall have full
power to enter an order placing Mortgagee in possession of the Property with the
same power granted to a Receiver pursuant to the applicable Sections of this
Mortgage and with all other rights and privileges of a mortgagee-in-possession
under applicable State law. All such costs, expenses and liabilities incurred by
Mortgagee shall be Secured Obligations.
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<PAGE>
(b) Payment for Use and Occupancy. Following an Event of Default and
-----------------------------
the exercise by Mortgagee of its remedies hereunder, if at any time Mortgagee
shall have (and shall exercise) the right, following such summary proceeding,
ejectment or other proceeding pursuant to Section 6.3(a), to exclude Mortgagor
from all or any part of the Property and Mortgagor shall fail to vacate all or
such portion of the Property, then, Mortgagor shall pay the fair and reasonable
rental value for the use and occupancy of the Property or any portion thereof
that is being occupied by Mortgagor for such period and, upon default of any
such payment Mortgagor may be evicted by any summary action or proceeding for
the recovery of possession of such portion of the Property for nonpayment of
rent, however designated.
SECTION 6.4. Appointment of Receiver. If an Event of Default shall
-----------------------
occur and shall be continuing, Mortgagee shall, to the fullest extent permitted
by law, and without regard to the adequacy or value of any security for the
Secured Obligations or the solvency of Mortgagor, or the occupancy of the
Property or any part thereof as a homestead, and without the requirement of any
bond, be entitled to the appointment of a Receiver for all or any part of the
Mortgaged Property and all Rents therefrom (the inclusion in this Mortgage of
the provisions for the appointment of a Receiver and the assignment of Rents
being an express condition upon which Mortgagee agreed to execute the Credit
Agreement and to accept this Mortgage), whether or not such receivership is
incidental to a proposed sale of the Mortgaged Property or otherwise, and, to
the fullest extent permitted by law, Mortgagor hereby consents to the
appointment of such a Receiver and will not oppose any such appointment.
SECTION 6.5. Waiver of Stay, Extension, Moratorium and Marshalling
-----------------------------------------------------
Laws and Equity of Redemption. To the maximum extent permitted by law, Mortgagor
- -----------------------------
shall not at any time insist upon, or plead, or in any manner whatever claim or
take any benefit or advantage of any applicable present or future stay,
extension or moratorium law, which may affect observance or performance of the
provisions of this Mortgage; nor claim, take or insist upon any benefit or
advantage of any present or future law providing for the valuation or appraisal
of, or rights of marshalling with respect to, the Mortgaged Property or any
portion thereof prior to or in connection with any sale or sales thereof which
may be made under or by virtue of this Mortgage; and Mortgagor, to the extent
that it lawfully may, hereby waives all benefit or advantage of any such law or
laws. Mortgagor, for itself and all who may claim under it, hereby waives, to
the maximum extent permitted by applicable law, any and all rights and equities
of redemption from sale under the power of sale created hereunder or from sale
under any order or decree of foreclosure of this Mortgage and (if an Event of
Default shall occur) all notice or notices of seizure, and all right to have the
Mortgaged Property marshalled upon any foreclosure hereof. Mortgagee shall not
be obligated to pursue or exhaust its rights or remedies as against any other
part of the Mortgaged Property and Mortgagor hereby waives any right or claim of
right to have Mortgagee proceed against any portion of the Mortgage Property in
any particular order.
SECTION 6.6. Mortgagee Authorized to Execute Documents. Mortgagor
-----------------------------------------
irrevocably appoints Mortgagee the true and lawful attorney of Mortgagor (which
appointment
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<PAGE>
is coupled with an interest and shall be irrevocable), in its name and stead and
on its behalf, for the purpose of effectuating any sale, assignment, transfer or
delivery for the enforcement hereof, whether pursuant to power of sale,
foreclosure or otherwise, to execute and deliver all deeds, bills of sale,
assignments, releases and other instruments as Mortgagee may consider necessary
or appropriate, with full power of substitution, Mortgagor hereby ratifying and
confirming all that its said attorney or any substitute shall lawfully do by
virtue hereof. Nevertheless, if so requested by Mortgagee or any purchaser,
Mortgagor will immediately ratify and confirm, without any cost or charge
therefor, any such sale, assignment, transfer or delivery by executing and
delivering to the grantee or such purchaser all such proper deeds, bills of
sale, assignments, releases and other instruments as may be designated in any
such request.
SECTION 6.7. Collateral Situated in More than One County. If the
-------------------------------------------
Mortgaged Property is situated in two or more counties in the State, or in two
judicial districts of the same county, Mortgagee shall have the full power to
select in which county or counties, or in which judicial district or districts,
the sale of the Mortgaged Property is to be made, and Mortgagee's selection
shall be binding upon Mortgagor and shall permit the sale of the whole to be
made in any of the counties or judicial districts in which part of the Mortgaged
Property is located. Mortgagor hereby waives any right it might otherwise have
or assert to object to foreclosure, through the use of a single Mortgage, upon
all of the Mortgaged Property in the State.
SECTION 6.8. Collateral in Other States. Mortgagor acknowledges and
--------------------------
agrees that the Other Mortgaged Properties may be located in states other than
the State, and Mortgagor therefore waives and relinquishes any and all rights it
may have, whether at law or equity, to require Mortgagee to proceed to enforce
or exercise any rights, powers and remedies that Mortgagee or any trustee may
have under this Mortgage and the Other Mortgages in any particular manner, in
any particular order, or in any particular state or other jurisdiction. Without
limiting the generality of the foregoing, (a) Mortgagee shall not be precluded
from or restricted in exercising any of its rights and remedies hereunder due to
the prior or concurrent exercise by Mortgagee or any trustee of any of its
rights and remedies under any Other Mortgage, (b) neither Mortgagee nor any
trustee shall be precluded from or restricted in exercising any of its rights
and remedies under any Other Mortgage due to the prior or concurrent exercise by
Mortgagee of any of its rights and remedies hereunder, and (c) neither Mortgagee
nor any trustee shall be required to exercise or enforce any of its rights and
remedies under any Other Mortgage before or concurrently with the exercise by
Mortgagee of any of its rights and remedies hereunder. Mortgagor further agrees
that any particular proceeding, including foreclosure through court action (in a
state or federal court) or power of sale, may be brought and prosecuted in the
local or federal courts of any one or more of the states in which any of the
Mortgaged Property and the Other Mortgaged Properties may be located, without
regard to the fact that any one or more prior or contemporaneous proceedings
have been instituted elsewhere with respect to the same or any other portion of
the Mortgaged Properties or the Other Mortgaged Properties.
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<PAGE>
SECTION 6.9. Application of Proceeds. Following the occurrence of an
-----------------------
Event of Default, any proceeds of any of the Mortgaged Property shall be applied
first, to the costs and expenses of the Secured Parties payable
-----
pursuant to the Credit Agreement and this Mortgage,
second, to the payment of all other Secured Obligations other than
------
principal and interest,
third, to interest accrued and unpaid on the Secured Obligations, on a
-----
pro rata basis among the Secured Parties determined by the amount of
interest accrued and unpaid on the Secured Obligations of each Secured
Party,
fourth, to the satisfaction of the principal amount of the Secured
------
Obligations, on a pro rata basis among the Secured Parties determined by
principal amount of the Secured Obligations of each Secured Party then
outstanding, and
fifth, the remainder, if any, to Mortgagor or such other Person as may
-----
entitled thereto by law.
Mortgagor shall remain liable for any deficiency.
SECTION 6.10. Setoff. To the fullest extent permitted by applicable
------
law, at any time while an Event of Default has occurred and is continuing, any
and all deposits (including all account balances, whether provisional or final
and whether or not collected or available) and any other Secured Obligations at
any time held or owing by the Secured Parties to or for the credit or account of
Mortgagor, except accounts with respect to which Mortgagor is a trustee or an
escrow agent in respect of bona fide third parties, may be offset and applied
toward the payment of the Secured Obligations owing to such Secured Party,
whether or not the Secured Obligations, or any part thereof, shall then be due.
SECTION 6.11. Receipt a Sufficient Discharge to Purchaser. Upon any
-------------------------------------------
sale of the Mortgaged Property or any part thereof or any interest therein,
whether pursuant to power of sale, foreclosure or otherwise, the receipt by
Mortgagee or the officer making the sale under judicial proceedings of the
purchase money therefor shall be a sufficient discharge to the purchaser for
such purchase money, and such purchaser shall not be obligated to see to the
application thereof.
SECTION 6.12. Sale a Bar Against Mortgagor. Any sale of the Mortgaged
----------------------------
Property or any part thereof or any interest therein under or by virtue of this
Mortgage, whether pursuant to power of sale, foreclosure or otherwise, shall
forever be a bar against Mortgagor.
SECTION 6.13. Remedies Cumulative; Waiver. No remedy or right of
---------------------------
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<PAGE>
Mortgagee hereunder, under the Credit Agreement, or any other Loan Document or
otherwise, or available under applicable law, shall be exclusive of any other
right or remedy, but each such remedy or right shall be in addition to every
other remedy or right now or hereafter existing at law or in equity under any
such document or under applicable law. No delay in the exercise of, or omission
to exercise, any remedy or right accruing on any default or Event of Default
shall impair any such remedy or right or be construed to be a waiver of any such
default or Event of Default or an acquiescence therein, nor shall it affect any
subsequent default or Event of Default of the same or a different nature. Every
such remedy or right may be exercised concurrently or independently, and when
and as often as may be deemed proper by Mortgagee. All obligations of Mortgagor,
and all rights, powers and remedies of Mortgagee expressed herein, shall be in
addition to, and not in limitation of, those provided by law or in the Credit
Agreement, any other Loan Document or any other written instrument relating to
any of the Secured Obligations or any security therefor. Any and all covenants
of Mortgagor in this Mortgage may from time to time, by instrument in writing
signed by Mortgagee, be waived to such extent and in such manner as Mortgagee
may desire, but no such waiver will ever affect or impair the rights of
Mortgagee hereunder, except to the extent specifically stated in such written
instrument.
SECTION 6.14. No Liability of Secured Parties. Notwithstanding
-------------------------------
anything contained in this Mortgage, this Mortgage is only intended as security
for the Secured Obligations and the Secured Parties shall not be obligated to
perform or discharge, and does not hereby undertake to perform or discharge, any
obligation, duty or liability of Mortgagor with respect to any of the Mortgaged
Property. Unless and until a Secured Party takes actual possession of the
Mortgaged Property, either through foreclosure, the taking of a deed in lieu
thereof or otherwise, the Secured Parties shall not have responsibility for the
control, care, management or repair of the Property nor shall such Secured Party
be responsible or liable for any negligence in the management, operation,
upkeep, repair or control of the Property resulting in loss or injury or death
to any licensee, employee, tenant or stranger or other Person. Mortgagor shall
indemnify and hold harmless the Secured Parties from and against any and all
loss, cost and liability incurred by Mortgagee in connection with any of the
foregoing which are not the responsibility of the Secured Parties in accordance
with this Section; provided, however, that Mortgagor shall not be liable for
such indemnification to any Secured Party to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results from such
Secured Party's gross negligence or willful misconduct.
ARTICLE VII
CONCERNING MORTGAGEE
SECTION 7.1. [Intentionally Omitted]
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Termination; Defeasance. This Mortgage and the security
-----------------------
interests created hereby shall terminate when the Secured Obligations due and to
become due shall have been paid or performed in full. Upon termination,
Mortgagee shall execute and deliver to Mortgagor an appropriate release and such
other documents reasonably required by Mortgagor, and shall turn over to
Mortgagor any of the Mortgaged Property and any other files, documents or
material held by Mortgagee. Mortgagor shall pay Mortgagee's reasonable expenses
(including attorneys' fees and expenses) in connection with the termination
hereof and any transfer of such property.
SECTION 8.2. Rights Cumulative; Waivers. To the fullest extent
--------------------------
permitted by law, the rights and remedies of the Secured Parties under this
Mortgage and the other Loan Documents shall be cumulative. The exercise, failure
to exercise or delay in exercising any right or remedy by any of the Secured
Parties shall not prevent any of them from exercising any other right or remedy
or exercising such right or remedy at a later time.
SECTION 8.3. Fees and Expenses. Subject to Section 10.2 of the
-----------------
Credit Agreement (to the extent applicable), Mortgagor shall pay upon demand all
fees and expenses (including reasonable attorneys' fees and expenses) incurred
by Mortgagee in connection with (a) the administration of this Mortgage and any
amendment or modification hereof, (b) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Mortgaged
Property or (c) the failure by Mortgagor to perform or observe any of the
provisions hereof and the exercise or enforcement of any of the rights of, and
collection of amounts due to, the Secured Parties hereunder.
SECTION 8.4. Indemnification.
---------------
(a) Indemnity. Mortgagor shall protect, indemnify and hold
---------
harmless Mortgagee and each of its Indemnified Parties from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs,
fees, charges and expenses (including reasonable attorneys' fees and expenses
and further including in connection with the enforcement of this indemnity)
(each, a "Loss") imposed upon or incurred by or asserted against any such
----
Secured Party or Indemnified Party by reason of (i) any accident, injury or
death of persons or loss of or damage to property occurring on or about the
Property or any part thereof; (ii) any use or nonuse of the Property or any part
thereof; (iii) any failure on the part of Mortgagor to perform or comply with
any of the terms of this Mortgage (including with respect to environmental
matters under Article IX of this Mortgage); (iv) the performance of any labor or
services or the furnishing of any materials or other property in respect of the
Mortgaged Property or any part thereof; (v) any negligent or tortious act or
omission on the part of Mortgagor or any of its agents, employees, contractors,
licensees, lessees or invitees;
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<PAGE>
(vi) any contest of any Legal Requirement, Imposition or other matter or (vii)
any other matter or thing arising from or attributable to Mortgagor's interest
in the Mortgaged Property and/or receipt of any income therefrom, other than
Losses resulting from Mortgagee's gross negligence or willful misconduct, as
determined by a court of competent jurisdiction. If any action, suit or
proceeding is brought against Mortgagee or any Indemnified Party by reason of
any such occurrence, Mortgagor, upon such Person's request, will at Mortgagor's
expense resist and defend such action, suit or proceeding or will cause the same
to be resisted and defended by counsel for the insurer of the liability or by
counsel approved by such Person. Any amounts payable to Mortgagee or any
Indemnified Party pursuant to the indemnity contained in this Section shall be
due within ten (10) days after demand therefor, and if not paid when due shall
bear interest at the Overdue Rate from and including the date due to the date of
payment by Mortgagor; and all such amounts, together with all such interest,
shall be deemed part of the Secured Obligations secured by this Mortgage. The
indemnity set forth in this Section shall survive the repayment in full of the
Secured Obligations and the release of any and all liens of Mortgagee, the
transfer of any and all right, title and interest in and to the Mortgaged
Property, or any part thereof, to any Person and the satisfaction of the Secured
Obligations.
(b) Third-Party Beneficiaries. Each Indemnified Party shall be a
-------------------------
third-party beneficiary hereof and shall be entitled to, and to enforce, all of
the rights, benefits and protections afforded herein to an Indemnified Party, as
if such Indemnified Party were a party hereto.
SECTION 8.5. Notices. All notices and other communications provided
-------
to any party in connection with this Mortgage shall be given and effective as
follows:
(a) If to the Lenders or to Mortgagee, at:
Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Telephone: (203) 862-7000
Attention: Arthur H. Amron
Facsimile: (203) 862-7312
and
Attention: Jay L. Maymudes
Facsimile: (203) 862-7350
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<PAGE>
With a copy to:
Howard, Smith & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telephone: (212) 841-1000
Facsimile: (212) 841-1010
(b) If to Mortgagor, at:
c/o Thermatrix Inc.
308 N. Peters Road, Suite 100
Knoxville, Tennessee 37922
Attention: Edward E. Greene
Telephone: (423) 539-9603
Facsimile: (423) 670-4091
With a copy to
Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road
Palo Alto, CA 94304
Attention: Michael J. Danaher, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
SECTION 8.6. Amendment and Waiver. Except as otherwise provided
--------------------
herein, this Mortgage may be amended, and observance of any term of this
Mortgage may be waived, with (and only with) the written consent of Mortgagor
and Mortgagee.
SECTION 8.7. Expenses of Mortgagor's Agreements and Duties. The
---------------------------------------------
terms, conditions, covenants and agreements to be observed or performed by
Mortgagor under this Mortgage shall be observed or performed by it at its sole
cost and expense.
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<PAGE>
SECTION 8.8. Mortgagee's Right to Use Agents and to Act in Name of
-----------------------------------------------------
Mortgagor. Mortgagee may exercise its rights and remedies under this Mortgage
- ---------
through an agent or other designee and, in the exercise thereof, Mortgagee or
any such other Person may act in its own name or in the name and on behalf of
Mortgagor.
SECTION 8.9. No Compensation or Expense. Mortgagee may exercise its
--------------------------
rights and remedies under this Mortgage (a) without payment of any rent, license
fee or compensation of any kind to Mortgagor and (b) for the account, and at the
expense, of Mortgagor.
SECTION 8.10. Limitation of Obligations with Respect to Mortgaged
---------------------------------------------------
Property.
- --------
(a) Reasonable Care. Neither Mortgagee nor any other Secured Party
---------------
shall have any duty or liability to protect or preserve any Mortgaged Property
or to preserve rights pertaining thereto other than the duty to use reasonable
care in the custody and preservation of any Mortgaged Property in its actual
possession. Mortgagee shall be deemed to have exercised reasonable care in the
custody and preservation of any Mortgaged Property in its possession if such
Mortgaged Property is accorded treatment substantially equal to that which
Mortgagee accords its own like property. Mortgagee shall be relieved of all
responsibility for any Mortgaged Property in its possession upon surrendering
it, or tendering surrender of it, to Mortgagor.
(b) No Obligations. Nothing contained in this Mortgage shall be
--------------
construed as requiring or obligating Mortgagee or any other Secured Party, and
neither Mortgagee nor any other Secured Party shall be required, or obligated,
to (i) make any demand, or to make any inquiry as to the nature or sufficiency
of any payment received by it, or to present or file any claim or notice or take
any action, with respect to any Mortgaged Property or the monies due or to
become due thereunder or in connection therewith, (ii) ascertain or take action
with respect to calls, conversions, exchanges, maturities, tenders, offers or
other matters relating to any Mortgaged Property, whether or not Mortgagee or
any other Secured Party has or is deemed to have knowledge or notice thereof,
(iii) take any necessary steps to preserve rights against any prior parties with
respect to any Mortgaged Property or (iv) notify Mortgagor or any other Person
of any decline in the value of any Mortgaged Property.
SECTION 8.11. Time of the Essence. Time is of the essence with
-------------------
respect to the various obligations of Mortgagor and rights and remedies of
Mortgagee under this Mortgage.
SECTION 8.12. Inconsistency with Loan Documents. Mortgagor and
---------------------------------
Mortgagee are parties to the Security Agreement. If any term or provision hereof
with respect to any Mortgaged Property hereunder which is Personal Property and
which is the subject of and covered by the Security Agreement is inconsistent
with any term or provision of the
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<PAGE>
Security Agreement shall govern and control with respect to such Personal
Property to the extent of such inconsistency.
SECTION 8.13. Severability. If any provision of this Mortgage shall be
------------
invalid, illegal or unenforceable in any jurisdiction, the remaining provisions
shall continue to be valid and enforceable and such provision shall continue to
be valid and enforceable in any other jurisdiction.
SECTION 8.14. Headings. The headings of the Sections and subsections
--------
are for convenience and shall not affect the meaning of this Mortgage.
SECTION 8.15. Assignment; Benefit. Mortgagor may not sell, convey,
-------------------
assign, transfer or otherwise dispose of all or any portion of its rights and
obligations under this Mortgage. Each Lender may assign all or any part of its
rights under this Mortgage as provided in the Credit Agreement. Mortgagor,
Mortgagee, the Lenders and their permitted successors and assigns shall be bound
by this Mortgage. They (and their Indemnified Parties) shall be the only persons
entitled to its benefits.
SECTION 8.16. GOVERNING LAW. THIS MORTGAGE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
NOTWITHSTANDING THE FOREGOING, (A) MATTERS RESPECTING TITLE TO THE MORTGAGED
PROPERTY AND THE CREATION, PERFECTION, PRIORITY AND FORECLOSURE OF LIENS ON, AND
SECURITY INTERESTS IN, THE MORTGAGED PROPERTY SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE WITHOUT
GIVING EFFECT TO THE CONFLICTS-OF-LAW RULES AND PRINCIPLES OF THE STATE; (B)
MORTGAGOR AGREES THAT WHETHER OR NOT DEFICIENCY JUDGMENTS ARE AVAILABLE UNDER
THE LAWS OF THE STATE AFTER A FORECLOSURE OR SALE (JUDICIAL OR NONJUDICIAL) OF
THE MORTGAGED PROPERTY, OR ANY PORTION THEREOF, OR ANY OTHER REALIZATION THEREON
BY MORTGAGEE, MORTGAGEE SHALL HAVE THE RIGHT, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, TO SEEK SUCH A DEFICIENCY JUDGMENT AGAINST MORTGAGOR IN OTHER
STATES OR FOREIGN JURISDICTIONS; AND (C) MORTGAGOR AGREES THAT, TO THE EXTENT
MORTGAGEE OBTAINS A DEFICIENCY JUDGMENT IN ANY OTHER STATE OR FOREIGN
JURISDICTION THEN, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH PARTY
SHALL HAVE THE RIGHT TO ENFORCE SUCH JUDGMENT IN THE STATE, AS WELL AS IN OTHER
STATES OR FOREIGN JURISDICTIONS.
SECTION 8.17. WAIVER OF JURY TRIAL. MORTGAGOR HEREBY KNOWINGLY,
--------------------
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED
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<PAGE>
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS MORTGAGE OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF MORTGAGEE OR MORTGAGOR IN CONNECTION
HEREWITH. MORTGAGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
NOTE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR MORTGAGEE ENTERING INTO THIS MORTGAGE.
SECTION 8.18. CONSENT TO JURISDICTION. EACH OF THE MORTGAGOR AND
-----------------------
MORTGAGEE IRREVOCABLY SUBMITS TO THE NON-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 MORTGAGE OR ANY
TRANSACTION CONTEMPLATED HEREBY. EACH OF THE MORTGAGOR AND MORTGAGEE 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 SECTION 8.5 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. EACH OF THE MORTGAGOR AND MORTGAGEE IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION,
SUIT OR PROCEEDING ARISING OUT OF THIS MORTGAGE 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 (OR IN ANY COURT DESCRIBED BELOW) HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. MORTGAGOR ACKNOWLEDGES THAT IN ANY ACTION OR PROCEEDING TO ENFORCE
PAYMENT OF THE SECURED OBLIGATIONS OR ANY OTHER RIGHT OF THE MORTGAGEE OR THE
LENDERS UNDER THIS MORTGAGE, IT WAIVES THE RIGHT TO ASSERT ANY COUNTERCLAIM OF
ANY KIND OTHER THAN A COMPULSORY COUNTERCLAIM. NOTWITHSTANDING THE FOREGOING,
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY
MANNER PERMITTED BY STATE LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED
AGAINST MORTGAGOR OR OTHERWISE TO FORECLOSE THIS MORTGAGE OR EXERCISE ANY OTHER
REMEDIES HEREUNDER IN ANY APPROPRIATE STATE COURT OR FEDERAL COURT IN THE STATE.
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<PAGE>
SECTION 8.19. Limitation on Interest Payable. It is the intention of
------------------------------
the parties to conform strictly to the usury laws, whether State or federal,
that are applicable to the transaction of which this Mortgage is a part. All
agreements between Mortgagor and Mortgagee (and the Lenders) whether now
existing or hereafter arising and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever shall the amount paid or
agreed to be paid by Mortgagor for the use, forbearance or detention of the
money to be loaned under the Credit Agreement or any Loan Document, or for the
payment or performance of any covenant or obligation contained herein or in the
Credit Agreement or any related document or other Loan Document, exceed the
maximum amount permissible under applicable federal or state usury laws. If
under any circumstances whatsoever fulfillment of any such provision, at the
time performance of such provision shall be due, shall involve exceeding the
limit of validity prescribed by law, then the obligation to be fulfilled shall
be reduced to the limit of such validity. If under any circumstances Mortgagor
shall have paid an amount deemed interest by applicable law, which would exceed
the highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing in respect of the Secured Obligations and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal and any
other amounts due hereunder, the excess shall be refunded to Mortgagor. All sums
paid or agreed to be paid for the use, forbearance or detention of the principal
under any extension of credit by Mortgagee shall, to the extent permitted by
applicable law, and to the extent necessary to preclude exceeding the limit of
validity prescribed by law, be amortized, prorated, allocated and spread from
the date of this Mortgage until payment in full of the Secured Obligations so
that the actual rate of interest on account of such principal amounts is uniform
throughout the term hereof.
SECTION 8.20. Covenants To Run With the Land. All of the grants,
------------------------------
covenants, terms, provisions and conditions in this Mortgage shall run with the
Land and shall apply to, and bind the successors and assigns of Mortgagor. If
there shall be more than one mortgagor, the covenants and warranties hereof
shall be joint and several.
SECTION 8.21. No Merger. The rights and estate created by this
---------
Mortgage shall not, under any circumstances, be held to have merged into any
other estate or interest now owned or hereafter acquired by Mortgagee unless
Mortgagee shall have consented to such merger in writing.
SECTION 8.22. Relationship. The relationship of Mortgagee to Mortgagor
------------
hereunder is strictly and solely that of mortgagor and mortgagee and nothing
contained in this Mortgage, or any other document or instrument now existing and
delivered in connection therewith or otherwise in connection with the Secured
Obligations is intended to create, or shall in any event or under any
circumstance be construed as creating a partnership, joint venture, tenancy-in-
common, joint tenancy or other relationship of any nature whatsoever between
Mortgagee and Mortgagor other than as mortgagee and mortgagor.
-33-
<PAGE>
ARTICLE IX
ENVIRONMENTAL MATTERS
SECTION 9.1. Notice of Environmental Matters.
(a) Delivery of Notice. Mortgagor shall notify Mortgagee promptly
------------------
after, and in any event within three (3) Business Days after, any Responsible
Officer of Mortgagor obtains knowledge of one or more of the matters described
in Section 6.2(i) of the Credit Agreement with respect to the Property or
Mortgagor, as if the same was a direct obligation of Mortgagor set forth at
length herein.
(b) Contents of Notice. All such notices shall comply with the
------------------
requirements of such Section. In addition, Mortgagor shall provide Mortgagee
with copies of all communications between Mortgagor and any Person required by
or otherwise relating to any of the matters described in such Section.
SECTION 9.2. Obligations of Mortgagor. Mortgagor hereby covenants to
------------------------
comply with, and to cause its officers, directors, shareholders, partners,
agents, servants and employees and each tenant of the Property to comply with,
all of the obligations applicable to Mortgagor, the Property and each such
tenant with respect to the Property set forth in Section 6.6(b) of the Credit
Agreement, as if each of the same was a direct obligation of Mortgagor set forth
at length herein.
-34-
<PAGE>
IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this
Mortgage as of the date first written above.
WAHLCO, INC.
By: /s/ Daniel S. Tedone
--------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and
and Chief Financial Officer
Attest:
__________________________
Name:
Title:
-35-
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Catherine Jones, a Notary Public in and for said County, in
the State aforesaid, do hereby certify that Daniel S. Tedone Executive Vice
President and Chief Financial Officer of Wahlco, Inc., a California corporation,
who is personally known to me to be the same person whose name is subscribed to
the foregoing instrument appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as his/her own free and
voluntary act and as the free and voluntary act and deed of said corporation for
the uses and purposes therein set forth.
Given under my hand and notarial seal, this 25th day of February,
1999.
/s/ Catherine Jones
-------------------------
Notary Public
Catherine Jones
-------------------------
(Type or Print Name)
(Seal)
My Commission Expires: Catherine Jones
Notary Public, State of New York
No. 01J05088551
Qualified in New York County
Commission Expires 11/17/1999
-36-
<PAGE>
Exhibit A
to Mortgage
DESCRIPTION OF LAND
470 West 172/nd/ Street
Thornton, Illinois 60476
described more particularly as follows:
Lot 15 in Percy Wilson's third addition to Washington Park, being a subdivision
of the West 2 of the East 30 Rods of the Northwest 3 of Section 28, Township 36
North, Range 14, East of the Third Principal Meridian, Plat thereof recorded
August 16, 1930, as Document No. 10727954, in Cook County, Illinois.
Real Estate Index No.: 29-28-102-016
A-1
<PAGE>
Exhibit B
to Mortgage
MATERIAL AGREEMENTS
None.
B-1
<PAGE>
Exhibit C
to Mortgage
PERMITTED ENCUMBRANCES
1. Liens created or permitted by the Credit Agreement.
2. Zoning laws and regulations.
3. Any charges, liens or encumbrances existing as of the Effective Date.
C-1
<PAGE>
Exhibit D
to Mortgage
INFORMATION FOR FINANCING STATEMENTS
Chief Executive Office: 3600 West Segerstrom Avenue
Santa Ana, CA 92704-6495
Principal Place of Business: 3600 West Segerstrom Avenue
Santa Ana, CA 92704-6495
Location of Each Required Filing Office:
1. Secretary of State of Illinois
2. Secretary of State of California
3. Recorder of Deeds, Cook County, Illinois
D-1
<PAGE>
EXHIBIT 10.6
$5,720,585.64 New York, New York
February 25, 1999
FOR VALUE RECEIVED, WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware
corporation and THERMATRIX INC. A Delaware corporation, (hereinafter referred to
as "Borrowers"), hereby jointly and severally unconditionally PROMISE TO PAY to
WEXFORD MANAGEMENT LLC or registered assigns, a Connecticut limited liability
company, as agent (the "Agent"), at 411 West Putnam Avenue, Greenwich,
Connecticut 06830 or at such other place as the holder of this Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of [five
million, seven hundred and twenty thousand, five hundred and eighty five and
sixty four cents.] ($5,720,585.64) or such lesser amount as may be outstanding
hereunder, together with interest on the unpaid principal amount of this Note
outstanding from time to time at the rate provided in the Credit Agreement (as
hereinafter defined).
This Note is issued pursuant to that certain Second Amended and
Restated Credit Agreement dated as of February 25, 1999 among Borrowers, the
Lenders named therein and the Agent, as agent (the "Credit Agreement"), and is
entitled to the benefit and security of the Loan Documents provided for therein,
to which reference is hereby made for a statement of all of the terms and
conditions under which the loan evidenced hereby is made. All capitalized terms,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Credit Agreement or in the Loan Documents.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the Maturity Date (as defined in the Credit
Agreement). Interest thereon shall be paid until such principal amount is paid
in full at such interest rates and at such times as are specified in the Credit
Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
The Borrowers shall have no right to set off any amounts owed, under
this Note against any amounts, if any, owed or claimed to be owed now or in the
future to either of the Borrowers by the Agent or any Lender resulting from any
claims, rights, damages, demands, causes of action or liabilities of any nature
whatsoever, known or unknown, contingent or fixed, whether due or to become due,
that any Borrower has had, now has or may have at any future time by reason of
any cause, matter or thing whatsoever, directly or indirectly, including,
without limitation, relating to the Merger Agreement or the transactions
contemplated thereby. Borrowers jointly and severally agree that, as of the date
of this Credit Agreement, their obligations under this Credit Agreement are not
subject to any offsets or defenses against the Agent, the Lenders or Borrower of
any kind. Borrowers further jointly and severally agree that their obligations
under
<PAGE>
this Note shall not be subject to any counterclaims, offsets or defenses against
the Agent, the Lenders or against Borrower of any kind which may arise in the
future.
Upon and after the occurrence of an Event of Default, this Note may,
as provided in the Credit Agreement, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrowers.
<PAGE>
This Note has been executed, delivered and accepted at New York, New
York and shall be interpreted, governed by, and construed in accordance with,
the laws of the State of New York.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President &
Chief Financial Officer
THERMATRIX INC.
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT 10.7
Registration Rights Agreement, dated as of February 25, 1999 (the
"Agreement"), between Thermatrix, Inc., a Delaware corporation (the
"Company") and Wexford Management LLC a Connecticut limited liability
company (the "Investor").
---------------------------------------------------------------------
The Company and the Investor have entered into the Credit Agreement,
dated as of February 25, 1999 (the "Credit Agreement"), pursuant to which, among
other things, the Company is issuing to the Investor a warrant to purchase
450,000 shares of Common Stock of the company, par value, $.001 per share, of
the Company (the "Warrant").
The execution and delivery of this Agreement by the Company is a
condition precedent to the obligations of the Investor under the Credit
Agreement.
In consideration of the foregoing, the covenants and obligations set
forth below, the parties agree as follows:
1. Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If at any time and from
---------------------------------------
time to time the Company proposes to register any shares of its capital stock
under the Securities Act of 1933, as amended (the "Securities Act"), whether or
not for sale for its own account, on a form and in the manner that would permit
registration of Registrable Securities for the sale to the public under the
Securities Act, the Company will give written notice to all Holders of its
intention to do so. Upon the written request of a Holder given within 20 days
after the giving of any such notice by the Company, the Company will use its
best efforts to cause to be included in such Registration Statement all of the
Registrable Securities so requested for inclusion by Holders. If the
Registration Statement is to cover, in whole or in part, any underwritten
distribution, the Company shall use its best efforts to cause the Registrable
Securities requested for inclusion pursuant to this Section to be included in
the underwriting on the same terms and conditions (including any lock-up) as the
shares otherwise being sold through the underwriters. In such event, the
Investor's right to registration pursuant to this Agreement shall be conditioned
upon Investor's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein. If
the Investor elects to participate in such underwriting, the Investor shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company.
(b) Priority in Incidental Registrations. If, in the good faith
------------------------------------
judgment of the managing underwriter of any underwritten offering, the inclusion
of all of the Registrable Securities requested for inclusion pursuant to this
Section 1 would adversely affect the successful marketing of the proposed
offering, then the number of shares of capital stock and Registrable Securities,
if any, to be included in such registration shall be reduced, such reduction
shall be applied, first, by excluding shares of the capital stock of the Company
proposed to be sold by shareholders of the Company other than the Holders, and
second, by excluding shares of
<PAGE>
Registrable Securities proposed to be sold by the Holders, provided however,
that so long as the proceeds of the offering are not being used to retire the
Company's Obligations under the Credit Agreement, the Registrable Securities
proposed to be sold by the Company shall be excluded to the extent necessary
so that the Registrable Securities to be included by the Holders in such
registration and underwriting are not less than 20% of the total number
securities included therein. The Company shall so advise all Holders
distributing their securities through such registration and underwriting of
such limitation, and the number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated among all
such Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing
of the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of
shares allocated to any Holder the nearest 100 shares. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 1 without incurring any liability to Holders of
Registrable Securities.
2. Registration Procedures. If and whenever the Company is required
-----------------------
by the provisions of Section 1 to effect the registration of Registrable
Securities under the Securities Act, the Company will, at its expense, as
expeditiously as possible:
(i) prepare and file with the Commission a Registration
Statement with respect to the Registrable Securities and any other shares of
its capital stock and such amendments and supplements thereto and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for a period not in excess of 120 days and to
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement; provided that before filing a Registration Statement or prospectus,
--------
or any amendments or supplements thereto, the Company will furnish, at the
Company's expense, to one counsel selected by the Holders holding a majority
of the Registrable Securities covered by such Registration Statement to
represent all Holders of Registrable Securities covered by such Registration
Statement (the "Special Counsel"), copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel;
(ii) furnish to each seller of such Registrable Securities
such number of copies of any Registration Statement referred to in clause (i)
of this Section 2 and of each amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such Registration Statement (including each preliminary prospectus and summary
prospectus), and any other prospectus filed under Rule 424 under the
Securities Act in conformity with the requirements of the Securities Act, and
such other documents as such seller may reasonably request;
(iii) use its best efforts to register or qualify such
Registrable Securities covered by any Registration Statement referred to in
clause (i) of this Section 2 under such other securities or blue sky laws of
such jurisdictions as each seller shall reasonably request, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such
-2-
<PAGE>
seller to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation or file a consent to service of process in any jurisdiction where,
but for the requirements of this clause (iii), it would not be obligated to be
so qualified or to consent to general service of process in any such
jurisdiction;
(iv) use its best efforts to cause such Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(v) notify each seller of any such Registrable Securities
covered by a Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of an amended or supplemental prospectus
as may be necessary so that, as thereafter delivered to the sellers of such
Registrable Securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(vi) use its best efforts to list such Registrable Securities
on any securities exchange or automated quotation system on which securities
of the same class are then listed, if such Registrable Securities are not
already so listed and if such listing is then permitted under the rules of
such exchange or system, and to provide a transfer agent and registrar for
such Registrable Securities covered by a Registration Statement; and
(vii) make available for inspection by the Special Counsel, by
any underwriter participating in any disposition to be effected pursuant to
such Registration Statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial
and other records, pertinent corporate documents and properties of the
Company, and cause all of the Company's officers, directors and employees to
supply all information reasonably requested by the Special Counsel,
underwriter, attorney, accountant or agent in connection with such
Registration Statement.
3. Expenses. With respect to each registration effected pursuant to
--------
Section 1, all Registration Expenses (defined below) in connection with such
registration and the public offering in connection therewith shall be borne by
the Company; provided that security holders participating in any such
--------
registration shall bear their pro rata share of the underwriting discounts and
selling commissions (on the basis of the number of Registrable Securities of
each such person included in such registration). "Registration Expenses" shall
mean any and all expenses incident to performance of or compliance with this
Agreement, including, without limitation, (i) all registration and filing fees
of the Commission, or the National Association of Securities
-3-
<PAGE>
Dealers, Inc., (ii) all fees and expenses of complying with securities or blue
sky laws (including fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities), (iii)
all printing, messenger and delivery expenses, (iv) all expenses and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange or automated quotation system pursuant to Section 3(vii),
(v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, (vi) the reasonable fees and disbursements of the Special Counsel,
(vii) any expenses and disbursements of underwriters customarily paid by the
issuers or sellers of securities, including fees and disbursements of counsel
for the underwriters, but excluding underwriting discounts and commissions,
(viii) liability insurance if the Company so desires or if the underwriters so
require, and (ix) the reasonable fees and expenses of any special experts
retained by the Company in connection with the requested registration.
4. Indemnification and Contribution.
--------------------------------
(a) Indemnification by the Company. In the event of a registration
------------------------------
of any Registrable Securities pursuant to Section 1, the Company will
indemnify and hold harmless each Holder of such Registrable Securities
included in a Registration Statement pursuant to the provisions of this
Agreement and any underwriter (as defined in the Securities Act) of such
Registrable Securities, and their respective Affiliates, and each of their
successors from and against, and will reimburse such Holder, underwriter and
Affiliate with respect to, any and all claims, actions, demands, losses,
damages, liabilities, costs and expenses to which such Holder, underwriter or
Affiliate may become subject under the Securities Act or otherwise, including,
without limitation, the reasonable fees and expenses of legal counsel
(including those incurred in connection with any claim for indemnity
hereunder) insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses arise out of or are based upon any untrue
statement of any material fact contained in such Registration Statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading or arise out
of any violation by the Company of any rule or regulation under the Securities
Act or any state securities laws applicable to the Company and relating to
action or inaction required of the Company in connection with such
registration; provided that the Company will not be liable in any case to the
--------
extent, but only to the extent, that any such claim, action, demand, loss,
damage, liability, cost or expense arises out of or is based upon an untrue
statement or omission made in reliance upon and in strict conformity with
information furnished by such Holder or such underwriter in writing specifically
for use in the preparation thereof. This indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such Holder,
underwriter or Affiliate and shall survive the transfer of such securities by
such Holder or such underwriter.
(b) Indemnification by the Holders. Each Holder of Registrable
------------------------------
Securities, severally and not jointly, which Registrable Securities are
included in a registration pursuant to the provisions of this Agreement, will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the
-4-
<PAGE>
Company who signs the Registration Statement including such Registrable
Securities, each director of the Company, each underwriter and any person who
controls the underwriter and their respective Affiliates and each of their
successors from and against, and will reimburse the Company and such officer,
director, underwriter or controlling person and their respective Affiliates
with respect to, any and all claims, actions, demands, losses, damages,
liabilities, costs or expenses to which the Company or such officer, director,
underwriter or controlling person and their respective Affiliates may become
subject under the Securities Act or otherwise, including, without limitation,
the reasonable fees and expenses of legal counsel (including those incurred in
connection with any claim for indemnity hereunder) insofar as such claims,
actions, demands, losses, damages, liabilities, costs or expenses arise out of
or are based upon any untrue statement of any material fact contained in such
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading; provided that such Holder will be liable in any such case to the
--------
extent, but only to the extent, that any such claim, action, demand, loss,
damage, liability, cost or expense arises out of or is based upon an untrue
statement or omission made in reliance upon and in strict conformity with
written information furnished by such Holder specifically for use in the
preparation thereof. The liability of each Holder under this Section shall be
limited to the proportion of any such claim, action, demand, loss, damage,
liability, cost or expense which is equal to the proportion that the public
offering price of the Registrable Securities sold by such Holder under such
registration statement bears to the total offering price of all securities
sold thereunder, but not, in any event, to exceed the proceeds received by
such Holder from the sale of Registrable Securities covered by such
Registration Statement. This indemnity shall survive the transfer of such
securities by such Holder and the underwriter.
(c) Notices of Claims, etc. Promptly after receipt by a party to be
----------------------
indemnified pursuant to the provisions of Section 4(a) or 4(b) (an "indemnified
party") of notice of the commencement of any action involving the subject matter
of the foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the provisions
of Section 4(a) or 4(b), notify the indemnifying party of the commencement
thereof, but the omission to so notify the indemnifying party will not relieve
it from any liability which it may have to an indemnified party otherwise than
under this Section and shall not relieve the indemnifying party from liability
under this Section unless, and to the extent, such indemnifying party is
prejudiced by such omission. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after the notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of this Section 4(a) and 4(b) for any legal expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided that, if the defendants in any
--------
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there may be
reasonable defenses
-5-
<PAGE>
available to it that are different from or additional to those available to
the indemnifying party or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred. No indemnifying party shall be liable to an indemnified party for
any settlement of any action or claim without the consent of the indemnifying
party and no indemnifying party may unreasonably withhold its consent to any
such settlement. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability and equitable claims in respect to such claim or litigation.
(d) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement or any underwriter
makes a claim for indemnification pursuant to this Section but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section provides for indemnification in such
case, or (ii) contribution under the Securities Act may be required on the part
of any such Holder or underwriter, as the case may be, in circumstances for
which indemnification is provided under this Section 4, then, and in each such
case, the Company on the one hand and such Holder or underwriter, as the case
may be, on the other, will contribute to the aggregate claims, actions, demands,
losses, damages, liabilities, costs or expenses to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and of the Holder of
Registrable Securities or the underwriter, as the case may be, on the other, in
connection with the statements or omissions that resulted in such claims,
actions, demands, losses, damages, liabilities, costs or expenses, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of the Holder of Registrable Securities or the underwriter,
as the case may be, on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or by the Holder of Registrable
Securities or the underwriter, as the case may be, on the other, and each
party's relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided that, in any such case,
--------
(A) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation and (B) no such Holder or underwriter will be required to
contribute any amount in excess of the proceeds received by such Holder or
underwriter, as the case may be, from the sales of Registrable Securities
covered by the Registration Statement.
(e) Other Indemnification. Notwithstanding the foregoing, to the
---------------------
extent that the provisions on indemnification and contribution contained in the
underwriting agreement
-6-
<PAGE>
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
5. Reporting Requirements Under Securities Exchange Act of 1934.
------------------------------------------------------------
(a) Exchange Act Reporting. The Company shall keep effective its
----------------------
registration under Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"), and shall timely file such information, documents and reports
as the Commission may require or prescribe under the Exchange Act. The Company
shall timely file such information, documents and reports as the Commission may
require or prescribe under Section 13 of the Exchange Act.
(b) Rule 144. The Company acknowledges and agrees that the purposes
--------
of the requirements contained in this Section 5 are to enable any such Holder to
comply with the current public information requirement contained in paragraph
(c) of Rule 144 under the Securities Act should such Holder ever wish to dispose
of any of the securities of the Company acquired by it without registration
under the Securities Act in reliance upon Rule 144 (or any other similar or
successor exemptive provision). In addition, the Company shall take such other
measures and file such other information, documents and reports as shall
hereafter be required by the Commission as a condition to the availability of
Rule 144 under the Securities Act (or any similar or successor exemptive
provision hereafter in effect). The Company agrees to use its best efforts to
facilitate and expedite transfers of Registrable Securities pursuant to Rule 144
under the Securities Act (or any similar or successor exemptive provision
hereafter in effect), which efforts shall include timely instructions to its
transfer agent to expedite such transfers of Registrable Securities.
6. Shareholder Information. It shall be a condition precedent to
-----------------------
the obligations of the Company to take any action pursuant to Section 2 hereof
with respect to the Registrable Securities of the Investor that the Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of the
Investor's Registrable Securities.
7. Standoff Agreement. The Holders agree in connection with a
------------------
public offering of the Company's securities in which such Holder is
participating, upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of
any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred eighty (180)
days) from the effective date of such registration as may be requested by the
underwriters; provided that such restrictions are also imposed on each other
Selling Shareholder in such public offering, including any officers and
directors of the Company.
8. Specific Enforcement. All of the parties acknowledge that the
--------------------
parties will be irreparably damaged in the event that this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by any of the
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<PAGE>
parties hereto, the other parties shall, in addition to all other remedies, be
entitled to a temporary or permanent injunction, without showing any actual
damage, or a decree for specific performance, in accordance with the
provisions of this Agreement.
9. Descriptive Headings; Definitions; Certain Interpretations.
----------------------------------------------------------
(a) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(b) As used in this Agreement, the following terms shall have the
following respective meanings:
"Affiliate" shall mean (a) any person or entity directly or indirectly
---------
controlling, controlled by or under common control with another person or
entity; (b) any person or entity owning or controlling 10% or more of the
outstanding voting securities of such other person or entity; (c) any partner,
officer, director, employee or shareholder of such entity or any parent, spouse,
child, brother, sister or other relative with a relationship (by blood, marriage
or adoption) not more remote than first cousin of any of the foregoing; or (d)
any liquidating trust, trustee or other similar person or entity for any such
person or entity.
"Competitor of the Company" shall mean a company engaged in the
-------------------------
design, development, manufacture and/or sale of (i) equipment or systems used to
control or destroy air emissions including, but not limited to, particulate
matter ("PM"), oxides of nitrogen ("NOx"), and volatile organic compounds and
hazardous air pollutants (collectively "VOCs"); (ii) gas flow diverters, dampers
and expansion joints used to control the flow of air and gases in power
generation and industrial facilities; or (iii) equipment or systems used to
control emissions from stationary and/or mobile diesel engines, and, in each
case, (iv) that generates revenues of at least $3 million per annum from such
business or businesses.
"Holder" shall mean (a) the Investor and (b) any other person holding
------
at least 45,000 Registrable Securities (such number to be equitably adjusted to
give effect to any reclassification, share combination, share subdivision,
share dividend, share exchange or similar transaction or event) to which the
rights of registration under this Agreement have been transferred or assigned by
the Investor or its transferees.
"Registrable Securities" shall mean (a) shares of Common Stock and (b)
----------------------
any securities issued in respect of any such shares by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger or consolidation or reorganization in each case issuable upon exercise of
the Warrant; provided that, such securities shall cease to be Registrable
--------
Securities when such securities have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" or "any" are
not exclusive and "include" and "including" are not limiting; (iii) a reference
to any agreement or other contract includes permitted supplements and
-8-
<PAGE>
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its successors and assigns; and (vi) a reference in this
Agreement to a Section is to the Section of this Agreement.
10. Notices. All notices, requests and other communications to any
-------
party hereunder shall be in writing and sufficient if delivered personally or
sent by telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to the Company:
Thermatrix Inc.
308 N. Peters Road, Suite 100
Knoxville, Tennessee 37922
Attention: Edward E. Greene
Telephone: (423) 539-9603
Facsimile: (423) 670-4091
With a copy to
Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road
Palo Alto, CA 94304
Attention: Michael J. Danaher, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
If to the investor:
Wexford Management LLC, as Agent
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Arthur H. Amron
Telephone: (203) 862-7000
Telecopier: (203) 862-7312
With a copy to:
Howard, Smith & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telephone: (212) 841-1000
Facsimile: (212) 841-1010
-9-
<PAGE>
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
11. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
12. Benefits of Agreement. All of the terms and provisions of this
---------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. This Agreement is for the sole
benefit of the parties hereto and not for the benefit of any third party.
13. Enforceability. It is the desire and intent of the parties
--------------
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
15. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. EACH OF THE
---------------------------------------------
COMPANY AND THE HOLDER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
JURISDICTION OF ANY FEDERAL AND STATE COURT IN NEW YORK SITTING IN NEW YORK CITY
AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
LITIGATED EXCLUSIVELY IN SUCH COURTS. EACH OF THE COMPANY AND THE HOLDER AGREES
NOT TO COMMENCE ANY LEGAL PROCEEDING RELATED HERETO OR THERETO EXCEPT IN SUCH
COURT. EACH OF THE COMPANY AND THE HOLDER IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING IN ANY SUCH COURT 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. EACH OF THE HOLDER AND THE COMPANY IRREVOCABLY WAIVES ANY AND
-10-
<PAGE>
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
16. Waivers; Amendments. No waiver of any right hereunder by any
-------------------
party shall operate as a waiver of any other right, or of the same right with
respect to any subsequent occasion for its exercise, or of any right to damages.
No waiver by any party of any breach of this Agreement shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies
provided by law. This Agreement may not be amended except by a writing executed
by the Company and by Holders holding at least 51% of the Registrable
Securities; provided that the provisions of this Section 16 may not be amended
--------
unless such amendment is executed by each Holder.
17. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns. The Investor's rights are assignable to any assignee or transferee
holding at least 45,000 Registrable Securities (such number to be equitably
adjusted to give effect to any reclassification, share combination, share
subdivision, share dividend, share exchange or similar transaction or event);
provided, however that such assignee or transferee agrees in writing to be bound
by the terms of this Agreement, and provided further that such rights are not
assignable to a Competitor of the Company. In addition, and whether or not any
express assignment shall have been made, the provisions of this Agreement which
are for the benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent Holder of any Registrable
Securities, subject to the provisions contained herein.
18. Termination. This Agreement shall terminate upon the earliest to
-----------
occur of the following events:
(a) termination by mutual written agreement of the Investor and the
Company;
(b) all Registrable Securities have been sold to or through a broker
or dealer or underwriter in a public distribution or public securities
transaction; or
(c) the sixth anniversary of the date hereof.
19. Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties with respect to the transactions contemplated by this
Agreement and supersedes all prior agreements or understandings among the
parties relating to the subject matter hereof.
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<PAGE>
In Witness Whereof, the parties have executed this Agreement as of the
date first above written.
THERMATRIX INC.
By: /s/ Daniel S. Tedone
----------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and
Chief Financial Officer
WEXFORD MANAGEMENT LLC
By: /s/ Arthur Amron
----------------------------------
Name: Arthur Amron
Title Senior Vice President and
General Counsel
-12-
<PAGE>
EXHIBIT 10.8
Execution Copy
Amended and Restated Security Agreement, dated as of
February 25, 1999, made by Wahlco Environmental Systems,
Inc., a Delaware corporation ("Borrower") and each
Subsidiary of Borrower listed on the signature pages hereto
(each a "Grantor", and together with Borrower, "Grantors")
and Wexford Management LLC, a Connecticut limited liability
company, as Agent (the "Agent").
----------------------------------------------------------
Whereas, concurrently with the execution and delivery hereof, Borrower
and Thermatrix Inc. (the "Borrowers") are entering into a Second Amended and
Restated Credit Agreement, dated as of the date hereof, with the Lenders named
therein (the "Lenders") and the Agent (as the same may hereafter be modified,
extended, replaced or otherwise amended, the "Credit Agreement"), pursuant to
which the Borrowers shall be jointly and severally liable for the payment and
performance of all of the obligations and liabilities to the Lenders and the
Agent set forth therein and in the other Loan Documents;
Whereas, each Grantor is a direct and/or indirect subsidiary of a
Borrower;
Whereas, it is a condition to the effectiveness of the Credit
Agreement that the Grantors guaranty the payment and performance of the
Obligations to the Lenders and the Agent and concurrently with the execution and
delivery hereof Grantors are entering executing and delivering a guaranty (the
"Guaranty"); and
Whereas, each of the Grantors will receive substantial direct and
indirect benefits from the Lenders and the Agent entering into the Credit
Agreement;
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 Original Wahlco
Security Agreement is amended and restated in its entirety and the parties
hereto agree as follows:
1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by any Grantor, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to any 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 any Grantor's rights in, to and under all purchase
orders for goods, services or other property, and all of any 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 any Grantor under all contracts for the sale,
lease or exchange of goods or other property and/or
<PAGE>
the performance of services by it (whether or not yet earned by performance on
the part of any 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
any 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 any Grantor.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by any 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 any Grantor, including, without
limitation, (i) all obligations or indebtedness owing to any 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
any 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 any Grantor.
"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
2
<PAGE>
hereafter acquired by any 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.
"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 any Grantor.
"Patents" means all of the following now or hereafter acquired by any
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
any 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 financial officer of any Grantor.
"Permitted Liens" means the Security Interests and the Liens on
Collateral permitted to be created, assumed or exist pursuant to Section 1.68 of
the Credit Agreement.
"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 any 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 Grantors under the
Credit Agreement and the Loan Documents.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Trade Secrets" means trade secrets, along with any and all (i)
income, royalties, damages and payments now and hereafter due and/or payable to
any Grantor with respect thereto, including, without limitation, damages and
payments thereof, (ii) rights to sue for past, present
3
<PAGE>
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
any Grantor.
"Trademarks" means all of the following now owned or hereafter
acquired by any 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 any 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
--------
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. Grantors represent and warrant as
follows:
(A) Each Grantor has good and marketable title to all of the
Collateral in which such Grantor purports to grant a Security Interest
hereunder, free and clear of any Liens other than the Permitted Liens. Each
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) No Grantor has 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 LIM/Mannesman Security Agreements 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 any 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 Grantors) asserting any claim thereto or
security interest therein, except that the Agent or its designee may have
possession of the Collateral as contemplated hereby.
(C) The Security Interests constitute valid security interests under
the UCC securing the Secured Obligations. No UCC financing statements other
than the UCC Financing
4
<PAGE>
statements filed by the Agent in connection with the Original Wahlco Security
Agreement, and no filings other than the filings made in the Copyright Office
and the PTO by the Agent on January 22, 1999, are necessary to cause the
Security Interests to constitute perfected security interests in the Collateral
(except Inventory in transit) in which each 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.
(D) All Inventory in which each 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.
(E) Each Grantor has caused the Agent to be named as loss payee on
each insurance policy required by Section 6.7 of the Credit Agreement. Evidence
of the Agent's status as loss payee is attached as Schedule 2F hereto.
3. The Security Interests. (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 Grantors
hereunder, under the Credit Agreement and under the Guaranty, each 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 each 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;
(9) Patent Licenses;
(10) Trademarks;
(11) Trademark Licenses;
(12) Trade Secrets;
5
<PAGE>
(13) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer materials
and records) of each 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 each 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 (i) any property, rights or licenses to the extent the
granting of a security interest therein would be contrary to applicable law or
(ii) any rights under any license agreement where such license agreement would
be terminable by the counterparty thereto if any Grantor's interest therein were
subject to the security interest created hereby (but only to the extent such
right to terminate is enforceable under applicable law). Each such license
agreement existing on the date hereof is set forth in Schedule 11 of the
Disclosure Letter.
4. Further Assurances; Covenants. (A) No Grantor will change (i)
its name, identity or corporate structure or the location of its chief executive
office or chief place of business in any manner or (ii) the locations where it
keeps or holds any Collateral or any records relating thereto from the current
location of such Collateral unless such Collateral shall have a value of less
than $250,000 unless, in each case, Grantors shall have given the Agent prior
written notice thereof. Grantors 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) Each 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, each Grantor hereby
authorizes the Agent to execute and file financing statements or continuation
statements without each Grantor's signature appearing thereon. Each Grantor
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
Each Grantor shall pay the costs of, or incidental to, any recording or filing
of any financing or continuation statements concerning the Collateral in which
each 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 Grantors' agents or processors, each Grantor
shall notify such
6
<PAGE>
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) Each Grantor shall keep full and accurate books and records
relating to the Collateral in which each 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) Each Grantor will immediately deliver and pledge each Instrument
to the Agent, appropriately endorsed to the Agent, provided that so long as no
--------
Event of Default shall have occurred and be continuing under the Credit
Agreement. Each 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 each Grantor, make appropriate arrangements for
making any other Instrument pledged by each 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) Each 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 an Event of Default under the
Credit Agreement shall have occurred and be continuing, each 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 such 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 such 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 Grantors or the Agent, shall
be borne by Grantors.
(G) Upon the occurrence and during the continuance of any Event of
Default under the Credit Agreement, Grantors will promptly notify (and Grantors
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,
Grantors will not sell, lease, exchange, assign or otherwise dispose of, or
grant any option with respect to, any Collateral except that, subject to the
rights of the Agent and the Lenders hereunder if an Event of Default shall have
occurred and be continuing under the Credit Agreement, Grantors may sell, lease,
exchange, assign or otherwise dispose of Collateral pursuant to Section 7.3(c)
of the Credit Agreement, 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.
7
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(K) Collateral Covenants Regarding Intellectual Property:
(1) Each 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
Grantors' 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 Grantors'
ownership of any intellectual property which is material to the conduct of
Grantors' 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 Grantors,
relating thereto or represented thereby.
(3) Each 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 Grantors' 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, each Grantor shall
notify the Agent promptly after it learns thereof and shall, if requested
by the Agent, promptly sue for infringement, misappropriation or dilution
and to recover any and all damages for such infringement, misappropriation
or dilution, and take such other actions as Grantors shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property
Collateral.
5. General Authority. Each Grantor hereby irrevocably appoints the
Agent its true and lawful attorney, with full power of substitution, in the name
of Each Grantor, the Agent, the Lenders or otherwise, for the sole use and
benefit of the Agent and the Lenders, but at Grantors' expense, to the extent
permitted by law to exercise, at any time and from time to time while an Event
of Default under the Credit Agreement has occurred and is continuing, all or any
of the following powers with respect to all or any of the Collateral:
(A) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(B) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
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<PAGE>
(C) 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
(D) 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 Grantors not less than ten days' prior
- --------
written 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. Grantors agree that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the UCC.
6. Remedies Upon Event of Default. (A) If an Event of Default has
occurred and is continuing under the Credit Agreement, 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). Grantors will execute and deliver such
documents and take such 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 any Grantor
which may be waived, and each 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
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<PAGE>
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 any Grantor to, and each 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 Grantors, whether at the premises of any
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 Grantors' 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 any 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 any
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 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
an Event of Default under the Credit Agreement, 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 all other Secured Obligations other
------
than principal and interest;
third, to the ratable payment of accrued but unpaid interest on the
-----
Secured Obligations in accordance with the terms thereof;
fourth, to the ratable payment of unpaid principal of the Secured
------
Obligations; and
10
<PAGE>
finally, to payment to Borrower 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 Grantors.
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 any Grantor fails to comply with the
provisions of the Credit Agreement 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 Grantors, and Grantors 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 Grantors; and if Grantors
fail 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 Grantors'
account therefor, and Grantors agree 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 Grantors 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.
11
<PAGE>
12. Termination of Security Interests; Release of Collateral. Upon
the repayment in full of all Secured Obligations under the Credit Agreement, the
Security Interests shall terminate and all rights to the Collateral shall revert
to Grantors. 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 Grantors, execute and deliver to Grantors such documents as
Grantors 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 10.13 of the Credit Agreement.
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
Credit Agreement, the Guaranty or this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement, the Credit 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 Grantors and their
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 Grantors 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. GRANTORS, 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
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<PAGE>
TRANSACTION CONTEMPLATED HEREBY. GRANTORS, 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 SECTION 10.13 OF THE CREDIT AGREEMENT 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. GRANTORS,
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.
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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.
Wahlco Environmental Systems, Inc.
By: /s/ Daniel S. Tedone
--------------------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President
and Chief Financial Officer
Bachmann Companies, Inc.
By: /s/ Daniel S. Tedone
--------------------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and
Chief Financial Officer
Wahlco, Inc.
By: /s/ Daniel S. Tedone
--------------------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and
Chief Financial Officer
Wahlco Engineered Products, Inc.
By: /s/ Daniel S. Tedone
--------------------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and
Chief Financial Officer
Wexford Management LLC, as Agent
By: /s/ Arthur H. Amron
--------------------------------------------
Name: Arthur H. Amron
Title: Senior Vice President and
General Counsel
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<PAGE>
EXHIBIT 10.9
Execution Copy
Amended and Restated Security Agreement, dated as
of February 25, 1999, made by Thermatrix Inc., a
Delaware corporation ("Borrower") 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").
Whereas, Wahlco Environmental Systems Inc. ("Wahlco"), the Agent and
the Lenders named therein (the "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 notes issued under a non-committed line of credit established,
guaranteed and collateralized at the Chase Manhattan Bank in February 1997 (the
"Chase Notes"), and Wahlco is obligated to repay such borrowings and amounts
otherwise due under the 1998 Credit Agreement and the Chase Notes.
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
merged with and into Wahlco and Wahlco became a wholly owned subsidiary of
Thermatrix at the effective time of the Merger;
Whereas, in connection with the Merger, Borrower agreed to guaranty
and secure the obligations of Wahlco to the Lenders and to Chase and executed
the Guaranty and Security Agreement, each dated January 13, 1999, dated the date
hereof, in favor of the Lenders and the Agent;
Whereas, on January 22, 1999, the Agent, on behalf of the Lenders,
purchased the Chase Notes from Chase, including the right to receive all accrued
and unpaid interest thereon;
Whereas, concurrently with the execution and delivery hereof, Borrower
and Wahlco are entering into a Second Amended and Restated Credit Agreement,
dated as of the date hereof, with the Lenders and the Agent (as the same may
hereafter be modified, extended, replaced or otherwise amended, the "Credit
Agreement"), which amends and restates the 1998 Credit Agreement, the Chase
Notes and the Guaranty;
Whereas, in order to induce said Lenders and the Agent to enter into
the Credit Agreement, Borrower has agreed to confirm its grant of a continuing
security interest in and to
<PAGE>
the Collateral (as hereafter defined) to secure its obligations under the Credit
Agreement and the Note issued pursuant thereto;
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 Original
Thermatrix Security Agreement is amended and restated in its entirety and the
parties hereto agree as follows:
1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by Borrower, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to Borrower 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 Borrower's rights in, to and under all purchase orders
for goods, services or other property, and all of Borrower'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 Borrower 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 Borrower), 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
Borrower: (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 Borrower.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower, including without limitation all motor vehicles,
trucks, trailers,
2
<PAGE>
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 Borrower, including, without
limitation, (i) all obligations or indebtedness owing to Borrower (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
Borrower.
"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 Borrower.
"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 Borrower, 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.
"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 Borrower.
"Patents" means all of the following now or hereafter acquired by
Borrower: (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
Borrower 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 financial officer of Borrower.
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<PAGE>
"Permitted Liens" means the Security Interests and the Liens on
Collateral permitted to be created, assumed or exist pursuant to Section 1.68 of
the Credit Agreement.
"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 Borrower 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 Borrower under the
Credit Agreement and the Loan Documents.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Trade Secrets" means trade secrets, along with any and all (i)
income, royalties, damages and payments now and hereafter due and/or payable to
Borrower 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
Borrower.
"Trademarks" means all of the following now owned or hereafter
acquired by Borrower: (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 Borrower'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
--------
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. Borrower represents and warrants
as follows:
4
<PAGE>
(A) Borrower has good and marketable title to all of the Collateral
in which Borrower purports to grant a Security Interest hereunder, free and
clear of any Liens other than the Permitted Liens. Borrower 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) Borrower 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 LIM/Mannesman Security Agreements 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 Borrower 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 Borrower) asserting any claim thereto or security
interest therein, except that the Agent or its designee may have possession of
the Collateral as contemplated hereby.
(C) As promptly as practicable, but in no event later than 10 days
after the date hereof, Borrower shall furnish to the Agent file search reports
from the state and local UCC filing offices in Tennessee and California
confirming the perfection of the Security Interests granted hereunder provided,
however, if such UCC filing offices have not yet confirmed the filing of the
applicable UCC-1 financing statements, then Borrower shall deliver such file
search reports promptly upon confirmation of such filings.
(D) The Security Interests constitute valid security interests under
the UCC securing the Secured Obligations. No UCC financing statements other than
the UCC Financing statements filed by the Agent on January 22, 1999, and no
filings other than the filings made in the Copyright Office and the PTO by the
Agent on January 22, 1999, are necessary to cause the Security Interests to
constitute perfected security interests in the Collateral (except Inventory in
transit) in which Borrower 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 Borrower 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.
(F) Borrower has caused the Agent to be named as loss payee on each
insurance policy required by Section 6.7 of the Credit Agreement. Evidence of
the Agent's status as loss payee is attached as Schedule 2F hereto.
3. The Security Interests. (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 Borrower
hereunder and under the Guaranty, Borrower
5
<PAGE>
hereby grants to the Lenders and the Agent for the ratable benefit of the
Lenders a continuing security interest in and to all of the following property
of Borrower, 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;
(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 Borrower 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 Borrower 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 (i) any property, rights or licenses to the extent the granting of a
security interest therein would be contrary to applicable law or (ii) any rights
under any license agreement where such license agreement would be terminable by
the counterparty thereto if Borrower's interest therein were subject to the
security interest created hereby (but only to the extent such right to terminate
is enforceable under applicable law). Each such license agreement existing on
the date hereof is set forth in Schedule 11 of the Disclosure Letter.
4. Further Assurances; Covenants. (A) Borrower will not change (i)
its
6
<PAGE>
name, identity or corporate structure or the location of its chief executive
office or chief place of business in any manner or (ii) the locations where it
keeps or holds any Collateral or any records relating thereto from the current
location of such Collateral unless such Collateral shall have a value of less
than $250,000 unless, in each case, Borrower shall have given the Agent prior
written notice thereof. Borrower 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) Borrower 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, Borrower hereby
authorizes the Agent to execute and file financing statements or continuation
statements without Borrower's signature appearing thereon. Borrower agrees that
a carbon, photographic, photostatic or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement. Borrower shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements concerning the Collateral in which Borrower 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 Borrower's agents or processors, Borrower
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) Borrower shall keep full and accurate books and records relating
to the Collateral in which Borrower 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) Borrower will immediately deliver and pledge each Instrument to
the Agent, appropriately endorsed to the Agent, provided that so long as no
--------
Event of Default shall have occurred and be continuing under the Credit
Agreement. Borrower 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 Borrower, make appropriate arrangements for
making any other Instrument pledged by Borrower 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) Borrower 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
7
<PAGE>
rights of the Agent and the Lenders hereunder if an Event of Default under the
Credit Agreement shall have occurred and be continuing, Borrower 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 Borrower 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 Borrower'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 Borrower or the Agent, shall
be borne by Borrower.
(G) Upon the occurrence and during the continuance of any Event of
Default under the Credit Agreement, Borrower will promptly notify (and Borrower
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,
Borrower will not sell, lease, exchange, assign or otherwise dispose of, or
grant any option with respect to, any Collateral except that, subject to the
rights of the Agent and the Lenders hereunder if an Event of Default shall have
occurred and be continuing under the Credit Agreement, Borrower may sell, lease,
exchange, assign or otherwise dispose of Collateral pursuant to Section 7.3 (c)
of the Credit Agreement, 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.
(K) Collateral Covenants Regarding Intellectual Property:
(1) Borrower 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
Borrower'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 Borrower's
ownership of any intellectual property which is material to the conduct of
Borrower's business, its right to register the same, or to keep and
maintain the same.
(2) In no event shall Borrower, 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 Borrower,
relating thereto or represented thereby.
(3) Borrower will take all necessary and appropriate actions,
including, without limitation, in any proceeding before PTO, to maintain
and pursue each
8
<PAGE>
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 Borrower'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, Borrower shall
notify the Agent promptly after it learns thereof and shall, if requested
by the Agent, promptly sue for infringement, misappropriation or dilution
and to recover any and all damages for such infringement, misappropriation
or dilution, and take such other actions as Borrower shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property
Collateral.
5. General Authority. Borrower hereby irrevocably appoints the Agent
its true and lawful attorney, with full power of substitution, in the name of
Borrower, the Agent, the Lenders or otherwise, for the sole use and benefit of
the Agent and the Lenders, but at Borrower's expense, to the extent permitted by
law to exercise, at any time and from time to time while an Event of Default
under the Credit Agreement has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral:
(A) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(B) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(C) 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
(D) 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 Borrower not less than ten days' prior
- --------
written 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. Borrower agrees that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the UCC.
6. Remedies Upon Event of Default. (A) If an Event of Default has
occurred and is continuing under the Credit Agreement, 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
9
<PAGE>
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). Borrower will execute and deliver such
documents and take such 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 Borrower which
may be waived, and Borrower, 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 Borrower to, and Borrower 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 Borrower, whether at the premises of
Borrower 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 Borrower'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 Borrower, 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 Borrower.
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
10
<PAGE>
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 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
an Event of Default under the Credit Agreement, 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 all other Secured Obligations other
------
than principal and interest;
third, to the ratable payment of accrued but unpaid interest on the
-----
Secured Obligations in accordance with the terms thereof;
fourth, to the ratable payment of unpaid principal of the Secured
------
Obligations; and
finally, to payment to Borrower 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 Borrower.
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,
11
<PAGE>
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 Borrower fails to comply with the
provisions of the Credit Agreement 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 Borrower, and Borrower 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 Borrower; and if Borrower
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 Borrower's
account therefor, and Borrower 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 Borrower 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 Credit Agreement, the
Security Interests shall terminate and all rights to the Collateral shall revert
to Borrower. 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 Borrower, execute and deliver to Borrower such documents as
the Borrower 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 10.13 of the Credit Agreement.
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
Credit Agreement, any Loan Document or this Agreement preclude any other or
further exercise thereof or the exercise of any other right. The rights in this
Agreement, the Credit Agreement and the Loan Documents are cumulative and are
not exclusive of any other remedies provided by law.
12
<PAGE>
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 Borrower 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 Borrower 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. BORROWER, 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. BORROWER, 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
SECTION 10.13 OF THE CREDIT AGREEMENT 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. BORROWER, 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
13
<PAGE>
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.
14
<PAGE>
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: Executive Vice President and
Chief Financial Officer
Wexford Management LLC, as Agent
By: /s/ Arthur H. Amron
-------------------------------------------
Name: Arthur H. Amron
Title: Senior Vice President and
General Counsel
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 H. Amron
-------------------------------------------
Name: Arthur H. 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 H. Amron
-------------------------------------------
Name: Arthur H. Amron
Title: Vice President
15
<PAGE>
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By: Wexford Advisors LLC, As General Partner
By: /s/ Arthur H. Amron
-----------------------------------------------
Name: Arthur H. Amron
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996, INSTITUTIONAL, L.P.
By: Wexford Advisors LLC, As General Partner
By: /s/ Arthur H. Amron
-----------------------------------------------
Name: Arthur H. Amron
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996 LIMITED
By: Wexford Advisors LLC, As Investment Manager
By: /s/ Arthur H. Amron
------------------------------------------------
Name: Arthur H. Amron
Title: Vice President
WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P.
By: Wexford Euris Advisors LLC, As General Partner
By: /s/ Arthur H. Amron
------------------------------------------------
Name: Arthur H. Amron
Title: Vice President
16
<PAGE>
EXHIBIT 10.10
_______________________________
FORM OF DEBENTURE
_______________________________
by
[COMPANY NAME]
in favour of
WEXFORD MANAGEMENT LLC
Dibb Lupton Alsop
117 The Headrow
LEEDS
LS1 5JX
Tel: 0113 241 2657
Fax: 0113 234 0895
<PAGE>
CLAUSES PAGE
- ------- ----
1. Covenant to Pay 1
2. Demands or Notices 1
3. Charging provisions 1
4. Security to be continuing 4
5. Continuing obligations 5
6. Continuing obligations in respect of Assets 7
7. Appointment of Receiver 7
8. Power of Attorney 9
9. Application of security proceeds 9
10. Dealings with property requiring WEXFORD consent 9
11. WEXFORD power of sale 10
12. Company to meet WEXFORD expenses 10
13. Operation of Company's account with WEXFORD 10
14. WEXFORD right of set-off 11
15. Power to grant Debenture 11
16. WEXFORD as Trustee 11
17. Definitions 11
18. Governing Law 13
<PAGE>
DEBENTURE
This DEBENTURE is dated February 25, 1999 and made by:-
[COMPANY NAME] (Company Number __________) of [ADDRESS OF REGISTERED OFFICE]
(registered office) (the "Company") in favour of WEXFORD MANAGEMENT LLC, a
Connecticut Limited liability company as agent and trustee ("WEXFORD").
Definitions are given in Clause 17.
1. COVENANT TO PAY
---------------
The Company covenants that it will on demand in writing pay or discharge
the Secured Liabilities.
2. DEMANDS OR NOTICES
------------------
2.1 A demand for payment or any other demand or notice under this
Debenture may be made or given by any manager or officer of WEXFORD by
letter addressed to the Company and sent by courier or telefax
transmission to or left at to the registered office of the Company or
the Company's existing or last known place of business (or if more
than one, any one of such places);
2.2 If a demand or notice is sent by courier it will be deemed to have
been made or given 168 hours after being despatched with a recognised
international courier for 5 day delivery and if by fax shall be deemed
to have been given when sent provided a transmission report is
received (unless the transmission report shows the fax would not have
been received on a Business Day of the recipient in which case the fax
shall be deemed to have been received at 9.00am local time on the next
Business Day of the recipient);
2.3 A certificate by any manager or officer of WEXFORD as to the amount of
the Secured Liabilities or any part of them will, in the absence of
manifest error, be prima facie evidence of such amount as against the
Company.
3. CHARGING PROVISIONS
-------------------
3.1 The Company charges to WEXFORD, as agent and trustee for the Lenders,
as a continuing security and, subject to Clause 4.2, with full title
guarantee for the payment or discharge of the Secured Liabilities:-
3.1.1 by way of legal mortgage all the freehold and leasehold
property (including the property described in the First
Schedule) now vested in it whether or not the title to the
property is registered at H.M. Land Registry together with all
present and future buildings, fixtures (including trade and
tenant's fixtures), plant and machinery which are at any time
on the property;
3.1.2 by way of fixed charge:-
3.1.2.1 all future freehold and leasehold property belonging
to the Company together with all buildings, fixtures
(including trade and tenant's fixtures), plant and
machinery which are at any time on the property;
<PAGE>
3.1.2.2 all present and future interests of the Company in or
over land or the proceeds of sale of it and all
present and future licences of the Company to enter
upon or use land and the benefit of all other
agreements relating to land to which it is or may
become party or otherwise entitled and all fixtures
(including trade and tenant's fixtures), plant and
machinery which are at any time on the property
charged under this Debenture;
3.1.2.3 all the Company's present and future goodwill and
uncalled capital;
3.1.2.4 all present and future stocks, shares and other
securities owned (at law or in equity) by the Company
including any listed in the Second Schedule and all
rights and interests accruing or offered at any time
in relation to them, all rights and interests in and
claims under all policies of insurance and assurance
held or to be held by or inuring to the benefit of the
Company and the benefit of all rights and claims to
which the Company is now or may be entitled under any
contracts;
3.1.2.5 all patents, patent applications, trade marks, trade
mark applications, trading names, brand names, service
marks, copyrights, rights in the nature of copyright,
moral rights, inventions, design rights, registered
designs, all trade secrets and know-how, computer
rights, programmes, systems, tapes, disks, software,
all applications for registration of any of them and
other intellectual property rights held or to be held
by the Company or in which it may have an interest and
the benefit of all present and future agreements
relating to the use of or licensing or exploitation of
any such rights (owned by the Company or others) and
all present and future fees, royalties or similar
income derived from or incidental to any of the
foregoing in any part of the world;
3.1.2.6 all present and future book and other debts and
monetary claims of the Company whether payable now or
in the future and the benefit of all present and
future rights and claims of the Company against third
parties relating to them and capable of being
satisfied by the payment of money (save as charged
under sub-clause 3.1.2.4);
3.1.2.7 all present and future plant and machinery not
otherwise charged under this Clause 3 and all other
present and future chattels of the Company (excluding
any of the same for the time being forming part of the
Company's stock in trade or work in progress); and
3.1.2.8 all present and future bank accounts, cash at bank and
credit balances of the Company with any bank or other
person whatsoever and all rights relating or attaching
to them (including the right to interest) including
any listed in the Third Schedule;
3.1.3 by way of floating charge all the Assets not effectively
otherwise subject to a fixed charge under this Clause 3.
3.2 WEXFORD may by notice to the Company, immediately convert the floating
charge created under sub-clause 3.1.3 into a fixed charge over any
Assets specified in that notice on the occurrence of any of the
following:
3.2.1 an Event of Default has occurred and is continuing; or
<PAGE>
3.2.2 WEXFORD (acting reasonably) consider the Assets concerned to be
in imminent danger of being seized or sold under any form of
distress, attachment, execution or other legal process or to be
otherwise in jeopardy.
3.3 The floating charge will, without notice from WEXFORD, automatically
be converted with immediate effect into a fixed charge:-
3.3.1 in respect of any Assets charged under sub-clause 3.1.3 which
become subject to a fixed charge in favour of any other person
or to a disposition otherwise than by way of sale in the
ordinary course of the Company's business immediately upon such
charge or disposition;
3.3.2 in respect of all the Assets charged under sub-clause 3.1.3 if
and when the Company ceases to carry on business or to be a
going concern; and
3.3.3 in respect of all Assets charged under sub-clause 3.1.3 on the
making of an order for the compulsory winding-up of the Company
or on the convening of a meeting for the passing of a
resolution for the voluntary winding-up of the Company or on
the presentation of a petition for the making of an
administration order in relation to the Company.
3.4 The Company will not without the previous written consent of WEXFORD:-
3.4.1 create or attempt to create or permit to subsist any mortgage,
charge, lien or encumbrance on any Asset charged under this
Debenture (other than to a Prior Chargee pursuant to security
documents in its favour executed at the same time as, or prior
to the date of, this Debenture), dispose of or part with
possession in any way (except on the determination of any
lease, tenancy or licence) or share occupation of any Asset (in
any case other than arising in the ordinary course of business
or by operation of law) other than in favour of one clearing
bank which is making available the Company's working capital
facilities (the "Bank") in respect of those working capital
facilities made available by the Bank to the Company or a
related company provided the Bank, the Company and any such
related company enter into a priority and intercreditor
arrangement (Wexford, the Bank and the Company acting
reasonably in agreeing the provisions of the same) which allows
the Bank payment from proceeds of enforcement of security in
priority to Wexford up to an amount not exceeding a total
aggregate of (Pounds)500,000 and which does not restrict
Wexford's rights to enforce this Debenture; or
3.4.2 in any way dispose of the equity of redemption of any such
Asset or any interest in any such Asset
and the Company applies (and will apply) to the Chief Land Registrar
for a restriction to be entered on the register of title of all
present and future registered freehold and leasehold property of the
Company in the following terms:-
"Except under an order of the Registrar no disposition by the
proprietor of the land is to be registered without the consent of the
proprietor for the time being of the charge hereby created".
3.5 The Company will, if required to do so by WEXFORD, deposit with
WEXFORD during the continuance of this security and WEXFORD will be
entitled to hold all deeds and documents of title relating to the
Company's freehold, leasehold and heritable property and stocks,
shares and other securities and all policies of insurance and
assurance.
<PAGE>
3.6 The Company (at its own cost) will on demand in writing by WEXFORD
execute and deliver in such form as WEXFORD may reasonably require:-
3.6.1 a legal mortgage of any freehold or leasehold property of the
Company which is not effectively charged by sub-clause 3.1.1
and of any freehold or leasehold property acquired by the
Company after the date of this Debenture;
3.6.2 a chattel mortgage over such chattels, plant and machinery as
WEXFORD may specify which are material to the net asset value
or operations of the Company; and
3.6.3 documents capable of vesting title in Assets and documents more
effectively granting or perfecting Wexford's security;
and at all times on or after the security constituted by this
Debenture becomes enforceable, the Company will do and concur in all
such other acts or things as WES may deem necessary to vest in WEXFORD
title to all or any of the Assets.
3.7 Any fixed mortgage, charge or other security hereafter created by the
Company in favour of WEXFORD shall have priority over the floating
charge created by this Debenture, except insofar as WEXFORD shall
declare otherwise whether at or after the time of creation of such
fixed security.
3.8 The Company will pay into its account with WEXFORD (or as WEXFORD may
direct) all moneys which it receives in respect of any policies of
insurance or assurance, fees, royalties, income or book or other debts
or any other of the rights and claims charged to WEXFORD under sub-
clause 3.1.2 and until such payment hold all moneys so received upon
trust for WEXFORD and will not without the prior written consent of
WEXFORD charge, factor, discount, or assign any of those policies,
fees, royalties, income, debts, rights or claims in favour of any
other person or purport to do so.
4. SECURITY TO BE CONTINUING
-------------------------
4.1 This security will be a continuing security for the Secured
Liabilities notwithstanding any intermediate payment or settlement of
all or any part of the Secured Liabilities or other matter or thing
whatsoever and will be without prejudice and in addition to any other
right remedy or security of whatever sort which WEXFORD may hold at
any time for the Secured Liabilities or any other obligation
whatsoever and will not be affected by any release, reassignment or
discharge of such other right remedy or security.
4.2 The security, charges, liens, encumbrances, representations,
warranties, undertakings and covenants of the Company in this
Debenture are subject to and rank behind the security,
representations, warranties, undertakings, charges, liens,
encumbrances and covenants of the Company in favour of the Prior
Chargees existing as at the date of this Debenture.
4.3 This security will be enforceable at all times whilst an Event of
Default is continuing.
4.4 No assurance, security or payment which may be avoided under any law
relating to bankruptcy, insolvency or winding-up (including sections
238, 239, 242, 243, 244 or 245 of the Insolvency Act 1986), and no
release, settlement or discharge given or made by WEXFORD (on behalf
of the Lenders) on the faith of any such assurance, security or
payment, shall prejudice or affect the right of WEXFORD to enforce the
security created by or pursuant to this Debenture to the full extent
of the Secured Liabilities.
<PAGE>
4.5 Any settlement or discharge between the Company and WEXFORD or any
Lender shall be conditional upon no security or payment to WEXFORD or
any Lender by the Company or any other person being avoided or set
aside or ordered to be refunded or reduced by virtue of any provision
or enactment relating to bankruptcy, insolvency or liquidation for the
time being in force and accordingly (but without limiting the other
rights of WEXFORD or such Lender hereunder), WEXFORD or such Lender
shall be entitled to recover from the Company the value which WEXFORD
or such Lender has placed upon such security or the amount of any such
payment as if such settlement or discharge had not occurred.
4.6 Any release of all security constituted by this Debenture at the
relevant time may be conditional upon the Company being wound up,
liquidated or struck off the register of companies such that it no
longer exists as a legal entity immediately on or after such release
and, accordingly, if the Company is not wound up, liquidated or struck
off or is reinstated or restored, the security constituted by this
Debenture shall be reinstated and take effect as if such release has
not occurred.
5. CONTINUING OBLIGATIONS
----------------------
Save where the provisions of this Clause are inconsistent with or conflict
with the terms of the respective agreements between the Company and each of
the Prior Chargees (in which case such agreement shall prevail to the
extent of any such inconsistency or conflict), the Company will:-
5.1 promptly notify WEXFORD of its acquisition of any heritable, freehold
or leasehold property;
5.2 keep all buildings, trade and other fixtures, fixed and other plant
and machinery forming part of the property charged under this
Debenture in good and substantial repair;
5.3 not commit or permit to be committed any material breach of any
covenants and stipulations from any time to time affecting its
freehold or leasehold property or the mode of user or enjoyment of the
same (including without limitation all environmental laws), and not
without the prior consent in writing of WEXFORD enter into any onerous
or restrictive obligations affecting any such property or make any
structural or material alteration thereto or do or suffer to be done
on any such property anything which is a "development" as defined in
section 55 of the Town and Country Planning Act 1990, nor do or suffer
or omit to be done any act, matter or thing whereby any provision of
any Act of Parliament, order or regulation from time to time in force
affecting any such property is infringed;
5.4 observe and perform all covenants reserved by or contained in any
lease, agreement for lease or tenancy agreement under which any part
of its freehold or leasehold property may be held and will not without
the consent of WEXFORD vary, surrender, cancel, assign or otherwise
dispose of or permit to be forfeited any leasehold interest forming
part of such property or agree any rent review;
5.5 not without the prior written consent of WEXFORD part with possession
of the whole or any part of, or confer on any other person any right
or licence to occupy, or grant any licence to assign or sublet any of
its freehold or leasehold land or buildings;
5.6 not without the prior written consent of WEXFORD allow any person
other than itself to be registered under the Land Registration Act
1925 as proprietor of any of its freehold or leasehold property or any
part thereof or create or permit to arise any overriding interest (as
specified in section 70(1) of the Land Registration Act 1925)
affecting such property and the reasonable costs incurred by WEXFORD
of registering
<PAGE>
a notice restricting dealing or other notice, lodging a caution
against registration of the title to such property or a land charge
(as appropriate) of any part thereof, shall be an expense properly
incurred in relation to the security;
5.7 indemnify WEXFORD (and as a separate covenant any receiver, receivers
or similar person appointed by it) against all existing and future
rents, taxes, rates, duties, fees, renewal fees, charges, assessments,
impositions and outgoings whatsoever (whether imposed by deed or
statute or otherwise and whether in the nature of capital of revenue
and even though of a wholly novel character) which now or at time
during the continuance of the security constituted by or pursuant to
this Debenture are payable in respect of the Assets or any part
thereof or by the owner or occupier thereof;
5.8 not without the previous written consent of WEXFORD redeem or purchase
any of its own shares or issue any redeemable shares or create and
issue any loan stock; and
5.9 comply in all material respects with the terms of all applicable laws,
including common law, statute and subordinate legislation, European
Community Regulations and Directives and judgements and decisions of
any court or authority competent to make such judgement or decision
compliance with which is mandatory for the Company including without
limitation all environmental laws, legislation relating to public
health, town & country planning, control and handling of hazardous
substances or wastes, fire precautions and health and safety at work.
5.10 not pay money into or open or maintain any account with other than
those listed in the Third Schedule and the Company hereby represents
and warrants to Wexford, and acknowledges that Wexford is relying
thereon, that it does not hold, operate or have any right, title or
interest in any account other than those listed in the Third schedule;
5.11 if so requested by Wexford send or join with Wexford in sending notice
to any person holding an account of the Company in the form prescribed
by Wexford and use reasonable endeavours to procure an undertaking
from such person acknowledging Wexford's right, title and interest
therein and confirming operation of the relevant account or accounts
in the form prescribed by Wexford;
5.12 not at any time after a request from Wexford to send or join in
sending a notice under Clause 5.11 withdraw or deal with any amount
standing to the credit of any account other than as may thereafter be
expressly permitted by Wexford;
5.13 pay into the current account listed in the Third Schedule or a
separate designated account (as Wexford may require) of the Company
all moneys which it may receive in respect of the book debts and other
debts hereby charged and (subject to any rights of the Bank holding
such account or the Prior Chargee in respect thereof) pay or otherwise
deal with such moneys standing in such account in accordance with any
directions from time to time given in writing by Wexford and prior to
such floating charge crystallising in the absence of any directions
from Wexford any moneys received by the Company and paid into such
account in respect of the book debts and other debts hereby charged
shall upon such payment in stand released from the fixed charge on
such debts created under clause 3.1.2 of this Debenture and shall
stand subject to the floating charge created under Clause 3.1.3 of
this Debenture over the other property and assets of the Company: any
such release shall in no respects derogate from the subsistence and
continuance of the said fixed charge on all other book and other debts
of the Company for the time being outstanding;
5.14 if called upon to do so by Wexford execute a legal assignment of such
book debts to Wexford in such terms as Wexford may require and give
notice thereof to the debtors
<PAGE>
from whom the debts are owing or incurred and take such other steps as
Wexford may require to perfect such legal assignment; and
5.15 deal with such book debts and other debts in accordance with any
directions from time to time given in writing by Wexford (subject to
any rights of the Prior Chargee in respect thereof) and in default of
and subject to any such directions deal with the same only in the
ordinary course of getting in and realising the same (but not sell
assign factor or discount the same in any way).
6. CONTINUING OBLIGATIONS IN RESPECT OF THE ASSETS
-----------------------------------------------
6.1 Save where the provisions of this Clause are inconsistent with or
conflict with the terms of the respective agreements between the
Company and each of the Prior Chargees in their form at the date of
this Debenture (in which case such agreement shall prevail to the
extent of any such inconsistency or conflict) the Company covenants
with WEXFORD that the Company will:-
6.1.1 keep the Assets in good and substantial repair and in good
working order and condition and maintain all insurances in the
name of the Company as are normally maintained by prudent
companies carrying on similar businesses and in particular will
insure and keep insured those of its Assets as are insurable
with a reputable insurance company with the interest of WEXFORD
noted upon the policy if WEXFORD should require it against such
risks and in such amounts as are customarily insured against in
relation to assets of such nature by prudent companies carrying
on comparable businesses (having regard to the nature of the
Company's business) with that of the Company at least to the
full replacement value for the time being with adequate
provision to cover other losses;
6.1.2 pay all premiums and other moneys necessary for effecting and
maintaining such insurances in force on the dates upon which
such moneys are to be paid under the insurance policy and will
on demand produce to WEXFORD proof that all such payments have
been properly made together with the policy or policies of
insurance.
6.2 If the Company fails to keep any of the Assets in good and substantial
repair and in good working order and condition or does not take out
and maintain such insurances as set out above or prove to WEXFORD that
the premiums and other moneys have been paid then WEXFORD may as it
thinks fit repair and keep in repair the Assets or any of them (with
liberty for that purpose by itself or its agents to enter upon the
freehold and leasehold property of the Company) or take out or renew
any such insurance in any sum and on terms which WEXFORD may think
fit.
6.3 All moneys received on any insurance policy will, be applied either in
making good the loss or damage in respect of which the money is
received or at any time whilst an Event of Default is continuing
either in making good such loss or damage or in or towards discharge
of the Secured Liabilities as WEXFORD requires..
6.5 The Company will permit any authorised representative of WEXFORD at
all reasonable times to enter upon any part of the freehold and
leasehold property of the Company and of any other property where the
Company may be carrying out any contract or other works.
7. APPOINTMENT OF RECEIVER
-----------------------
7.1 WEXFORD shall be and is entitled to appoint in writing a receiver, a
receiver and manager or administrative receiver (the "Receiver" which
term will include plural
<PAGE>
and any substitute receiver(s)) of all or any of the Assets either
immediately or at any time after:-
7.1.1 a request from the Company for such appointment;
7.1.2 the Company's failure to make payment in full of all or any of
the Secured Liabilities when due, or, if payable on demand,
following a demand for payment from WEXFORD; or
7.1.3 the presentation of a petition for an administration order to
be made in respect of the Company.
7.2 Where more than one receiver is appointed they will have power to act
separately (unless the appointment of WEXFORD specifies to the
contrary).
7.3 Any appointment over part only of the Assets charged under this
Debenture will not preclude WEXFORD from making any subsequent
appointment of a Receiver over any part of the Assets over which an
appointment has not previously been made by it.
7.4 WEXFORD may from time to time determine the remuneration of the
Receiver and may (subject to Section 45 of the Insolvency Act 1986)
remove the Receiver from all or any part of the Assets of which he is
the Receiver and at any time after any Receiver has vacated office or
ceased to act, appoint a further Receiver over all or any part of
those Assets.
7.5 The Receiver will be the agent of the Company (which will be solely
liable for his acts, defaults and remuneration) unless and until it
goes into liquidation, (after which he will act as principal), and
will have and be entitled to exercise in relation to the Company all
the powers set out in Schedule 1 to the Insolvency Act 1986 and all
the powers conferred from time to time on Receivers by statute and in
particular by way of addition to but without prejudice to those powers
(and those of WEXFORD) the Receiver will have power:-
7.5.1 to sell, let or lease or concur in selling, letting or leasing
and to vary the terms or determine, surrender or accept
surrenders of leases or tenancies of or grant options and
licences over all or any part of the Assets and so that any
such sale may be made for cash payable by instalments or for
shares or securities of another company and the Receiver may
promote or concur in promoting a company to purchase the Assets
to be sold;
7.5.2 to sever any fixtures (including trade and tenant's fixtures)
from the property of which they form part;
7.5.3 to exercise all voting and other rights attaching to stocks,
shares and other securities owned by the Company;
7.5.4 to make and effect all repairs and improvements;
7.5.5 to redeem any prior encumbrance and to settle and pass the
accounts of the encumbrancer and any accounts so settled and
passed will (subject to any manifest error) be conclusive and
binding on the Company and the moneys so paid will be deemed to
be an expense properly incurred by the Receiver;
7.5.6 to promote the formation of a subsidiary or subsidiaries of the
Company, purchasing, leasing, licensing or otherwise acquiring
interests in all or any of the assets of the Company;
<PAGE>
7.5.7 to make any arrangement or compromise which WEXFORD or the
Receiver may think fit;
7.5.8 to make and effect all repairs, renewals, improvements, and
insurances;
7.5.9 to appoint managers officers and agents for any of the
purposes referred to in this Clause 7 at such salaries as the
Receiver may determine;
7.5.10 to do all other acts and things as may be considered by the
Receiver to be incidental or conducive to the above or
otherwise incidental or conducive to the preservation,
improvement or realisation of the Assets.
7.6 A person dealing with the Receiver in good faith and for value shall
not be concerned to enquire whether the Receiver is validly appointed
or acting within his powers.
8. POWER OF ATTORNEY
-----------------
The Company irrevocably appoints WEXFORD (whether or not the Receiver has
been appointed) and also (as a separate appointment) the Receiver severally
the Attorney and Attorneys of the Company, for the Company and in its name
and on its behalf and as its act and deed or otherwise to execute and
deliver and otherwise perfect any deed, assurance, agreement, instrument or
act which may be required of the Company under this Debenture or may be
deemed proper for any of its purposes, and to convey or transfer a legal
estate to any purchaser of any freehold, leasehold or heritable property
charged under this Debenture.
9. APPLICATION OF SECURITY PROCEEDS
--------------------------------
Any moneys received under the powers conferred by this Debenture will,
subject to the repayment of any prior claims, be paid or applied in the
following order of priority:-
9.1 in satisfaction of all costs, charges and expenses properly incurred
and payments properly made by WEXFORD or the Receiver and of the
remuneration of the Receiver;
9.2 in or towards satisfaction of the Secured Liabilities in whatever
order WEXFORD may require;
9.3 as to the surplus (if any) to the person(s) entitled to it;
Provided that the Receiver may retain any moneys in his hands for so long
as he thinks fit, and WEXFORD may, without prejudice to any other rights
WEXFORD may have at any time and from time to time, place and keep for such
time as WEXFORD may think prudent any moneys received, recovered or
realised under or by virtue of this Debenture to or at a separate or
suspense account to the credit either of the Company or of WEXFORD as
WEXFORD thinks fit without any intermediate obligation on the part of
WEXFORD to apply such moneys or any part of such moneys in or towards the
discharge of the Secured Liabilities.
10. DEALINGS WITH PROPERTY REQUIRING WEXFORD CONSENT
------------------------------------------------
While this Debenture subsists:-
10.1 (save in the ordinary course of business) no statutory or other power
of granting or agreeing to grant or of accepting or agreeing to accept
surrenders of leases or tenancies of the whole or any part of the
freehold and leasehold property charged under this Debenture will be
capable of being exercised by the Company without the previous written
consent of WEXFORD;
<PAGE>
10.2 (save in the ordinary course of business) the Company shall not be
entitled to part with possession (otherwise than on the determination
of any lease, tenancy or licence) of any property hereby charged, or
to share the occupation thereof with any other person or persons, or
to surrender or purport to surrender or permit to be forfeited the
lease of any leasehold property hereby charged without such consent as
aforesaid;
10.3 Section 93 of the Law of Property Act 1925 (consolidation of
mortgages) will not apply to this Debenture.
11. WEXFORD POWER OF SALE
---------------------
11.1 Section 103 of the Law of Property Act 1925 will not apply to this
Debenture but the statutory power of sale will as between WEXFORD and
a purchaser from WEXFORD arise on and be exercisable at any time after
the execution of this Debenture provided that WEXFORD will not
exercise the power of sale until payment of all or any part of the
Secured Liabilities has become due or, being payable on demand, been
demanded or the Receiver has been appointed but this proviso will not
affect a purchaser or put him upon inquiry whether such demand or
appointment has been validly made.
11.2 The statutory powers of sale, leasing and accepting surrenders
exercisable by WEXFORD under this Debenture are extended so as to
authorise WEXFORD whether in its own name or in that of the Company to
grant a lease or leases of the whole or any part or parts of the
freehold and leasehold property of the Company with whatever rights
relating to other parts of it and containing whatever covenants on the
part of the Company and generally on such terms and conditions
(including the payment of money to a lease or tenant on a surrender)
and whether or not at a premium as WEXFORD thinks fit.
12. COMPANY TO MEET WEXFORD EXPENSES
--------------------------------
All reasonable costs, charges and expenses incurred hereunder by WEXFORD,
and all other moneys paid by WEXFORD or by the Receiver in perfecting or
otherwise in connection with this security or in respect of the Assets,
including (without prejudice to the generality of the foregoing) (1) all
moneys expended by WEXFORD under Clauses 6 and 16 hereof, (2) all costs of
WEXFORD (on a solicitor and own client basis) of all proceedings for the
enforcement of this security or for obtaining payment of moneys hereby
secured or arising out of or in connection with the acts authorised by
Clause 7 hereof, (3) all costs and losses to WEXFORD arising in consequence
of any default by the Company in the performance of its obligations and (4)
all administrative charges of WEXFORD based on the time spent by it in
connection with any of the foregoing shall be recoverable from the Company
as a debt and may be debited to any account of the Company and shall bear
interest accordingly and shall be charged on the Assets.
13. OPERATION OF COMPANY'S ACCOUNT WITH WEXFORD
-------------------------------------------
On receiving notice that the Company has encumbered or disposed of any of
the Assets WEXFORD will be entitled to close the Company's then current
account or accounts and to open a new account or accounts with the Company
and (without prejudice to any right of WEXFORD to combine accounts) no
money paid in or carried to the Company's credit in any such new account
will be appropriated towards or have the effect of discharging any part of
the amount due to WEXFORD on any closed account. If WEXFORD does not open a
new account or accounts immediately on receipt of such notice WEXFORD will
nevertheless be treated as if it had done so at the time when it received
such notice and as from that time all payments made to WEXFORD will be
credited or be treated as having been credited to the new account or
accounts and will not reduce the amount of the Secured Liabilities.
<PAGE>
14. WEXFORD RIGHT OF SET-OFF
------------------------
14.1 The Company agrees that any moneys from time to time standing to its
credit on any account with WEXFORD may be retained as cover for and at
any time without notice to the Company applied by WEXFORD in or
towards payment or satisfaction of any Secured Liabilities now or
hereafter from time to time due and payable by the Company.
14.2 If WEXFORD exercises any right of set-off in respect of any liability
of the Company and that liability or any part of it is in a different
currency from any credit balance against which WEXFORD seeks to set it
off, WEXFORD may use the currency of the credit balance to purchase an
amount in the currency of the liability at the then prevailing spot
rate of exchange and to pay out of the credit balance all reasonable
out of pocket costs, charges and expenses incurred by WEXFORD in
connection with that purchase.
15. POWER TO GRANT DEBENTURE
------------------------
The Company certifies that the security created by this Debenture does not
contravene any of the provisions of its Memorandum or Articles of
Association.
16. WEXFORD AS TRUSTEE
------------------
16.1 The security, representations, undertakings and covenants herein
are granted to Wexford for itself and in its capacity as agent and
trustee for the Lenders to be held on trust for Wexford and the
Lenders to be administered in accordance with the Loan Agreement, the
Security Agreements and the Stock Pledge Agreement (each as defined in
the Loan Agreement) and the Guarantee (and to the extent they are
inconsistent or conflict with each other or this Debenture in respect
of the relationship between the Lenders and Wexford the Loan Agreement
shall prevail).
16.2 For English law purposes, the perpetuity period applicable to
trusts under this Debenture is 80 years.
16.3 Wexford is authorised to take such action as is provided to be
taken by it 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 realisation
of the Assets) Wexford 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.
16.4 Wexford shall not be responsible for the existence, genuineness or
value of any of the Assets or for the validity, perfection, priority
or enforceability of the security interests in any of the Assets,
whether impaired by operation of law or by reason of any action or
omission to act or exercise or non-exercise of its discretion on its
part hereunder. Wexford shall have no duty to ascertain or inquire as
to the performance or observance of any of the terms of this Debenture
by the Company.
17. DEFINITIONS
-----------
In the interpretation of this Debenture:-
17.1 "Assets" shall mean the whole of the property (including uncalled
capital) which is or may be from time to time comprised in the
property and undertaking of the Company;
<PAGE>
"Business Day" shall mean 9.00am to 5.00pm local time on any day
(other than a Saturday or Sunday) on which banks generally are open
for the transaction of normal banking business in the main financial
centre of the relevant person or legal entity;
"Event of Default" means any event (including a breach) which entitles
WEXFORD to accelerate or demand payment or repayment of the
liabilities and obligations guaranteed by the Company pursuant to the
Guarantee;
"Guarantee" means the guaranty (sic) dated 28 July 1995 made between
the guarantors identified therein (including the Company) in favour of
WES Acquisition Corp as amended and assigned to WEXFORD pursuant to a
first amendment to guaranty (sic) document dated 30 January 1998 as
amended, varied, supplemented, substituted or novated from time to
time;
"Lenders" shall mean the following (each of them a "Lender") 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 and any
additional or substituted assignees or alternate lender or lenders the
other Lenders may from time to time nominate by written notice to the
Borrowers;
"Loan Agreement" means the amended and restated credit agreement dated
30 January 1998 made between (inter alia) Wahlco Environmental Systems
Inc., Wexford and the Lenders;
"Prior Chargees" means such of the following as hold security or
guarantees from the Company (or the right to request the same) as at
the date of this Debenture Midland Bank plc London & International
Mercantile Limited;
"Secured Liabilities" shall mean all or any monies and liabilities
which will for the time being (and whether on or at any time after
demand) be due, owing or incurred in whatsoever manner to WEXFORD the
Lenders or any of them by the Company under the Guarantee, the Loan
Agreement, this Debenture and the Security Agreements (as defined in
the Loan Agreement) to which it is party whether actually or
contingently, solely or jointly and whether as principal or surety and
whether or not WEXFORD or such Lenders shall have been an original
party to the relevant transaction, as well after as before any demand
made or decree obtained under this Debenture;
17.2 The expressions "WEXFORD" "LENDERS" and "LENDER" will include persons
deriving title from such persons;
17.3 The expressions "holding company" and "subsidiary" shall have the
meanings given to them in Section 736 of the Companies Act 1985;
17.4 References to "including" will not be construed restrictively but will
be construed as meaning "including, without prejudice to the
generality of the foregoing";
17.5 References to Clauses are to be construed as references to the
clauses of this Debenture and references to this Debenture include the
Schedule;
17.6 References to the Loan Agreement, the Guarantee or this Debenture and
to any provisions of it shall be construed as references to it in
force for the time being and as modified, extended, amended, varied,
supplemented, substituted, restated or novated from time to time (and
in particular but without limitation references to the Loan Agreement
shall include the Loan Agreement as amended and restated by a
<PAGE>
second amended and restated credit agreement between Wahlco
Environmental Systems, Inc., Thermatrix Inc., the Lenders and Wexford
from the date such agreement is executed and references to the
Guarantee shall include the Guarantee as amended and restated by an
amended and restated guaranty (sic) between the Guarantors (as
defined therein), the Lenders and Wexford from the date such
agreement is executed);
17.7 References to statutes, statutory provisions and other legislation
shall include all amendments, modifications and re-enactments for the
time being in force;
17.8 Words importing the singular are to include the plural and vice
versa;
17.9 References to a person are to be construed to include references to a
corporation, firm, company, partnership, joint venture,
unincorporated body of persons, individual or any state or any agency
of a state, whether or not a separate legal entity;
17.10 References to any person are to be construed to include that
person's assignees or transferees or successors in title, whether
direct or indirect;
17.11 Clause headings are for ease of reference only and are not to affect
the interpretation of this Debenture;
17.12 If at any time any provision of this Debenture is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Debenture nor the legality, validity or
enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby.
18. GOVERNING LAW
-------------
This Debenture will be governed by and construed according to English law.
IN WITNESS whereof this Debenture has been executed by the Company as a deed and
signed on behalf of WEXFORD (on behalf of itself and the Lenders) this
day of 1999
THE FIRST SCHEDULE
County and District (or London Title No.(s) (if Address or Description
Borough) registered land)
- --------------------------------------------------------------------------------
[________________] [________________] [________________]
- --------------------------------------------------------------------------------
THE SECOND SCHEDULE
- --------------------------------------------------------------------------------
SHARES OWNED IN: TYPE OF SHARE: AMOUNT:
- --------------------------------------------------------------------------------
[________________] [________________] [________________]
- -------------------------------------------------------------------------------
<PAGE>
THE THIRD SCHEDULE
- -------------------------------------------------------------------------------
BANK ACCOUNT SORT CODE
- -------------------------------------------------------------------------------
[Blank Name] Account Holder: [__________] [__________]
Account Name: [__________]
Account No.: [__________]
- -------------------------------------------------------------------------------
Executed and Delivered as a deed by the Company
(pursuant to a resolution of its Board of Directors)
acting by:-
Director ........................................
Director/Secretary ....................................
Signed on behalf of WEXFORD (on behalf of itself
and the Lenders) by:-
......................................
The address for service on WEXFORD in the case of any registered land is:-
Dibb Lupton Alsop
117 The Headrow
Leeds
LS1 5JX
Ref: (Wahlco) 25132-33/SJD/MRS
For all other purposes the address for service on WEXFORD is its registered
office for the time being.
<PAGE>
EXHIBIT 10.11
EXECUTION COPY
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT, dated as of
February 25, 1999, among WAHLCO ENVIRONMENTAL SYSTEMS, INC.,
a Delaware corporation ("Wahlco"), THERMATRIX INC., a
Delaware Corporation ("Thermatrix, and together with Wahlco,
"Borrowers"), and BACHMANN COMPANIES, INC., a Delaware
corporation, WAHLCO ENGINEERED PRODUCTS LTD., a United
Kingdom Corporation, WAHLCO ENGINEERED PRODUCTS GROUP
LIMITED, a United Kingdom corporation, and TEDDINGTON
BELLOWS (HOLDINGS), LTD., a United Kingdom corporation each
a direct or indirect subsidiary of Borrowers (individually
as a "Pledgor" and collectively together with the Borrowers,
as "Pledgors"), WEXFORD MANAGEMENT LLC, a Connecticut
limited liability company, as Agent (the "Agent").
-----------------------------------------------------
WHEREAS, each Pledgor is the record and beneficial owner of the shares
of common and preferred stock described in Schedule I hereto (the "Pledged
Shares" of such Pledgor) issued by the corporations named therein; and
WHEREAS, on January 13, 1999, pursuant to an Agreement and Plan of
Merger, dated November 9, 1998 (the "Merger Agreement"), among the Borrowers and
TMX Acquisition Sub I, Inc., a wholly owned subsidiary of Thermatrix ("Merger
Sub"), Merger Sub merged with and into Wahlco (the "Merger") and Wahlco became a
wholly owned subsidiary of Thermatrix at the effective time of the Merger;
WHEREAS, concurrently with the execution and delivery hereof, the
Borrowers are entering into a Second Amended and Restated Credit Agreement,
dated as of the date hereof, with the Lenders named therein (the "Lenders") and
the Agent (as the same may hereafter be modified, extended, replaced or
otherwise amended, the "Credit Agreement"), pursuant to which the Borrowers
shall be jointly and severally liable for the payment and performance of all of
the obligations and liabilities to the Lenders and the Agent set forth therein
and in the other Loan Documents (as such term is defined in the Credit
Agreement) (all of such obligations and liabilities, the "Liabilities");
WHEREAS, it is a condition to the effectiveness of the Credit
Agreement that the Pledgors enter into this Agreement; and
WHEREAS, each of the Pledgors will receive substantial direct and
indirect benefits from the Lenders and the Agent entering into the Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce Lender to enter into the Credit Agreement,
the Stock Pledge Agreement, dated July 28, 1995 as amended by the first
amendment thereto, is hereby amended and restated in its entirety, and, it is
agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as therein defined, and the following
shall have (unless otherwise
<PAGE>
provided elsewhere in this Stock Pledge Agreement) the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined):
"Agreement" shall mean this Stock Pledge Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Bankruptcy Code" shall mean Title 11, United States Code, as amended
from time to time, and any successor statute thereto.
"Pledged Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
2. Pledge. Each Pledgor hereby pledges to the Agent and the Lenders,
------
and grants to the Agent and the Lenders, a first priority security interest in,
all of the following (collectively, the "Pledged Collateral"):
(a) the Pledged Shares of such Pledgor and the certificates
representing the Pledged Shares, and all dividends, distributions, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares of such Pledgor;
(b) all additional shares of stock of any issuer of the Pledged
Shares of such Pledgor from time to time acquired by such Pledgor in any manner
(which shares shall be deemed to be part of the Pledged Shares), and the
certificates representing such additional shares, and all dividends,
distributions, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares; and
(c) all shares of any Person who, after the date of this Agreement,
becomes, as a result of any occurrence, a directly owned Subsidiary of such
Pledgor (which shares shall be deemed to be part of the Pledged Shares) and the
certificates representing such shares, and all dividends, distributions, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares.
3. Security for Obligations. This Agreement secures, and the
------------------------
Pledged Collateral is security for, the prompt payment in full when due, whether
at stated maturity, by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of Pledgors now or hereafter existing under this Agreement
and under the Guaranty (collectively, the "Secured Obligations").
2
<PAGE>
4. Delivery of Pledged Collateral. All certificates representing or
------------------------------
evidencing the Pledged Shares other than the shares of Nuevo Metro-Flex
Italiana, S.r.L. shall be delivered to the Agent and held by the Agent on behalf
of the Lenders on the date hereof and shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent. In addition, the Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing Pledged
Shares for certificates or instruments of smaller or larger denominations.
5. Representations and Warranties. Except as set forth in the
------------------------------
Disclosure Letter, each Pledgor represents and warrants to the Agent and the
Lenders that:
(a) Such Pledgor is, and at the time of delivery of the Pledged
Shares to the Agent pursuant to Section 4 hereof will be, the sole holder of
record and the sole beneficial owner of the Pledged Collateral pledged by such
Pledgor free and clear of any Lien thereon or affecting the title thereto,
except for the Lien created by this Agreement.
(b) All of the Pledged Shares of such Pledgor have been duly
authorized, validly issued and are fully paid and non-assessable.
(c) Such Pledgor has the right and requisite corporate authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
pledged by such Pledgor to the Agent as provided herein.
(d) None of the Pledged Shares of such Pledgor has been issued or
transferred in violation of the securities registration, securities disclosure
or similar laws of any jurisdiction to which such issuance or transfer may be
subject.
(e) The authorized Stock of each of the issuers listed on Schedule I
hereto consists of the number of shares of stock, with the number of shares
issued and outstanding, that are described in Schedule I hereto. As of the date
hereof, there are no existing options, warrants, calls or commitments of any
character whatsoever relating to any Stock of any of such issuers.
(f) No consent, approval, authorization or other order of any Person
and no consent, authorization, approval, or other action by, and no notice to or
filing with, any Governmental Authority is required either (i) for the pledge by
such Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by such Pledgor or (ii) for
the exercise by the Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Agreement, except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.
(g) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create a valid first priority Lien on and a
first priority perfected security interest in the Pledged Collateral pledged by
such Pledgor, and the proceeds thereof, securing the payment of the Secured
Obligations, subject to no other Lien or security interest.
3
<PAGE>
(h) This Agreement has been duly authorized, executed and delivered
by such Pledgor and constitutes a legal, valid and binding obligation of such
Pledgor enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, or other similar laws affecting the rights
of creditors generally or by the application of general equity principles.
(i) The Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding shares of Stock of the issuers thereof.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
6. Covenants. Each Pledgor covenants and agrees that until the
---------
Termination Date:
(a) Without the prior written consent of the Agent, such Pledgor will
not sell, assign, transfer, pledge, or otherwise encumber any of its rights in
or to the Pledged Collateral pledged by such Pledgor or any unpaid dividends or
other distributions or payments with respect thereto or grant a Lien in any
therein except as otherwise permitted by the Loan Agreement.
(b) Such Pledgor will, at its expense, promptly execute, acknowledge
and deliver all such instruments and take all such action as the Agent from time
to time may request in order to ensure to the Agent and the Lenders the benefits
of the Liens in and to the Pledged Collateral intended to be created by this
Agreement, including the filing of any necessary Uniform Commercial Code
financing statements, which may be filed by the Agent with or without the
signature of such Pledgor, and will cooperate with the Agent, at such Pledgor's
expense, in obtaining all necessary approvals and making all necessary filings
under federal or state law in connection with such Liens or any sale or transfer
of the Pledged Collateral.
(c) Such Pledgor has and will defend the title to the Pledged
Collateral and the Liens of the Agent and the Lenders thereon against the claim
of any Person and will maintain and preserve such Liens until the Secured
Obligations are paid in full.
(d) Such Pledgor will, upon obtaining any additional shares of stock
of any issuer of the Pledged Shares or any new directly owned Subsidiary, which
shares are not already Pledged Collateral, promptly (and in any event within
three Business Days) deliver to the Agent a Pledge Amendment, duly executed by
such Pledgor, in substantially the form of Schedule II hereto (a "Pledge
Amendment"), in respect of the additional Pledged Shares which are to be pledged
pursuant to this Agreement. Such Pledgor hereby authorizes the Agent to attach
each Pledge Amendment to this Agreement delivered to the Agent shall for all
purposes hereunder be considered Pledged Collateral.
(e) Pledgors covenant and agree to use their commercially reasonable
efforts to deliver the shares of Nuevo Metro-Flex Italiana, S.r.L. to the Agent,
accompanied by duly executed instruments of transfer or assignment in blank.
4
<PAGE>
7. Pledgor's Rights. As long as no Default or Event of Default shall
----------------
have occurred and be continuing and until written notice shall be given to each
Pledgor in accordance with Section 8 (a) hereof,
(a) such Pledgor shall have the right, from time to time, to vote and
give consents with respect to the Pledged Collateral or any part thereof for all
purposes not inconsistent with the provisions of this Agreement, the Credit
Agreement, and any other agreement; provided, however, that no vote shall be
-------- -------
cast, and no consent shall be given or action taken, which would have the effect
of impairing the position or interest of the Agent or any Lender in respect of
the Pledged Collateral or which would have the effect of impairing the position
or interest of the Agent or any Lender in respect of the Pledged Collateral or
which would authorize or effect (except as and to the extent expressly permitted
by the Credit Agreement) (i) the dissolution or liquidation, in whole or in
part, of any of its Subsidiaries, (ii) the consolidation or merger of any of its
Subsidiaries with any other Person, (iii) the sale, disposition or encumbrance
of all or substantially all of the assets of any of its Subsidiaries, (iv) any
change in the authorized number of shares, the stated capital or the authorized
share capital of any of its Subsidiaries or the issuance of any additional
shares of its Stock, or (v) the alteration of the voting rights with respect to
the Stock of any of its Subsidiaries;
(b) (i) such Pledgor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid in respect of
the Pledged Shares to the extent not in violation of the Credit Agreement
other than any and all (A) dividends paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral, (B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution, and (C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged Collateral;
provided, however, that until actually paid all rights to such
-------- -------
distributions shall remain subject to the Lien created by this Agreement;
and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to such Pledgor in accordance with clause (i) above)
and all other distributions in respect of any of the pledged Shares of
such Pledgor, whenever paid or made, shall be delivered to the Agent to
hold as Pledged Collateral and shall, if received by such Pledgor, be
received in trust for the benefit of the Agent or any Lender, be
segregated from the other property or funds of such Pledgor, and be
forthwith delivered to the Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement).
8. Defaults and Remedies. (a) Upon the occurrence of an Event of
---------------------
Default and during the continuation of such Event of Default, then or at any
time after such declaration (provided that such declaration is not rescinded by
the Agent) and following written notice to each Pledgor, Agent (personally or
through an agent) is hereby authorized and empowered to transfer and register in
its name or in the name of its nominee the whole or any part of the Pledged
Collateral, to exchange certificates or instruments representing or evidencing
Pledged Securities for certificates or instruments of smaller or larger
denominations, to exercise the voting rights with respect thereto, to collect
and receive all cash dividends and other
5
<PAGE>
distributions made thereon, to sell in one or more sales after seven days'
notice of the time and place of any public sale or of the time after which a
private sale is to take place (which notice each Pledgor agrees is commercially
reasonable), but without any previous notice or advertisement, the whole or any
part of the Pledged Collateral as though the Agent was the outright owner
thereof, each Pledgor hereby irrevocably constituting and appointing the Agent
as the proxy and attorney-in-fact of such Pledgor, with full power or
substitution to do so, and which shall remain in effect until the Secured
Obligations are paid in full; provided, however, that the Agent shall not have
any duty to exercise any such right or to preserve the same and shall not be
liable for any failure to do so or for any delay in doing so. Any sale shall be
made at a public or private sale at the Agent's place of business, or at any
public building in the City of New York or elsewhere to be named in the notice
of sale, either for cash or upon credit or for future delivery at such price, as
the Agent may deem fair, and the Agent may be the purchaser of the whole or any
part of the Pledged Collateral so sold and hold the same thereafter in its own
right free from any claim of such Pledgor or any right of redemption. Each sale
shall be made to the highest bidder, but the Agent reserves the right to reject
any and all bids at such sale which, in its discretion, it shall deem
inadequate. Demands of performance, except as otherwise herein specifically
provided for, notice of sale, advertisements and the presence of property at
sale are hereby waived and any sale hereunder may be conducted by an auctioner
or any officer or agent of the Agent.
(b) If, at the original time or times appointed for the sale of the
whole or any part of the Pledged Collateral, the highest bid, if there be but
one sale, shall be inadequate to discharge in full all the Secured Obligations,
or if the pledged Collateral be offered for sale in lots, if at any of such
sales, the highest bid for the lot offered for sale would indicate to the Agent,
in its discretion, the unlikelihood of the proceeds of the sales of the whole of
the Pledged Collateral being sufficient to discharge all the Secured
Obligations, the Agent may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time of sale or the
time of previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby waived;
provided, however, that any sale or sales made after such postponement shall be
- -------- -------
after seven days' notice to Pledgors.
(c) in the event of any sales hereunder the Agent shall, after
deducting all costs or expenses of every kind (including reasonable attorneys'
fees and disbursements) for care, safekeeping, collection, sale, delivery or
otherwise, apply the residue of the proceeds of the sales to the payment or
reduction, either in whole or in part, of the Secured Obligations in accordance
with the agreements and the instruments governing and evidencing such
Obligations, returning the surplus, if any, to Pledgors.
(d) if, at any time when the Agent in its sole discretion determines,
following the occurrence and during the continuance of an Event of Default, that
in connection with any actual or contemplated exercise of its rights (when
permitted under this Section 8) to sell the whole or any part of the Pledged
Collateral registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
"Act"), each Pledgor shall, in an expeditious manner, cause its Subsidiaries to:
6
<PAGE>
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
the Pledged Collateral and use its best efforts to cause such
registration statement to become and remain effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the sale or other disposition of the Pledged Collateral
covered by such registration statement whenever the Agent shall desire
to sell or otherwise dispose of the Pledged Collateral.
(iii) Furnish to the Agent such numbers copies of a prospectus
and a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as the Agent may request in order to
facilitate the public sale or other disposition of the Pledged
Collateral by the Agent.
(iv) Use its best efforts to register or qualify the Pledged
Collateral covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as the Agent shall request, and do such other
reasonable acts and things as may be required of it to enable the
Agent to consummate the public sale or other disposition in such
jurisdictions of the Pledged Collateral by the Agent.
(v) Furnish, at the request of the Agent, on the date that
shares of the Pledged Collateral are delivered to the underwriters for
sale pursuant to such registration or, if the security is not being
sold through underwriters, on the date that the registration statement
with respect to such shares of the Pledged Collateral becomes
effective, (A) an opinion, dated such date, of the independent counsel
representing such registrant for the purposes of such registration,
addressed to the underwriters, if any, and in the event the Pledged
Collateral is not being sold through underwriters, then to the Agent,
in customary form and covering matters of the type customarily covered
in such legal opinions; and (B) a comfort letter, dated such date,
from the independent certified public accountant of such registrant,
addressed to the underwriters, if any, and in the event the Pledged
collateral is not being sold through underwriters, then to the Agents,
in a customary from and covering matters of the type customarily
covered by such comfort letters and as the underwriters or the Agent
shall reasonably request. The opinion of counsel referred to above
shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the
Agent any reasonably request.
(vi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but not later
than 18 months after the effective date of the registration statement,
an earnings statement covering the period of at least 12 months
7
<PAGE>
beginning with the first full month after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(e) All expenses incurred in complying with Section 8(d)
hereof, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and expenses of counsel for
the Agent, expenses of the independent certified public accountants (including
any special audits incident to or required by any such registration) and
expenses of complying with the securities or blue sky laws or any jurisdictions,
shall be paid by Pledgors.
(f) if, at any time when the Agent shall determine to exercise
its right to sell the whole or any part of the Pledged Collateral hereunder,
such Pledged Collateral or the part of thereof to be sold shall not, for any
reason whatsoever, be effectively registered under the Act, the Agent may, in
its discretion (subject only to applicable requirements of law), sell such
Pledged Collateral or part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event the Agent in its discretion (x)
may, in accordance with applicable securities laws, proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have filed
under said Act (or similar statute), (y) may approach and negotiate with a
single possible purchaser to effect such sale, and (z) may restrict such sale to
a purchaser who will represent and agree that such purchaser is purchasing for
its own account, for investment and not with a view to the distribution or sale
of such Pledged Collateral thereof. In addition to a private sale as provided
above in this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act (or similar
statute) at the time of any proposed sale pursuant to this Section 8, then the
Agent shall not be required to effect such registration or cause the same to be
effected but, in its discretion (subject only to applicable requirements of
law), may require that any sale hereunder (including a sale at auction) be
conducted subject to restrictions (i) as to the financial sophistication and
ability of any Person permitted to bid or purchase at any such sale, (ii) as to
the content of legends to be placed upon any certificates representing the
Pledged Collateral sold in such sale, including restrictions on future transfer
thereof, (iii) as to the representations required to be made by each Person
bidding or purchasing at such sale relating to that Person's access to financial
information about Pledgors and such Person's access to financial information
about Pledgors and such Person's intentions as to the holding of the Pledged
Collateral so sold for investment, for its own account, and not with a view to
the distribution thereof, and account, and not with a view to the distribution
thereof, and (iv) as to such other matters as the Agent may, in its discretion,
deem necessary or appropriate in order that such sale (notwithstanding any
failure so to register) may be effected in compliance with the Bankruptcy Code
and other laws affecting the enforcement of creditors' rights and the Act and
all applicable state securities laws.
8
<PAGE>
(g) Each Pledgor acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in paragraph (f), the Agent may, in its discretion, elect to register any
or all the Pledged Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. Each Pledgor, however, recognizes
that the Agent may be unable to effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or more private sales thereof.
Each Pledgor also acknowledges that any such private sale may result in prices
and other terms less favorable to the seller than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. Lender
shall be under no obligation to delay a sale of any of the Pledged Collateral
for the period of time necessary to permit the registrant to register such
securities for public sale under the Act, or under applicable state securities
laws, even if any Pledgor would agree to do so.
(h) Each Pledgor agrees that following the occurrence and during the
continuance of an Event of Default it will not at any time plead, claim or take
the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
the Pledged Collateral of the possession thereof by any purchaser at any sale
hereunder, and such Pledgor waives the benefit of all such laws to the extent it
lawfully may do so. Each Pledgor agrees that it will not interfere with any
right, power and remedy of the Agent provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Agent or any one or more of such
rights, powers or remedies. No failure or delay on the part of the Agent to
exercise any such right, power or remedy and no notice or demand which may be
given to or made upon any Pledgor by the Agent with respect to any such remedies
shall upon any Pledgor by the Agent with respect to any such remedies shall
operate as a waiver thereof, or limit or impair the Agent's right to take any
action or to exercise any power or remedy hereunder, without notice or to
exercise any power or remedy hereunder, without notice or demand, or prejudice
its rights as against any Pledgor in any respect.
(i) Each Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to the
Agent, that the Agent has no adequate remedy at law in respect of such breach
and, as a consequence, agrees that each and every covenant contained in this
Section 8 shall be specifically enforceable against such Pledgor, and such
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that the Secured
Obligations are not then due and payable in accordance with the agreements and
instruments governing and evidencing such obligations. Each Pledgor further
acknowledges the impossibility of ascertaining the amount of damages which would
be suffered by the Agent by reason of a breach of any of such covenants and,
consequently, agrees that, if the Agent shall sue for damages for breach, it
shall pay, as liquidated damages and not as a penalty, an amount equal to the
lessor of (i) the value of the Pledged Collateral pledged by such Pledgor on the
date the Agent shall demand compliance with this Section 8, and (ii) the amount
required to pay in full the Secured Obligations.
9
<PAGE>
(9) Application of Proceeds. Any cash held by the Agent as Pledged
-----------------------
Collateral and all cash proceeds received by the Agent in respect of any sale
of, liquidation of, or other realization upon all or any part or the Pledged
Collateral shall be applied by the Agent as follows:
first, to the Agent in an amount sufficient to pay in full the expense
-----
of the Agent in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, including, without limitation,
attorney's fees;
second, to the Agent, on behalf of the Lenders, in an amount equal to
------
any other Secured Obligations other than principal and interest;
third, to the Agent, on behalf of the Lenders, in an amount equal to
-----
the then unpaid and accrued interest and prepayment premiums, if any, on
the Secured Obligations;
fourth, to the Agent, on behalf of the Lenders in an amount equal to
------
the principal amount of the Secured obligations; and
finally, after payment in full of all Secured Obligations, to pay to
-------
Pledgors, or their successors or assigns, or to whomever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction may
direct, any surplus then remaining from such proceeds.
10. Waiver. No delay on the Agent's part in exercising any power of
------
sale, Lien, option or other right hereunder, and no notice or demand which may
be given to or made upon Pledgors by the Agent in respect to any power of sale,
Lien, option or other right hereunder, shall constitute a waiver thereof, or
limit or impair the Agent's right to take any action or to exercise any power of
sale, Lien, option, or any other right hereunder, without notice or demand, or
prejudice the Agent's rights as against Pledgors in any respect.
11. Assignment. The Agent may assign, endorse or transfer any
----------
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Loan Agreement, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
12. Termination. Immediately following the payment of all Secured
-----------
Obligations, the Agent shall deliver to each Pledgor the Pledged Collateral
pledged by such Pledgor at the time subject to this Agreement and all
instruments of assignment executed in connection therewith, free and clear of
the Liens hereof and, except as otherwise provided herein, all of Pledgors'
obligations hereunder shall at such time terminate.
13. Lien Absolute. All rights of the Agent hereunder, and all
-------------
obligations of Pledgors hereunder, shall be absolute and unconditional
irrespective of:
10
<PAGE>
(a) any lack of validity or enforceability of the Loan Agreement, the
Notes, any other Loan Document or any other agreement or instrument governing or
evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or part of the Secured Obligations, or any other amendment or
waiver of or consent to any departure from the Loan Agreement, the Notes, any
other Loan Document or any other agreement or instrument governing or evidencing
any Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or discharge of, any Pledgor.
14. Release. Each Pledgor consents and agrees that the Agent may at
-------
any time, or from time to time, in its discretion (a) renew, extend or change
the time of payment, and/or the manner, place or terms of payment of all or any
part of the Secured Obligations and (b) exchange, release and/or surrender all
or any of the Pledged Collateral, or any part thereof, by whomsoever deposited,
which is now or may hereafter be held by the Agent in connection with all or any
of the Secured Obligations; all in such manner and upon such terms as the Agent
may deem proper, and without notice to or further assent from such Pledgor, it
being hereby agreed that such Pledgor shall be and remain bound upon this
Agreement, irrespective of the existence value or condition of any of the
Pledged Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time, exceed the aggregate principal
amount thereof set forth in the Loan Agreement, or any other agreement governing
any Secured Obligations. Each Pledgor hereby waives notice of acceptance of this
Agreement, and also presentment, demand, protest and notice of dishonor of any
and all of the Secured Obligations, and promptness in commencing suit against
any party hereto or liable hereon, and in giving any notice to or of making any
claim or demand hereunder upon such Pledgor. No act or omission of any kind on
the Agent's part shall in any event affect or impair this Agreement.
15. Indemnification. Each Pledgor jointly and severally agrees to
---------------
indemnify and hold the Agent harmless from and against any taxes, liabilities,
claims and damages, including reasonable attorney's fees and disbursements, and
other expenses incurred or arising by reason of the taking or the failure to
take action by the Agent, in good faith, in respect of any (transaction effected
under this Agreement or in connection with the Lien provided for herein,
including, without limitation, any taxes payable in connection with the delivery
or registration of any of the Pleaded Collateral as provided herein. Whether or
not the transactions contemplated by this Agreement shall be consummated, each
Pledgor jointly and severally agrees to pay to the Agent all out-of-pocket costs
and expenses incurred in
11
<PAGE>
connection with this Agreement and all reasonable fees, expenses and
disbursements, including registration costs under the Act (or similar statute)
and the reasonable fees of the Agent's Agents or representatives, incurred in
connection with the execution and delivery of this Agreement and the performance
by the Agent of the provisions of this Agreement and of any transactions
effected in connection with this Agreement. The obligations of Pledgors under
this Section 15 shall survive the termination of this Agreement.
16. Reinstatement. This Agreement shall remain in full force and
-------------
effect and continue to be effective should any petition be filed by or against
any Pledgor for liquidation or reorganization, should any Pledgor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
17. Miscellaneous. (a) the Agent may execute any of its duties
-------------
hereunder by or through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
(b) Each Pledgor jointly and severally agrees to promptly reimburse
the Agent for actual out of pocket expenses, including, without limitation,
reasonable counsel fees, incurred by the Agent in connection with the
administration and enforcement of this Agreement.
(c) Neither the Agent nor any of its officers, directors, employees,
agents or counsel shall be liable for any action lawfully taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or their
own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon Pledgors and their
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent and its successors and assigns, and shall be governed by, and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for and on behalf of the Agent
and Pledgors.
18. Severability. If for any reason any provision or provisions
------------
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
19. Notices. Except as otherwise provided herein, whenever it
-------
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this
12
<PAGE>
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either shall be delivered in person
with receipt acknowledged or sent by registered or certified mail, return
receipt requested, postage prepaid, or by telecopy and confirmed by telecopy
answerback addressed as follows:
(a) If to the Agent, at:
Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Telephone: (203) 862-7000
Attention: Arthur H. Amron
Facsimile: (203) 862-7312
and
Attention: Jay L. Maymudes
Facsimile: (203) 862-7350
With a copy to:
Howard, Smith & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telephone: (212) 841-1000
Facsimile: (212) 841-1010
(b) If to any Pledgor, at its principal business
address specified on Schedule II hereto
With a copy to:
Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road
Palo Alto, CA 94304
Attention: Michael J. Danaher, Esq.
Andrew Hirsch, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or
13
<PAGE>
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
21. CONSENT TO JURISDICTION; WAIVERS. EACH PLEDGOR AND THE
--------------------------------
AGENT AND THE LENDERS CONSENTS FOR THEMSELVES AND IN RESPECT OF THEIR
PROPERTIES, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE
JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE STATE OF NEW YORK WITH
RESPECT TO ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PLEDGOR FURTHER
CONSENTS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE IN RESPECT OF ANY
PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH RESPECT TO SUCH
COLLATERAL. EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS,
GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT ITS ADDRESS FOR NOTICES PURSUANT
HERETO, IN CONNECTION WITH ANY OF THE AFORESAID PROCEEDINGS IN ACCORDANCE WITH
THE RULES APPLICABLE TO SUCH PROCEEDINGS. EACH PLEDGOR HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY HAVE NOW OR IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
EACH PLEDGOR IN ANY JURISDICTION.
EACH PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR THE
GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE AGENT OR EITHER PLEDGOR IN CONNECTION HEREWITH.
EACH PLEDGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH LOAN DOCUMENT
TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENT ENTERING INTO THIS AGREEMENT.
14
<PAGE>
22. Section Titles. The Section titles contained in this Agreement
--------------
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
23. Counterparts. This Agreement may be executed in any number of
------------
counterparts, which shall, collectively and separately, constitute one
agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first written above.
THERMATRIX, INC.
By: /s/ Daniel S. Tedone
-------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President
and Chief Financial Officer
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By: /s/ Daniel S. Tedone
-------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President
and Chief Financial Officer
BACHMAN COMPANIES, INC.
By: /s/ Daniel S. Tedone
-------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President and
Chief Financial Officer
WAHLCO ENGINEERED PRODUCTS GROUP LTD.
By: /s/ Daniel S. Tedone
-------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
-------------------------------
Name: Edward E. Greene
Title: Director
WAHLCO ENGINEERED PRODUCTS LTD.
By: /s/ Daniel S. Tedone
-------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
-------------------------------
Name: Edward E. Greene
Title: Director
16
<PAGE>
TEDDINGTON BELLOWS (HOLDINGS), LTD.
By: /s/ Daniel S. Tedone
--------------------------------
Name: Daniel S. Tedone
Title: Director
By: /s/ Edward E. Greene
--------------------------------
Name: Edward E. Greene
Title: Director
Accepted and Acknowledged by:
WEXFORD MANAGEMENT LLC
By: /s/ Arthur Amron
--------------------------------
Name: Arthur Amron
Title: Senior Vice President
and General Counsel
17
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
NUMBER OF SHARES
CLAIMS OF CERTIFICATE SHARES ISSUED AND
PLEDGOR NAME AND ADDRESS OF ISSUER STOCK NUMBER(S) PLEDGED OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thermatrix, Inc. Wahlco Environmental Common CS-1 100 100
Systems, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Thermatrix, Inc. Thermatrix Ltd. Ordinary(pound)1 1 2 2
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Environmental Systems, Inc. Bachmann Companies, Inc. Common CS-1001 74,000 74,000
29 Lexington Avenue Preferred 0 0
Lewiston, Maine 04240
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Environmental Systems, Inc. Wahlco, Inc. Common CS-1001 100 100
3600 West Segerstrom Avenue
Santa Ana, California 92704
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Environmental Systems, Inc. Wahlco Engineered Products Ordinary E ? 18,051,421
Group Ltd.
Broombank Park
Chesterfield Trading Estate
Sheepbridge
WES Technology Inc. Chesterfield S41 9RT England Ordinary(pound)1 ? 1 18,051,422
- ----------------------------------------------------------------------------------------------------------------------------------
Bachmann Companies, Inc. Wahlco Engineered Products Inc. Common CS-1001 100,000 100,000
29 Lexington Street
Lewiston, Maine 04248 Preferred
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Engineered Products Group Wahlco Engineered Products, Ltd. Class A 6,051,589 6,051,589
Limited Broombank Park Class B 2,649,979 2,500,000
Chesterfield Trading Estate
Sheepbridge
WES Technology Inc. Chesterfield S41 9RT England Class B 1
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Engineered Products Group Pentney Engineering Ltd. Ordinary E 3,511,822
Limited Broombank Park
Chesterfield Trading Estate
Sheepbridge
WES Technology Inc. Chesterfield S41 9RT England Ordinary E 1 3,511,823
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Environmental Systems Inc. Teddington Bellows (Holdings) Ordinary(pound)1 1
Ltd.
Telio Works
Wahlco Engineered Products Group Pontardulais, Swansea SA4 1RP Ordinary(pound)1 593,211 593,212
Ltd. West Glamorgan, Wales UK
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Engineered Products Limited Nuovo Metro-Flex Itailana
Sr1. No Information
Via Bastiglia 42, Rebbio
Como 22100, Italy
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Engineered Products Group WES Property Ltd. Ordinary(pound)1 2 2
Ltd. Broombank Park
Chesterfield Trading Estate
Sheepbridge
Chesterfield S41 9RT England
- ----------------------------------------------------------------------------------------------------------------------------------
Teddington Bellows (Holdings) Ltd. Teddington Bellows (Holdings) Ordinary(pound)1 493,311 493,312
Ltd. Ordinary E 1
Broombank Park
Chesterfield Trading Estate
Sheepbridge
Chesterfield S41 9RT England
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Engineered Products Group Treste Plant Hire Ltd. Ordinary(pound)1 99,999 100,000
Ltd. Broombank Park
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Chesterfield Trading Estate
Sheepbridge
WES Technology, Inc. Chesterfield S41 9RT England Ordinary(pound)1 1
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Enginnered Products Group Wahlco International Limited Ordinary(pound)1 9,984
Ltd. Broombank Park
Chesterfield Trading Estate
Sheepbridge
Wahlco Environmental Systems Inc. Chesterfield S41 9RT England Ordinary(pound)1 1 10,000
- ----------------------------------------------------------------------------------------------------------------------------------
Wahlco Engineered Products Group Teddington Bellows (Holdings) Ordinary(pound)1 593,211 593,212
Ltd. Ltd.
Wahlco Environmental Systems Inc. Ordinary(pound)1 1
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated _______ __, 19__ is delivered pursuant to
Section 6(d) of the Stock Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to that certain Stock
Pledge Agreement, dated as of January ___, 1999 by the undersigned and others,
as Pledgors, to the Agent and the Lenders named therein, and that the Pledged
Securities listed on this Pledge Amendment shall be and become a part of the
Pledged Collateral referred to in said Stock Pledge Agreement and shall secure
all Secured Obligations referred to in said Stock Pledge Agreement.
[Name of Pledgor]
By:_______________
Name:
Title:
<TABLE>
<CAPTION>
Name and Address Class of Certificate Number of Number of shares
of Pledgor Issuer Stock Number(s) Shares issues and outstandings
- ----------- ------ ----- --------- ------ -----------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
20
<PAGE>
EXHIBIT 10.12
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED
IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS
AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 OR (2) THERMATRIX INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
Warrant No. W-1
Warrant
To Purchase Shares of Common Stock,
Par Value $.001 Per Share
of
Thermatrix Inc.
This is to Certify That Wexford Management LLC, or such holder's
registered assigns (the "Investor"), is the owner of 450,000 Warrants (as
defined below), each of which entitles the registered holder thereof to purchase
from Thermatrix Inc., a Delaware corporation (the "Company"), one fully paid,
duly authorized and nonassessable share of Common Stock, par value $.001 per
share, of the Company (the "Common Stock"), at any time or from time to time on
or before 5:00 p.m., New York City time, on February 25, 2004, at an exercise
price equal to the lesser of (x) $3.875 per share and (y) the average closing
price of the Common Stock as reported by the Nasdaq National Market for the ten
trading days immediately following the Issue Date; provided, that if there were
no sales of the Common Stock on any such date, the simple average of the highest
bid and lowest asked prices for the Common Stock on such date shall be used in
place of a closing price for such date in calculating such ten-day average (such
lesser price, the "Exercise Price"), all on the terms and subject to the
conditions hereinafter set forth. As soon as practicable after such ten-day
period has expired, the Investor shall calculate the Exercise Price and submit
such calculation to the Company for its approval, whereupon such calculation
shall be attached hereto as Exhibit A and shall be incorporated herein by
reference.
The number of shares of Common Stock issuable upon exercise of each
such Warrant (the "Number Issuable"), which is initially one (1) share, is
subject to adjustment from time to time pursuant to the provisions of Section 2
of this Warrant Certificate.
<PAGE>
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 14 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby
-------------------
may be exercised, in whole or in part, by the registered holder hereof at any
time or from time to time on or before 5:00 p.m., New York City time, on
February __, 2004, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (a) this Warrant
Certificate, (b) a Notice of Exercise substantially in the form attached hereto
as Exhibit B and (c) unless the holder is exercising the conversion right set
forth in Section 3, payment of the Exercise Price for the shares of Common
Stock issuable upon exercise of such Warrants, which shall be payable by a
certified or official bank check payable to the order of the Company, or
(collectively, the "Warrant Exercise Documentation").
As promptly as practicable, and in any event within five Business Days
after receipt of the Warrant Exercise Documentation, the Company shall deliver
or cause to be delivered (a) certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock specified in the
Warrant Exercise Documentation, (b) if applicable, cash in lieu of any fraction
of a share, as hereinafter provided, and (c) if less than the full number of
Warrants evidenced hereby are being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the date
of delivery of the Warrant Exercise Documentation so that the Person entitled to
receive shares of Common Stock upon such exercise shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time. No such surrender shall be effective to constitute the Person
entitled to receive such shares as the record holder thereof while the transfer
books of the Company for the Common Stock are closed for any purpose (but not
for any period in excess of five Business Days); but any such surrender of this
Warrant Certificate for exercise during any period while such books are so
closed shall become effective for exercise immediately upon the reopening of
such books, as if the exercise had been made on the date this Warrant
Certificate was surrendered and for the Number Issuable of Common Stock
specified in the Warrant Exercise Documentation and at the Exercise Price.
The Company shall pay all expenses in connection with, and all taxes
and other governmental charges (other than income taxes of the holder) that may
be imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby, no
fractions of shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Current Market Price
per share of Common Stock on the Business Day which
2
<PAGE>
next precedes the day of exercise. If more than one such Warrant shall be
exercised by the holder thereof at the same time, the number of full shares of
Common Stock issuable on such exercise shall be computed on the basis of the
total number of Warrants so exercised.
Section 2. Adjustments.
-----------
(a) Adjustment of Number Issuable. The Number Issuable shall
-----------------------------
be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make a distribution on the
outstanding shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock
into a larger number of shares;
(C) combine the outstanding shares of Common Stock
into a smaller number of shares; or
(D) issue any shares of its capital stock in a
reclassification of the Common Stock;
then, and in each such case (other than a dividend or distribution received
by or set aside for the benefit of the holder pursuant to Section 2(c)
hereof), the Number Issuable in effect immediately prior to such event
shall be adjusted (and any other appropriate actions shall be taken by the
Company) so that the holder of any Warrant evidenced hereby thereafter
exercised shall be entitled to receive the number of shares of Common Stock
or other securities of the Company which such holder would have owned or
had been entitled to receive upon or by reason of any of the events
described above, had such Warrant been exercised immediately prior to the
happening of such event and the Exercise Price shall be adjusted
accordingly. An adjustment made pursuant to this clause (i) shall become
effective retroactively (x) in the case of any such dividend or
distribution, to a date immediately following the close of business on the
record date for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision, combination or reclassification, to the close of
business on the date upon which such corporate action becomes effective.
(ii) The Company promptly shall deliver to each registered
holder of Warrants prior to effecting any transaction which would result in
an increase or decrease in the Number Issuable pursuant to this Section 2 a
notice thereof, together with a certificate, signed by the Chief Executive
Officer or a Vice-President and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary of the
3
<PAGE>
Company, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased Number Issuable then in effect
following such adjustment.
(iii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward adjustments
in the Number Issuable, in addition to those otherwise required by this
Section 2(a), as the Board of Directors of the Company in their discretion
shall determine to be advisable in order that any stock dividend,
subdivision or combination of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of securities convertible
into or exchangeable for Common Stock, hereafter made by the Company to its
shareholders shall not be taxable; provided, however, that any such
-------- -------
adjustment shall be made, as nearly as practicable, in a manner which
treats all holders of Warrants with similar protections on an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger
-------------------------------------------------------
or Sale of Assets. In case of any capital reorganization or reclassification
- -----------------
or other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another Person (other than
a consolidation or merger in which the Company is the resulting or surviving
person and which does not result in any reclassification or change of
outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or substantially all of the assets of the Company (any
of the foregoing, a "Transaction"), the Company, or such successor or
purchasing Person, as the case may be, shall execute, make lawful provision
for and deliver to each holder of the Warrants evidenced hereby, prior to
effecting any of the foregoing Transactions, a certificate that the holder of
each such Warrant then outstanding shall have the right thereafter to exercise
such Warrant into the kind and amount of shares of stock or other securities
(of the Company or another issuer) or property or cash receivable upon such
Transaction by a holder of the number of shares of Common Stock into which
such Warrant could have been exercised immediately prior to such Transaction.
Such certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 2 and shall contain other terms identical to the terms hereof.
(c) Special Distributions. If the holder so elects by sending
---------------------
a Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in
cash, in capital stock (which shall include, without limitation, any options,
warrants or other rights to acquire capital stock) of the Company, whether or
not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) in other property or assets, to holders of Common Stock (a
"Special Distribution"), then the Board of Directors shall promptly distribute
to the holder the amount of such dividend or distribution that any holder of
Warrants would have been entitled to receive had it exercised such Warrants
prior to the record date for such dividend or distribution. If the holder so
elects by sending a Special Notice to the company, then the Board of Directors
shall set aside such amount of such dividend or distribution, and upon the
exercise of a Warrant evidenced hereby, the holder shall be
4
<PAGE>
entitled to receive, such dividend or distribution that such holder would have
received had such Warrant been exercised immediately prior to the record date
for such dividend or distribution. Prior to any Special Distribution described
in this Section 2(c), the Company shall as provided in Section 4 hereof notify
each holder (prior to the occurrence of each Special Distribution) of its
intent to make such Special Distribution and the holder, if it elects to have
such distribution set aside the amount thereof rather than have an adjustment
to the Number Issuable as provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii),
shall notify the Company by sending a Special Notice prior to the date of any
such Special Distribution.
Section 3. Conversion Right. In lieu of exercising this Warrant as
----------------
specified in Section 1, the holder may from time to time convert this Warrant,
in whole or in part, into a number of shares determined by dividing (a) the
aggregate Current Market Price of the shares or other securities otherwise
issuable upon exercise of this Warrant minus the aggregate Exercise Price of
such shares by (b) the Current Market Price of one share.
Section 4. Redemption. The Company shall not have any right to
----------
redeem any of the Warrants evidenced hereby.
Section 5. Notice of Certain Events. In case at any time or from
------------------------
time to time the Company shall declare any dividend or any other distribution to
the holders of its Common Stock, or shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase any
additional shares of stock of any class or any other right, or shall authorize
the issuance or sale of any other shares or rights which would result in an
adjustment to the Number Issuable pursuant to Section 2(a)(ii) or would result
in a Special Distribution pursuant to Section 2(c), or there shall be any
Transaction, or there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such cases
the Company shall mail to each holder of the Warrants evidenced hereby at such
holder's address as it appears on the transfer books of the Company, as promptly
as practicable but in any event at least 30 days prior to the applicable date
hereinafter specified, a notice stating (a) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or warrants or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined, (b) the date of issuance thereof or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective; provided that in the case of any event to which Section 2(b) applies,
--------
(i) the Company shall give prior written notice as aforesaid and (ii) such
notice also shall specify the date as of which it is expected that the holders
of Common Stock of record shall be entitled to exchange their Common Stock for
shares of stock or other securities or property or cash deliverable upon such
reorganization, reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
Section 6. Certain Covenants. The Company covenants and agrees that
-----------------
all shares of capital stock of the Company which may be issued upon the exercise
of the Warrants evidenced hereby will be duly authorized, validly issued and
fully paid and nonassessable. The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrants, such number of its
authorized but unissued shares of Common Stock as will from time
5
<PAGE>
to time be sufficient to permit the exercise of all outstanding Warrants, and
shall take all action required to increase the authorized number of shares of
Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common stock to permit such reservation or to permit the
exercise of all outstanding Warrants.
Section 7. Investor Consent Required. If the Company or any subsidiary has any
-------------------------
outstanding Obligations (as such term is defined in the Second Amended and
Restated Credit Agreement, dated February __, 1999, among the Investor as Agent,
the Lenders named therein, the Company and Wahlco Environmental Systems, Inc.
(the "Credit Agreement")), the Company shall not without the Investor's consent
issue any equity security, or any note, debenture, bond or other debt or equity
security convertible or exchangeable into, or grant any option, warrant or
similar right that upon exercise would provide the right to purchase, any shares
of stock (of any class or series) of the Company without the Investor's consent,
if such security contains anti-dilution protections that are more favorable than
those provided in Section 2 hereof. Notwithstanding the foregoing, the
Investor's consent shall not be required for such issuance if the Company has
amended the terms of Section 2 so as to provide the Investor with anti-dilution
protections at least as favorable as such more favorable terms; provided,
however, that the Exercise Price shall not be adjusted as a result of such
issuance or grant but may be adjusted as a result of subsequent issuances or
grants in accordance with the terms of such amended anti-dilution protections.
Section 8. Registered Holder. The person in whose name this Warrant
-----------------
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes.
Section 9. Transfer of Warrants. Any transfer of the rights
--------------------
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached Exhibit C
hereto, properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants proposed
for transfer, and with respect to the shares of Common Stock underlying such
Warrants, shall be effective under the Securities Act or (b) the Company shall
have received an opinion of counsel reasonably satisfactory to it that no
violation of such act or similar state acts will be involved in such transfer.
Thereupon, the Company shall issue in the name or names specified by the
registered holder hereof and, in the event of a partial transfer, in the name of
the registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable hereunder.
Each such Certificate shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act, unless in
the aforesaid reasonably satisfactory opinion of counsel for the Holder or the
security holder, as the case may be, such legend is not necessary in order to
insure compliance with the Securities Act. The Holder shall not transfer this
warrant to a Competitor of the Company.
Section 10. Denominations. The Company covenants that it will, at
-------------
its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a
6
<PAGE>
new Warrant Certificate or Certificates in denominations specified by such
holder for an aggregate number of Warrants equal to the number of Warrants
evidenced by this Warrant Certificate.
Section 11. Replacement of Warrants. Upon receipt of evidence
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an institutional investor, its own unsecured indemnity agreement shall be deemed
to be reasonably satisfactory), or, in the case of mutilation, upon surrender
and cancellation thereof, the Company will issue a new Warrant Certificate of
like tenor for a number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.
Section 12. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 13. Rights Inure to Registered Holder. The Warrants
---------------------------------
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their respective
successors and permitted assigns. This Warrant Certificate shall be for the
sole benefit of the registered holder thereof. Nothing in this Warrant
Certificate shall be construed to give the registered holder hereof any rights
as a holder of shares of Common Stock until such time, if any, as the Warrants
evidenced by this Warrant Certificate are exercised or converted in accordance
with the provisions hereof.
Section 14. Definitions. For the purposes of this Warrant
-----------
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
------------
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
------------
Preamble hereof.
"Company" shall have the meaning assigned to such term in the Preamble
-------
hereof.
"Competitor of the Company" shall mean a company engaged in the
-------------------------
design, development, manufacture and/or sale of (i) equipment or systems used to
control or destroy air emissions including, but not limited to, particulate
matter ("PM"), oxides of nitrogen ("NOx") and volatile organic compounds and
hazardous air pollutants (collectively "VOCs"); (ii) gas flow diverters, dampers
and expansion joints used to control the flow of air and gases in power
generation and industrial facilities; or (iii) equipment or systems used to
control emissions from stationary and/or mobil diesel engines, and, in each
case, (iv) generates revenues of $3 million per annum from such business or
businesses.
7
<PAGE>
"Current Market Price" per share shall mean, on any date specified
--------------------
herein for the determination thereof, (a) if the Common Stock is then listed on
a national securities exchange, designated as a Nasdaq Stock Market security or
quoted in the over-the-counter-market by a member firm of the NASD, the average
daily Market Price of the Common Stock for those days during the period of 15
days, ending on such date, on which the national securities exchanges were open
for trading, and (b) if the Common Stock is not then so listed, designated or
quoted, the Market Price on such date.
"Exercise Price" shall have the meaning assigned to such term in the
--------------
Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
-----------------
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"Investor" shall have the meaning assigned to such term in the
--------
Preamble hereof.
"Issue Date" shall mean February 25, 1999.
----------
"Market Price" shall mean, per share of Common Stock, on any date
------------
specified herein: (a) if the Common Stock is listed on any national securities
exchange or is designated as a Nasdaq Stock Market security, the last trading
price of the Common Stock on such date as reported in the Wall Street Journal;
or (b) if the Common Stock is not so listed or designated, the average of the
reported closing bid and ask prices of the Common Stock in the over-the-counter-
market, on such date as reported by any member firm of the NASD selected by the
Company; or (c) if none of (a) or (b) is applicable, the Fair Market Value per
share determined in good faith by the Board of Directors of the Company which
shall be deemed to be Fair Market Value unless holders of at least 50% of Common
Stock issued or issuable upon exercise of the Warrants request that the Company
obtain an opinion of a nationally recognized public accounting firm chosen by
the Company (who shall bear the expense) and reasonably acceptable to such
requesting holders of the Warrants, in which event the Fair Market Value shall
be as determined by such investment banking firm.
"Number Issuable" shall have the meaning assigned to such term in the
---------------
Preamble hereof.
"Person" shall mean any individual, corporation, limited liability
------
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Securities Act" shall mean the Securities Act of 1933.
--------------
"Special Distribution" shall have the meaning assigned to such term in
--------------------
Section 2(c) hereof.
8
<PAGE>
"Special Notice" shall mean the notice sent by a holder to the Company
--------------
indicating its preference to have any Special Distribution distributed
immediately or set aside for its benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in Section
-----------
2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the
--------
Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning assigned to
------------------------------
such term in Section 1 hereof.
Section 15. Notices. All notices, requests and other communications
-------
provided for or permitted hereunder shall be in writing and sufficient if
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested, (a) if
to the holder of a Warrant, at such holder's last known address or telecopy
number appearing on the books of the Company; and (b) if to the Company, at its
principal executive office, or the telecopy number of such office, in the United
States, or such other address or telecopy number as the party to whom notice is
to be given may have furnished to the other party in accordance herewith. Each
such notice, request or communication shall be effective when received or, if
given by mail, when delivered at the address specified in this Section or on the
fifth Business Day following the date on which such communication is posted,
whichever occurs first.
Section 16. Share Legend. Each certificate representing shares of
------------
Common Stock or any other securities issued upon exercise of this Warrant shall
bear the following legend unless such shares or other securities have been
registered under the Securities Act and any applicable state securities laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE
STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 OR (B) THERMATRIX INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER."
9
<PAGE>
In Witness Whereof, the Company has caused this Warrant Certificate to be
duly executed as of the Issue Date.
Thermatrix Inc.
By: /s/ Daniel S. Tedone
------------------------------------
Name: Daniel S. Tedone
Title: Executive Vice President
and Chief Financial Officer
10
<PAGE>
Exhibit A
To Warrant
[Calculation of Exercise Price]
The Exercise Price for the Warrant is $_____________ per share of Common Stock.
The Exercise Price was calculated as follows:
Accepted and Agreed
Thermatrix Inc.
By:__________________________________
Name: Daniel S. Tedone
Title: Executive Vice President
and Chief Financial Officer
<PAGE>
Exhibit B
to Warrant
[Form of Notice of Exercise]
To: Thermatrix Inc.
(1) The undersigned hereby elects to purchase _______________ shares of
Common Stock of Thermatrix Inc. pursuant to the terms of the attached Warrant,
and
[_] tenders payment of the purchase price in full, together with all
applicable transfer taxes, if any;
[_] elects to exercise its conversion right pursuant to Section 3
thereof.
(2) Please issue a certificate of certificates representing said shares
of Common Stock in the name of the undersigned.
(3) The undersigned represents and warrants:
(a) that the aforesaid shares of Common Stock are being acquired
for the account of the undersigned for investment and not with a view to, or
for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
(b) that the undersigned is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Common
Stock.
(c) that the undersigned acknowledges and understands that the
Common Stock constitutes "restricted securities" under the Securities Act and
has not been registered under the Securities Act in reliance upon a specific
exemption therefrom. The undersigned further acknowledges and understands that
the Company is under no obligation to register the Common Stock except as
described in the Registration Rights Agreement between the Company and Wexford
Management LLC, dated February __, 1999. The undersigned understands that the
certificate evidencing the Common Stock will be imprinted with a legend which
prohibits the transfer of the Common Stock unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company; and
(d) that the undersigned is familiar with the provisions of Rule
144, promulgated under the Securities Act. The undersigned further understands
that in the event all of the applicable requirements of Rule 144 are not
satisfied, registration under the Securities Act, some other registration
exemption will be required for transfer of the Securities.
(Date) (Signature)
<PAGE>
Exhibit C
To Warrant
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is
_____________________________________, and irrevocably appoints ________________
as agent to transfer this security on the books of the Company. Such agent may
substitute another to act for such agent.
Signature:
____________________________________
Date: ___________________________
