Exhibit 10.31
ASSIGNMENT OF DEPOSIT ACCOUNTS
AND
SECURITY AGREEMENT
by and between
ACE CASH EXPRESS, INC.
and
WILMINGTON TRUST COMPANY, as Trustee
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Dated as of November 15, 1996
ASSIGNMENT OF DEPOSIT ACCOUNTS
AND SECURITY AGREEMENT
This ASSIGNMENT OF DEPOSIT ACCOUNTS AND SECURITY AGREEMENT (this "Security
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Agreement") dated as of November 15, 1996 is by and between ACE CASH EXPRESS,
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INC. (doing business sometimes under the name of Ace America's Cash Express), a
Texas corporation (the "Debtor"), and WILMINGTON TRUST COMPANY, a Delaware
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banking corporation, not in its individual capacity but solely as Trustee (the
"Trustee").
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W I T N E S S E T H:
WHEREAS, the Debtor and American Express Travel Related Services Company,
Inc., a New York corporation ("AMEX") have entered into that certain 1992 Master
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Agreement dated as of October 14, 1992 (the "1992 Master Agreement"), as amended
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by the First Amendment to 1992 Master Agreement dated as of December 1, 1992
(the "First Master Agreement Amendment"), as further amended by those certain
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letter agreements dated respectively on or about December 6, 1993, October 26,
1994, August 2, 1994 and July 13, 1995, as further amended by the Second
Amendment to 1992 Master Agreement dated as of September 8, 1995 (the "Second
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Master Agreement Amendment"), as further amended by that certain letter
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agreement dated February 1, 1996 (the "February 1996 Letter Agreement"), and as
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further amended by the Third Amendment to 1992 Master Agreement dated as of the
date hereof (the "Third Master Agreement Amendment") (the 1992 Master Agreement,
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as amended by the foregoing Amendments and Letter Agreements, and as hereafter
amended, is hereinafter referred to as the "Master Agreement");
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WHEREAS, the February 1996 Letter Agreement provides, in part, that the
provisions in the 1992 Master Agreement relating to MoneyGram/SM/ Money Transfer
Services, the MoneyGram/SM/ Agency and Trust Agreement, the operations of the
Debtor in respect thereof and Proceeds (or Trust Funds) in respect thereof shall
be deemed severed and deleted from the provisions of the 1992 Master Agreement;
WHEREAS, the Debtor and AMEX have entered into that certain Amended and
Restated Assignment of Deposit Accounts and Security Agreement dated as of
December 1, 1992, as amended, (the "AMEX Security Agreement") and other Security
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Documents (as defined in the Collateral Trust Agreement (as hereinafter
defined)) pursuant to which the Debtor assigned certain deposit accounts and
granted a security interest in all assets, other than real property, of the
Debtor to AMEX to secure the AMEX Obligations (as hereinafter defined);
WHEREAS, the Debtor and Principal Mutual Life Insurance Company, an Iowa
corporation ("Principal Mutual"), have entered into that certain Note Purchase
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Agreement dated as of the date hereof (the "Principal Mutual Note Agreement"),
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pursuant to which Principal Mutual has agreed to purchase from the Debtor
$20,000,000 in aggregate principal amount of the Debtor's 9.03% Senior Secured
Notes due 2003 and, in return, the Debtor has agreed, among other things, to
assign certain deposit accounts and grant a security interest in certain assets
to the Trustee to secure the Principal Mutual Obligations (as hereinafter
defined);
WHEREAS, AMEX and Principal Mutual have agreed that it is in their best
interests for the Debtor to enter into this Security Agreement which grants the
Trustee, for the benefit of AMEX, Principal Mutual, other Noteholders (as
defined in the Collateral Trust Agreement) and other Beneficiaries (as defined
in the Collateral Trust Agreement), a security interest in the Collateral (as
hereinafter defined);
WHEREAS, AMEX and Principal Mutual have agreed that it is in their best
interests for the Debtor, the Trustee, AMEX and Principal Mutual to enter into
the Collateral Trust Agreement dated as of the date hereof (the "Collateral
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Trust Agreement") which sets forth the respective rights and interests of the
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Trustee, AMEX, the Noteholders and any other Beneficiaries in and to the
Collateral; and
WHEREAS, AMEX is willing, to the extent provided in Section 8.1 of the
Collateral Trust Agreement, to subordinate the security interests granted to it
pursuant to the AMEX Security Agreement and other Security Documents provided
the Trustee, Principal Mutual and the Debtor execute and deliver, and the other
Noteholders and Beneficiaries, if any, agree to be bound by, the Collateral
Trust Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, all terms describing items or types of
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collateral defined in the Uniform Commercial Code in effect in the State of New
York shall have the meanings given therein unless otherwise defined herein,
capitalized terms used herein that are not otherwise defined in this Security
Agreement shall have the meanings ascribed to them in the Collateral Trust
Agreement, and the following terms shall have the meanings given in this
Section 1.
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1.1. The term "AMEX Obligations" shall mean all existing and future
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obligations and liabilities of the Debtor to AMEX and/or its assignee under the
Master Agreement, the AMEX Security Agreement and any and all other agreements,
documents
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and instruments heretofore, now or hereafter executed in connection therewith or
which relate thereto other than the principal amount of Revolving Commitment
Advances made in excess of $18.5 million (plus interest, fees and expenses
thereon) without the consent required pursuant to Section 8.5 of the Collateral
Trust Agreement. The term AMEX Obligations shall not include obligations or
liabilities of the Debtor to AMEX in connection with MoneyGram/SM/ Money
Transfer Services, the MoneyGram/SM/ Agency and Trust Agreement, the operations
of the Debtor in respect thereof or any other MoneyGram/SM/-based obligations or
liabilities; provided nothing contained herein is intended to change the
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Debtor's obligations thereunder with respect to moneys to be transmitted to
AMEX.
1.2. The term "Beneficiary Obligations" shall mean the AMEX
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Obligations, the Principal Mutual Obligations and all existing and future
obligations and liabilities of the Debtor to any and all Beneficiaries under all
Beneficiary Agreements and any and all agreements, documents and instruments
executed in connection therewith or which relate thereto other than (i) with
respect to AMEX, the principal amount of Revolving Commitment Advances made in
excess of $18.5 million (plus interest, fees and expenses thereon) without the
consent required pursuant to Section 8.5 of the Collateral Trust Agreement, (ii)
with respect to Principal Mutual and the other Noteholders, the principal amount
advanced or loaned by Principal Mutual or any other Noteholder made in excess of
$20 million (plus interest, fees and expenses thereon) without the consent
required pursuant to Section 8.4 of the Collateral Trust Agreement and (iii)
with respect to any other Beneficiary, the principal amount advanced or loaned
by such Beneficiary made in excess of the limitation agreed to by such
Beneficiary pursuant to Section 8.9(c)(Z) of the Collateral Trust Agreement
(plus interest, fees and expenses thereon) without the consent required by
Section 8.9(d) of the Collateral Trust Agreement.
1.3. The term "Center" shall mean a location where the Debtor conducts
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check cashing and related business. All of the Debtor's Centers are identified
on Schedule 1 to the Collateral Trust Agreement, and the term Center shall
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include, without limitation, each and every location where the Debtor conducts
check cashing and related business irrespective of whether such location is
listed on Schedule 1 to the Collateral Trust Agreement or is timely disclosed on
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a Certificate of Update.
1.4. The term "Certificate of Update" shall mean a Certificate signed
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by a Responsible Officer of the Debtor which sets forth any changes during the
prior month to Schedules 1, 2, 3, 4, 5, 6 and 7 to the Collateral Trust
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Agreement.
1.5. The term "Collateral" shall mean and include:
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a. All of the Deposit Accounts;
b. All of the Receivables;
c. All of the Inventory;
d. All of the Equipment;
e. All documents and instruments (whether negotiable or
nonnegotiable), chattel paper, checks (of any nature), money orders (in blank
form or completed), drafts, notes, investments, securities, acceptances,
certificates of deposit, trust receipts, and any other writings evidencing a
right to the payment of money, and all cash and currency, whether now or
hereafter owned by the Debtor, whether or not in the possession of the Debtor
(collectively, the "Instruments");
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f. All certificates of title, documents of title, certificates
and policies of insurance, fidelity bonds, whether now or hereafter owned by the
Debtor, and whether or not in the possession of the Debtor;
g. All trademarks, trade names, service marks, registration
marks, logos and the like, whether now or hereafter owned by the Debtor;
h. (i) All of the Debtor's rights as a consignee or an unpaid
vendor, whether now owned or hereafter acquired; (ii) all additional amounts,
whether now owned or hereafter acquired, due to the Debtor from any Person,
irrespective of whether such additional amounts have been specifically assigned
to the Trustee; and (iii) all of the Debtor's right, title and interest in other
property, including warranty claims, relating to any goods whatsoever securing
the Obligations;
i. All of the Debtor's ledger sheets, files, records, books of
account, business papers and documents (including, but not limited to, computer
programs, source codes, object codes, tapes and related electronic data
processing software and system documentation and manuals), whether now owned or
hereafter acquired;
j. All of the Debtor's rights under the agreements and
contracts with Custodial Agents set forth in Schedule 2 to the Collateral Trust
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Agreement and such other agreements or contracts whether now or hereafter
entered into by the Debtor for the collection, safekeeping and/or deposit of
checks, drafts and other instruments or Collateral, together with all renewals,
extensions, amendments and modifications thereof (all such contracts and
agreements and rights of the Debtor thereunder are herein collectively called
the "Custodial Agreement Rights");
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k. All of the Debtor's other tangible and intangible assets,
including, but not limited to, any and all general intangibles and contract
rights, whether or not specifically enumerated above and whether now owned or
hereafter acquired; and
l. All accessions or accretions to, substitutes for and
proceeds and products of the assets of the Debtor described in the above
subsections a. through k., in whatever form, and all insurance proceeds and
proceeds of tort claims paid or payable in connection with the loss or damage of
any of the assets of the Debtor described in the above subsections a. through
k.;
excluding, however, from the above subsections a. through l., all hazardous and
nonhazardous wastes, including, but not limited to, recyclable waste materials.
Notwithstanding the foregoing or any other provision of the Security
Documents, the Trustee acknowledges and agrees that the Collateral shall not
include (i) any of the food stamp coupons or any other items held in trust by
the Debtor or any of the rights of the Debtor under that certain Food Stamp
Issuing Agent Contract with the Texas Department of Human Services, or (ii) any
of the lottery tickets or similar lottery items, together with any Deposit
Accounts established for purposes of complying with any applicable
jurisdiction's lottery statutes or governing regulations or any applicable
lottery contracts, any and all rights of the Debtor under lottery contracts and
applications with lottery authorities, and all cash and currency held in trust
by the Debtor and due to any of the various state lottery authorities, or (iii)
any instruments or contracts evidencing loans to consumers (provided cash
payments and other proceeds made or received on or in connection with such
instruments or contracts shall not be excluded), or (iv) any demand accounts
(whether interest-bearing or not, and if interest-bearing, then all interest
accrued and paid or payable thereon, whether now or hereafter established and
maintained from time to time by Debtor, and all moneys from time to time in or
credited to any and all such deposit accounts, including all earnings or profits
therefrom, in the form of interest or otherwise) held by the Debtor as agent for
third parties containing funds owned by such third parties to be used for the
payment of utility bills, to the extent (in the case of each of clause (i), (ii)
and (iv)) a grant of any security interest therein would be void or otherwise
impermissible in respect of such contract or property. Nothing contained in
this Section 1.5 or elsewhere in this Security Agreement shall be deemed or
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interpreted to limit or otherwise diminish the exception provided for in (x)
Section 25 of the 1992 Master Agreement related to the sale, abandonment or
other disposal of worn-out tangible property in the ordinary course of business,
(y) Section 6.2.P. of the
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First Master Agreement Amendment, or (z) Section 9.1 of the Principal Mutual
Note Agreement which defines "Asset Disposition", in part, to exclude a transfer
made in the ordinary course of the Debtor's business involving property that is
either inventory held for sale or is no longer required in the operation of the
Debtor's business.
1.6. The term "Custodial Agent" shall mean an armored car service
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organization utilized by the Debtor to transport Collateral from Centers to
Depositories at which Deposit Accounts are maintained. All of the Debtor's
Custodial Agents, and all of the Debtor's agreements with its Custodial Agents,
are identified on Schedule 2 to the Collateral Trust Agreement, and the term
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Custodial Agent shall include, without limitation, each and every armored car
service organization utilized by the Debtor irrespective of whether it is listed
on Schedule 2 to the Collateral Trust Agreement or is timely disclosed on a
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Certificate of Update.
1.7. The term "Custodial Agreement Rights" shall have the meaning set
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forth in Section 1.5.j of this Security Agreement.
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1.8. The term "Debtor" shall mean Ace Cash Express, Inc., together with
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its successors and assigns. The Debtor also transacts business under the trade
name(s) identified on Schedule 3 to the Collateral Trust Agreement.
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1.9. The term "Deposit Accounts" shall mean all demand, time, savings,
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passbook and other like accounts (including any account evidenced by a
certificate of deposit), whether interest-bearing or not, and if interest-
bearing then all interest accrued and paid or payable thereon, whether now or
hereafter established and maintained from time to time by the Debtor, and all
moneys from time to time in or credited to any and all such deposit accounts,
including all earnings or profits therefrom in the form of interest or
otherwise. All of the Debtor's Deposit Accounts are identified on Schedule 4 to
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the Collateral Trust Agreement, and the term Deposit Account shall include,
without limitation, each and every account established and maintained by the
Debtor at a Depository irrespective of whether such account is listed on
Schedule 4 to the Collateral Trust Agreement or is timely disclosed on a
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Certificate of Update.
1.10. The term "Depository" shall mean each financial institution at which
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a Deposit Account is maintained.
1.11. The term "Equipment" shall mean and include all of the Debtor's
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equipment, whether now owned or hereafter acquired, and includes all goods for
use in the Debtor's business (including, without limitation, all vehicles, motor
vehicles,
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mobile goods, machinery, furniture and trade fixtures) with all parts, equipment
and attachments relating thereto. The Equipment is located at the Locations of
Collateral identified on Schedule 5 to the Collateral Trust Agreement.
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1.12. The term "Instruments" shall have the meaning set forth in Section
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1.5.e of this Security Agreement.
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1.13. The term "Inventory" shall mean and include all of the Debtor's
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inventory, whether now owned or hereafter acquired, including, without
limitation, all Instruments, cash and currency maintained by the Debtor for sale
at its operating locations. The Inventory is located at the Locations of
Collateral identified on Schedule 5 to the Collateral Trust Agreement.
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1.14. The term "Obligations" shall mean and include, collectively, the
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AMEX Obligations, the Principal Mutual Obligations, the Beneficiary Obligations,
all other obligations secured by this Security Agreement and all obligations due
the Trustee under the Collateral Trust Agreement.
1.15. The term "Obligor" shall mean any Person, other than the Debtor,
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obligated on or with respect to any Receivable, Instrument, document, chattel
paper or general intangible, however such obligation may arise or be evidenced,
whether such liability is direct or indirect, contingent or mature, primary or
secondary.
1.16. The term "Permitted Lien" shall mean the liens and security
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interests in the assets of the Debtor permitted to exist under the Master
Agreement, the Security Documents, the Collateral Trust Agreement, the Principal
Mutual Note Agreement and all other Beneficiary Agreements, including, without
limitation, the liens and security interests in favor of AMEX pursuant to the
AMEX Security Agreement and the Master Agreement, which liens and security
interests are subordinate to the liens and security interests of the Trustee as
described in Section 8.1 of the Collateral Trust Agreement. A lien shall not be
a Permitted Lien unless it is permitted under each of the Master Agreement, each
Security Document, the Collateral Trust Agreement, the Principal Mutual Note
Agreement and each other Beneficiary Agreement.
1.17. The term "Principal Mutual Obligations" shall mean all existing and
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future obligations and liabilities of the Debtor to Principal Mutual and the
other Noteholders under the Principal Mutual Note Agreement and any and all
other agreements, documents and instruments executed in connection therewith or
which relate thereto other than the principal amount advanced or loaned by
Principal Mutual or any other Noteholder made in excess of $20 million (plus
interest, fees and expenses thereon) without
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the consent required pursuant to Section 8.4 of the Collateral Trust Agreement.
1.18. The term "Receivables" shall mean and include the following,
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whether now existing or hereafter arising: all of the Debtor's accounts and
rights to payment for goods sold or leased or for services rendered, all sums of
money due or becoming due with respect thereto, documents, instruments or
agreements pertaining thereto, all guaranties and security therefor, and
including all goods giving rise thereto and the rights pertaining to such goods
(e.g., the right of stoppage in transit), and all related insurance and proceeds
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payable with respect to claims thereunder.
2. GRANT OF SECURITY INTEREST. To secure the full and prompt payment,
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observance and performance of all of the Obligations and the Secured Debt (the
Obligations and the Secured Debt being hereinafter referred to collectively as
the "Liabilities"), the Debtor hereby assigns, as a pledge, the Deposit Accounts
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to the Trustee, and grants to the Trustee a continuing security interest in all
of the Collateral, wherever located, whether in the Debtor's possession or in
the possession and control of a third party for the Debtor's or the Trustee's
account. The Debtor agrees that all the Debtor's ledger sheets, files, records,
books of account, business papers and documents shall, until delivered to or
removed by the Trustee, be kept by the Debtor in trust for the Trustee and
without cost to the Trustee in appropriate containers in safe places. Each
confirmatory assignment schedule or other form of assignment hereafter executed
by the Debtor shall be deemed to include the foregoing security interest grant,
whether or not the same appears therein.
3. CUSTODY, INSPECTION, COLLECTION AND MAINTENANCE OF THE COLLATERAL AND
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RECORDS.
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3.1. The Debtor will safeguard and protect all of the Collateral and
make no disposition thereof, except for the disposition of Inventory in the
ordinary and usual course of the Debtor's business or as otherwise permitted
under each of the Master Agreement, the Principal Mutual Note Agreement and each
other Beneficiary Agreement.
3.2. The Debtor shall maintain books and records pertaining to the
Collateral in such detail, form and scope as it currently does, or as the
Trustee, AMEX, the Required Noteholders or any other Beneficiary hereafter shall
reasonably require. At all reasonable times, the Trustee, AMEX, the
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Noteholders and all other Beneficiaries shall have full access to, and the right
to audit, check, inspect and make abstracts and copies from, the Debtor's books,
records, audits, correspondence and all other papers relating to the Collateral.
The Trustee, AMEX, the Noteholders and all other Beneficiaries, and their
respective agents, may enter upon any of the Debtor's premises at any time
during business hours and at any other reasonable time, and from time to time,
for the purpose of inspecting the Collateral and any and all records pertaining
thereto. The Trustee acknowledges that the Debtor's security procedures may
preclude unannounced inspections of some aspects of the Debtor's business, and
the Debtor agrees to cooperate fully with the Trustee in the exercise of its
rights hereunder. At any time an AMEX Event of Default, a Principal Mutual Event
of Default or an Event of Default (as defined in any other Beneficiary's
Beneficiary Agreement) exists, the Debtor shall pay when billed the reasonable
costs and expenses (including attorneys' fees) incurred by the Beneficiaries in
connection with any inspections in accordance with this Section 3.2. Nothing in
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this Section 3.2 shall in any way diminish the Debtor's obligations under
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Section 15 of Exhibit A to the 1992 Master Agreement, Sections 6.1.G and 7.1 of
the First Master Agreement Amendment or Section 7.5 of the Principal Mutual Note
Agreement.
3.3. The Debtor hereby irrevocably authorizes and directs all
accountants and auditors employed by the Debtor or the Trustee at any time
during the term of this Security Agreement during reasonable business hours
(unless the Trustee has received a Notice of Actionable Default and such Notice
of Actionable Default has not been withdrawn, then at any time) to exhibit and
deliver to the Trustee copies of any of the Debtor's financial statements, trial
balances or other accounting records of any sort in the accountant's or
auditor's possession, and to disclose to the Trustee any information they may
have concerning the Debtor's financial status and business operations. The
Debtor hereby authorizes all federal, state and municipal authorities to furnish
to the Trustee copies of reports or examinations relating to the Debtor, whether
made by the Debtor or otherwise; provided that the Trustee notifies the Debtor
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of the Trustee's receipt of such reports and examinations; and provided further
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that the Trustee shall provide copies of such reports and examinations to each
other Beneficiary. At any time an AMEX Event of Default, a Principal Mutual
Event of Default or an Event of Default (as defined in any other Beneficiary's
Beneficiary Agreement) exists, the Debtor shall pay when billed the reasonable
costs and expenses (including attorneys' fees) incurred by the Beneficiaries in
connection with this Section 3.3. Nothing in this Section 3.3 shall in any way
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diminish the Debtor's obligations under Section 15 of Exhibit A to the 1992
Master Agreement, Sections 6.1.G and 7.1 of the First Master Agreement Amendment
or Section 7.5 of the Principal Mutual Note Agreement.
3.4. The Debtor will, immediately upon learning thereof, report to the
Trustee all matters materially affecting the loss, value, enforceability or
collectability of any material
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portion of the Collateral, and the Trustee shall forward a copy of such reports
to each Beneficiary.
3.5. Except as otherwise expressly provided herein, nothing herein
contained shall be construed to constitute the Debtor as the Trustee's agent for
any purpose whatsoever, and neither the Trustee nor any Beneficiary shall be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof, unless the same results from the Trustee's gross negligence
or willful misconduct. The Trustee does not, by any provision contained herein
or in any assignment or otherwise, assume any of the Debtor's obligations under
any contract or agreement assigned to the Trustee, and the Trustee shall not be
responsible in any way for the performance by the Debtor of any of the terms and
conditions thereof, except as the Trustee hereafter shall assume such
responsibility expressly in writing.
3.6. The Debtor has paid and shall continue to pay, when due, all
taxes, assessments and other charges levied or assessed upon any of the
Collateral; provided, however, the Debtor shall not be required to pay any such
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taxes, assessments or other charges if any such nonpayment will not have a
Material Adverse Effect, or if (a) the amount, applicability or validity thereof
is currently being contested in good faith by appropriate action promptly
initiated and diligently conducted, (b) the Debtor shall have set aside on its
books reserves (segregated to the extent required by GAAP) reasonably determined
by the Debtor to be adequate with respect thereto, and (c) the Debtor has
notified the Trustee of such circumstances in detail reasonably satisfactory to
the Trustee.
3.7. The Debtor presently complies with, and shall continue to comply
with, all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to the Collateral or any part thereof or
to the operation of the Debtor's business, noncompliance with which would have a
Material Adverse Effect. The Debtor may, however, contest or dispute any acts,
rules, regulations, orders and directions of those bodies or officials in any
reasonable manner; provided that the Trustee is satisfied that the contest or
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dispute will not have a Material Adverse Effect on the Trustee's security
interest in the Collateral.
3.8. The Trustee may at any time take such steps as the Trustee deems
necessary to protect the Trustee's security interest in and to preserve the
Collateral, including, but not limited to, the hiring of such security guards or
the placing of other security protection measures as the Trustee may deem
appropriate. The Trustee may, upon the receipt of a Notice of Actionable
Default and during such time as such Notice of
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Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn pursuant to the Collateral Trust Agreement, employ
and maintain at any of the Debtor's premises a custodian who shall have full
authority to do all acts necessary to protect the Trustee's security interest in
the Collateral. The Debtor agrees to cooperate fully with all of the Trustee's
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as the Trustee may direct. All of the Trustee's reasonable expenses
of preserving the Collateral, including any expenses relating to the
compensation and bonding of a custodian, shall be charged to the Debtor's
account and shall be deemed a part of the Obligations.
3.9. All costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred by the Trustee in all efforts made to enforce payment
of the Liabilities or otherwise affect collection of any of the Collateral, as
well as all costs and expenses, including attorneys' fees and legal expenses,
incurred in connection with the entering into a proposed or actual modification
to this Security Agreement or the enforcement of this Security Agreement and/or
instituting, maintaining, preserving, protecting, enforcing or foreclosing the
Trustee's security interest in any of the Collateral, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or relating to the Trustee's transactions with the
Debtor, shall be charged to the Debtor's account and shall be deemed a part of
the Obligations.
3.10. The Debtor shall bear the full risk of loss with respect to the
Instruments, Inventory or Equipment in which the Trustee has a security
interest, except for any loss caused by the Trustee's gross negligence or
willful misconduct. At the Debtor's own cost and expense, the Debtor shall keep
all of the Instruments, Inventory and Equipment insured, with reputable
insurance companies in amounts reasonably acceptable to the Trustee, against the
hazards of fire, flood, sprinkler leakage, hazards covered by extended coverage
insurance and such other hazards as may be required by the Trustee pursuant to
the Collateral Trust Agreement; provided that such insurance coverage shall be
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consistent with industry practices. The Debtor shall cause to be delivered to
the Trustee the insurance policies or binders therefor and, at least fifteen
(15) days prior to the expiration of any such insurance, additional policies or
duplicates thereof, or binders, evidencing the renewal or replacement of such
insurance and the payment of the premiums therefor. Such policies shall
provide, in a manner reasonably satisfactory to the Trustee, that any losses
thereunder shall be payable first to the Trustee as the Trustee's interest may
appear. Each insurance policy to be provided under this Section 3.10 shall
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contain an agreement by the insurer that it will not cancel such policy except
upon at least thirty (30) calendar days' prior written notice to the Trustee,
and that any
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loss otherwise payable thereunder shall be payable notwithstanding any act or
negligence of the Debtor which might, absent such agreement, result in a
forfeiture of all or part of such insurance payment. In the event of any loss
thereunder, the insurers are directed by the Debtor to make payment for such
loss to the Trustee as its interest may appear if (a) the loss involves claims
which exceed in the aggregate Twenty Five Thousand and 00/100 Dollars
($25,000.00) or (b) the Trustee has received a Notice of Actionable Default and
such Notice of Actionable Default has not been withdrawn, otherwise the payment
for such losses shall be made directly to the Debtor. If any insurance losses
are paid by check, draft or other instrument payable to the Debtor and the
Trustee jointly, the Trustee may endorse the Debtor's name thereon and do such
other things as the Trustee may deem advisable to reduce the same to cash. All
loss recoveries received by the Trustee upon any such insurance and not remitted
to the Debtor may be applied to the Liabilities in the order provided in Section
4 of the Collateral Trust Agreement. The Debtor shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Section 3.10, unless the Trustee is included therein as a named
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insured, with loss payable as required in this Section 3.10. The Debtor shall
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immediately notify the Trustee whenever any such separate insurance is applied
for and shall promptly deliver to the Trustee the policy or policies or binders
evidencing the same.
3.11. Until the Debtor's authority to do so is terminated by the Trustee
following receipt by the Trustee of Notice of Actionable Default, the Debtor
will, at the Debtor's sole cost and expense, but on the Trustee's behalf and for
the Trustee's account, collect in trust for the Trustee all Instruments, cash
and currency included in the Collateral and received or receivable in the
ordinary course of its business (including all amounts unpaid on the Debtor's
Receivables), and shall not commingle such collections with the Debtor's other
funds or use the same except as permitted by the Master Agreement, the Principal
Mutual Note Agreement and any other Beneficiary Agreement. In the event of any
commingling, such collected amounts shall be deemed impressed with a trust for
the benefit of the Trustee.
3.12. At any time following receipt by the Trustee of a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn pursuant to the Collateral Trust Agreement,
without notice to the Debtor, the Trustee shall have the right to send notice of
the assignment of and the Trustee's security interest in Receivables to any
Obligor of the Debtor or any third party holding or otherwise concerned with any
of the Collateral. Thereafter, following the Trustee's receipt of a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall
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not have been withdrawn pursuant to the Collateral Trust Agreement, the Trustee
shall have the sole right to collect Receivables and take possession of the
Collateral. Any of the Trustee's actual, but reasonable, accrued collection
expenses under such circumstances, including, but not limited to, stationery and
postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, shall be charged to
the Debtor's account and be deemed a part of the Obligations.
3.13. Upon the Trustee's request and upon the creation of any Receivables,
or at such intervals as the Trustee may require, the Debtor shall provide the
Trustee with such schedules, documents and/or information regarding the
Receivables as the Trustee reasonably may require. The Trustee shall have the
right to confirm and verify all Receivables and do whatever the Trustee
reasonably may deem necessary to protect the Trustee's security interest. The
items to be provided under this Section 3.13 are to be in form reasonably
------------
satisfactory to the Trustee and executed by the Debtor and delivered to the
Trustee from time to time solely for the Trustee's convenience in maintaining
records of the Collateral, and the Debtor's failure to deliver any of such items
to the Trustee shall not affect, terminate, modify or otherwise limit the
Trustee's security interest in any of the Collateral.
3.14. The Debtor shall not, without the Trustee's consent, compromise or
adjust any of the Receivables (or extend the time for payment thereof) or grant
any additional discounts, allowances or credits thereon other than, in each
case, in the ordinary and usual course of the Debtor's business.
3.15. If any of the Receivables includes a charge for any tax payable to
any governmental taxing authority, the Trustee is hereby authorized in its
discretion to pay the amount thereof to the proper taxing authority for the
Debtor's account and to charge the Debtor's account therefor, such amount shall
be deemed a part of the Obligations. The Debtor shall notify the Trustee if any
of the Receivables includes any tax due to any such taxing authority, and in the
absence of the Debtor's notice or the Trustee's actual knowledge of the
inclusion of any tax due, the Trustee shall have the right to retain the full
proceeds of such Receivables and shall not be liable for any taxes that may be
due from the Debtor by reason of the sale and delivery creating such
Receivables.
3.16. The Trustee shall have the irrevocable right, upon the receipt of a
Notice of Actionable Default and during such time as such Notice of Actionable
Default shall not have been withdrawn pursuant to the Collateral Trust
Agreement, to receive, endorse, assign and/or deliver in the name of the Trustee
or the Debtor any check, draft or other Instrument, and
13
the Debtor hereby waives notice of presentment, protest and nonpayment of any
Instrument so endorsed. The Debtor hereby irrevocably appoints the Trustee or
the Trustee's designee as the Debtor's attorney-in-fact with power to endorse
the Debtor's name upon any Instruments or other evidences of payment or
Collateral that may come into the Trustee's possession; to sign the Debtor's
name on any invoice relating to any of the Receivables, drafts against Obligors,
assignments and verifications of Receivables and notices to Obligors; to send
verifications of Receivables to any Obligor; to notify the postal authorities to
change the address for delivery of mail addressed to the Debtor to such address
as the Trustee may designate; to sign the Debtor's name on all financing
statements or any other documents or instruments deemed necessary or appropriate
by the Trustee to preserve, protect or perfect the Trustee's interest in the
Collateral and to file the same; and to do all other acts and things necessary
to carry out the full intent of this Security Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission, nor for any
error of judgment or mistake of fact or law, unless resulting from gross
negligence or willful misconduct; this power being coupled with an interest is
irrevocable while any of the Liabilities remain unpaid. Notwithstanding the
generality of the foregoing provisions, the Trustee acknowledges that its
exercise of such powers and authority shall be solely in a manner consistent
with, and for the purpose of, enforcement, maintenance and protection of its
rights under this Security Agreement and the Collateral Trust Agreement for the
purposes thereof.
3.17. The Trustee shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Receivables or
any Instrument, or for any damage resulting therefrom unless resulting from its
gross negligence or willful misconduct. When entitled to exercise its rights
and powers hereunder, the Trustee may, without consent from the Debtor, xxx upon
or otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise upon any terms, any of the Receivables or any
securities, instruments or insurance applicable thereto and/or release the
Obligor thereon; provided that the Trustee shall provide the Debtor written
--------
notice of any actions taken by the Trustee pursuant to this Section 3; provided
--------- --------
further, however, that the Trustee's failure to provide the Debtor with such
------- -------
written notice shall not affect the validity of the Trustee's actions taken
hereunder.
3.18. The Inventory subject to the Trustee's security interest may not be
taken or removed from the location(s) indicated in Schedule 5 to the Collateral
----------
Trust Agreement, except if the Inventory is deposited into a Deposit Account or
is moved
14
to a new location and the Debtor has previously filed a financing statement
(which is substantially similar to the financing statements filed by the Debtor
in connection with the execution of this Security Agreement) in the applicable
jurisdiction with respect to such new location.
3.19. Following the Trustee's receipt of a Notice of Actionable Default
and during such time as such Notice of Actionable Default shall not have been
withdrawn pursuant to the Collateral Trust Agreement, then upon notice to the
Debtor, the Inventory subject to the Trustee's security interest shall not be
sold or taken or removed from the location(s) indicated in Schedule 5 to the
----------
Collateral Trust Agreement, except for deposit into a Deposit Account or except
with the Trustee's prior written consent and upon substitution of other
Collateral in form and amount satisfactory to the Trustee in the Trustee's sole
discretion.
3.20. The Debtor shall keep and maintain the Equipment in good order and
repair, ordinary wear and tear excepted, at the location(s) indicated in
Schedule 5 to the Collateral Trust Agreement (except that, as long as the
----------
Equipment remains subject to a perfected security interest in favor of the
Trustee, the Debtor may move the Equipment from one location specified in
Schedule 5 to the Collateral Trust Agreement, to another location specified in
----------
Schedule 5 to the Collateral Trust Agreement), and shall not move, sell or
----------
otherwise dispose of the Equipment without the prior written consent of the
Trustee, except for disposals and sales in the ordinary course of business or
Equipment which is moved to a new location and the Debtor has previously filed a
financing statement (which is substantially similar to the financing statements
filed by the Debtor in connection with the execution of this Security Agreement)
in the applicable jurisdiction with respect to such new location.
3.21. The Equipment shall be and shall remain personal property, and
nothing shall affect the character of the Equipment or cause the Equipment to
become part of realty, or prevent the Trustee from removing it from the premises
on which it is located or to which it may be attached following receipt by the
Trustee of a Notice of Actionable Default and during such time as such Notice of
Actionable Default shall not have been withdrawn pursuant to the Collateral
Trust Agreement.
3.22. The Debtor shall provide the Trustee, with copies to AMEX, the
Noteholders and each other Beneficiary, on or within ten (10) days after the end
of each month, a Certificate of Update.
4. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Debtor hereby makes the
-----------------------------------------
following representations, covenants and warranties, which shall be deemed to be
incorporated by
15
reference, as true and correct in all material respects, in (a) each request for
an Advance or Revolving Commitment Advance under the Master Agreement and at the
time of the funding thereof by AMEX and (b) any request for an advance or the
funding thereof in connection with any other Indebtedness of the Debtor to AMEX,
the Noteholders or any other Beneficiary for borrowed money, and each of the
following representations, covenants and warranties shall be deemed repeated and
confirmed, in all material respects, with respect to each item of the Collateral
as it is created or otherwise acquired by the Debtor:
4.1. The information set forth herein with respect to the definitions of
"Custodial Agent," "Debtor," "Deposit Accounts," "Inventory" and "Equipment," as
defined in Section 1 of this Security Agreement, and the agreements with
---------
Custodial Agents listed in Schedule 2 to the Collateral Trust Agreement, is
----------
complete and accurate in all material respects as of the date of this Security
Agreement.
4.2. The execution, delivery and performance hereof and of any other
document executed and delivered by the Debtor in connection with the Obligations
are within the Debtor's corporate powers, have been duly authorized by the
Debtor, and comply in all material respects with any applicable law, rule or
regulation or the terms of the Debtor's current Restated Articles of
Incorporation, Bylaws or other applicable documents, instruments or agreements
relating to the Debtor's corporate organization or governance or material to the
conduct of the Debtor's business, or of any indenture or other material
agreement or undertaking to which the Debtor is a party or by which the Debtor
is bound, except as permitted under each of the Master Agreement, the Principal
Mutual Note Agreement and any other Beneficiary Agreement.
4.3. There is no litigation or proceeding pending or, to the best
knowledge of the Debtor, threatened against the Debtor or any of its assets
which, if determined adversely to the Debtor, reasonably may be expected to
result in a material adverse change in the Debtor's financial condition or
materially affect a material portion of the assets of the Debtor, the authority
of the Debtor to enter into this Security Agreement or the validity or
enforceability of this Security Agreement or the priority of the Trustee's lien.
4.4. At the time the Collateral becomes subject to the Trustee's security
interest: (a) the Debtor shall be the sole owner of and fully authorized to
sell, transfer, pledge and/or grant a first security interest in each and every
item of the Collateral, which interests shall be prior to the already existing
secured interests in favor of AMEX; (b) all documents, instruments and
agreements shall be true and correct and in all respects what they purport to
be; (c) all signatures and
16
endorsements that appear thereon shall be genuine and all signatories and
endorsers shall have full capacity to contract; and (d) none of the transactions
underlying or giving rise to the Collateral shall violate in any material
respect any applicable state or federal laws or regulations, and all documents
or instruments relating to the Collateral shall be legally sufficient under such
laws or regulations and shall be legally enforceable in accordance with their
terms (subject to exceptions for insolvency laws and equitable principles).
4.5. The Debtor shall from time to time take such actions as the Trustee
may from time to time reasonably request in writing by way of obtaining,
executing, delivering and/or filing financing statements, landlord's or
mortgagee's waivers, and other notices and amendments and renewals thereof, and
the Debtor shall take any and all steps and observe such formalities as may be
necessary or as the Trustee may reasonably request, in order to create and
maintain a valid first lien upon, pledge of, or paramount security interest in
the Collateral, except with respect to any Permitted Lien. All charges,
expenses and fees which the Trustee may incur in filing any of the foregoing,
and any local taxes relating thereto, shall be charged to the Debtor's account
and be deemed a part of the Obligations, or, at the Trustee's option, shall be
paid to the Trustee immediately upon demand. The Debtor hereby authorizes the
Trustee to (a) execute and file at any time or times one or more financing
statements with respect to all or part of the Collateral, signed only by the
Trustee, and (b) file the original or a photocopy of this Security Agreement as
a financing statement.
4.6. Until termination and release of the security interests granted
pursuant to this Security Agreement as provided in the Collateral Trust
Agreement, the security interest in the Collateral hereby granted to the Trustee
shall continue in full force and effect. Until such time, the Debtor shall not,
without the Trustee's prior written consent, pledge, sell, assign, transfer,
create a security interest in, or encumber or allow to be encumbered in any way,
any part of the Collateral to anyone other than the Trustee, except for the sale
of Inventory in the ordinary course of business, the disposition of property
which no longer has any valuable utility or use in the Debtor's operations and
Permitted Liens. The Debtor hereby agrees to defend the Trustee's interest in
the Collateral against any and all persons whatsoever.
4.7. The Debtor shall execute and deliver, or cause to be executed and
delivered, to the Trustee, with a copy to each Beneficiary, from time to time,
upon the Trustee's reasonable request (in writing), such supplemental
agreements, statements, assignments, and transfers, or instructions or documents
relating to the Collateral, and such other instruments as the Trustee so
17
requests, in order that the full intent of this Security Agreement may be
carried into effect.
4.8. All balance sheets, earnings statements and other financial data
which have been or may hereafter be furnished to the Trustee did and do and
shall fairly represent the Debtor's financial condition as of the dates thereof
and/or the results of the Debtor's operations for the period for which the same
are furnished and have been and shall be prepared in accordance with GAAP,
except that interim financial statements will not contain footnotes and will be
subject to year-end adjustments, and any material adverse change in such
financial condition or the Debtor's operations since the date of each such
report shall be disclosed at the time of delivery thereof. The Debtor shall
continue to furnish whatever information or reports concerning the Collateral
and the Debtor's financial condition that the Trustee may reasonably request
during the term of this Security Agreement. All other information, reports and
other papers and data furnished to the Trustee are and shall be, at the time the
same are so furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give the Trustee a true and
accurate knowledge of the subject matter; provided, however, that any
-------- -------
information, reports and other papers or data furnished by the Debtor to the
Trustee as (a) budgets or forecasts shall be only what the Debtor believes to be
reasonable under the circumstances, and (b) drafts of documents shall be subject
to completion by any subsequent drafts and the final version of such documents.
The Trustee acknowledges that only the annual financial statements of the Debtor
will be audited. The Debtor agrees that it shall provide each Beneficiary
copies of any documents provided to the Trustee pursuant to this Section 4.8.
-----------
4.9. To the best knowledge of the Debtor, (a) each of the Receivables is
and shall be a good and valid account representing the amount of the undisputed
bona fide indebtedness incurred by the customer therein named, for a fixed sum
as set forth in the invoice relating thereto with respect to an absolute sale
and delivery of goods by the Debtor, or work, labor and/or services rendered by
the Debtor, and (b) none of the Receivables is or shall be subject to any
defense, setoff, counterclaim, discount or allowance, except as permitted by
Section 3.14 or as disclosed in writing by the Debtor to the Trustee.
------------
4.10. The Debtor shall give the Trustee written notice of each office at
which the Debtor keeps its records pertaining to accounts, contract rights and
general intangibles and the location of the Debtor's chief executive office.
Until and except as such notice is given, all such records shall be kept at the
Debtor's address as it appears in Section 9.2 of the Collateral Trust Agreement.
The Debtor shall promptly (but in any event no later than five (5) days after
the Debtor first has
18
knowledge of any event described in clause (c) and (d) below in this Section
-------
4.10) give the Trustee written notice of: (a) any change in the location of
----
such records, its chief executive office, the Inventory, the Equipment or its
corporate name; (b) any additional trade name under which the Debtor transacts
business; (c) the filing of any liens or judgments against the assets of the
Debtor; and (d) any litigation or proceedings which if determined adversely to
the Debtor reasonably may be expected to have a Material Adverse Effect.
4.11. (a) The Debtor and the Trustee have delivered or will be delivering
letters of instruction to, and have obtained or will be obtaining agreements
from, the Depositories with respect to the Deposit Accounts. Such letters of
instruction shall be substantially similar to Exhibit A or B to the Collateral
--------- -
Trust Agreement, as required by Section 4.14 of this Agreement, except for
------------
changes approved by AMEX; provided such changes approved by AMEX do not (i)
--------
prejudice the Noteholders to a greater extent than any other Beneficiary (other
than the Trustee) or (ii) substantially adversely affect the security interests
and liens granted to the Trustee under this Security Agreement. To enable the
Depositories' continuing compliance with all such instructions or agreements,
the Debtor agrees that all cash, checks and other Instruments received in its
operations shall be deposited initially by or for the account of the Debtor only
in those Deposit Accounts designated as either a "Currency Account" (with
respect to cash) or a "Deposit Account" (with respect to checks and other
Instruments) in each such letter of instruction, except for cash retained at or
delivered to the premises at which the Debtor conducts its business or funds
transfers between Deposit Accounts, in either case as permitted by such
instructions or agreements.
(b) No deposit, account, certificate of deposit, check, note, draft
or other instrument has been or shall be received by the Debtor unless the same
is pledged and assigned to the Trustee, and each check, draft and all other
Instruments are or shall be (i) duly endorsed by the Debtor "for deposit only"
to a Deposit Account (or an equivalent endorsement), (ii) delivered to the
Trustee, a Custodial Agent or another designated agent, bailee or trustee for
the Trustee no later than the next Business Day following receipt by the Debtor
and (iii) deposited into a Deposit Account no later than the next Business Day
following the date the Debtor receives the same; provided that, for purposes of
--------
subclauses (ii) and (iii), the Debtor need not so deliver or deposit checks made
payable to the Debtor (including post-dated checks) until the aggregate amount
thereof received by the Debtor from time to time shall exceed Fifty Thousand and
00/100 Dollars ($50,000.00).
(c) Except for cash in Centers and cash in possession of Custodial
Agents, all cash received by the Debtor
19
has been and shall, unless otherwise approved by the Trustee in writing,
continue to be deposited in one or more Deposit Accounts. Except as otherwise
expressly permitted herein or in the Collateral Trust Agreement, cash, checks,
drafts and other Instruments used or arising in connection with business
operations at the Centers shall be delivered, picked up and otherwise moved or
transported only by a Custodial Agent.
(d) The Debtor is and shall remain in full compliance with all
agency and trust agreements with Custodial Agents and Depositories, and all
representations, warranties and certifications of the Debtor, and, to the best
knowledge of the Debtor, all representations, warranties and certifications of
the Custodial Agent or Depository, as applicable, contained therein are and
shall continue to be true and correct in all material respects, and, to the best
knowledge and belief of the Debtor, all Custodial Agents and Depositories are
and shall continue to be in full compliance therewith.
4.12. With respect to any Deposit Account for which a Depository shall not
agree to provide a copy of the periodic bank statement therefor directly to the
Trustee, the Debtor agrees to provide a copy of such statement (exclusive of all
detail relating to items thereon) to the Trustee, and at the request of a
Beneficiary to such Beneficiary, by facsimile transmission no later than the
next Business Day following the date such statement is received by the Debtor.
The Debtor shall promptly provide a copy of any such detail to the Trustee and
each requesting Beneficiary by mail or courier for delivery on the next Business
Day following the facsimile transmission of the statement without detail.
4.13. Schedules 1, 2, 3, 4 and 5 to the Collateral Trust Agreement, as
----------- - - - -
amended and revised pursuant to Section 3.22 of this Security Agreement, are
------------
complete and accurate in all material respects.
4.14. At all times (i) at least 80% of the Debtor's Centers shall only use
Depositories which are bound by effective agreements substantially similar to
Exhibit A to the Collateral Trust Agreement and (ii) at least 95% of the
---------
Debtor's Centers shall only use Depositories which are bound by effective
agreements substantially similar to Exhibit A or B to the Collateral Trust
--------- -
Agreement.
4.15. At all times at least 95% of the Debtor's Centers shall only use
Custodial Agents which are bound by effective agreements substantially similar
to Exhibit C to the Collateral Trust Agreement; provided, with respect to any
--------- --------
Center acquired after the date hereof, if (i) on the date of such acquisition,
such Center is bound by an agreement with a Custodial Agent, (ii) such Custodial
Agent, despite the Debtor's
20
reasonable efforts, will not execute a letter substantially similar to Exhibit C
---------
to the Collateral Trust Agreement, and (iii) the Debtor cannot terminate such
Center's agreement with such Custodial Agent, then such Center shall not be
considered in determining whether the Debtor is in compliance with the foregoing
95% test (so long as at least 90% of the Debtor's Centers use Custodial Agents
which are bound by effective agreements substantially similar to Exhibit C to
---------
the Collateral Trust Agreement); provided further that the Debtor shall
-------- -------
terminate such Center's agreement with such Custodial Agent as soon as possible
and shall enter into an agreement with a Custodial Agent which will execute a
letter substantially similar to Exhibit C to the Collateral Trust Agreement.
---------
4.16. The Debtor shall not grant any liens or security interests in
any of its property to any Person except for Permitted Liens.
4.17. Between the date which is 54 months after the date hereof and
the date which is 56 months after the date hereof (and every 60 months
thereafter) the Debtor shall provide a legal opinion issued by its outside
counsel addressed to each Beneficiary confirming the perfection of the liens and
security interests granted hereunder and specifying any action required to be
taken between the date of such opinion and the date of such next opinion to
maintain the perfection of the Trustee's liens and security interests.
5. THE TRUSTEE'S RIGHTS AND REMEDIES.
---------------------------------
5.1. Following receipt by the Trustee of a Notice of Actionable
Default and during such time as such Notice of Actionable Default shall not have
been withdrawn pursuant to the Collateral Trust Agreement:
(a) The Trustee may at any time, without further notice to the
Debtor, notify the Obligors and other Persons whose obligations have been
assigned, or in which a security interest has been granted hereunder, that such
obligations have been assigned, or a security interest therein has been granted,
to the Trustee and/or that payments thereunder or in respect thereof shall be
made directly to the Trustee or to the Trustee's designee. If requested by the
Trustee, the Debtor will so notify the Obligors and other Persons whose
obligations to the Debtor have been assigned or in which a security interest has
been granted hereunder. The Trustee may in its own name or in the name of others
(including, without limitation, the Debtor) communicate with such Obligors and
other Persons, enforce payment or collect any of the Collateral by legal
proceedings or otherwise, and adjust, settle or compromise the amount or payment
thereof;
21
(b) All payments received by the Debtor under or in connection with
any of the Collateral shall be held by the Debtor in trust for the Trustee,
shall be segregated from other funds of the Debtor and shall, forthwith upon
receipt by the Debtor, be turned over to the Trustee, in the same form as
received by the Debtor (duly indorsed to the Trustee, if required) for deposit
in the Collateral Account; and
(c) Any and all such payments so received by the Trustee (whether
from the Debtor or otherwise) shall be deposited in the Collateral Account and
held as part of the Trust Estate subject to withdrawal and distribution by the
Trustee as provided in the Collateral Trust Agreement.
5.2. Following receipt by the Trustee of a Notice of Actionable Default
and during such time as such Notice of Actionable Default shall not have been
withdrawn pursuant to the terms and provisions of the Collateral Trust
Agreement, the Trustee may exercise in respect of the Collateral, in addition to
all other rights and remedies provided for herein, the Collateral Trust
Agreement or otherwise available to it, all the rights and remedies of a secured
party on default under the Uniform Commercial Code (whether or not the Uniform
Commercial Code applies to the affected Collateral), and under all other
applicable law as in effect in any relevant jurisdiction. In addition, the
Trustee may also:
(a) require the Debtor to, and the Debtor hereby agrees that it will
at its expense and upon request of the Trustee forthwith, assemble all or any
part of the Collateral as directed by the Trustee and make such Collateral
available to the Trustee at a place to be designated by the Trustee, which place
shall be reasonably convenient to the Trustee and the Debtor, whether at the
premises of the Debtor or otherwise;
(b) enter, with or without process of law and without breach of the
peace, any premises where any of the Collateral or the books and records of the
Debtor related thereto are or may be located and, without charge or liability to
the Trustee, seize and remove such Collateral and such books and records from
such premises or remain upon such premises and use the same for the purpose of
enforcing any and all rights and remedies of the Trustee under this Security
Agreement; and
(c) sell, lease, assign, grant an option or options to purchase or
otherwise dispose of all or any part of the Collateral in one or more parcels,
at public or private sale or sales, at any exchange, broker's board or at any of
the Trustee's offices or elsewhere, at such prices as the Trustee may deem best,
for cash, on credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable; provided, however, that the Debtor
-------- -------
shall not be credited with the
22
net proceeds of any such credit sale, future delivery or lease of the Collateral
until the cash proceeds thereof are actually received by the Trustee. The
Debtor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to the Debtor 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. No notification required by law need be given to the
Debtor if the Debtor has signed, after the receipt by the Trustee of a Notice of
Actionable Default, a statement renouncing any right to notification of sale or
other intended disposition. The Trustee shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Trustee 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. Any Beneficiary shall have the
right upon any such public sale or sales and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Debtor
which right or equity is hereby expressly waived and released. In the event of
a sale of Collateral, or any part thereof, to a Beneficiary following the
occurrence of an Actionable Default, such Beneficiary shall not deduct or offset
from any part of the purchase price to be paid therefor any indebtedness owing
to it by the Debtor. Any and all Proceeds received by the Trustee with respect
to any sale of, collection from or other realization upon all or any part of the
Collateral whether consisting of monies, checks, notes, drafts, bills of
exchange, money orders or commercial paper of any kind whatsoever, shall be
deposited by the Trustee in the Collateral Account and shall be held by the
Trustee as part of the Trust Estate, subject to withdrawal and distribution by
the Trustee as provided in the Collateral Trust Agreement. The Trustee is
hereby granted a license or other right to use, without charge, the Debtor's
labels, copyrights, patents, rights of use of any name, trade names, trademarks
and advertising matter, or any property of a similar nature, in advertising for
sale and selling any Collateral.
5.3. To the extent permitted by applicable law, the Debtor waives all
claims, damages and demands against the Trustee or the Beneficiaries arising out
of the repossession, retention or sale of the Collateral, or any part or parts
thereof, except any such claims, damages and awards arising out of the gross
negligence or willful misconduct of the Trustee or the Beneficiaries, as the
case may be. In no event, however, does the Debtor waive any obligations of the
Trustee or the Beneficiaries under applicable law to act in a commercially
reasonable manner.
5.4. The Debtor recognizes that in the event the Debtor fails to perform,
observe or discharge any of its obliga-
23
tions or liabilities under this Security Agreement, no remedy at law will
provide adequate relief to the Trustee and the Trustee shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
5.5. The rights and remedies provided under this Security Agreement
are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law or equity.
6. WAIVERS.
-------
6.1. The Debtor hereby waives notice of nonpayment of any of the
Obligations, demand, presentment, protest and notice thereof with respect to any
and all Instruments, notice of acceptance thereof, notice of loans or advances
made, credit extended, Collateral received or delivered, or any other action
taken in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
6.2. No failure, omission or delay on the part of the Trustee in
exercising any right, remedy, option or power under this Security Agreement, or
in giving or insisting upon strict performance by the Debtor hereunder or in
giving notice hereunder shall operate as a waiver of the same or any other power
or right, and no single or partial exercise of any such power or right shall
preclude any other or further exercise thereof or the exercise of any other such
power or right. The Trustee, notwithstanding any such failure, shall have the
right thereafter to insist upon the strict performance by the Debtor of any and
all of the terms and provisions of this Security Agreement to be performed by
the Debtor. The collection and application of proceeds, the entering and taking
possession of the Collateral, and the exercise of the rights of the Trustee
contained in the Security Documents, including, without limitation, this
Security Agreement, shall not cure or waive any Actionable Default, or affect
any Notice of Actionable of Default, or invalidate any acts done pursuant to
such notice. No waiver by the Trustee of any breach or default of or by any
party hereunder shall be deemed to alter or affect the Trustee's rights under
this Security Agreement with respect to any prior or subsequent default.
6.3. The Debtor waives and releases the benefit of all valuation,
appraisal, redemption and exemption laws to the extent permitted by applicable
law. In the event the Trustee seeks to take possession of any of the Collateral
by replevin or other court process, the Debtor hereby irrevocably waives (a) any
bonds, and any surety or security relating thereto required by any statute,
court rule or otherwise as an incident to such possession and (b) any demand for
possession of the Collateral
24
prior to the commencement of any suit or action to recover possession thereof.
7. MISCELLANEOUS.
-------------
7.1. THIS SECURITY AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
INTERPRETED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. Notwithstanding the general limitations set forth in Section 22.1 of the
Master Agreement, Section 11.7(b) of the Principal Mutual Note Agreement, any
applicable provisions of any other Beneficiary Agreements, the Debtor hereby
consents and submits to the jurisdiction of any local, state or federal court
located within a jurisdiction in which any of the Collateral shall be located
for purposes of any action related to such Collateral that is commenced by the
Trustee to enforce or foreclose its security interest hereunder. The Debtor
warrants and represents that it has appointed CT Corporation as its registered
agent in the jurisdictions of Arkansas, Arizona, Colorado, Florida, Georgia,
Indiana, Louisiana, Maryland, Missouri, North Carolina, New Mexico, Ohio,
Oklahoma, South Carolina, Tennessee, Virginia, Washington and the District of
Columbia, and covenants with the Trustee that such registered agent shall not be
changed without written notice to, and the written consent of, the Trustee. The
Debtor hereby waives any right it may have to transfer or change the venue of
any litigation brought against it by the Trustee in accordance with this Section
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7.1.
---
7.2. If at any time the AMEX Obligations are assigned to First Data,
or an Affiliate or Subsidiary of First Data, all references to AMEX in this
Security Agreement shall be deemed to include AMEX and such assignee until all
obligations of the Debtor to AMEX under the Master Agreement have been
satisfied, at which time all references to AMEX shall be deemed to be to such
assignee.
7.3. Neither this Security Agreement nor any portion or provisions
hereof may be changed, modified, amended, waived, supplemented, discharged,
canceled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the parties hereto.
7.4. All notices or other communications hereunder shall be given in
the manner and to the addresses set forth in Section 9.2 of the Collateral Trust
Agreement.
7.5. The Debtor agrees that checks and other instruments delivered to
the Trustee in payment or on account of the Obligations constitute conditional
payment only until payment is actually received in immediately payable funds by
the Trustee, and, subject to the provisions of Sections 3.4.3.C and 3.4.3.F of
the 1992 Master Agreement and Section 5.5 of the Second Master
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Agreement Amendment (as each may be amended or restated), Section 4 of the
Principal Mutual Note Agreement and similar provisions in any other Beneficiary
Agreements, the Debtor waives the right to direct the application of any and all
payments at any time or times hereafter received by the Trustee on account of
the Obligations. The Debtor agrees that the Beneficiaries shall have the
continuing exclusive right to apply and reapply any and all such payments in
such manner as such Beneficiary may deem advisable, notwithstanding any entry by
such Beneficiary upon any of its books and records.
7.6. If any part of this Security Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
7.7. The captions in this Security Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Security Agreement.
7.8. THE DEBTOR, TO THE MAXIMUM EXTENT IT MAY LEGALLY DO SO, HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE
OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS SECURITY
AGREEMENT OR ANY OTHER RELATED DOCUMENTS, OR IN ANY WAY CONNECTED WITH, OR
RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO
SUCH DOCUMENTS, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING AND IRRESPECTIVE OF WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT IT MAY LEGALLY DO SO, THE DEBTOR
HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS SECTION 7.8 WITH ANY
-----------
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO
WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.
(Initials)
the Debtor
--------------
7.9. NOTHING IN THIS SECURITY AGREEMENT, THE COLLATERAL TRUST
AGREEMENT OR ANY OTHER SECURITY DOCUMENT SHALL BE CONSTRUED AS, AND AMEX HAS NOT
INTENDED THERE TO BE, A WAIVER OF ANY RIGHTS AMEX MAY HAVE UNDER APPLICABLE
STATE OR FEDERAL LAWS (INCLUDING FEDERAL BANKRUPTCY LAWS) RELATING TO THE
OBLIGATIONS OF ACE TO REMIT TRUST FUNDS TO AMEX. HOWEVER, IF AT ANY TIME AFTER
THE TRUSTEE HAS RECEIVED A NOTICE OF ACTIONABLE DEFAULT, THE APPLICATION OF SUCH
LAWS WOULD RESULT IN ANY RECOVERIES BY AMEX, AMEX SHALL REMIT SUCH RECOVERIES TO
THE
26
TRUSTEE FOR DISTRIBUTION IN ACCORDANCE WITH SECTION 4.4 OF THE COLLATERAL TRUST
-----------
AGREEMENT.
7.10. To the extent that any of the Beneficiaries receive payments on
the Secured Debt or receive Proceeds of Collateral which are subsequently
invalidated, declared to be fraudulent or preferential, or are required to be
repaid to a trustee, receiver or any other Person under the Bankruptcy Code or
under state, federal or common law, then, to the extent the payments or Proceeds
are so repaid, the Secured Debt or part thereof which was intended to be
satisfied shall be revived and will continue to be in full force and effect as
if those payments or Proceeds had never been received by such Beneficiary.
7.11. This Security Agreement may be executed and delivered in
counterparts, all of which taken together shall constitute this Security
Agreement. Delivery of an executed signature page by any of the parties by
facsimile transmission shall be deemed execution and delivery of this Security
Agreement for all purposes hereof. Notwithstanding execution and delivery of
this Security Agreement by facsimile transmission as provided above, the parties
shall undertake to provide each other with original executed copies of this
Security Agreement within two (2) Business Days following the date hereof. In
making proof of this Security Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
7.12. Any financing statement (or any amendment or supplement thereto)
delivered by the Debtor to the Trustee shall be considered to continue to be
valid and in full force and effect, notwithstanding its filing in the public
records at a later time when the person who signed such statement on behalf of
the Debtor is no longer in an official capacity with the Debtor.
27
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement or caused this Security Agreement to be executed and delivered by
their duly authorized officers as of the date first set forth above.
ACE CASH EXPRESS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Trustee
By:
------------------------------
Name:
----------------------------
Title:
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28
