Exhibit 99.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is made as of January 12, 2001,
by and between Anchor Pacific Underwriters, Inc., a Delaware corporation (the
"Debtor"), and Legion Insurance Company, a Pennsylvania corporation (the
"Secured Party"), with reference to the following:
FOR VALUE RECEIVED, including without limitation, financial accommodations
from the Secured Party, the Debtor hereby agrees as follows:
1. Security Interest.
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(a) Creation of Security Interest. Debtor hereby grants to Secured
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Party a continuing security interest in all of Debtor's right, title and
interest in and to the Collateral, as defined in Subsection 1(b) below, in order
to secure the payment and performance of the obligations of Debtor to Secured
Party described in Subsection 1(c) below.
(b) Collateral. As used herein, the term "Collateral" shall mean all
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of the assets, properties and business of Debtor acquired from the estate of
Novaeon, Inc., on or about January 12, 2001 (the "Novaeon Business") pursuant to
that Asset Purchase Agreement dated December 28, 2000 by and between Debtor and
Novaeon, Inc. (the "Purchase Agreement"), either tangible, intangible, real,
personal or mixed, whether now owned or hereafter acquired and wherever located,
together with all proceeds or products thereof including, without limitation,
all payments under insurance (whether or not the Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty (save any obligation which is
the responsibility of Secured Party), payable by reason of loss or damage or
otherwise with respect thereto and all proceeds from the operation of the
Novaeon Business from the date hereof to the date of any foreclosure thereof.
(c) Obligations Secured. The security interest granted to Secured
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Party by Debtor pursuant to this Section 1 shall secure payment and performance
of Debtor's obligations under (i) that certain secured Promissory Note of even
date herewith (the "Note") and (ii) any amendment, modification, renewal or
extension of the Note (collectively the "Secured Obligations").
2. Representations and Warranties of Debtor. Debtor hereby represents
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and warrants to Secured Party that:
(a) Debtor is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. The name of Debtor set
forth on the first page hereof is the true and correct legal name of Debtor.
(b) Debtor has all the necessary corporate power and authority to
enter into this Agreement and to perform the obligations to be performed by it
hereunder and to consummate the transactions contemplated hereby. This Agreement
has been duly authorized and approved by all necessary action on the part of the
Board of Directors. This Agreement has been duly executed and delivered by
Debtor and constitutes the valid and binding obligation of Debtor, enforceable
against Debtor in accordance with its terms, subject as to enforceability to any
applicable bankruptcy, insolvency, moratorium or other laws affecting creditors'
rights generally or such principles of equity as a court of competent
jurisdiction might apply.
(c) Assuming the filing of the UCC-1 Financing Statement in the form
attached hereto as Exhibit A in the appropriate state or county governmental
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office, the payment of all requisite fees in connection with such filing and the
satisfaction of all other filing requirements imposed by statute or otherwise,
all filings, registrations and recordings necessary or appropriate to create,
preserve, protect and perfect the security interest granted by Debtor to Secured
Party hereby in respect of the Collateral will have been accomplished and the
security interest granted to Secured Party pursuant to this Agreement in and to
the Collateral will constitute a valid and enforceable perfected security
interest therein, and Secured Party is entitled to all the rights, priorities
and benefits afforded by the California Uniform Commercial Code or other
relevant law as enacted in any relevant jurisdictions to perfected security
interests.
(d) So long as any of the Secured Obligations remain unpaid, Debtor
will not execute or authorize to be filed at any public office any other
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements filed or to be filed in respect of and covering the
security interest granted hereby by Debtor and purchase money security
interests. Debtor further covenants that it will not grant any additional
security interests which rank in priority to the security interest in the
Collateral granted in this Agreement in the assets, properties or the business
of Debtor without the prior written consent of Secured Party except for purchase
money security interests and provided further that Debtor has granted a prior
security interest in all of its assets to Imperial Bank.
(e) No representations or warranties of Debtor contained in this
Agreement or in any document, statement or certificate furnished or to be
furnished pursuant to this Agreement, contain an untrue statement of a material
fact, or omit to state a material fact necessary to make the statements of fact
herein not misleading.
3. Covenants of Debtor. Until payment in full of all Secured Obligations,
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Debtor agrees that, unless Secured Party shall have otherwise consented in
writing:
(a) Debtor shall execute and take such action as may reasonably be
requested from time to time by Secured Party, including the execution and
delivery of financing statements and certificates of title, and the filing of
financing statements, as may be necessary to perfect and maintain the security
interest granted to Secured Party hereby. In the event Debtor refuses or fails
to timely execute and deliver any financing statement reasonably requested by
Secured Party, Debtor authorizes Secured Party to file any such financing
statements without the signature of Debtor.
(b) Debtor shall not misuse, abuse, waste or allow to deteriorate the
Collateral, except for ordinary wear and tear. Secured Party may examine and
inspect the Collateral, wherever located, during normal business hours and upon
at least 48 hours' prior notice to Debtor. Debtor will insure the Collateral
against all risks to which the Collateral is exposed in the ordinary course, and
shall cause Secured Party to be named as loss payee thereunder to the extent of
its interest therein.
(c) Debtor shall pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or its property or assets, prior
to the date on which penalties attach thereto, and all lawful claims which, if
unpaid, would become a lien or charge upon the Collateral, except to the extent
that the imposition of any such tax, assessment, charge or levy or the validity
of any such claim is being contested in good faith by the appropriate
proceedings.
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(d) Debtor shall notify Secured Party within ten (10) days of any
change in (i) Debtor's corporate name, (ii) Debtor's business or legal
structure, or (iii) Debtor's place of business or chief executive office if the
Debtor has more than one place of business. The Collateral will at all times be
kept by Debtor at Debtor's places of business within and outside of the State of
California at the addresses listed on Exhibit B hereto, and shall not, without
prior written notice thereof to Secured Party, be moved therefrom except, prior
to an Event of Default, for the storage of Collateral at locations within the
continental United States other than that set forth above if (i) Debtor gives
Secured Party written notice of a new storage location at least thirty (30) days
prior to storing Collateral at such location, (ii) Secured Party's security
interest in such Collateral is and continues to be a duly perfected lien
thereon, (iii) neither Secured Party's nor Debtor's right of entry upon the
premises where such Collateral is stored, or its right to remove the Collateral
therefrom, is in any way restricted, (iv) the owner of such premises agrees with
Secured Party not to assert any landlord's, bailee's or other lien in respect of
the Collateral for unpaid rent or storage charges and (v) all negotiable
documents and receipts in respect of any Collateral maintained at such premises
are properly delivered to Secured Party. No Collateral is now, nor shall any
Collateral at any time or times hereafter be, stored with a bailee, warehouseman
or similar party without Secured Party's prior written consent and, if Secured
Party gives such consent, Debtor will concurrently therewith cause any such
bailee, warehouseman or similar party to issue and deliver to Secured Party, in
form and substance acceptable to Secured Party, warehouse receipts therefor in
Secured Party's name.
4. Events of Default. The occurrence of any one or more the following
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events shall constitute an "Event of Default" hereunder:
(a) Event of Default Pursuant to Note. There shall occur an Event of
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Default pursuant to the Note.
(b) Misrepresentation. Any warranty or representation of Debtor to
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Secured Party in this Security Agreement is determined by a court of competent
jurisdiction to have been false or misleading in any material respect when made.
(c) Breach of Covenants. Debtor shall fail or neglect to perform,
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keep or observe any covenant or obligation of Debtor contained in this Security
Agreement and the breach of any such covenant or obligation is not cured within
thirty (30) days after Debtor's receipt of written notice of such breach from
Secured Party.
(d) Insolvency, Etc. The Debtor shall commence a voluntary case
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concerning itself under Title 11 of the United States Code entitled "Bankruptcy"
as now or hereafter in effect; or an involuntarily case shall be commenced
against the Debtor and the petition shall not be controverted within thirty (30)
days, or shall not be dismissed within sixty (60) days after commencement of the
case; or a custodian shall be appointed for, or shall take charge of, all or
substantially all of the property of the Debtor, or the Debtor shall commence
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Debtor, or there
shall be commenced against the Debtor any such proceeding, or the Debtor shall
be adjudicated insolvent or bankrupt.
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5. Secured Party's Rights and Remedies.
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(a) Upon the occurrence of an Event of Default as hereinabove set
forth, Secured Party may exercise all rights or remedies that Secured Party may
have as a secured party under the Uniform Commercial Code.
(b) Upon the occurrence of any Event of Default, as hereinabove set
forth, Secured Party may sell, lease or otherwise dispose of all or any part of
the Collateral upon any terms which are commercially reasonable or may take all
of the assets constituting the Novaeon Business, in which case such taking shall
be deemed as payment in full of the Note and shall subject the Secured Party to
the obligations of Debtor due and owing to Novaeon, Inc., under the Purchase
Agreement. Debtor agrees that fifteen (15) days prior written notice to Debtor
of any public or private sale or other disposition of the Collateral shall be
reasonable notice thereof, and such sale shall be at such location as Secured
Party may designate in such notice.
(c) All proceeds from the sale or other disposition of the
Collateral, and all other amounts received by Secured Party pursuant to the
terms of this Agreement, unless otherwise expressly required by law or
regulation, or if Secured Party or its assignee takes the assets constituting
the Novaeon Business in which event such taking shall constitute payment in full
of all obligations under the Note and this Agreement, shall be applied as
follows:
(i) First, to the payment of all expenses reasonably
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incurred by Secured Party in connection with any sale or disposition of the
Collateral, including, but not limited to, the expenses of taking, advertising,
processing, preparing and storing the Collateral to be sold, and all court costs
and all reasonable legal fees of Secured Party in connection therewith;
(ii) Second, to the payment of all obligations owed to
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Secured Party pursuant to the Secured Obligations and which have come due and
are unpaid; and
(iii) Third, the balance, if any, to Debtor.
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Debtor shall remain liable to the extent of any deficiency between the amount of
the proceeds of the Collateral and the aggregate amount of the sums referenced
in clauses (i) and (ii) of this Section 5(c).
(d) No delay or omission by Secured Party in exercising any right or
remedy hereunder or with respect to any obligation of Debtor to Secured Party
secured hereunder shall operate as a waiver thereof or of any other right or
remedy available to Secured Party, and no single or partial exercise thereof
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy. Secured Party, in its sole discretion, on at least seven
(7) days' prior written notice to Debtor, may (but shall have no obligation to)
remedy any Event of Default by Debtor hereunder or with respect to any
obligation of Debtor to the Secured Party or any other person, firm, corporation
or other entity in any reasonable manner without waiving the Event of Default
remedied and without waiving any other prior or subsequent Event of Default by
Debtor, and shall be reimbursed for its necessary and reasonable out-of-pocket
expenses in so remedying any of such Event of Default. All rights and remedies
of Secured Party hereunder are cumulative.
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6. Miscellaneous.
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(a) Further Acts. Debtor and Secured Party shall execute and deliver
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all instruments and documents and shall perform all other acts which the other
may reasonably request in order to effect the rights and obligations of the
parties hereto and the other transactions contemplated in this Agreement.
(b) Notices. Any notices and other communications required or
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permitted in this Agreement shall be effective if in writing and delivered
personally or sent by telecopier, Federal Express, or registered or certified
air mail, postage prepaid, addressed as follows:
If to Debtor, addressed to:
Anchor Pacific Underwriters, Inc.
000 Xxxx Xxx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Chief Executive Officer
If to Secured Party, addressed to:
Legion Insurance Company
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X'Xxxxx, Executive Vice President
Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date delivered, if delivered personally,
(b) two (2) business day after being sent by Federal Express, if sent by Federal
Express, (c) one (1) business day after being delivered, if delivered by
telecopier, and (d) three (3) business days after being sent, if sent by
registered or certified air mail. Each of the parties hereto shall be entitled
to specify a different address by giving notice as aforesaid to each of the
other parties hereto.
(c) Attorneys' Fees. In the event of any controversy, claim or
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dispute between the parties hereto arising out of or relating to this Agreement
or any of the documents provided for herein, or the breach thereof, the
prevailing party shall be entitled to recover from the losing party reasonable
attorneys' fees, expenses and costs.
(d) Assignment; Binding Effect. Neither party may assign, without
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the prior written consent of the other, its rights, duties or obligations under
this Agreement to any person or entity, in whole or in part; provided, however,
that this Agreement may be assigned by Secured Party without the consent of
Debtor (i) to Xxxx North America Holding, Inc. ("Xxxx"), or (ii) to a subsidiary
of Xxxx, other than Debtor, all of whose stock is owned by Xxxx. This Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the respective parties hereto.
(e) Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instruments.
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(f) Integration. This Agreement, together with the Note, sets forth
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all the promises, covenants, agreements, conditions and understandings between
the parties hereto, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
with respect to the subject matter hereof except as herein contained.
(g) Amendment; Waiver. This Agreement may be amended, modified,
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extended or terminated, either retroactively or prospectively, and the
provisions hereof may be waived, only by an instrument in writing signed by the
parties hereto. Each party hereto may waive any right hereunder by an
instrument in writing signed by such party.
(h) Governing Law; Interpretation. This Agreement shall be governed
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by, construed in accordance with and enforced under the laws of the State of
California applicable to contracts made and to be performed in California,
without regard to choice of law principles.
(i) Jurisdiction; Venue. Each party hereto agrees that all actions
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or disputes arising directly or indirectly as a result or in consequence of this
Agreement, shall be instituted and litigated only in courts having situs in
Orange County and the United States District Court for the Central District of
California, and Debtor and Secured Party each hereby consent to the exclusive
jurisdiction and venue of any state or federal court located and having its
situs in Orange County.
(j) Waiver of Right to Trial by Jury. Each party hereto knowingly
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and willingly waives its right to a trial by jury in any action or dispute
arising directly or indirectly as a result or in consequence of this Agreement,
and agrees that any such action or dispute shall be heard before a judge only.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"Debtor"
Anchor Pacific Underwriters, Inc.
By: /s/ XXXXXXX X. XXXX
________________________________________
Xxxxxxx X. Xxxx, Chief Executive Officer
"Secured Party"
Legion Insurance Company
By /s/ XXXXXXX X'XXXXX
_______________________________________
Title: Executive Vice President
__________________________________
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Exhibit A
Form of UCC-1
(See Attached)
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Exhibit B
List of Addresses
000 X. Xxx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
0000 Xxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
00000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, XX 00000
0000 Xxxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Specialty Risk Services
00000 Xxxxxx Xxxxxxx
Xxxxxxx, XX
Specialty Risk Services
Xxx Xxxxx Xxxxx
Xxxx, XX 00000
Specialty Risk Services
0000 Xxxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Specialty Risk Services
000 Xxxxx Xxxxxx Xxxx
Xxxx xx Xxxxxxx, XX 00000
Specialty Risk Services
000 Xxxxxxxx Xxxxxxxxx Xx., Xxxxx 000
Xxxx Xxxx, XX 00000
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