Security Agreement
This Security Agreement (the "Security Agreement") is made as of June 12,
2007, between Security National Life Insurance Company, a Utah corporation, the
"Borrower" under a Loan Agreement with Lender of the same date of this Security
Agreement, and Security National Financial Corporation, a Utah corporation, the
"Guarantor" under that Loan Agreement (collectively, "Grantor"), and Zions First
National Bank ("Lender"), pursuant to a Loan Agreement of even date herewith
between Borrower and Lender (the "Loan Agreement").
For good and valuable consideration, receipt of which is hereby
acknowledged, Grantors and Lender hereby agree as follows:
1. Definitions. Except as otherwise provided herein, terms defined in the
Loan Agreement shall have the same meanings when used herein. Terms defined in
the singular shall have the same meaning when used in the plural and vice versa.
Terms defined in the Uniform Commercial Code which are used herein shall have
the meanings set forth in the Uniform Commercial Code, except as expressly
defined otherwise. As used herein, the term:
"Collateral" means the collateral described in Section 2, Grant of Security
Interest, below.
"Default Rate" means the default interest rate provided in the Promissory
Note.
"Financial Obligations Collateral" means all Underlying Notes, instruments,
deeds of trust, mortgages, guarantees, and security agreements that are part of
the Collateral.
"Liquidation Costs" means the reasonable costs and out of pocket expenses
incurred by Lender in obtaining possession of any Collateral, in storage and
preparation for sale, lease or other disposition of any Collateral, in the sale,
lease, or other disposition of any or all of the Collateral, and/or otherwise
incurred in foreclosing on any of the Collateral, including, without limitation,
(a) reasonable attorneys fees and legal expenses, (b) transportation and storage
costs, (c) advertising costs, (d) sale commissions, (e) sales tax and license
fees, (f) costs for improving or repairing any of the Collateral, and (g) costs
for preservation and protection of any of the Collateral.
"Permitted Encumbrances" means liens for taxes and assessments not yet due
and payable or, if due and payable, those being contested in good faith by
appropriate proceedings and for which appropriate reserves are maintained,
security interests and liens created by the Loan Documents, and security
interests and liens authorized in writing by Lender.
"Uniform Commercial Code" means the Uniform Commercial Code as adopted now
or in the future in the State of Utah or any other state in which the Collateral
is located.
2. Grant of Security Interest. Grantors hereby grant to Lender a security
interest in the following personal property of Grantors (the "Collateral"):
a. Any and all Underlying Notes and instruments payable to or owing to
Security National Life Insurance Company or held by Security National Life
Insurance Company;
b. Any and all Underlying Notes and instruments payable to or owing to
Security National Mortgage Company that have been assigned to or are held
by Security National Life Insurance Company and which also qualify as
Underlying Notes under the Loan Agreement of the same date herewith between
Lender and Borrower;
c. Any and all deeds of trust, mortgages, and security agreements,
collateral that secure any of the foregoing obligations;
d. All guarantees and supporting obligations that are related to any
of the foregoing obligations; and
e. All amendments, modifications, renewals, extensions, replacements,
additions, and accessions to the foregoing and all proceeds thereof.
Grantors and Lender acknowledge their mutual intent that all security
interests contemplated herein are given as a contemporaneous exchange for new
value to Grantors, regardless of when advances to Grantors are actually made or
when the Collateral is acquired.
3. Debts Secured. The security interest granted by this Security Agreement
shall secure the following debts, obligations and liabilities of Grantors, to
Lender, including, without limitation, (a) the Promissory Note of Borrower in
favor of Lender of even date herewith in the original principal amount of Forty
Million Dollars ($40,000,000.00) (the "Promissory Note"), and all renewals,
extensions, modifications and replacements thereof (including any which increase
the original principal amount), (b) all obligations of Borrower or Guarantor
arising from or relating to the Loan Documents, including, without limitation,
this Security Agreement, (c) advances of the same kind and quality or relating
to this transaction, and (d) all overdrafts on any account of Grantors
maintained with Lender, now existing or hereafter arising.
Grantors and Lender expressly acknowledge their mutual intent that the
security interest created by this Security Agreement secure any and all future
debts, obligations, and liabilities of Grantors to Lender only upon the mutual
agreement of the parties at the time Lender extends such future credit to
Grantors.
4. Location of Grantors and Collateral. Grantors represents and warrants
that:
a. Borrower and Guarantor are corporations incorporated under the laws
of the State of Utah.
b. The complete and exact name of Borrower is Security National Life
Insurance Company. The complete and exact name of Guarantor is Security
National Financial Corporation.
c. During the five (5) years preceding the date of this Security
Agreement:
i. Grantors has not been known by nor used any legal, fictitious
or trade name;
ii. Grantors has not changed its name in any respect;
iii. Grantors has not been the surviving entity of a merger or
consolidation;
d. Grantors' chief executive office and principal place of business is
located at 5300 South 360 West, Salt Lake City, Utah, 84157.
e. Grantors' place of business is located at 5300 South 360 West, Salt
Lake City, Utah, 84157.
f. During the five (5) years preceding the date of this Security
Agreement, there has not been any change in any of the above locations.
Grantors agrees that they will not change its state of organization, name,
or any of the above locations or create any new locations for such matters
without giving Lender at least thirty (30) days prior written notice thereof.
5. Representations and Warranties Concerning Collateral. Grantors represent
and warrant that:
a. Grantors are the sole owner of the Collateral.
b. The Collateral is not subject to any security interest, lien, prior
assignment, or other encumbrance of any nature whatsoever except Permitted
Encumbrances.
c. The Financial Obligations Collateral, if any, are each a bona fide
obligation of the obligor identified therein for the amount identified in
the records of Grantors, except for normal and customary disputes which
arise in the ordinary course of business and which do not affect a material
portion of the Financial Obligations Collateral.
d. There are no defenses or setoffs to payment of the Financial
Obligations Collateral, if any, which can be asserted by way of defense or
counterclaim against Grantors or Lender, except for normal and customary
disputes which arise in the ordinary course of business and which do not
affect a material portion of the Financial Obligations Collateral.
e. Grantors have no knowledge of any fact or circumstance which would
materially impair the ability of any obligor on the Financial Obligations
Collateral, if any, to timely perform its obligations thereunder, except
those which arise in the ordinary course of business and which do not
affect a material portion of the Financial Obligations Collateral.
f. Any services performed or goods sold giving rise to the Financial
Obligations Collateral, if any, have been rendered or sold in compliance
with applicable laws, ordinances, rules, and regulations and in the
ordinary course of Grantors' business.
6. Covenants Concerning Collateral. Grantors covenant that:
a. Grantors will keep the Collateral free and clear of any and all
security interests, liens, assignments or other encumbrances, except
Permitted Encumbrances.
b. Grantors agree to furnish Lender with any information reasonably
needed to identify Collateral that Lender wishes to describe in its
financing statement promptly upon request. Grantors will execute and
deliver any documents (properly endorsed, if necessary) reasonably
requested by Lender for perfection or enforcement of any security interest
or lien, give good faith, diligent cooperation to Lender, and perform such
other acts reasonably requested by Lender for perfection and enforcement of
any security interest or lien, including, without limitation, obtaining
control for purposes of perfection with respect to Collateral consisting of
investment property, letter-of-credit rights, and electronic chattel paper.
Lender is authorized to file, record, or otherwise utilize such documents
as it deems necessary to perfect and/or enforce any security interest or
lien in the Collateral. Grantors acknowledges that they are not authorized
to file any financing statement or amendment or termination statement with
respect to any financing statement without the prior written consent of
Lender and agrees that it will not do so without the prior written consent
of Lender, subject to Grantors' rights under U.C.A. ss. 70A-9-509 of the
Utah Uniform Commercial Code or equivalent section of the Uniform
Commercial Code in any other jurisdiction. Grantors will pay the cost of
recording and filing the same in all public offices wherever recording or
filing is deemed by Lender to be necessary or desirable.
c. Borrower shall submit to Lender reports as to the Collateral, at
such times and in such form as Lender may reasonably request. Grantors will
at all times keep accurate and complete records of the Collateral. Lender
or its representatives may, at any time and from time to time, enter any
premises where the Collateral and/or the records pertaining to the
Collateral are located and inspect, inventory, audit, check, copy, and
otherwise review the Collateral and the records concerning the Collateral.
d. Upon the occurrence of an Event of Default and when Lender so
requests, all collections and other proceeds from the Financial Obligations
Collateral, if any, shall be deposited into an account designated by Lender
(the "Cash Collateral Account"), which account shall be under the sole and
exclusive control of Lender. Such proceeds and collections shall not be
commingled with any other funds and shall be promptly and directly
deposited into such account in the form in which received by Grantors. Such
proceeds and collections shall not be deposited in any other account and
said Cash Collateral Account shall contain no funds other than such
proceeds and collections. All or any portion of the funds on deposit in
said Cash Collateral Account may, in the sole discretion of Lender, be
applied from time to time as Lender elects to payment of obligations
secured by this Security Agreement or Lender may elect to turn over to
Grantors, from time to time, all or any portion of such funds.
e. Grantors agree to use diligent and good faith efforts to collect
the Financial Obligations Collateral, if any. Until written notice is given
by Lender, Grantors are authorized to collect the Financial Obligations
Collateral in a commercially reasonable manner. Lender, in its discretion,
may terminate such authority at any time whereupon Lender is authorized by
Grantors, without further act, to notify any and all account debtors and
obligors to make payment thereon directly to Lender, and to take possession
of all proceeds from the Financial Obligations Collateral, and to take any
action which Grantors might or could take to collect the Financial
Obligations Collateral, including the right to make any compromise,
discharge, or extension. Lender may exercise such collection rights at any
time, when either Grantor is in default under this Security Agreement or
the Loan Documents. Upon request of Lender, Grantors agree to execute and
deliver to Lender a notice to the account debtors and obligors instructing
said account debtors and obligors to pay Lender. Grantors further agree to
execute and deliver to Lender all other notices and similar documents
requested by Lender to facilitate collection of the Financial Obligations
Collateral.
f. All costs of collection of the Financial Obligations Collateral, if
any, including attorneys fees and legal expenses, shall be borne solely by
Grantors, whether such costs are incurred by or for Grantors or Lender. In
the event Lender elects to undertake direct collection of the Financial
Obligations Collateral, Grantors agree to deliver to Lender, if so
requested, all books, records, and documents in Grantors' possession or
under its control as may relate to the Financial Obligations Collateral or
as may be helpful to facilitate such collection. Lender shall have no
obligation to cause an attorneys demand letter to be sent, to file any
lawsuit, or to take any other legal action in collection of the Financial
Obligations Collateral. It is agreed that collection of the Financial
Obligations Collateral in a commercially reasonable manner does not require
that any such legal action be taken.
g. Grantors do hereby make, constitute, and appoint Lender and its
designees as Grantors' true and lawful attorney in fact, with full power of
substitution, such power to be exercised in the following manner: (1) upon
occurrence of an Event of Default, Lender may institute procedures whereby
payments and other proceeds of the Financial Obligations Collateral shall
be paid under a remittance account or lock box arrangement with Lender, or
Lender's agent, and pursuant to which Lender shall receive and open all
mail addressed to Grantors and remove therefrom any payments of the
Financial Obligations Collateral, if any; (2) upon occurrence of an Event
of Default, Lender may cause mail relating to the Financial Obligations
Collateral to be delivered to a designated address of Lender where Lender
may open all such mail and remove therefrom any payments of the Financial
Obligations Collateral; (3) upon occurrence of an Event of Default, Lender
may endorse Grantors' names upon notes, checks, acceptances, drafts, money
orders, or other forms of payment of the Financial Obligations Collateral;
(4) upon occurrence of an Event of Default, Lender may settle or adjust
disputes or claims in respect to the Financial Obligations Collateral for
amounts and upon such terms as Lender, in good faith, deems to be
advisable, in such case crediting Grantors with only the proceeds received
and collected by Lender after deduction of Lender's costs, including
reasonable attorneys fees and legal expenses; and (5) Lender may do any and
all other things necessary or proper to perfect and, upon occurrence of an
Event of Default, to protect the liens and rights of Lender created under
this Security Agreement.
h. Prior to the advancing of any funds under the Loan Agreement,
Grantors shall deliver to Lender the original of any of such instruments or
notes that are secured by Commercial Property or Construction Property
under the Loan Agreement that are being used as part of the Borrowing Base
as set forth in the Loan Agreement. For all other instruments or notes that
are secured by Underlying Property that is not Commercial Property or
Construction Property, Grantors may retain the original document or note.
Lender grants Grantors a revocable license to receive payments or rents
under all instruments or notes. Lender may revoke such license at any time
upon an occurrence of default under the Note, the Loan Agreement, this
Security Agreement. Upon such a revocation, Grantors shall immediately
endorse and deliver all instruments or notes to Lender as required by
Lender, along with all profits, payments, rents, or other monies received
by Grantors pursuant to such instruments or notes. For such other
instruments retained in original form by Grantors, Grantors may also sell
or assign such instruments or notes in the ordinary course of business as
long as Grantors are not in default under this Security Agreement, the Loan
Agreement, or the Promissory Note. In such instances, Lender will cooperate
with Grantors in allowing for the security interest in any such specific
instruments or chattel that are being sold to a bona fide purchaser to
terminate.
i. Grantors shall, immediately upon obtaining knowledge thereof,
report to Lender in writing any material claim or dispute asserted by any
obligor on any item of that Collateral, and any other material matters that
may affect the value, enforceability or collectability of any of that
Collateral. Grantors shall also immediately report to Lender (which may be
accomplished in any meetings with Lender to report on Collateral under the
Loan Agreement) any default on any item of Financial Obligations Collateral
under which Grantors shall take such action as foreclosing on or
repossessing any such Collateral.
j. Grantors shall not, without Lender's written consent, make any
material settlement, compromise or adjustment of any item of Financial
Obligations Collateral or grant any material discounts, extensions,
allowances or credits thereon. Grantors, however, may take such actions
that are customary and normal in its ordinary course and practice of
business without the Lender's written consent, such as granting extensions
of time for up to one year consistent with the Loan Agreement or imposing
default rates of interest in the event of default.
7. Right to Perform for Grantors. Lender may, in its sole discretion and
without any duty to do so, elect to discharge taxes, tax liens, security
interests, or any other encumbrance upon the Collateral, perform any duty or
obligation of Grantors, pay filing, recording, insurance and other charges
payable by Grantors, or provide insurance as provided herein if Grantors fail to
do so. Any such payments advanced by Lender shall be repaid by Grantors upon
demand, together with interest thereon from the date of the advance until
repaid, both before and after judgment, at the Default Rate.
8. Default. Time is of the essence of this Security Agreement. The
occurrence of any Event of Default shall constitute a default under this
Security Agreement.
No course of dealing or any delay or failure to assert any Event of Default
shall constitute a waiver of that Event of Default or of any prior or subsequent
Event of Default.
9. Remedies. Upon the occurrence of an Event of Default, Lender shall have
the following rights and remedies, in addition to all other rights and remedies
existing at law, in equity, or by statute or provided in the Loan Documents:
a. Lender shall have all the rights and remedies available under the
Uniform Commercial Code;
b. Lender shall have the right to enter upon any premises where the
Collateral or records pertaining to the Collateral may be and take
possession of the Collateral and such records;
c. Upon request of Lender, Grantors shall, at the expense of Grantors,
assemble the Collateral and records pertaining to the Collateral at a place
designated by Lender and tender the Collateral and such records to Lender;
and
d. Lender may sell, lease or otherwise dispose of any or all of the
Collateral and, after deducting the Liquidation Costs, apply the remainder
to pay, or to hold as a reserve against, the obligations secured by this
Security Agreement.
Grantors shall be liable for all deficiencies owing on any obligations
secured by this Security Agreement after liquidation of the Collateral. Lender
shall not have any obligation to clean-up or otherwise prepare any Collateral
for sale, lease, or other disposition.
The rights and remedies herein conferred are cumulative and not exclusive
of any other rights and remedies and shall be in addition to every other right,
power and remedy herein specifically granted or hereafter existing at law, in
equity, or by statute which Lender might otherwise have, and any and all such
rights and remedies may be exercised from time to time and as often and in such
order as Lender may deem expedient. No delay or omission in the exercise of any
such right, power or remedy or in the pursuance of any remedy shall impair any
such right, power or remedy or be construed to be a waiver thereof or of any
default or to be an acquiescence therein.
Upon the occurrence of any Event of Default, Grantors agree to pay all
costs and expenses, including reasonable attorneys fees and legal expenses,
incurred by or on behalf of Lender in enforcing, or exercising any remedies
under, this Security Agreement, and any other rights and remedies. Additionally,
Grantors agree to pay all Liquidation Costs. Any and all such costs, expenses,
and Liquidation Costs shall be payable by Grantors upon demand, together with
interest thereon from the date of the advance until repaid, both before and
after judgment, at the Default Rate.
Regardless of the occurrence of any Event of Default, Grantors agree to pay
all expenses, including reasonable attorneys fees and legal expenses, incurred
by Lender in any bankruptcy proceedings of any type involving Grantors, the
Collateral, or this Security Agreement, including, without limitation, expenses
incurred in modifying or lifting the automatic stay, determining adequate
protection, use of cash collateral, or relating to any plan of reorganization.
10. Notices. All notices or demands by any party hereto shall be in writing
and shall be sent as provided in the Loan Agreement.
11. Indemnification. Grantors shall indemnify Lender for any and all claims
and liabilities, and for damages which may be awarded or incurred by Lender, and
for all reasonable attorneys fees, legal expenses, and other out-of-pocket
expenses incurred in defending such claims, arising from or related in any
manner to the negotiation, execution, or performance by Grantors or by Lender in
good faith of this Security Agreement, but excluding any such claims based upon
breach or default by Lender or gross negligence or willful misconduct of Lender.
12. General. This Security Agreement is made for the sole and exclusive
benefit of Grantors and Lender and is not intended to benefit any third party.
No such third party may claim any right or benefit or seek to enforce any term
or provision of this Security Agreement.
Lender and its officers, directors, employees, representatives, agents, and
attorneys, shall not be liable to Grantors or any Guarantor for consequential
damages arising from or relating to any breach of contract, tort, or other wrong
in connection with or relating to this Security Agreement or the Collateral.
If the incurring of any debt by Grantors or the payment of any money or
transfer of property to Lender by or on behalf of Grantors or any Guarantor
should for any reason subsequently be determined to be "voidable" or "avoidable"
in whole or in part within the meaning of any state or federal law (collectively
"voidable transfers"), including, without limitation, fraudulent conveyances or
preferential transfers under the United States Bankruptcy Code or any other
federal or state law, and Lender is required to repay or restore any voidable
transfers or the amount or any portion thereof, or upon the advice of Lender's
counsel is advised to do so, then, as to any such amount or property repaid or
restored, including all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Grantors and Guarantor, and each of them, and
this Security Agreement, shall automatically be revived, reinstated and restored
and shall exist as though the voidable transfers had never been made.
This Security Agreement shall be governed by and construed in accordance
with the laws of the State of Utah.
Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction only, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
All references in this Security Agreement to the singular shall be deemed
to include the plural if the context so requires and vice versa. References in
the collective or conjunctive shall also include the disjunctive unless the
context otherwise clearly requires a different interpretation.
All agreements, representations, warranties and covenants made by Grantors
shall survive the execution and delivery of this Security Agreement, the filing
and consummation of any bankruptcy proceedings, and shall continue in effect so
long as any obligation to Lender contemplated by this Security Agreement is
outstanding and unpaid, notwithstanding any termination of this Security
Agreement. All agreements, representations, warranties and covenants in this
Security Agreement shall bind the party making the same and its heirs and
successors, and shall be to the benefit of and be enforceable by each party for
whom made and their respective heirs, successors and assigns.
This Security Agreement, together with the Loan Documents, constitute the
entire agreement between Grantors and Lender as to the subject matter hereof and
may not be altered or amended except by written agreement signed by Grantors and
Lender. All other prior and contemporaneous agreements, arrangements, and
understandings between the parties hereto as to the subject matter hereof are,
except as otherwise expressly provided herein, rescinded.
IN WITNESS WHEREOF, Lender and Grantors have caused this Security Agreement
to be duly executed and delivered as of the date first above written.
Lender:
Zions First National Bank
By: s/s Todd Harris
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Todd Harris
Vice President
Grantors:
Security National Life Insurance Company,
a Utah corporation
By: s/s Scott M. Quist
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Scott M. Quist, President
Security National Financial Corporation,
a Utah corporation
By: s/s Scott M. Quist
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Scott M. Quist, President