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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, supplemented, amended and restated
or otherwise modified from time to time, this "Security Agreement"), dated as of
June 30, 2000, is made by LANCER PARTNERSHIP, LTD., a Texas limited partnership
("Grantor"), in favor of THE FROST NATIONAL BANK, a national banking
association, as agent (in such capacity, the "Agent") for each of the Banks
under the Credit Agreement (as defined below).
WITNESSETH:
WHEREAS, pursuant to that certain Seventh Amendment and Restated Credit
Agreement, dated as of the date hereof (as modified, amended, supplemented, or
restated from time to time, the "Credit Agreement"), among Grantor, LANCER DE
MEXICO, S.A. DE C.V., formerly known as NUEVA DISTRIBUIDORA LANCERMEX, S.A. de
C.V., a sociedad anonima de capital variable organized under the laws of the
United Mexican States ("Mexico Subsidiary") (Grantor and Mexico Subsidiary being
hereinafter collectively referred to as "Borrower"), Lancer Corporation, a Texas
corporation, Lancer Capital Corporation, a Delaware corporation, Lancer
International Sales, Inc., a Texas corporation, Servicios Lancermex, S.A. de
C.V., a sociedad anonima de capital variable organized under the laws of the
United Mexican States, Industrias Lancermex, S.A. de C.V., a sociedad anonima de
capital variable organized under the laws of the United Mexican States and The
Frost National Bank, individually and as Agent, Xxxxxx Trust and Savings Bank,
an Illinois banking corporation, individually, and Whitney National Bank, a
national banking association, individually, and each of the lenders that are now
or hereafter parties thereto, and certain other financial institutions who from
time to time are parties thereto (the "Banks"), the Banks have extended
Commitments to make Loans to Borrower;
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Grantor is required to execute and deliver this
Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Commitments to the Borrower pursuant to the Credit Agreement, the Grantor
agrees, for the benefit of each of the Banks, as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Collateral Account" is defined in Section 6.2.
"Deposit Accounts" is defined in clause (t) of Section 2.1.
"Equipment" is defined in clause (a) of Section 2.1.
"Event of Default" means the occurrence of any of the following events
or conditions:
(a) An Event of Default under the Credit Agreement shall occur
and be continuing;
(b) The failure to pay, when due, any portion of the Secured
Indebtedness, subject to applicable notice and cure periods,
if any;
(c) The failure of Grantor to observe any of the terms,
conditions or covenants contained in this Security Agreement,
subject to applicable notice and cure periods, if any; or
(d) The ownership of the Collateral or any of the Collateral,
except for Inventory sold in the ordinary course of business
or as permitted under Section 4.1.3 hereof, or any legal or
equitable interest therein, becomes vested in a person or
entity other than Grantor.
"Inventory" is defined in clause (b) of Section 2.1.
"Lender Party" means, as the context may require, Agent, each Bank, and
each of their respective successors, transferees and assigns.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Indebtedness" is defined in Section 2.2.
"Third Party" is defined in clause (a) of Section 3.1.3.
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"U.C.C." means the Uniform Commercial Code, as in effect in the State
of Texas.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Security Agreement, including its preamble and recitals, with
such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
Agent for its benefit and the benefit of each of the Banks, and hereby grants to
Agent, for its benefit and the benefit of each of the Banks, a security interest
in all of the following, whether now or hereafter existing or acquired (the
"Collateral"):
(a) all equipment in all of its forms of Grantor, wherever
located, including all machinery, manufacturing, distribution, selling,
data processing and office equipment, assembly systems, tools, molds,
dies, fixtures, appliances, furniture, furnishings, vehicles, trade
fixtures, and other tangible personal property (other than Inventory),
and all parts thereof and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor (any
and all of the foregoing being the "Equipment");
(b) all inventory in all of its forms of Grantor, wherever
located, including:
(i) all goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, all consigned goods and
other items which have previously constituted Equipment but
are then currently being held for sale or lease in the
ordinary course of Grantor's business, all raw materials and
work in process therefor, finished goods thereof, and all
other materials and supplies of any kind, nature or
description used or consumed in the manufacture, production,
packing, shipping, advertising, finishing or sale thereof;
(ii) all goods in which Grantor has an interest in
mass or a joint or other interest or right of any kind
(including goods in which Grantor has an interest or right as
consignee); and
(iii) all goods which are returned to or repossessed
by Grantor;
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and all accessions thereto, products thereof and documents therefore
(any and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments and general intangibles of Grantor, whether or
not arising out of or in connection with the sale or lease or other
disposition of goods or the rendering of services, and all rights of
Grantor now or hereafter existing in and to all security agreements,
guaranties, leases and other contracts securing or otherwise relating
to any such accounts, contracts, contract rights, chattel paper,
documents and instruments (any and all such accounts, contracts,
contract rights, chattel paper, documents, instruments, and general
intangibles being the "ReceivableS", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) Intentionally Omitted;
(e) all contracts, contract rights and general intangibles of
Grantor, including without limitation, all tax refunds, claims, causes
of action, judgments, franchises, permits, licenses, supply contracts,
purchase contracts, and agreements (collectively, "General
Intangibles");
(f) all of Grantor's right, title and interest in and to any
and all depository, savings, or custodial, or other accounts maintained
by Grantor with any of the Banks, all sums now or at any time hereafter
on deposit therein, credited thereto, or payable thereon and all
instruments, documents and other writings evidencing any of the
foregoing accounts (such accounts collectively referred to herein as
the "Deposit Accounts");
(g) all investment property of Grantor;
(h) all books, records, writings, data bases, information and
other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1.;
(i) all of Grantor's other property and rights of every kind
and description and interests therein; and
(j) all products, offspring, rents, issues, profits, returns,
income and proceeds of and from any and all of the foregoing Collateral
(including proceeds which constitute property of the types described in
clauses (a), (b), (c), (d), (e), (f), (g), (h), and (i), proceeds
deposited from time to time in the Deposit Accounts and in any lock
boxes of Grantor, and, to the extent not otherwise included, all
payments under insurance (whether or not Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
Notwithstanding the foregoing, "Collateral" shall not include any General
Intangibles as to which, or other rights arising under contracts as to which,
the grant of a security interest would constitute a
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violation of a valid and enforceable restriction on such grant, unless and until
any required consents shall have been obtained. Grantor agrees to use its best
efforts to obtain any such required consent.
SECTION 2.2. SECURITY FOR THE OBLIGATION. This Security Agreement
secures the payment and performance of the Obligation, including, without
limitation, all obligations now or hereafter existing under the Credit
Agreement, the Notes, this Security Agreement and each of the other Loan
Documents to which Grantor is or may become a party, whether for principal,
interest, costs, fees, expenses or otherwise (including all such amounts which
would become due but for the operation of the automatic stay under Section
362(a) of the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. Sections 502(b) and 506(b)) (all of the foregoing, together with all
renewals, extensions and modifications of all or any part thereof, being the
"Secured Indebtedness").
SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the Collateral
and shall:
(a) remain in full force and effect until payment in full of
the Secured Indebtedness and the termination of all Commitments;
(b) be binding upon Grantor, its successors, transferees and
assigns; and
(c) inure, together with the rights and remedies of Agent
hereunder, to the benefit of Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer (in whole or in part) any note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender Party under any Loan Document (including this Security Agreement),
or otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of the Credit Agreement. Upon the payment in
full of the Secured Indebtedness and the termination of all Commitments, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, Agent will, at
Grantor's sole expense, execute and deliver to Grantor such documents as Grantor
shall reasonably request to evidence such termination.
SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Security
Agreement had not been executed;
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(b) the exercise by Agent of any of its rights hereunder shall
not release Grantor from any of its duties or obligations under any
such contracts or agreements included in the Collateral; and
(c) neither Agent nor any other Lender Party shall have any
obligation or liability under any such contracts or agreements included
in the Collateral by reason of this Security Agreement, nor shall Agent
or any other Lender Party be obligated to perform any of the
obligations or duties of Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents
and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment and
Inventory of Grantor is located at the places specified in ITEM A of SCHEDULE I
hereto, except for Inventory in transit in the ordinary course of Grantor's
business; provided, however, that Inventory and Equipment may be moved to other
locations in accordance with clause (a) of Section 4.1.1. All of the Inventory
which is imported from a location outside the United States arrives at one of
the ports or locations specified in ITEM A of SCHEDULE I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified in
ITEM A of SCHEDULE I hereto. Each location of Equipment or Inventory which is
subject to a lease, sublease, mortgage or similar instrument is described as
such in ITEM A of SCHEDULE I hereto and Grantor shall, upon the request of Agent
provide Agent with the name and address of each lessor, sublessor, lessee,
sublessee and/or mortgagee (other than Grantor) with respect to any or all such
locations. All of the lock boxes of Grantor are located at the places specified
in ITEM B of SCHEDULE I hereto. The place(s) of business and chief executive
office of Grantor and the office(s) where Grantor keeps its records concerning
the Receivables, are located at the addresses specified in ITEM C of SCHEDULE I
hereto. Except as set forth on ITEM D of SCHEDULE I hereto, Grantor has no trade
names. Grantor has not been known by any legal name different from the one set
forth on the signature page hereto. Except as previously disclosed to Agent in
writing, Grantor has not been the subject of any merger or other corporate
reorganization. Grantor is not a party to any Federal, state or local government
contract.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. Grantor has good and
marketable title to the Collateral and Grantor is the legal and beneficial owner
of the Collateral and owns the Collateral free and clear of any Lien, security
interest, charge or encumbrance except for the security interest created by this
Security Agreement and except as permitted by the Credit Agreement. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of Agent relating to this Security Agreement, and
except as permitted by the Credit Agreement.
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SECTION 3.1.3. POSSESSION AND CONTROL.
(a) The name and address of each bailee, processor,
warehouseman, consignee or other Person in possession of any of the
Inventory or Equipment (each such Person being a "Third Party") on the
date hereof, other than carriers and shippers of Inventory in transit
in the ordinary course of Grantor's business, is set forth in ITEM A of
SCHEDULE I hereto, together with the address of the location where such
Inventory or Equipment is or may be held. Except as otherwise indicated
in ITEM A of SCHEDULE I hereto, no Person (other than a Person
identified in ITEM A of SCHEDULE I thereto as being a consignee) in
possession of any of the Inventory or Equipment conducts a business at
the location of such Inventory or Equipment other than a business in
the nature of warehousing or transporting goods for others. In the
event that any Inventory is in the possession of a Third Party, such
Inventory is not evidenced by a negotiable instrument or document.
(b) Except as indicated in clause (a) of this Section, Grantor
has exclusive possession and control of the Equipment and Inventory.
SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
Grantor has, contemporaneously herewith, delivered to Agent possession of all
originals of all negotiable documents, instruments and chattel paper currently
owned or held by Grantor (duly endorsed in blank, if requested by Agent).
SECTION 3.1.6. VALIDITY, ETC. This Security Agreement creates a valid
security interest in the Collateral, securing the payment of the Secured
Indebtedness, which security interest is a first priority security interest in
the Collateral except to the extent previously disclosed to Agent in writing,
and all filings and other actions necessary or desirable to perfect and protect
such security interest will be duly made or taken.
SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. No authorization, approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body is required either:
(a) for the grant by Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by Grantor; or
(b) for the filing required for perfection of or the exercise
by Agent of its rights and remedies hereunder.
SECTION 3.1.8. COMPLIANCE WITH LAWS. Grantor is in compliance with the
requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every Governmental Authority, the non-compliance with which might materially
adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of Grantor or the value of the Collateral
or the worth of the Collateral as collateral security.
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SECTION 3.1.9. TAXES. All taxes, assessments and other charges levied
against the Collateral have been paid in full, other than taxes, assessments and
charges not yet due and payable.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. Grantor covenants and agrees that, so
long as any portion of the Secured Indebtedness shall remain unpaid, and until
the termination of the Commitments, Grantor will, unless the Required Banks
under the Credit Agreement shall otherwise consent in writing, perform the
obligations set forth in this Section.
SECTION 4.1.1. AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees
that it shall:
(a) keep all the Equipment and Inventory (other than Inventory
in transit and Inventory sold in the ordinary course of business) at
the places therefor specified in Section 3.1.1 or, upon 30 days' prior
written notice to Agent, at such other places in a jurisdiction where
all representations and warranties set forth in Article III (including
Section 3.1.6) shall be true and correct, and all action required
pursuant to the first sentence of Section 4.1.7 shall have been taken
with respect to the Equipment and Inventory;
(b) with respect to any Equipment or Inventory in the
possession or control of any Third Party or any of Grantor's agents,
notify such Third Party or agent of Agent's security interest in such
Equipment or Inventory and, upon Agent's request following the
occurrence and during the continuance of an Event of Default, direct
such Third Party or agent to hold all such Equipment or Inventory for
Agent's account and subject to Agent's instructions;
(c) cause the Equipment to be maintained and preserved in the
same condition, repair and working order as when new, ordinary wear and
tear excepted, and in accordance with any manufacturer's manual; and
forthwith, or in the case of any material loss or damage to any of the
Equipment, as quickly as practicable after the occurrence thereof, make
or cause to be made all repairs, replacements, and other improvements
in connection therewith which are necessary or desirable to such end;
and promptly furnish to Agent a statement respecting any loss or damage
to any of the Equipment within ten (10) business days after Grantor
obtains knowledge of any such loss or damage; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with Generally Accepted
Accounting Principles have been set aside.
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SECTION 4.1.2. AS TO RECEIVABLES. Grantor shall keep its place(s) of
business and chief executive office and the office(s) where it keeps its records
concerning the Receivables, and all originals of all chattel paper which
evidence Receivables, located at the addresses set forth in ITEM C of SCHEDULE I
hereto, or, upon 30 days' prior written notice to Agent at such other locations
in a jurisdiction where all actions required by the first sentence of Section
4.1.7 shall have been taken with respect to the Receivables; not change its name
except upon 30 days' prior written notice to Agent; hold and preserve such
records and chattel paper; and permit representatives of Agent, at any time
during normal business hours to inspect and make abstracts from such records and
chattel paper.
SECTION 4.1.3. AS TO ALL COLLATERAL.
(a) Grantor shall not permit the ownership of any of the
Collateral, or any legal or equitable interest therein, to become
vested in any other person or entity unless otherwise permitted under
or pursuant to the terms of the Credit Agreement; provided, however,
until such time as Agent shall notify Grantor of the revocation of such
power and authority Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory and Equipment normally held
by Grantor or any Third Party for such purpose, and use and consume, in
the ordinary course of its business, any raw materials, work in process
or materials normally held by Grantor or any Third Party for such
purpose, and use and consume, in the ordinary course of its business,
any raw materials, work in process or materials normally held by
Grantor for such purpose, (ii) will, at its own expense, endeavor to
collect, as and when due, all amounts due with respect to any of the
Collateral, including the taking of such action with respect to such
collection as Agent may reasonably request or, in the absence of such
request, as Grantor may deem advisable, and (iii) may grant, in the
ordinary course of business, to any party obligated on any of the
Collateral, any rebate, refund or allowance to which such party may be
lawfully entitled, and may accept, in connection therewith, the return
of goods, the sale or lease of which shall have given rise to such
Collateral. Agent however, may, at any time after the occurrence of an
Event of Default, whether before or after any revocation of such power
and authority or the maturity of any of the Secured Indebtedness,
notify any parties obligated on any of the Collateral to make payment
to Agent of any amounts due or to become due thereunder and enforce
collection of any of the Collateral by suit or otherwise and surrender,
release, or exchange all or any part thereof, or compromise or extend
or renew for any period (whether or not longer than the original
period) any indebtedness thereunder or evidenced thereby. Upon the
written request of Agent after the occurrence of an Event of Default,
Grantor will, at its own expense, within five (5) days after receipt of
such request, notify any parties obligated on any of the Collateral to
make payment to Agent of any amounts due or to become due thereunder.
(b) Agent is authorized to endorse, in the name of Grantor,
any item, howsoever received by Agent representing any payment on or
other proceeds of any of the Collateral.
SECTION 4.1.5. INTENTIONALLY OMITTED.
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SECTION 4.1.5. INSURANCE. Grantor will maintain, and will cause each of
its Subsidiaries to maintain, insurance with respect to the Equipment and
Inventory with companies reasonably acceptable to Agent. Such insurance shall be
in an amount not less than the fair market value of the Equipment and Inventory
and shall be against such casualties, with such deductible amounts as Agent
shall reasonably approve. All insurance policies shall be written for the
benefit of Grantor and Agent, as their interest may appear, payable to Agent as
loss payee, or in other forms satisfactory to Agent, and such policies or
certificates evidencing the same shall be furnished to Agent. All policies of
insurance shall provide for written notice to Agent at least thirty (30) days
prior to cancellation.
SECTION 4.1.6. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.1.7. FURTHER ASSURANCES, ETC. Grantor agrees that, from time
to time at its own expense, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or desirable, or that Agent may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will
(a) upon the written request of Agent, xxxx conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest
granted hereby;
(b) upon the written request of Agent, any Receivable shall be
evidenced by a promissory note or other instrument, negotiable document
or chattel paper, and Grantor shall deliver and pledge to Agent
hereunder such promissory note, instrument, negotiable document or
chattel paper, duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance
satisfactory to Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim form
under or pursuant to the federal assignment of claims statute, 31
U.S.C. Section 3726, any successor or amended version thereof or any
regulation promulgated under or
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pursuant to any version thereof), as may be reasonably necessary or
desirable, or as Agent may reasonably request, in order to perfect and
preserve the security interests and other rights granted or purported
to be granted to Agent hereby;
(d) furnish to Agent, from time to time upon Agent's written
request, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral
as Agent may reasonably request, all in reasonable detail; and
(e) furnish to Agent on a reasonable good faith efforts basis
such landlord estoppel and waiver agreements for properties leased by
Grantor (or properties where Grantor maintains inventory or equipment)
as shall be requested by Agent (all in form and substance acceptable to
Agent).
With respect to the foregoing and the grant of the security interests hereunder,
Grantor hereby authorizes Agent to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of Grantor where permitted by law. A carbon,
photographic or other reproduction of this Security Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
ARTICLE V
AGENT
SECTION 5.1. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact, with full authority in
the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Agent's discretion, to take any action and to execute any
instruments which Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
(a) to ask, demand, collect, xxx for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above;
(c) to file any claims or take any action or institute any
proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.7).
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Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Agent may perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection therewith
shall be payable by Grantor pursuant to Section 6.3.
SECTION 5.3. AGENT HAS NO DUTY. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
their interests (on behalf of the Banks) in the Collateral and shall not impose
any duty on it to exercise any such powers. Except for reasonable care of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Agent shall not have any duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. Agent is required to exercise reasonable
care in the custody and preservation of any of the Collateral in its possession;
provided, however, Agent shall be deemed to have exercised reasonable care in
the custody and preservation of any of the Collateral, if it takes such action
for that purpose as Grantor reasonably requests in writing at times other than
upon the occurrence and during the continuance of any Event of Default, but
failure of Agent to comply with any such request at any time shall not in itself
be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may:
(i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Agent,
forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to all
parties;
(ii) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at
public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice
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of sale shall be required by law, at least ten (10) days'
prior notice to Grantor of the time and place of any public
sale or the time after which any private sale is to be made
shall constitute reasonable notification. Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned; and
(iii) in its own name or the name of Grantor, at any
time, to notify any account debtor or obligor or any party
obligated on any of the Collateral (including, but not limited
to the Receivables, Related Contracts, and General
Intangibles) to make all payments due or to become due thereon
directly to Agent or such other person or officer as Agent may
require, whereupon the power and authority of Grantor to
collect the same in the ordinary course of its business shall
be deemed to be immediately revoked and terminated. With or
without such general notification, Agent may take or bring in
Grantor's name or that of the Agent all steps, actions, suits
or proceedings deemed by Agent reasonably necessary or
desirable to effect possession or collection of the
Collateral, including sums due or paid thereon, may complete
any contract or agreement of Grantor in any way related to any
of the Collateral, may make allowances or adjustments related
to the Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of
Grantor, may remove from Grantor's premises all documents,
instruments, records, files or other items relating to the
Collateral. Regardless of any provision hereof, however, Agent
shall never be liable for its failure to collect or for its
failure to exercise diligence in the collection, possession,
or any transaction concerning, all or part of the Collateral
or sums due or paid thereon, nor shall it be under any
obligation whatsoever to anyone by virtue of this Security
Agreement, except to account for the funds that it shall
actually receive hereunder.
Each account debtor and obligor making payment to
Agent hereunder shall be fully protected in relying on the
written statement of Agent that it then holds a security
interest which entitles it to receive such payments, and the
receipt of Agent for such payment shall be full acquittance
therefor to the one making such payment.
Issuance by Agent of a receipt to any person, firm,
corporation or other entity obligated to pay any amounts to
Grantor shall be a full and complete release, discharge and
acquittance to such person, firm, corporation or other entity
to the extent of any amount so paid to Agent. Agent is hereby
authorized and empowered on behalf of the Grantor to endorse
the name of Grantor upon any check, draft, instrument,
receipt, instruction or other document or items, including,
but not limited to, all items evidencing payment upon any
indebtedness of any person, firm, corporation or other entity
to Grantor coming into Agent's possession, and to receive and
apply the proceeds therefrom in accordance with the terms
hereof. Agent is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to execute all
checks, drafts, receipts, instruments, instructions or other
documents,
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agreements or items on behalf of Grantor, after the occurrence
of an Event of Default, as shall be deemed by Agent to be
necessary or advisable, in the sole discretion of Agent, to
protect their security interests in the Collateral or the
repayment of the indebtedness secured hereby, and Agent shall
not incur any liability in connection with or arising from its
exercise of such power of attorney, except in the event of
Agent's willful misconduct or gross negligence.
(b) In addition to and without limiting the rights of Agent
under Section 6.2. below, all cash proceeds received by Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Agent, be held
by Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Agent pursuant to
Section 6.2) in whole or in part by Agent for the benefit of the Banks
against, all or any part of the Secured Indebtedness in such order as
provided in the Credit Agreement or as Agent shall elect. Any surplus
of such cash or cash proceeds held by Agent and remaining after payment
in full of all the Secured Indebtedness shall be paid over to Grantor
or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.2. COLLATERAL ACCOUNT.
(a) If an Event of Default shall have occurred and be
continuing, upon written notice by Agent to Grantor pursuant to this
clause, all proceeds of Collateral received by Grantor shall be
delivered in kind to Agent for deposit to a deposit account (the
"Collateral Account") of Grantor maintained with Agent, and Grantor
shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for
the benefit of Agent until delivery thereof is made to Agent. No funds
other than proceeds of Collateral will be deposited in the Collateral
Account.
(b) Agent shall have the right to apply any amount in the
Collateral Account to the payment of any of the Secured Indebtedness
that is due and payable or payable upon demand, or to the payment of
any of the Secured Indebtedness at any time that an Event of Default
shall have occurred and be continuing. Agent may at any time transfer
to Grantor's general demand deposit accounts any or all of the
collected funds in the Collateral Account; provided, however, that any
such transfer shall not be deemed to be a waiver or modification of any
of Agent's rights under this Section.
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SECTION 6.3. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent from and against any and
all claims, losses and liabilities arising out of or resulting from
this Security Agreement (including, without limitation, enforcement of
this Security Agreement), except claims, losses or liabilities
resulting from Agent's gross negligence or willful misconduct.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH INDEMNIFIED
PERSON.
(b) Grantor will upon demand pay to Agent the amount of any
and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which Agent
may incur in connection with:
(i) the administration of this Security Agreement;
(ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon,
any of the Collateral;
(iii) the exercise or enforcement of any of the
rights of Agent or the Banks hereunder; or
(iv) the failure by Grantor to perform or observe any
of the provisions hereof.
SECTION 6.4. RIGHTS CUMULATIVE. The rights, titles, interests, liens
and securities of Agent hereunder shall be cumulative of all of the securities,
rights, titles, interests or liens which Agent may now or at any time hereafter
hold securing the payment of the Secured Indebtedness, or any part thereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN DOCUMENT. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
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SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to Grantor, mailed, delivered or transmitted to it at the address or
facsimile number set forth below its signature hereto, if to Agent, mailed,
delivered or transmitted to it at the address or facsimile number of Agent
specified in the Credit Agreement, or as to either party at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; and all such notices and other
communications, if transmitted by facsimile, shall be deemed given when
transmitted (upon receipt of electronic confirmation of transmission).
SECTION 7.4. SECTION CAPTIONS. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such 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
Security Agreement.
SECTION 7.6. LIMITATION. Regardless of any provisions contained in this
Security Agreement, the Credit Agreement, the Notes, or any other evidences of
the Secured Indebtedness, or other instruments executed or delivered in
connection therewith, neither Agent nor any Lender Party shall ever be entitled
to receive, collect or apply, as interest on the Secured Indebtedness, any
amount in excess of the highest lawful rate and, in the event that Agent or any
Lender Party ever receives, collects or applies, as interest, any such excess,
such amount which would be excessive interest shall be applied to the reduction
of the unpaid principal balance of the Secured Indebtedness, and if the
principal balance of the Secured Indebtedness is paid in full, any remaining
excess shall be forthwith paid to Grantor. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the highest
lawful rate, Grantor, Agent, and the Banks shall, to the maximum extent
permitted under applicable law, (a) characterize any non-principal payment as an
expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) "spread" the total amount of
interest throughout the entire term of the Credit Agreement and the Notes so
that the interest rate is uniform throughout the entire term of the Credit
Agreement and the Notes.
SECTION 7.7 OBLIGATIONS ABSOLUTE. All rights and remedies of the Agent
hereunder, and all obligations of the Grantor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Documents or any other agreement or
instrument relating to any of the foregoing;
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(b) any change in the time, manner, or place of payment of,
or in any other term of, all or any of the Secured Indebtedness, any or
all of the Obligation, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement or any of the Loan
Documents;
(c) any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guaranty, for all or any of the Secured
Indebtedness; or
(d) any other circumstance (other than payment in full of the
Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Grantor.
SECTION 7.8. SUCCESSORS AND ASSIGNS. This Security Agreement is binding
upon and shall inure to the benefit of Grantor, Agent, and the Banks, their
respective heirs, executors, representatives, administrators, successors and
assigns; provided, however, that Grantor may not, without the prior written
consent of Agent, assign any rights, powers, duties or obligations hereunder.
SECTION 7.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF TEXAS.
SECTION 7.10. FINAL AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
GRANTOR:
LANCER PARTNERSHIP, LTD., a Texas
limited partnership
By: Lancer Capital Corporation, a Delaware
corporation, general partner
By: /s/ XXXXX XXXXX
---------------
Name: Xxxxx Xxxxx
Title: Secretary
Address:
0000 Xxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
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SCHEDULE I
TO
SECURITY AGREEMENT
ITEM A. LOCATION OF EQUIPMENT AND INVENTORY
(1) 0000 Xxxxxx Xxxx., Xxx Xxxxxxx, Xxxxx 00000
(2) 10815 Sentinel, Xxx Xxxxxxx, Xxxxx 00000
ITEM B. LOCATION OF LOCK BOXES
The Frost National Bank
ITEM C. LOCATION OF RECORDS CONCERNING RECEIVABLES
(1) 000 Xxxx Xxxxx, Xxx Xxxxxxx, Xxxxx 00000
(2) 0000 Xxxxxx Xxxx., Xxx Xxxxxxx, Xxxxx 00000
ITEM D. TRADE NAMES
[To be completed]
