March 17, 1997
SECURITY AGREEMENT
Bank/Secured Party:
NATIONSBANK OF TEXAS, N.A.
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Debtor:
HALLMARK FINANCE CORPORATION
00000 Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Debtor is a corporation. The collateral is located at Debtor's address
shown above.
Terms used herein which are defined in that certain Loan Agreement
of even date herewith between Debtor and Bank (the "Loan Agreement"),
unless otherwise defined herein, shall have the same meanings set forth
in the Loan Agreement.
1. Security Interest. For good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Debtor
(hereinafter referred to as "Debtor") assigns and grants to Bank (also
known as "Secured Party"), a security interest and lien in the
Collateral (hereinafter defined) to secure the payment and the
performance of the Obligation (hereinafter defined).
2. Collateral. A security interest is granted in the following
collateral described in this Item 2 (the Collateral"):
A. Types of Collateral.
[X] Premium Finance Agreements:
[X] Blanket Lien: All Premium Finance Agreements and all rights
and privileges related thereto, including, without limitation, all
collateral therefor and guaranties thereof, now owned or hereafter
acquired by Debtor; all notes receivable of Debtor (notes made payable
to the order of Debtor) now existing or hereafter arising, together with
all renewals, extensions, modifications or rearrangements of such notes,
payments thereon, and all other proceeds, monies, income and benefits
arising from or by virtue of all sums payable or distributable with
respect to such notes; all accounts as that term is defined in Chapter 9
of the Texas Business and Commerce Code, general intangibles, executory
contract rights, chattel paper, documents, instruments, notes, drafts,
acceptances, tax refunds, insurance proceeds, rights to refund and
indemnification, and all other debts, obligations and liabilities in
whatever form owing to Debtor from any person, firm or corporation now
existing or at any time hereafter arising including all securities,
guaranties, warranties, indemnity agreements, insurance policies and all
other agreements pertaining to the same; all collateral which secures
any of the foregoing; and all proceeds of the foregoing. The Collateral
includes all of Debtor's rights to receive payment from any party or
parties arising under any reinsurance or similar types of agreements
related to any Premium Finance Agreements of Debtor, including rights
arising under the Reinsurance Agreements as defined in the Loan
Agreement, as well as all of Debtor's rights to any unearned insurance
premiums. Notwithstanding the foregoing, the Collateral does not
include any Premium Finance Agreement sold to Peregrine Premium Finance
L.C. prior to the date hereof.
[X] Accounts:
[X] Blanket Lien: Any and all accounts and other rights of Debtor
to the payment for goods sold or leased or for services rendered whether
or not earned by performance, including, without limitation, contract
rights, book debts, checks, notes, drafts, instruments, chattel paper,
acceptances, and any and all amounts due to Debtor from a factor or
other forms of obligations and receivables, now existing or hereafter
arising.
[X] Inventory:
[X] Blanket Lien: Any and all of Debtor's goods held as
inventory, whether now owned or hereafter acquired, including without
limitation, any and all such goods held for sale or lease or being
processed for sale or lease in Debtor's business, as now or hereafter
conducted, including all materials, goods and work in process, finished
goods and other tangible property held for sale or lease or furnished or
to be furnished under contracts of service or used or consumed in
Debtor's business, along with all documents (including documents of
title) covering such inventory.
[X] Equipment:
[X] Blanket Lien: Any and all of Debtor's goods held as
equipment, including, without limitation, all machinery, tools, dies,
furnishings, or fixtures, wherever located, whether now owned or
hereafter acquired, together with all increases, parts, fittings,
accessories, equipment, and special tools now or hereafter affixed to
any part thereof or used in connection therewith.
[X] Instruments and/or Investment Documents:
[X] Blanket Lien: Any and all of Debtor's instruments, documents,
and other writings of any type, which evidence a right to the payment
of money and which are of a type that is transferred in the ordinary
course of business by delivery with any necessary indorsement or
assignment, whether now owned or hereafter acquired, including, without
limitation, negotiable instruments, promissory notes, and documents of
title owned or to be owned by Debtor, certificates of deposit, and all
liens, security agreements, leases and other contracts securing or
otherwise relating to any of said instruments or documents.
[X] General Intangibles:
[X] Blanket Lien: Any and all of Debtor's general intangible
property, whether now owned or hereafter acquired by Debtor or used in
Debtor's business currently or hereafter, including, without limitation,
all patents, trademarks, service marks, trade secrets, copyrights and
exclusive licenses (whether issued or pending) literary rights, contract
rights and all documents, applications, materials and other matters
related thereto, all inventions, all manufacturing, engineering and
production plans, drawings, specifications, processes and systems, all
trade names, goodwill and all chattel paper, documents and instruments
relating to such general intangibles.
[X] Other:
[X] Computer Collateral:
[X] Blanket Lien: All of the following property now owned or
hereafter acquired (whether as owner, lessee, licensee, or otherwise) by
Debtor: (i) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories and all peripheral
devices and other related computer hardware; (ii) all software programs
(including source code and object code and all related applications and
data files) designed for use on the computers and electronic data
processing hardware described in clause (i) above; (iii) all firmware
associated therewith; (iv) all documentation (including flow charts,
logic diagrams, manuals, guides and specifications) for such hardware,
software and firmware described in the preceding clauses (i), (ii), and
(iii); and (v) all rights with respect to all of the foregoing,
including, without limitation, licenses, options, warranties, service
contracts, program services, test rights, maintenance rights, support
rights, improvement rights, renewal rights and indemnifications and any
substitutions, replacements, additions or model conversions of any of
the foregoing.
B. Substitutions, Proceeds and Related Items. Any and all
substitutes and replacements for, accessions, attachments and other
additions to, tools, parts and equipment now or hereafter added to or
used in connection with, and all cash or non-cash proceeds and products
of, the Collateral (including, without limitation, all income, benefits
and property receivable, received or distributed which results from any
of the Collateral, such as dividends payable or distributable in cash,
property or stock; insurance distributions of any kind related to the
Collateral, including, without limitation, returned premiums, interest,
premium and principal payments; redemption proceeds and subscription
rights; and shares or other proceeds of conversions or splits of any
securities in the Collateral); any and all choses in action and causes
of action of Debtor, whether now existing or hereafter arising,
relating directly or indirectly to the Collateral (whether arising in
contract, tort or otherwise and whether or not currently in litigation);
all documents, accounts and chattel paper, whether now existing or
hereafter arising directly or indirectly from or related to the
Collateral; all warranties related to the Collateral; all of Debtor's
books, records, data, plans, manuals, computer software, computer tapes,
computer systems, computer disks, computer programs, source codes and
object codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to retrieve data
and other information pertaining directly or indirectly to the
Collateral from third parties, whether now existing or hereafter
arising; and all returned, refused, stopped in transit, or repossessed
Collateral, any of which, if received by Debtor, upon request shall be
delivered immediately to Bank.
C. Balances and Other Property. The balance of every deposit
account of Debtor maintained with Bank and any other claim of Debtor
against Bank, now or hereafter existing, liquidated or unliquidated, and
all money, instruments, securities, documents, chattel paper, credits,
claims, demands, income, and any other property, rights and interests of
Debtor which at any time shall come into the possession or custody or
under the control of Bank or any of Bank's agents or affiliates for any
purpose, and the proceeds of any thereof. Bank shall be deemed to have
possession of any of the Collateral in transit to or set apart for Bank
or any of its agents or affiliates.
3. Description of Obligation(s). The following obligations
("Obligation" or Obligations ) are secured by this Agreement: (a) All
debts, obligations, liabilities and agreements of Debtor to Bank, now or
hereafter existing, arising directly or indirectly between Debtor and
Bank whether absolute or contingent, joint or several, secured or
unsecured, due or not due, contractual or tortious, liquidated or
unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above; (b) All
costs incurred by Bank to obtain, preserve, perfect and enforce this
Agreement and maintain, preserve, collect and realize upon the
Collateral; (c) All other costs and attorney's fees incurred by Bank,
for which Debtor is obligated to reimburse Bank in accordance with the
terms of the Loan Agreement and all other Loan Documents (hereinafter
defined), together with interest at the maximum rate allowed by law, or
if there is no maximum rate, 15% per annum; and (d) All amounts which
may be owed to Bank pursuant to the Loan Agreement and all other Loan
Documents executed between Bank and any other Debtor. If Debtor is not
the obligor of the Obligation, and in the event any amount paid to Bank
on any Obligation is subsequently recovered from Bank in or as a result
of any bankruptcy, insolvency or fraudulent conveyance proceeding,
Debtor shall be liable to Bank for the amounts so recovered up to the
fair market value of the Collateral whether or not the Collateral has
been released or the security interest terminated. In the event the
Collateral has been released or the security interest terminated, the
fair market value of the Collateral shall be determined, at Bank's
option, as of the date the Collateral was released, the security
interest terminated, or said amounts were recovered.
4. Debtor's Warranties. Debtor hereby represents and warrants to
Bank as follows:
A. Financing Statements. Except as may be noted by schedule
attached hereto and incorporated herein by reference, no financing
statement covering the Collateral is or will be on file in any public
office, except the financing statements relating to this security
interest, and no security interest, other than the one herein created,
has attached or been perfected in the Collateral or any part thereof.
B. Ownership. Debtor owns, or will use the proceeds of any loans
by Bank to become the owner of, the Collateral free from any setoff,
claim, restriction, lien, security interest or encumbrance except
(a) liens in favor of Bank, (b) liens for taxes, assessments or similar
charges, incurred in the ordinary course of business that are not yet
due and payable, (c) liens of mechanics, materialmen, warehousemen,
carriers, operators and other like liens securing obligations incurred
in the ordinary course of business that are not yet due and payable;
(d) landlord's liens for rentals not yet due and payable; and (e) liens
securing any purchase money Indebtedness permitted hereunder (if any) if
such liens do not encumber any property other than the property for
which such Indebtedness was incurred and do not secure payment of any
amount other than the amount from time to time owing on the property for
which such Indebtedness was incurred and the Indebtedness initially
secured by such lien does not exceed $100,000.
C. Fixtures and Accessions. None of the Collateral is affixed to
real estate or is an accession to any goods, or will become a fixture or
accession, except as expressly set out herein.
D. Claims of Debtors on the Collateral. All account debtors and
other obligors whose debts or obligations are part of the Collateral
have no right to setoffs, counterclaims or adjustments, and no defenses
in connection therewith.
E. Environmental Compliance. The conduct of Debtor's business
operations and the condition of Debtor's property does not and will not
violate any federal laws, rules or ordinances for environmental
protection, regulations of the Environmental Protection Agency and any
applicable local or state law, rule, regulation or rule of common law
and any judicial interpretation thereof relating primarily to the
environment or any materials defined as hazardous materials or
substances under any local, state or federal environmental laws, rules
or regulations, and petroleum, petroleum products, oil and asbestos
("Hazardous Materials").
F. Power and Authority. Debtor has full power and authority to
make this Agreement, and all necessary consents and approvals of any
persons, entities, governmental or regulatory authorities and securities
exchanges have been obtained to effectuate the validity of this
Agreement.
G. Licenses and Permits. Debtor has obtained all licenses,
permits, and approvals required by applicable law for it to engage in
the business of insurance premium financing in each state in which
Debtor engages in such business. To the best knowledge of Debtor,
Debtor owns, is licensed, or is entitled to use by license or otherwise,
or has all permits and other governmental approvals for all licenses,
technology, know-how, processes and rights with respect to any of the
foregoing used in or necessary for the conduct of Debtor's business as
currently conducted except where failure to do so does not and is not
reasonably expected to have a material adverse effect upon the
Borrower's financial condition or operation or the Collateral.
H. Form of Agreements. The form of each premium finance
agreement used by Debtor in its insurance premium financing business has
been approved by the State Board of Insurance of the State of Texas or
other governmental regulatory authority with jurisdiction to approve
same.
I. Compliance with Law. Debtor has complied with all applicable
laws, including, without limitation, Chapter 24 of the Texas Insurance
Code, Title 28 of the Texas Administrative Code, the Truth-in-Lending
Act (the "Act"), and Regulation Z ("Reg Z") promulgated pursuant
thereto, and all other statutes applicable to Debtor's business.
J. Reinsurance Agreements. Each Reinsurance Agreement is in full
force and effect and constitutes the legal, valid, and binding
obligation of each party thereto.
5. Debtor's Covenants. Until full payment and performance of all
of the Obligation and termination or expiration of any obligation or
commitment of Bank to make advances or loans to Debtor, unless Bank
otherwise consents in writing:
A. Obligation and This Agreement. Debtor shall perform all of
its agreements herein and in any other agreements between it and Bank.
B. Ownership and Maintenance of the Collateral. Debtor shall
keep all tangible Collateral in good condition. Debtor shall defend the
Collateral against all claims and demands of all persons at any time
claiming any interest therein adverse to Bank. Debtor shall keep the
Collateral free from all liens and security interests except those liens
described in paragraph 4.B of this Agreement. Debtor shall furnish to
Bank proof of payment of ad valorem taxes payable on the Collateral as
and when requested by Bank.
C. Insurance. Debtor shall insure the Collateral which is of an
insurable nature (the parties agree that Premium Finance Agreements
shall not be insured) with companies acceptable to Bank. Such insurance
shall be in an amount not less than the fair market value of the
Collateral and shall be against such casualties, with such deductible
amounts as Bank shall approve. All insurance policies shall be written
for the benefit of Debtor and Bank as their interests may appear,
payable to Bank as loss payee, or in other form satisfactory to Bank,
and such policies or certificates evidencing the same shall be furnished
to Bank. All policies of insurance shall provide for written notice to
Bank at least thirty (30) days prior to cancellation. Risk of loss or
damage is Debtor's to the extent of any deficiency in any effective
insurance coverage.
D. Bank's Costs. Debtor shall pay all costs necessary to obtain,
preserve, perfect, defend and enforce the security interest created by
this Agreement, collect the Obligation, and preserve, defend, enforce
and collect the Collateral, including but not limited to taxes,
assessments, insurance premiums, repairs, rent, storage costs and
expenses of sales, legal expenses, reasonable attorney's fees and other
fees or expenses for which Debtor is obligated to reimburse Bank in
accordance with the terms of the Loan Documents. Whether the Collateral
is or is not in Bank's possession, and without any obligation to do so
and without waiving Debtor's default for failure to make any such
payment, Bank at its option may pay any such costs and expenses,
discharge encumbrances on the Collateral, and pay for insurance of the
Collateral, and such payments shall be a part of the Obligation and bear
interest at the rate set out in the Obligation for amounts past due.
Debtor agrees to reimburse Bank on demand for any costs so incurred.
E. Information and Inspection. Debtor shall (i) promptly furnish
Bank any information with respect to the Collateral requested by Bank;
(ii) allow Bank or its representatives to inspect the Collateral, at any
time and wherever located, and to inspect and copy, or furnish Bank or
its representatives with copies of, all records relating to the
Collateral and the Obligation; and (iii) promptly furnish Bank or its
representatives such information as Bank may request to identify the
Collateral, at the time and in the form requested by Bank.
F. Additional Documents. Debtor shall sign and deliver any
papers deemed necessary or desirable in the judgment of Bank to obtain,
maintain, and perfect the security interest hereunder and to enable Bank
to comply with any federal or state law in order to obtain or perfect
Bank's interest in the Collateral or to obtain proceeds of the
Collateral.
G. Parties Liable on the Collateral. Debtor shall preserve the
liability of all obligors on any Collateral and shall preserve the
priority of all security therefor. Bank shall have no duty to preserve
such liability or security, but may do so at the expense of Debtor,
without waiving Debtor's default.
H. Records of the Collateral. Debtor at all times shall maintain
accurate books and records covering the Collateral. Debtor immediately
will xxxx all books and records with an entry showing the absolute
assignment of all Collateral to Bank, and Bank is hereby given the right
to audit the books and records of Debtor relating to the Collateral at
any time and from time to time. The amounts shown as owed to Debtor on
Debtor's books and on any assignment schedule will be the undisputed
amounts owing and unpaid.
I. Disposition of the Collateral. If disposition of any
Collateral gives rise to an account, chattel paper or instrument, Debtor
immediately shall notify Bank, and upon request of Bank shall assign or
indorse the same to Bank. No Collateral may be sold, leased,
manufactured, processed or otherwise disposed of by Debtor in any manner
without the prior written consent of Bank, except the Collateral sold,
leased, manufactured, processed or consumed in the ordinary course of
business.
J. Accounts. Each account held as Collateral will represent the
valid and legally enforceable obligation of third parties.
K. Notice/Location of the Collateral. Debtor shall give Bank
written notice of each office of Debtor in which records of Debtor
pertaining to accounts held as Collateral are kept, and each location at
which the Collateral is or will be kept, and of any change of any such
location. If no such notice is given, all records of Debtor pertaining
to the Collateral and all Collateral of Debtor are and shall be kept at
the address marked by Debtor above.
L. Change of Name/Status and Notice of Changes. Without the
written consent of Bank, Debtor shall not change its name, change its
corporate status, use any trade name or engage in any business not
reasonably related to its business as presently conducted. Debtor shall
notify Bank immediately of (i) any material change in the Collateral,
(ii) a change in Debtor's residence or location, (iii) a change in any
matter warranted or represented by Debtor in this Agreement, or in any
of the Loan Documents or furnished to Bank pursuant to this Agreement,
and (iv) the occurrence of an Event of Default (hereinafter defined).
M. Use and Removal of the Collateral. Debtor shall not use the
Collateral illegally. Debtor shall not, unless previously indicated as
a fixture, permit the Collateral to be affixed to real or personal
property without the prior written consent of Bank. Debtor shall not
permit any of the Collateral to be removed from the locations specified
herein without the prior written consent of Bank, except for the sale of
inventory in the ordinary course of business.
N. Possession of the Collateral. Upon the occurrence of any
Trigger Event, within one (1) Business Day, Borrower shall immediately
notify Bank of the occurrence of such Trigger Event and deliver to Bank
all Premium Finance Agreements of Borrower (excluding those Premium
Finance Agreements sold to Peregrine Premium Finance L.C. prior to the
date hereof), appropriately endorsed, with full recourse and warranty
and execute, acknowledge, and deliver to Bank and file or cause to be
filed any and all other documents, agreements and instruments and do all
other acts or things as Bank may reasonably request in order more fully
to effect the assignment of the Premium Finance Agreements to Bank.
O. Consumer Credit. If any Collateral or proceeds includes
obligations of third parties to Debtor, the transactions giving rise to
the Collateral shall conform in all respects to the applicable state or
federal law including but not limited to consumer credit law. Debtor
shall hold harmless and indemnify Bank against any cost, loss or expense
arising from Debtor's breach of this covenant.
P. Power of Attorney. Debtor appoints Bank and any officer
thereof as Debtor's attorney-in-fact with full power in Debtor's name
and behalf to do every act which Debtor is obligated to do or may be
required to do hereunder; however, nothing in this paragraph shall be
construed to obligate Bank to take any action hereunder nor shall Bank
be liable to Debtor for failure to take any action hereunder. This
appointment shall be deemed a power coupled with an interest and shall
not be terminable as long as the Obligation is outstanding and shall not
terminate on the disability or incompetence of Debtor.
Q. Waivers by Debtor. Debtor waives notice of the creation,
advance, increase, existence, extension or renewal of, and of any
indulgence with respect to, the Obligation; waives presentment, demand,
notice of dishonor, and protest; waives notice of the amount of the
Obligation outstanding at any time, notice of any change in financial
condition of any person liable for the Obligation or any part thereof,
notice of any Event of Default, and all other notices respecting the
Obligation; and agrees that maturity of the Obligation and any part
thereof may be extended or renewed, and after an Event of Default has
occurred and is continuing, accelerated, one or more times by Bank in
its discretion, without notice to Debtor. Debtor waives any right to
require that any action be brought against any other person or to
require that resort be had to any other security or to any balance of
any deposit account. Debtor further waives any right of subrogation or
to enforce any right of action against any other Debtor until the
Obligation is paid in full.
R. Other Parties and Other Collateral. No renewal or extension
of or any other indulgence with respect to the Obligation or any part
thereof, no release of any security, no release of any person (including
any maker, indorser, guarantor or surety) liable on the Obligation, no
delay in enforcement of payment, and no delay or omission or lack of
diligence or care in exercising any right or power with respect to the
Obligation or any security therefor or guaranty thereof or under this
Agreement shall in any manner impair or affect the rights of Bank under
the law, hereunder, or under any other agreement pertaining to the
Collateral. Bank need not file suit or assert a claim for personal
judgment against any person for any part of the Obligation or seek to
realize upon any other security for the Obligation, before foreclosing
or otherwise realizing upon the Collateral. Debtor waives any right to
the benefit of or to require or control application of any other
security or proceeds thereof, and agrees that Bank shall have no duty or
obligation to Debtor to apply to the Obligation any such other security
or proceeds thereof.
S. Collection and Segregation of Accounts and Right to Notify.
Bank hereby authorizes Debtor to collect the Collateral, subject to the
direction and control of Bank, but Bank may, after an Event of Default
has occurred and without further notice, curtail or terminate said
authority at any time. Upon notice by Bank, whether oral or in writing,
to Debtor, Debtor shall forthwith upon receipt of all checks, drafts,
cash, and other remittances in payment of or on account of the
Collateral, deposit the same in one or more special accounts maintained
with Bank over which Bank alone shall have the power of withdrawal. The
remittance of the proceeds of such Collateral shall not, however,
constitute payment or liquidation of such Collateral until Bank shall
receive good funds for such proceeds. Funds placed in such special
accounts shall be held by Bank as security for all Obligations secured
hereunder. These proceeds shall be deposited in precisely the form
received, except for the indorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make, and which
indorsement Bank is also hereby authorized, as attorney-in-fact, to make
on behalf of Debtor. In the event Bank has notified Debtor to make
deposits to a special account, pending such deposit, Debtor agrees that
it will not commingle any such checks, drafts, cash or other remittances
with any funds or other property of Debtor, but will hold them separate
and apart therefrom, and upon an express trust for Bank until deposit
thereof is made in the special account. Bank will, from time to time,
apply the whole or any part of the Collateral funds on deposit in this
special account against such Obligations as are secured hereby as Bank
may in its sole discretion elect. At the sole election of Bank, any
portion of said funds on deposit in the special account which Bank shall
elect not to apply to the Obligations, may be paid over by Bank to
Debtor. If an Event of Default has occurred and is continuing, Bank may
notify persons obligated on any Collateral to make payments directly to
Bank and Bank may take control of all proceeds of any Collateral. Until
Bank elects to exercise such rights, Debtor, as agent of Bank, shall
collect and enforce all payments owed on the Collateral.
T. Compliance with State and Federal Laws. Debtor will maintain
its existence, good standing and qualification to do business, where
required, and comply with all laws, regulations and governmental
requirements, including without limitation, environmental laws
applicable to it or any of its property, business operations and
transactions.
U. Environmental Covenants. Debtor shall immediately advise Bank
in writing of (i) any and all enforcement, cleanup, remedial, removal,
or other governmental or regulatory actions instituted, completed or
threatened pursuant to any applicable federal, state, or local laws,
ordinances or regulations relating to any Hazardous Materials affecting
Debtor's business operations; and (ii) all claims made or threatened by
any third party against Debtor relating to damages, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous
Materials. Debtor shall immediately notify Bank of any remedial action
taken by Debtor with respect to Debtor's business operations. Debtor
will not use or permit any other party to use any Hazardous Materials at
any of Debtor's places of business or at any other property owned by
Debtor except such materials as are incidental to Debtor's normal course
of business, maintenance and repairs and which are handled in compliance
with all applicable environmental laws. Debtor agrees to permit Bank,
its agents, contractors and employees to enter and inspect any of
Debtor's places of business or any other property of Debtor at any
reasonable times upon three (3) days prior notice for the purposes of
conducting an environmental investigation and audit (including taking
physical samples) to insure that Debtor is complying with this covenant
and Debtor shall reimburse Bank on demand for the costs of any such
environmental investigation and audit. Debtor shall provide Bank, its
agents, contractors, employees and representatives with access to and
copies of any and all data and documents relating to or dealing with any
Hazardous Materials used, generated, manufactured, stored or disposed of
by Debtor's business operations within five (5) days of the request
therefor.
V. Endorsement. At such times as Borrower is required by the
terms of Section 5.10 of the Loan Agreement and paragraph 5.N hereof,
Debtor will endorse each Premium Finance Agreement to Bank as follows:
"Pay to the order of NationsBank of Texas, N.A. with full recourse
and warranty"
W. Status of Reinsurance Agreements. Debtor will notify Bank of
any default by any party to any Reinsurance Agreement and will not enter
into any material alteration of the terms of any Reinsurance Agreement
without the prior written consent of Bank. Debtor will comply fully and
completely with all of Debtor's obligations under each Reinsurance
Agreement.
X. Compliance with Certain Laws. In addition to the other
provisions hereof, Debtor will comply with Chapter 24 of the Texas
Insurance Code, Title 28 of the Texas Administrative Code, the Act, and
Reg Z.
Y. Renewals of Licenses. Debtor will on a timely basis procure
all necessary renewals and extensions of all licenses, approvals, and
permits required for it to engage in the business of insurance premium
financing which are required by the laws of each state in which Debtor
engages in such business.
Z. Notification to Insurers. Debtor will notify each insurer
whose premiums are being financed with Premium Finance Agreements
constituting part of the Collateral, or its managing general agent, of
the existence of each Premium Finance Agreement in a timely manner and
take all such other action as may be necessary or required in order that
Debtor will be entitled to receive all unearned premiums from such
insurer if an insurance contract is canceled, and Debtor will furnish a
list of same to Bank upon Bank's request. Notice of the creation of
each Premium Finance Agreement shall be given to the insurer within
thirty (30) days of Debtor's acceptance of such agreement.
6. Grant of License to Use Intangibles. To the extent permitted
by applicable law and the terms of any agreements relating to Debtor's
General Intangibles, Debtor hereby grants to the Bank an irrevocable,
nonexclusive license (exercisable upon the occurrence of an Event of
Default) to use, assign, license or sublicense any of Debtor's General
Intangibles, and wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for
the compilation or printout thereof. No agreements hereafter acquired
or agreed to or entered into by Debtor shall prohibit, restrict, or
impair the rights granted hereunder.
7. Rights and Powers of Bank.
A. General. Bank, after an Event of Default has occurred and is
continuing, without liability to Debtor may: obtain from any person
information regarding Debtor or Debtor's business or the Collateral,
which information any such person also may furnish without liability to
Debtor; require Debtor to give possession or control of any Collateral
to Bank; indorse as Debtor's agent any instruments, documents or chattel
paper in the Collateral or representing proceeds of the Collateral;
contact account debtors directly to verify information furnished by
Debtor; take control of proceeds, including stock received as dividends
or by reason of stock splits; release the Collateral in its possession
to any Debtor, temporarily or otherwise; reject as unsatisfactory any
property hereafter offered by Debtor as Collateral; set standards from
time to time to govern what may be used as after acquired Collateral;
take control of funds generated by the Collateral, such as cash
dividends, interest and proceeds or refunds from insurance, and use same
to reduce any part of the Obligation and exercise all other rights which
an owner of such Collateral may exercise, except the right to vote or
dispose of the Collateral; at any time transfer any of the Collateral or
evidence thereof into its own name or that of its nominee; and demand,
collect, convert, redeem, receipt for, settle, compromise, adjust, xxx
for, foreclose or realize upon the Collateral, in its own name or in the
name of Debtor, as Bank may determine. Bank shall not be liable for
failure to collect any account or instruments, or for any act or
omission on the part of Bank, its officers, agents or employees, except
for its or their own willful misconduct or gross negligence. The
foregoing rights and powers of Bank will be in addition to, and not a
limitation upon, any rights and powers of Bank given by law, elsewhere
in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may
(but is not obligated to) purchase single interest insurance coverage
for the Collateral which insurance may at Bank's option (i) protect only
Bank and not provide any remuneration or protection for Debtor directly
and (ii) provide coverage only after the Obligation has been declared
due as herein provided. The premiums for any such insurance purchased
by Bank shall be a part of the Obligation and shall bear interest as
provided in 3(d) hereof.
B. Convertible Collateral. Bank may present for conversion any
Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Bank shall not have any
duty to present for conversion any Collateral unless it shall have
received from Debtor detailed written instructions to that effect at a
time reasonably far in advance of the final conversion date to make such
conversion possible.
8. Default.
A. Event of Default. An event of default ("Event of Default")
shall occur if: (i) Debtor or any other obligor on all or part of the
Obligation shall fail to timely and properly pay or observe, keep or
perform any term, covenant, agreement or condition in this Agreement or
in any other agreement between Debtor and Bank or between Bank and any
other obligor on the Obligation (beyond any applicable grace period
contained therein), including, but not limited to, any other note or
instrument, loan agreement, security agreement, deed of trust, mortgage,
promissory note, guaranty, certificate, assignment, instrument, document
or other agreement concerning or related to the Obligation
(collectively, the "Loan Documents") beyond any applicable grace period
contained therein; or (ii) Debtor or such other obligor shall fail to
timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any agreement between such party and any
affiliate or subsidiary of NationsBank Corporation beyond any applicable
grace period contained therein.
B. Rights and Remedies. If any Event of Default shall occur,
then, in each and every such case, Bank may, without presentment,
demand, or protest; notice of default, dishonor, demand, non-payment, or
protest; notice of intent to accelerate all or any part of the
Obligation; notice of acceleration of all or any part of the Obligation;
or notice of any other kind, all of which Debtor hereby expressly
waives, (except for any notice required under this Agreement, any other
Loan Document or applicable law); at any time thereafter exercise and/or
enforce any of the following rights and remedies at Bank's option:
(i) Acceleration. The Obligation shall, at Bank's option, become
immediately due and payable, and the obligation, if any, of Bank to
permit further borrowings under the Obligation shall at Bank's option
immediately cease and terminate.
(ii) Possession and Collection of the Collateral. At its option:
(a) if Bank has not already done so, (i) take possession or control of,
store, lease, operate, manage, sell, or instruct any agent or broker to
sell or otherwise dispose of, all or any part of the Collateral, (ii)
notify all parties under any account or contract right forming all or
any part of the Collateral to make any payments otherwise due to Debtor
directly to Bank, (iii) in Bank's own name, or in the name of Debtor,
demand, collect, receive, xxx for, and give receipts and releases for,
any and all amounts due under such accounts and contract rights, or (iv)
indorse as the agent of Debtor any check, note, chattel paper,
documents, or instruments forming all or any part of the Collateral; (b)
make formal application for transfer to Bank (or to any assignee of Bank
or to any purchaser of any of the Collateral) of all of Debtor's
permits, licenses, approvals, agreements, and the like relating to the
Collateral or to Debtor's business; (c) take any other action which Bank
deems necessary or desirable to protect and realize upon its security
interest in the Collateral; and (d) in addition to the foregoing, and
not in substitution therefor, exercise any one or more of the rights and
remedies exercisable by Bank under any other provision of this
Agreement, under any of the other Loan Documents, or as provided by
applicable law (including, without limitation, the Uniform Commercial
Code as in effect in Texas (hereinafter referred to as the "UCC")). In
taking possession of the Collateral Bank may enter Debtor's premises and
otherwise proceed without legal process, if this can be done without
breach of the peace. Debtor shall, upon Bank's demand, promptly make
the Collateral or other security available to Bank at a place designated
by Bank, which place shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss,
depreciation or other damages to the Collateral, unless caused by Bank's
willful and malicious act. Bank shall have no duty to take any action
to preserve or collect the Collateral.
(iii) Receiver. Obtain the appointment of a receiver for all or
any of the Collateral, Debtor hereby consenting to the appointment of
such a receiver and agreeing not to oppose any such appointment.
(iv) Right of Set Off. Without notice or demand to Debtor, set
off and apply against any and all of the Obligation any and all deposits
(general or special, time or demand, provisional or final) and any other
indebtedness, at any time held or owing by Bank or any of Bank's agents
or affiliates to or for the credit of the account of Debtor or any
guarantor or indorser of Debtor's Obligation.
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to
enter upon any premises upon which any of the same, or any Collateral,
may be situated and remove the same therefrom without liability. Bank
may surrender any insurance policies in the Collateral and receive the
unearned premium thereon. Debtor shall be entitled to any surplus and
shall be liable to Bank for any deficiency. The proceeds of any
disposition after default available to satisfy the Obligation shall be
applied to the Obligation in such order and in such manner as Bank in
its discretion shall decide.
Debtor specifically understands and agrees that any sale by Bank of all
or part of the Collateral pursuant to the terms of this Agreement may be
effected by Bank at times and in manners which could result in the
proceeds of such sale as being significantly and materially less than
might have been received if such sale had occurred at different times or
in different manners, and Debtor hereby releases Bank and its officers
and representatives from and against any and all obligations and
liabilities arising out of or related to the timing or manner of any
such sale.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal
securities law, Bank may offer and sell such Collateral in a transaction
exempt from registration under federal securities law, and any such sale
made in good faith by Bank shall be deemed "commercially reasonable".
(v) If any Event of Default exists, upon the written
demand of Bank, Debtor shall execute and deliver to Bank to the extent
permitted by applicable law and any contracts relating to the Computer
Collateral, an assignment or assignments of the Computer Collateral and
licenses in favor of, or otherwise of value to Debtor, and such other
documents as are necessary or appropriate to carry out the intent and
purposes of this Security Agreement. Such an assignment shall reduce
the Obligations then due only to the extent that Bank receives cash
proceeds in respect of the sale of, or other realization upon, the
Computer Collateral or licenses; such cash proceeds to be applied by
Bank as provided in the Loan Agreement.
9. General.
A. Parties Bound. Bank's rights hereunder shall inure to
the benefit of its successors and assigns. In the event of any
assignment or transfer by Bank of any of the Obligation or the
Collateral, Bank thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given
with respect to any of the Obligation or the Collateral not so assigned
or transferred. All representations, warranties and agreements of
Debtor if more than one are joint and several and all shall be binding
upon the personal representatives, heirs, successors and assigns of
Debtor.
B. Waiver. No delay of Bank in exercising any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. No waiver by Bank
of any right hereunder or of any default by Debtor shall be binding upon
Bank unless in writing, and no failure by Bank to exercise any power or
right hereunder or waiver of any default by Debtor shall operate as a
waiver of any other or further exercise of such right or power or of any
further default. Each right, power and remedy of Bank as provided for
herein or in any of the Loan Documents, or which shall now or hereafter
exist at law or in equity or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other such
right, power or remedy. The exercise or beginning of the exercise by
Bank of any one or more of such rights, powers or remedies shall not
preclude the simultaneous or later exercise by Bank of any or all other
such rights, powers or remedies.
C. Waiver. Without limiting the generality of the
appointment of Bank as Debtor's attorney-in-fact pursuant to the Loan
Agreement and the other Loan Documents, Debtor agrees that Bank shall
have the right and authority to the extent permitted by applicable law
and any contracts relating to the Computer Collateral (i) while any
Event of Default exists to license or sublicense the Computer
Collateral, any other General Intangible or any thereof, including,
without limitation, assignments, recordings, registrations and
applications therefor in the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency of
the United States, any State thereof or any other country or political
subdivision thereof, and for the purpose of the recording, registering
and filing of, or accomplishing any other formality with respect to, the
foregoing, to execute and deliver any and all agreements, documents,
instruments of assignment or other papers necessary or advisable to
effect such purpose; and (ii) to make claim for, and receive and give
acquittances for payment on account of, loss under any insurance policy
covering the Collateral, or any part thereof, and to receive, endorse
and collect all checks, drafts and other orders for the payment of money
representing the proceeds of such insurance.
D. Agreement Continuing. This Agreement shall constitute a
continuing agreement, applying to all future as well as existing
transactions, whether or not of the character contemplated at the date
of this Agreement, and if all transactions between Bank and Debtor shall
be closed at any time, shall be equally applicable to any new
transactions thereafter. Provisions of this Agreement, unless by their
terms exclusive, shall be in addition to other agreements between the
parties. Time is of the essence of this Agreement.
E. Definitions. Unless the context indicates otherwise,
definitions in the UCC apply to words and phrases in this Agreement; if
UCC definitions conflict, Article 9 definitions apply.
F. Notices. Notice shall be deemed reasonable if mailed
postage prepaid at least five (5) days before the related action (or if
the UCC elsewhere specifies a longer period, such longer period) to the
address of Debtor given above, or to such other address as any party may
designate by written notice to the other party. Each notice, request
and demand shall be deemed given or made, if sent by mail, upon the
earlier of the date of receipt or five (5) days after deposit in the
U.S. Mail, first class postage prepaid, or if sent by any other means,
upon delivery.
G. Modifications. No provision hereof shall be modified or
limited except by a written agreement expressly referring hereto and to
the provisions so modified or limited and signed by Debtor and Bank.
The provisions of the Agreement shall not be modified or limited by
course of conduct or usage of trade.
H. Applicable Law and Partial Invalidity. This Agreement
has been delivered in the State of Texas and shall be construed in
accordance with the laws of that State. Wherever possible each provision
of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Agreement. The invalidity or unenforceability of any
provision of any Loan Document to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply
to other persons or circumstances.
I. Financing Statement. To the extent permitted by
applicable law, a carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral shall be
sufficient as a financing statement.
J. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED
INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION
IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE,
THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE
ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY
SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW.
IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL.
JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY
BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(i) Special Rules. THE ARBITRATION SHALL BE CONDUCTED IN THE
COUNTY OF ANY DEBTOR'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL
APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION
WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS
OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON
A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
(ii) Reservation of Rights. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER
BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO)
SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY
REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH
SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY
OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT,
AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR
THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT
OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE
THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
K. Controlling Document. To the extent that this Security
Agreement conflicts with or is in any way incompatible with any other
Loan Document concerning the Obligation, any promissory note shall
control over any other document, and if such note does not address an
issue, then each other document shall control to the extent that it
deals most specifically with an issue.
L. Notice of Final Agreement. THIS WRITTEN SECURITY
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their duly authorized representatives
as of the date first above written.
HALLMARK FINANCE CORPORATION
By:
Xxxxx X. Xxxxxxx
Executive Vice President
NATIONSBANK OF TEXAS, N.A.
By:
Xxxxx X. Xxxxx
Vice President
