Exhibit 10.3
SECURITY AGREEMENT
Security Agreement (the "Agreement"), dated as of September 8, 1997,
between Local Financial Corporation (the "Company"), a Delaware corporation ,
and The Bank of New York, a New York corporation, as Trustee under the Indenture
referred to herein (the "Trustee"). Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Indenture (as defined below).
WITNESSETH:
WHEREAS, the Company and the Trustee have entered into an Indenture,
dated as of September 8, 1997 (the "Indenture"), which provides for the issuance
by the Company of Senior Notes due 2004 (the "Notes"); and
WHEREAS, pursuant to Section 10.18 of the Indenture, the Company has
agreed to establish and maintain a segregated account (the "Interest Reserve
Account") to provide a source of funds to pay interest due for a specified
period of time on the Notes; and
WHEREAS, pursuant to Section 10.18 of the Indenture, the Company has
covenanted to create, maintain and perfect in favor of the holders of the Notes
(the "Secured Parties") a first priority security interest in the Interest
Reserve Account; and
WHEREAS, capitalized terms used herein that are defined in the
Indenture are used herein as so defined, unless otherwise defined herein;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Grant of Security Interest.
(a) In order to secure the Company's obligations to make timely
payments of interest and principal in accordance with the terms of the Notes,
the Company hereby grants to the Trustee, for the ratable benefit of the Secured
Parties, continuing security interests (the "Security Interests") in and to all
of the Company's right, title and interest in and to the following property,
whether now owned or existing or hereafter acquired or arising and regardless of
where located (collectively, the "Collateral"):
(i) custodian account number 217037 at the Trustee, pursuant
to the terms of Section 10.18 of the Indenture, including, without
limitation, any funds on deposit therein and the interest earned
thereon (subject to the provisions of Section 3 hereof) (the
"Account");
(ii) any Permitted Investments (as defined in Section 1(b))
held by the Trustee and made with funds on deposit in the Account and
the interest earned thereon (subject to the provisions of Section 3
hereof);
(iii) all replacements of, accessions to, and substitutions
for, any of the foregoing Collateral;
(iv) all proceeds and products of any of the foregoing
Collateral; and
(v) all ledger sheets, files, records, documents and
instruments (including, without limitation, computer programs, tapes,
printouts, discs and other computer materials and related electronic
data processing software) maintained by the Company and/or the Trustee
on behalf of the Company and evidencing an interest in or otherwise
pertaining to any of the Collateral.
(b) For purposes of this Agreement, "Permitted Investments" shall mean
one or more of the following types of investments which are made by the Trustee
with funds on deposit in the Account in accordance with the terms of this
Agreement:
(i) interest-bearing deposit accounts of any "insured
depository institution," as defined in Section 3(c) of the Federal
Deposit Insurance Act, as amended;
(ii) direct obligations of, or obligations the principal and
interest on which are unconditionally guaranteed by, the United States
of America or any agency or instrumentality thereof;
(iii) obligations of any corporate issuer which are rated in
one of the two highest rating categories of any nationally recognized
statistical rating organization;
(iv) repurchase agreements with banks, brokers or dealers
involving any of the foregoing types of securities; or
(v) money market mutual funds;
provided that, notwithstanding anything to the contrary contained herein,
Permitted Investments shall not include any of the foregoing investments to the
extent that any such investment, in the good faith business judgment of the
Board of Directors of the Company, evidenced by a Board Resolution delivered to
the Trustee, involves at the time of acquisition or thereafter a reasonable
likelihood of a loss of principal. Permitted Investments may be made by the
Trustee only pursuant to a Company Order or such other arrangements as may be
agreed to by the Company and the Trustee to ensure the validity of any such
direction by the Company and that any such direction is authorized by the terms
of this Agreement, and the Trustee shall not make any investments of funds in
the Account except pursuant to such Company Orders or such other arrangements.
Any Permitted
2
Investments shall be segregated and held by the Trustee for the benefit of the
Secured Parties in accordance with the terms of this Agreement.
(c) Each provision of this Agreement referencing or otherwise related
to the Account or the Permitted Investments (including, without limitation,
Sections 2(a) and 3 hereof) shall apply to and be binding upon the Company with
respect to any other deposit account or Permitted Investments which constitutes
all or part of the Collateral (including by way of replacement or substitution
therefor or successive replacements or substitutions thereof).
2. Perfection, Representations and Covenants.
(a) In order to perfect the Security Interests in the Collateral
created hereby, the Company agrees that no later than the time the Account is
established, it will notify the Trustee in writing of Secured Parties' Security
Interests in the Account and any Permitted Investments and obtain from the
Trustee written confirmation that the Trustee (i) has not actually received
notice of any other Lien or claim on the Collateral, (ii) does not itself have
any Lien or other claim on the Collateral except as permitted in the Indenture
and, (iii) holds the Collateral as trustee and agent for the benefit of the
Secured Parties in accordance with the terms of this Agreement.
(b) The Company hereby warrants and covenants that the chief executive
office and principal place of business of the Company is located at 0000 XX 00xx
Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000 and the Company's records concerning
the Collateral will at all times be kept at such address. The Company agrees
that it will not change such chief executive office or principal place of
business or remove records without at least 30 Business Days' prior written
notice to the Trustee.
(c) The Company hereby represents and warrants that the Company's
correct corporate name is Local Financial Corporation. The Company agrees that
it will not change its name, identity or structure in any manner or use any
fictitious name which might make any financing statement or continuation
statement or other instrument or document filed hereunder misleading in any
respect without the prior written consent of the Trustee.
(d) The Company agrees to keep and maintain, at its own expense,
complete and accurate records of the Collateral (including, without limitation,
records in accordance with the provisions of the Indenture) and xxxx such
records in such manner as the Trustee may reasonably request in order to reflect
the Security Interests.
3. Account Balances, Withdrawals.
(a) The balance of any funds or other assets from time to time in the
Account and the Permitted Investments (not including any amounts or assets in
excess of the aggregate amount of funds and Fair Market Value of Permitted
Investments then required to be
3
maintained pursuant to the Indenture) shall constitute part of the Collateral
hereunder and shall not constitute payment of the Notes until applied as
hereinafter provided.
(b) The Company covenants not to (i) withdraw funds from the Account or
(ii) sell, transfer or otherwise dispose of any Permitted Investment (other than
to reinvest the proceeds therefrom in additional Permitted Investments or to
place such funds on deposit in the Account) except in each case to permit the
Paying Agent to make payments pro rata on all of the outstanding Notes,
provided, however, that if on any Interest Payment Date the amount of funds in
the Account and the Fair Market Value of Permitted Investments shall exceed the
amount required to be maintained therein pursuant to the Indenture, the Company
shall be entitled to withdraw all or any portion of such excess upon provision
of an Officers' Certificate to the Trustee evidencing such excess.
4. No Other Liens.
(a) The Company represents that the Security Interests in the
Collateral granted to secure the Notes pursuant to this Agreement when created
will be at all times a perfected and valid first-priority security interest in
and to the Collateral, with priority over the rights of every other Person in
the Collateral, and that the Collateral is free, clear and unencumbered by any
Liens in favor of any Person other than the Liens granted pursuant to this
Agreement to the Trustee for the benefit of the Secured Parties, and the Company
covenants to maintain the Collateral free, clear and unencumbered by any Liens
in favor of any Person other than Liens granted pursuant to this Agreement to
the Trustee for the benefit of the Secured Parties.
(b) The Company will not create, permit or suffer to exist any Liens
(other than the Security Interests) on the Collateral. The Company will forever
defend the right, title and interest of the Trustee in and to the Company's
rights to the Collateral against every Person whatsoever and take all such other
reasonable action as is necessary to remove any Lien (other than the Security
Interests) on the Collateral.
(c) The Company will advise the Trustee promptly, in reasonable detail,
of any Lien (other than the Security Interests) or claim made or asserted
against any of the Collateral or the occurrence of any other event which might
have a material adverse effect on the Collateral or the Security Interests.
(d) The Trustee shall not be required to take any steps necessary to
preserve any rights of any Person other than the Secured Parties to any of the
Collateral.
5. Further Assurances.
The Company shall at any time or times hereafter, at its expense and in
a timely manner, properly prepare, execute, deliver, file or record any
statement, assignment, conveyance, instrument, document, agreement or other
paper and take any other action
4
(including any filings of financing and continuation statements under the
Uniform Commercial Code in effect in any applicable jurisdiction) that from time
to time may be necessary or desirable, or that the Trustee may reasonably
request, in form and substance satisfactory to the Trustee to create, preserve,
perfect, maintain, confirm or validate the Security Interests as perfected
first-priority security interests in the Collateral and in order to consummate
fully all of the transactions contemplated under this Agreement, or in order to
enable the Trustee and the Secured Parties to obtain the full benefits of this
Agreement and for the Trustee to exercise and enforce any of their rights,
powers and remedies hereunder with respect to any of the Collateral.
6. Remedies on Default.
(a) In the event of an Event of Default:
(1) the Trustee, on behalf of the Secured Parties, shall have
all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State of New York and any other applicable
jurisdiction, including without limitation, the right, to the maximum
extent permitted by law, to exercise all voting, consensual and other
rights of ownership pertaining to the Collateral as if the Trustee was
the absolute and sole owner thereof, including, without limitation, the
withdrawal of funds from the Account to satisfy the Notes in accordance
with Section 6(b) hereof;
(2) the Company, at the request of the Trustee, shall assemble
the Collateral at such place or places, reasonably convenient to the
Trustee;
(3) the Trustee, in its discretion may, in the name of the
Company or otherwise, demand, xxx for or collect or receive any money
or property at any time payable or receivable, on account of or in
exchange for any of the Collateral; and
(4) the Trustee may take any of the other actions described in
Section 7(b) hereof.
(b) Prior to exercising any rights over the Collateral, the Trustee
shall give three Business Days' prior written notice to the Company. Promptly
following receipt of such notice from the Trustee, and subject to any notice to
the Company which may be required by applicable law, the Trustee shall sell,
redeem or otherwise convert any Permitted Investments to cash and place such
cash on deposit in the Account. The Company hereby agrees to cooperate with the
Trustee and to take any action which may be necessary or desirable to effect any
such sale, redemption or other conversion. After the Permitted Investments have
been converted to cash, the Trustee shall have the right to withdraw funds from
the Account to permit the Paying Agent to make payments on the Notes in
accordance with their terms and to the extent of amounts then owed to the
Secured Parties.
5
(c) The Company agrees to take all such action as may be appropriate to
give effect to the rights of the Trustee and the Secured Parties set forth in
this Section 6 and in Section 7 hereof.
7. Additional Remedies.
(a) No right, power or remedy set forth herein is exclusive of any
other available rights, powers, or remedies, but each is cumulative and in
addition to every other right, power or remedy given under this Agreement or
under any other agreement between or on behalf of the Secured Parties and the
Company whether now or hereafter existing at law or in equity or by statute. The
Trustee may pursue the rights, powers and remedies set forth herein concurrently
or in any sequence, and no exercise of one right or remedy shall be deemed to be
an election to exclude the exercise of any other right or remedy. No notice to
or demand on the Company hereunder shall, of itself, entitle the Company to any
other or further notice or demand in the same or similar circumstances.
(b) If an Event of Default shall have occurred and be continuing, the
Trustee may take action in accordance with this Agreement. The Trustee may
retain or sell, assign, transfer and deliver the whole or, from time to time,
any part of the Collateral at public or private sale, for cash, upon credit or
for other property, for immediate or future delivery, and for such price or
prices and on such other terms as are satisfactory to the Trustee in its
discretion. Upon consummation of any such sale, the Trustee shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall purchase and
thereafter hold the property sold absolutely free from any claim or right on the
part of the Company, and the Company hereby waives (to the full extent permitted
by law) all rights or equity of redemption, or any rights of stay or appraisal
which the Company now has or may at any time in the future have or claim under
any rule of law or statute now existing or hereafter enacted. The Trustee shall
give the Company five Business Days' written notice (which the Company agrees
shall be deemed to be reasonable notification within the meaning of Section
9-504(3) of the Uniform Commercial Code of the State of New York) of the
Trustee's intention to make any such public or private sale. Any such sale shall
be held at such time or times and at such place or places as the Trustee may
fix. At any such sale, the Collateral, or portion thereof to be sold, may be
sold as an entirety or in separate portions, as the Trustee may, in its
discretion, determine. The Trustee shall not be obligated to make any sale of
the Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of the Collateral may have been given. The Trustee 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
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case sale of all or any part of the
Collateral is made on credit or for future delivery, Collateral so sold may be
retained by the Trustee until the sale price is paid by the purchaser or
purchasers thereof, but the Trustee shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the Collateral so
sold and, in case of any such failure, the Collateral may be sold again upon
6
like notice. As an alternative to exercising the power of sale herein conferred
upon it, the Trustee may proceed by suit or suits at law or in equity to
foreclose this Agreement and sell the Collateral or any portion thereof pursuant
to judgment or decree of a court or courts having competent jurisdiction.
(c) Regardless of whether or not there shall have occurred or be
continuing any Event of Default, the Trustee may institute and maintain or cause
in the name of the Company, the Trustee or of the Secured Parties, or any
combination thereof, to be instituted and maintained, such suits and proceedings
as it in its discretion may deem to be reasonably necessary or expedient to
prevent any impairment of the Collateral.
8. Trustee Appointed Attorney-in-Fact.
The Company hereby constitutes and appoints the Trustee as its
attorney-in-fact for the purpose of carrying out the provisions, but subject to
the terms and conditions, of this Agreement and taking any action and executing
any instrument that the Trustee may deem necessary or advisable to accomplish
the purposes hereof, which appointments are irrevocable and coupled with
interests. Without limiting the generality of the foregoing, but subject to the
terms and conditions of this Agreement, upon an Event of Default, subject to
Section 6 hereof, the Trustee shall have the right, with full power of
substitution, either in the Trustee's name or in the name of the Company, to ask
for, demand, xxx for, collect, receive and give acquittance for any and all
monies due or to become due under or by virtue of the Collateral, to endorse
checks, drafts, orders and other instruments for the payment of money payable to
the Company, representing any distribution payable in respect of the Collateral
or any part thereof or on account thereof and to give full discharge for the
same, to settle, compromise, prosecute or defend any action, claim or proceeding
with respect thereto, and to sell, assign, pledge, transfer and make any
agreement respecting, or otherwise deal with, the same; provided, however, that
no action taken or omitted to be taken by the Trustee with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
right of offset in favor of the Company or to any claim or right of action
against the Trustee, except to the extent that the Trustee's actions are taken
or omitted to be taken with negligence or bad faith or constitute willful
misconduct.
9. Purchase of the Collateral by the Trustee.
At any sale of the Collateral, whether pursuant to power of sale or
otherwise hereunder, the Trustee may, to the extent permitted by applicable law,
bid for and purchase, free from any right or equity of redemption, or any right
of stay or appraisal (all such rights or equities being hereby waived and
released by the Company to the extent permitted by law), the Collateral or any
part thereof or any interest therein, and upon compliance with the terms of such
sale may hold, retain, exploit, resell or otherwise dispose of such property
without further accountability to the Company for the proceeds of such sale. The
Company will execute and deliver, or cause to be executed and delivered, such
instruments,
7
endorsements, assignments, waivers, certificates and other documents and take
such further action as the Trustee shall request in connection with any such
sale.
10. Provisions with respect to the Trustee.
The provisions of Article Six of the Indenture shall be applicable to
the rights and obligations of the Trustee under this Agreement as fully as if
the provisions of this Agreement were set forth in the Indenture.
11. Waiver of Claims.
Except as otherwise provided in this Agreement, THE COMPANY HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OF JUDICIAL HEARING IN
CONNECTION WITH THE TRUSTEE'S TAKING POSSESSION OR DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICES AND
HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE
COMPANY WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR ANY STATE, and, to the full extent permitted by applicable law, the
Company hereby further waives:
(a) all damages occasioned by such taking of possession except
any damages which are the direct result of the Trustee's negligence, bad
faith or willful misconduct;
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement by the
Trustee of the Secured Parties' rights and powers hereunder; and
(c) all right or equity of redemption and all rights of
appraisement, valuation, stay, marshalling of assets, extension or
moratorium, existing at law or in equity, by statute or otherwise, now
or hereafter in force, in order to prevent or delay the enforcement of
this Agreement or the sale or other disposition of the Collateral or
any portion thereof, and the Company, for itself and all who may claim
under it, insofar as it now or hereafter lawfully may, hereby waives
all such rights or equities.
Any sale of, or the exercise of any options to purchase, or any other
realization upon, the Collateral shall operate to divest all right, title,
interest, claim and demand, at law or in equity, of the Company therein and
thereto, and shall be a perpetual bar both at law and in equity against the
Company and against any and all persons claiming or attempting to claim funds in
the Collateral so sold, optioned or realized upon, or any part thereof, through
and under the Company.
8
12. Assignment; Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
respective legal representatives, successors and assigns of the parties hereto;
however, the Company may not assign any of its rights or delegate any of its
obligations hereunder.
13. No Waiver; Modification in Writing.
No failure or delay on the part of the Trustee in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
No provision of this Agreement may be amended, modified, supplemented, waived or
terminated without the prior written consent of the Trustee.
14. Communications.
All notices, demands and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telecopier, or air courier guaranteeing overnight delivery:
(a) if to the Company, initially at 0000 XX 00xx Xxxxxx,
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000, and thereafter at such other
address, notice of which is given in accordance with the provisions of
this Section 14; and
(b) if to the Trustee, initially at 000 Xxxxxxx Xxxxxx, Xxxxx
21 West, New York, New York 10286, Attention: Corporate Trust
Administration, and thereafter at such other address notice of which is
given in accordance with the provisions of this Section 14.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when receipt is acknowledged, if telecopied; and on the next Business Day if
timely delivered to an air courier guaranteeing overnight delivery.
15. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Agreement.
9
16. Governing Law.
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that application of the law of
another jurisdiction would be required thereby.
17. Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
18. Headings.
The headings used or contained in this Agreement are for convenience of
reference only and shall not modify, restrict or otherwise affect the
construction of any of the terms and provisions hereof.
19. Entire Agreement.
This Agreement, together with the Indenture, constitute the entire
agreement between the parties relative to the subject matter thereof. Any
previous agreement, written or oral, among the parties, relative to the subject
matter hereof is superseded by this Agreement.
20. Company's Obligations Absolute.
The liability of the Company under this Agreement shall remain in full
force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by (i) any change in the time,
place or manner of payment of all or any of the payment obligations or in any
other term of the Notes, any waiver, indulgence, renewal, extension, amendment
or modification of or addition, consent or supplement to or deletion from or any
other action or inaction under or in respect of the Notes or any assignment or
transfer thereof; (ii) any lack of validity or enforceability, in whole or in
part, of the Notes; (iii) any furnishing of any additional security for the
Notes or any acceptance thereof or any release or non-perfection of any security
interests in property of a Person other than the Company; (iv) any limitation on
any party's liability or obligations under the Notes; (v) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to the Company, or any action taken with respect
to this Agreement by any trustee or receiver, or by any court, in any such
proceeding, whether or not the Company shall have notice or knowledge of any of
the foregoing; or (vi) any other circumstance that might otherwise constitute a
defense available
10
to, or a discharge of, the Company. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
the Notes is rescinded or must otherwise be returned upon the insolvency,
bankruptcy or reorganization of the Company, all as though such payment had not
been made.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
LOCAL FINANCIAL CORPORATION
/s/ Xxxxxx X. Xxxxxxxx
By: --------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
THE BANK OF NEW YORK, as Trustee
/s/ Xxxx Xxxx Xxxxxxxxx
By: --------------------------------------------
Name: Xxxx Xxxx Xxxxxxxx
Title: Vice President
11
