EXHIBIT 10.3
SECURITY AGREEMENT
This SECURITY AGREEMENT dated as of November 12, 2004 (this "Security
Agreement"), is executed by and between each of those entities listed on
Schedule 1 attached hereto and incorporated herein by this reference (jointly,
severally, and collectively, the "Debtor"), each having its chief executive
office at the address listed opposite its name on Schedule 1, and STANDARD
FEDERAL BANK NATIONAL ASSOCIATION, a national banking association (the
"Administrative Agent", on behalf of itself and the other Lenders [as defined in
the Credit Agreement, referenced below, dated of even date herewith]), whose
address is 2600 West Big Beaver Road, Troy, Michigan 48084.
RECITALS
A. Meadowbrook Insurance Group, Inc., a Michigan corporation (the
"Borrower"), Administrative Agent and the Lenders are parties to that certain
Credit Agreement, dated of even date herewith (the "Credit Agreement"), pursuant
to which the Lenders have agreed to make certain Loans (as defined in the Credit
Agreement) to Borrower in the maximum amount of Twenty-Five Million and 00/100
Dollars ($25,000,000.00).
B. As a condition to the Lenders' loaning funds or providing other
financial accommodations to the Borrower pursuant to the Credit Agreement, the
Lenders require that the Debtor enter into this Security Agreement in order to
secure the obligations and performance of the Borrower under the Credit
Agreement, the Revolving Note executed by Borrower in favor of the Lenders dated
of even date herewith (the "Note") and related documents, including, but not
limited to, each of the agreements, documents, instruments and certificates from
time to time executed and delivered to and for the benefit of the Lenders and/or
the Administrative Agent in connection with the Obligations, and all amendments,
restatements, supplements and other modifications thereto. (collectively, the
"Loan Documents").
AGREEMENT
NOW THEREFORE, in consideration of the foregoing Recitals, and the mutual
covenants and agreements set forth herein, the Debtor and the Lenders (by the
Administrative Agent) hereby agree as follows:
AGREEMENTS:
SECTION 1 DEFINITIONS.
1.1 Defined Terms. For the purposes of this Security Agreement, the
following capitalized words and phrases shall have the meanings set forth below.
In the event of any conflict in the definition of a capitalized word or phrase
herein and a capitalized word or phrase in the Credit Agreement, the definition
in the Credit Agreement shall control. Capitalized words or phrases not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
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"Bankruptcy Code" shall mean the United States Bankruptcy Code, as
now existing or hereafter amended.
"Default Rate" shall mean a per annum rate of interest equal to the
Prime Rate plus four percent (4%).
"Letter of Credit" and "Letters of Credit" shall mean, respectively,
a letter of credit and all such letters of credit issued by any one or
more of the Lenders, in their sole discretion, for the account of an
Obligor.
"Obligor" shall mean the Borrower, the Debtor, any guarantor,
accommodation endorser, third party pledgor, or any other party liable
with respect to the Obligations.
"Organizational Identification Number" means, with respect to
Debtor, the organizational identification number assigned to Debtor by the
applicable governmental unit or agency of the jurisdiction of organization
of the Debtor.
1.2 Other Terms Defined in UCC. All other capitalized words and phrases
used herein and not otherwise specifically defined herein shall have the
respective meanings assigned to such terms in the UCC, to the extent the same
are used or defined therein.
1.3 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the
single number includes the plural, and vice versa, and in particular the
word "Debtor" shall be so construed.
(b) Section and Schedule references are to this Security Agreement
unless otherwise specified. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Security Agreement shall
refer to this Security Agreement as a whole and not to any particular
provision of this Security Agreement
(c) The term "including" is not limiting, and means "including,
without limitation".
(d) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including".
(e) Unless otherwise expressly provided herein, (i) references to
agreements (including this Security Agreement and the other Loan
Documents) and other contractual instruments shall be deemed to include
all subsequent amendments, restatements, supplements and other
modifications thereto, but only to the extent such amendments,
restatements, supplements and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or
regulation shall be construed as
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including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.
(f) To the extent any of the provisions of the other Loan Documents
are inconsistent with the terms of this Security Agreement, the provisions
of this Security Agreement shall govern.
(g) This Security Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements are
cumulative and each shall be performed in accordance with its terms.
SECTION 2 SECURITY FOR THE OBLIGATIONS.
2.1 Security for Obligations. As security for the payment and performance
of the Obligations, the Debtor does hereby pledge, assign, transfer, deliver and
grant to the Administrative Agent, for its own benefit and as agent for the
Lenders, a continuing and unconditional first priority security interest in and
to any and all property of the Debtor, of any kind or description, tangible or
intangible, wheresoever located and whether now existing or hereafter arising or
acquired, including the following (all of which property, along with the
products and proceeds therefrom, are individually and collectively referred to
as the "Collateral"):
(a) all property of, or for the account of, the Debtor now or
hereafter coming into the possession, control or custody of, or in transit
to, the Administrative Agent or any agent or bailee for the Administrative
Agent or any parent, affiliate or subsidiary of the Administrative Agent
or any participant with the Administrative Agent in the Obligations
(whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise), including all earnings, dividends, interest,
or other rights in connection therewith and the products and proceeds
therefrom, including the proceeds of insurance thereon; and
(b) the additional property of the Debtor, whether now existing or
hereafter arising or acquired, and wherever now or hereafter located,
together with all additions and accessions thereto, substitutions,
betterments and replacements therefor, products and Proceeds therefrom,
and all of the Debtor's books and records and recorded data relating
thereto (regardless of the medium of recording or storage), together with
all of the Debtor's right, title and interest in and to all computer
software required to utilize, create, maintain and process any such
records or data on electronic media, identified and set forth as follows:
(i) All Accounts and all Goods whose sale, lease or other
disposition by the Debtor has given rise to Accounts and have been
returned to, or repossessed or stopped in transit by, the Debtor, or
rejected or refused by an Account Debtor;
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(ii) All Inventory, including raw materials, work-in-process
and finished goods;
(iii) All Goods (other than Inventory), including embedded
software, Equipment, vehicles, furniture and Fixtures;
(iv) All Software and computer programs;
(v) All Securities, Investment Property, Financial Assets and
Deposit Accounts;
(vi) All Chattel Paper, Electronic Chattel Paper, Instruments,
Documents, Letter of Credit Rights, all proceeds of letters of
credit, Health-Care-Insurance Receivables, Supporting Obligations,
notes secured by real estate, Commercial Tort Claims and General
Intangibles, including Payment Intangibles; and
(vii) All Proceeds (whether Cash Proceeds or Noncash Proceeds)
of the foregoing property, including all insurance policies and
proceeds of insurance payable by reason of loss or damage to the
foregoing property, including unearned premiums, and of eminent
domain or condemnation awards.
Without limiting the generality of the foregoing, the following are
expressly excluded from the Collateral:
(A) the certain parcel of real estate owned in fee simple by
Meadowbrook Insurance Group, Inc., and located in the City of Southfield,
Oakland County, Michigan, and commonly known as 26255 American Drive,
Southfield, Michigan 48034;
(B) any property held by Meadowbrook, Inc., Crest Financial
Corporation or any of their respective subsidiaries on behalf of or for
the benefit of any third parties, including, but not limited to, insurance
premiums, claims payments, cash, letters of credit and/or securities;
(C) the stock of Liberty Premium Finance, a California corporation,
held and owned by Crest Financial Corporation; and
(D) the stock owned by Meadowbrook, Inc. in any insurance companies.
2.2 Possession and Transfer of Collateral; Release of Collateral. Until an
Event of Default has occurred hereunder, the Debtor shall be entitled to
possession or use of the Collateral (other than Instruments or Documents,
including Tangible Chattel Paper and Investment Property consisting of
certificated securities) and other Collateral required to be delivered to the
Administrative Agent pursuant to this Section 2. The cancellation or surrender
of any promissory note evidencing an Obligation, upon payment or otherwise,
shall not affect the right of the Administrative Agent to retain the Collateral
for any other of the Obligations. The Debtor shall not sell, assign (by
operation of law or otherwise), license, lease or otherwise dispose of, or grant
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any option with respect to any of the Collateral, except that the Debtor may
sell Inventory in the ordinary course of business. At such time as Borrower
achieves an AM Best Rating of B++, Debtor may request a release of any Lender's
lien on the Collateral (a "Request for Release") and, upon receipt of the
Request for Release and satisfactory evidence of an AM Best Rating of B++ of
Borrower, then the Administrative Agent shall cause a termination statement to
be filed; provided, however, that Administrative Agent shall, at all times,
reserve and retain the right to re-file any lien or liens on the Collateral if
Borrower's AM Best Rating falls below B++ at any time while the Obligations
remain outstanding. No Debtor at any time shall be authorized to file any
termination, amendment or other filing related to this Security Agreement. If
Administrative Agent releases all or any of the Collateral, Debtor hereby
acknowledges, covenants, consents and agrees that, from and after the date
hereof, Debtor shall not create, incur, or permit to exist, or permit any
subsidiary to create, incur or, permit to exist, any mortgage, pledge,
encumbrance, lien, security interest or charge in any kind of the Collateral,
except for any liens created by the Loan Documents.
2.3 Negative Pledge. While any of the Indebtedness remains outstanding,
Debtor hereby acknowledges, covenants, consents and agrees that, from and after
the date hereof, Debtor shall not create, incur, or permit to exist, or permit
any subsidiary to create, incur or, permit to exist, any mortgage, pledge,
encumbrance, lien, security interest or charge in any kind of the Collateral,
including, but not limited to, real estate, except for any liens created by the
Loan Documents, expressly permitted by Section 11.2 of the Credit Agreement or
otherwise approved in writing in advance by the Administrative Agent.
2.4 Financing Statements. The Administrative Agent and its attorneys and
agents shall have authority to file, and the Debtor shall, at the Administrative
Agent 's request, at any time and from time to time, execute and deliver to the
Administrative Agent such financing statements, amendments and other documents
and do such acts as the Administrative Agent deems necessary in order to
establish and maintain valid, attached and perfected first priority security
interests in the Collateral in favor of the Administrative Agent , for its own
benefit and as agent for its Affiliates, free and clear of all Liens and claims
and rights of third parties whatsoever, except Permitted Liens. The Debtor
hereby irrevocably authorizes the Administrative Agent at any time, and from
time to time, to file in any jurisdiction any initial financing statements and
amendments thereto without the signature of the Debtor that (a) indicate the
Collateral (i) is comprised of all assets of the Debtor or words of similar
effect, regardless of whether any particular asset comprising a part of the
Collateral falls within the scope of Article 9 of the Uniform Commercial Code of
the jurisdiction wherein such financing statement or amendment is filed, or (ii)
as being of an equal or lesser scope or within greater detail as the grant of
the security interest set forth herein, and (b) contain any other information
required by Section 5 of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed regarding
the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Debtor is an organization, the type of
organization and any Organizational Identification Number issued to the Debtor,
and (ii) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of the real property to which the Collateral relates. The
Debtor hereby agrees that a photogenic or other reproduction of this Security
Agreement is sufficient for filing as a financing statement and the Debtor
authorizes the
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Administrative Agent to file this Security Agreement as a financing statement in
any jurisdiction. The Debtor agrees to furnish any such information to the
Administrative Agent promptly upon request. The Debtor further ratifies and
affirms its authorization for any financing statements and/or amendments
thereto, executed and filed by the Administrative Agent in any jurisdiction
prior to the date of this Security Agreement. In addition, the Debtor shall make
appropriate entries on its books and records disclosing the security interests
of the Administrative Agent, for its own benefit and as agent for its
Affiliates, in the Collateral.
2.5 Preservation of the Collateral. The Administrative Agent may, but is
not required, to take such actions from time to time as the Administrative Agent
deems appropriate to maintain or protect the Collateral. The Administrative
Agent shall have exercised reasonable care in the custody and preservation of
the Collateral if the Administrative Agent takes such action as the Debtor shall
reasonably request in writing which is not inconsistent with the Administrative
Agent 's status as a secured party, but the failure of the Administrative Agent
to comply with any such request shall not be deemed a failure to exercise
reasonable care; provided, however, the Administrative Agent 's responsibility
for the safekeeping of the Collateral shall (i) be deemed reasonable if such
Collateral is accorded treatment substantially equal to that which the
Administrative Agent accords its own property, and (ii) not extend to matters
beyond the control of the Administrative Agent , including acts of God, war,
insurrection, riot or governmental actions. In addition, any failure of the
Administrative Agent to preserve or protect any rights with respect to the
Collateral against prior or third parties, or to do any act with respect to
preservation of the Collateral, not so requested by the Debtor, shall not be
deemed a failure to exercise reasonable care in the custody or preservation of
the Collateral. The Debtor shall have the sole responsibility for taking such
action as may be necessary, from time to time, to preserve all rights of the
Debtor and the Administrative Agent in the Collateral against prior or third
parties. Without limiting the generality of the foregoing, where Collateral
consists in whole or in part of securities, the Debtor represents to, and
covenants with, the Administrative Agent that the Debtor has made arrangements
for keeping informed of changes or potential changes affecting the securities
(including rights to convert or subscribe, payment of dividends, reorganization
or other exchanges, tender offers and voting rights), and the Debtor agrees that
the Administrative Agent shall have no responsibility or liability for informing
the Debtor of any such or other changes or potential changes or for taking any
action or omitting to take any action with respect thereto.
2.6 Other Actions as to any and all Collateral. The Debtor further agrees
to take any other action reasonably requested by the Administrative Agent to
ensure the attachment, perfection and first priority of, and the ability of the
Administrative Agent to enforce, the security interest of the Administrative
Agent , for its own benefit and as agent for its Affiliates, in any and all of
the Collateral including (a) causing the Administrative Agent 's name to be
noted as secured party on any certificate of title for a titled good if such
notation is a condition to attachment, perfection or priority of, or ability of
the bank to enforce, the security interest of the Administrative Agent , for its
own benefit and as agent for its Affiliates, in such Collateral, (c) complying
with any provision of any statute, regulation or treaty of the United States as
to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Administrative Agent to
enforce, the security interest of the Administrative Agent , for its own benefit
and as agent for its Affiliates, in such Collateral, (d) obtaining
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governmental and other third party consents and approvals, including any consent
of any licensor, lessor or other Person obligated on Collateral, (e) obtaining
waivers from mortgagees and landlords in form and substance satisfactory to the
Administrative Agent , and (f) taking all actions required by the UCC in effect
from time to time or by other law, as applicable in any relevant UCC
jurisdiction, or by other law as applicable in any foreign jurisdiction. The
Debtor further agrees to indemnify and hold the Administrative Agent harmless
against claims of any Persons not a party to this Security Agreement concerning
disputes arising over the Collateral.
2.7 Collateral in the Possession of a Warehouseman or Bailee. If any of
the Collateral at any time is in the possession of a warehouseman or bailee, the
Debtor shall promptly notify the Administrative Agent thereof, and shall
promptly obtain a Collateral Access Agreement. The Administrative Agent agrees
with the Debtor that the Administrative Agent shall not give any instructions to
such warehouseman or bailee pursuant to such Collateral Access Agreement unless
an Event of Default has occurred and is continuing or would occur after taking
into account any action by the Debtor with respect to the warehouseman or
bailee.
2.8 Letter-of-Credit Rights. If the Debtor at any time is a beneficiary
under a letter of credit now or hereafter issued in favor of the Debtor, the
Debtor shall promptly notify the Administrative Agent thereof and, at the
request and option of the Administrative Agent , the Debtor shall, pursuant to
an agreement in form and substance satisfactory to the Administrative Agent ,
either (i) arrange for the issuer and any confirmer of such letter of credit to
consent to an assignment to the Administrative Agent , for its own benefit and
as agent for its Affiliates, of the proceeds of any drawing under the letter of
credit, or (ii) arrange for the Administrative Agent , for its own benefit and
as agent for its Affiliates, to become the transferee beneficiary of the letter
of credit, with the Administrative Agent agreeing, in each case, that the
proceeds of any drawing under the letter to credit are to be applied as provided
in this Security Agreement.
2.9 Commercial Tort Claims. If the Debtor shall at any time hold or
acquire a Commercial Tort Claim, the Debtor shall immediately notify the
Administrative Agent in writing signed by the Debtor of the details thereof and
grant to the Administrative Agent , for its own benefit and as agent for its
Affiliates, in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Security Agreement, in each case in form and
substance satisfactory to the Administrative Agent , and shall execute any
amendments hereto deemed reasonably necessary by the Administrative Agent to
perfect the security interest of the Administrative Agent , for its own benefit
and as agent for its Affiliates, in such Commercial Tort Claim.
2.10 Electronic Chattel Paper and Transferable Records. If the Debtor at
any time holds or acquires an interest in any electronic chattel paper or any
"transferable record", as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, the Debtor shall promptly notify the Administrative Agent thereof
and, at the request of the Administrative Agent , shall take such action as the
Administrative Agent may reasonably request to vest in the Administrative Agent
control under Section 9-105 of the UCC of such electronic chattel paper or
control under Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic
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Transactions Act, as so in effect in such jurisdiction, of such transferable
record. The Administrative Agent agrees with the Debtor that the Administrative
Agent will arrange, pursuant to procedures satisfactory to the Administrative
Agent and so long as such procedures will not result in the Administrative
Agent's loss of control, for the Debtor to make alterations to the electronic
chattel paper or transferable record permitted under Section 9-105 of the UCC
or, as the case may be, Section 201 of the federal Electronic Signatures in
Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in control to make without loss of control.
SECTION 3 REPRESENTATIONS AND WARRANTIES.
The Debtor makes the following representations and warranties to the
Administrative Agent:
3.1 Debtor Organization and Name. Each member of the Debtor is a
corporation, limited liability company, general partnership, limited partnership
or limited liability partnership, duly organized, existing and in good standing
under the laws of the state or country indicated on Schedule 1, with full and
adequate power to carry on and conduct its business as presently conducted. The
Debtor is duly licensed or qualified in all foreign jurisdictions wherein the
nature of its activities requires such qualification or licensing. Each Debtor's
Organizational Identification Number is as listed on Schedule 1. The exact legal
name of the Debtor is as set forth on Schedule 1 of this Security Agreement, and
the Debtor currently does not conduct, nor has it during the last five (5) years
conducted, business under any other name or trade name.
3.2 Authorization. The Debtor has full right, power and authority to enter
into this Security Agreement and to perform all of its duties and obligations
under this Security Agreement. The execution and delivery of this Security
Agreement and the other Loan Documents will not, nor will the observance or
performance of any of the matters and things herein or therein set forth,
violate or contravene any provision of law or of the articles of organization,
articles of incorporation, bylaws, partnership agreement, certificate of
incorporation, certificate of organization or trust agreement, as the case may
be, of the Debtor. All necessary and appropriate action has been taken on the
part of the Debtor to authorize the execution and delivery of this Security
Agreement.
3.3 Validity and Binding Nature. This Security Agreement is the legal,
valid and binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors' rights generally and to general
principles of equity.
3.4 Consent; Absence of Breach. The execution, delivery and performance of
this Security Agreement and any other documents or instruments to be executed
and delivered by the Debtor in connection herewith, do not and will not (a)
require any consent, approval, authorization, or filings with, notice to or
other act by or in respect of, any governmental authority or any other Person
(other than any consent or approval which has been obtained and is in full force
and effect); (b) conflict with (i) any provision of law or any applicable
regulation, order, writ, injunction or decree of any court or governmental
authority, (ii) the articles of
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incorporation, bylaws, partnership agreement, articles of organization or trust
agreement of the Debtor, or (iii) any material agreement, indenture, instrument
or other document, or any judgment, order or decree, which is binding upon the
Debtor or any of its properties or assets; or (c) require, or result in, the
creation or imposition of any Lien on any asset of Debtor, other than Liens in
favor of the Administrative Agent created pursuant to this Security Agreement.
3.5 Ownership of Collateral; Liens. The Debtor is the sole owner or has
other rights in all of the Collateral, free and clear of all Liens, charges and
claims (including infringement claims with respect to patents, trademarks,
service marks, copyrights and the like), other than Permitted Liens.
3.6 Adverse Circumstances. No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which (a) would have a
Material Adverse Effect upon the Debtor, or (b) would constitute an Event of
Default or an Unmatured Event of Default.
3.7 Security Interest. This Security Agreement creates a valid security
interest in favor of the Administrative Agent in the Collateral and, when
properly perfected by filing in the appropriate jurisdictions, or by possession
or Control of such Collateral by the Administrative Agent or delivery of such
Collateral to the Administrative Agent, shall constitute a valid, perfected,
first-priority security interest in such Collateral.
3.8 Place of Business. The principal place of business and books and
records of the Debtor is set forth in the preamble to this Security Agreement,
and the location of all Collateral, if other than at such principal place of
business, is as set forth on Schedule 1 attached hereto and made a part hereof,
and the Debtor shall promptly notify the Administrative Agent of any change in
such locations. The Debtor will not remove or permit the Collateral to be
removed from such locations without the prior written consent of the
Administrative Agent, except for Inventory sold in the usual and ordinary course
of the Debtor's business.
3.9 Complete Information. This Security Agreement and all financial
statements, schedules, certificates, confirmations, agreements, contracts, and
other materials and information heretofore or contemporaneously herewith
furnished in writing by the Debtor to the Administrative Agent for purposes of,
or in connection with, this Security Agreement and the transactions contemplated
hereby is, and all written information hereafter furnished by or on behalf of
the Debtor to the Administrative Agent pursuant hereto or in connection herewith
will be, true and accurate in every material respect on the date as of which
such information is dated or certified, and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made (it
being recognized by the Administrative Agent that any projections and forecasts
provided by the Debtor are based on good faith estimates and assumptions
believed by the Debtor to be reasonable as of the date of the applicable
projections or assumptions and that actual results during the period or periods
covered by any such projections and forecasts may differ from projected or
forecasted results).
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SECTION 4 AFFIRMATIVE COVENANTS.
4.1 Debtor Existence. The Debtor shall at all times preserve and maintain
its (a) its existence and good standing in the jurisdiction of its organization,
and (b) its qualification to do business and good standing in each jurisdiction
where the nature of its business makes such qualification necessary (other than
such jurisdictions in which the failure to be qualified or in good standing
could not reasonably be expected to have a Material Adverse Effect), and shall
at all times continue as a going concern in the business which the Debtor is
presently conducting. If the Debtor does not have an Organizational
Identification Number and later obtains one, the Debtor shall promptly notify
the Administrative Agent of such Organizational Identification Number.
4.2 Compliance With Laws. The Debtor shall comply in all respects,
including the conduct of its business and operations and the use of the
Collateral, with all applicable laws, rules, regulations, decrees, orders,
judgments, licenses and permits, except where failure to comply could not
reasonably be expected to have a Material Adverse Effect.
4.3 Payment of Taxes and Liabilities. The Debtor shall pay and discharge,
prior to delinquency and before penalties accrue thereon, all property and other
taxes, and all governmental charges or levies against it or any of the
Collateral, as well as claims of any kind which, if unpaid, could become a Lien
on any of its property; provided that the foregoing shall not require the Debtor
to pay any such tax or charge so long as it shall contest the validity thereof
in good faith by appropriate proceedings and shall set aside on its books
adequate reserves with respect thereto in accordance with GAAP and, in the case
of a claim which could become a Lien on any of the Collateral, such contest
proceedings stay the foreclosure of such Lien or the sale of any portion of the
Collateral to satisfy such claim.
4.4 Maintain Property. The Debtor shall at all times maintain, preserve
and keep the Collateral, in good repair, working order and condition and shall
from time to time make all needful and proper repairs, renewals, replacements,
and additions thereto so that at all times the efficiency thereof shall be fully
preserved and maintained. The Debtor shall permit the Administrative Agent to
examine and inspect such Collateral, at all reasonable times.
4.5 Maintain Insurance. The Debtor shall at all times maintain with
insurance companies reasonably acceptable to the Administrative Agent , such
insurance coverage as may be required by any law or governmental regulation or
court decree or order applicable to it and such other insurance, to such extent
and against such hazards and liabilities, including employers', public and
professional liability risks, as is customarily maintained by companies
similarly situated, and shall have insured amounts no less than, and deductibles
no higher than, are reasonably acceptable to the Administrative Agent . The
Debtor shall furnish to the Administrative Agent a certificate setting forth in
reasonable detail the nature and extent of all insurance maintained by the
Debtor, which shall be reasonably acceptable in all respects to the
Administrative Agent. The Debtor shall cause each issuer of an insurance policy
to provide the Administrative Agent with an endorsement (i) showing the
Administrative Agent as loss payee with respect to each policy of property or
casualty insurance; and (ii) providing that thirty (30)
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days notice will be given to the Administrative Agent prior to any cancellation
of, material reduction or change in coverage provided by or other material
modification to such policy.
In the event the Debtor either fails to provide the Administrative Agent
with evidence of the insurance coverage required by this Section or at any time
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay any premium in whole or in part relating thereto, then
the Administrative Agent , without waiving or releasing any obligation or
default by the Debtor hereunder, may at any time (but shall be under no
obligation to so act), obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect thereto, which the
Administrative Agent deems advisable. This insurance coverage (a) may, but need
not, protect the Debtor's interests in such property, including the Collateral,
and (b) may not pay any claim made by, or against, the Debtor in connection with
such property, including the Collateral. The Debtor may later cancel any such
insurance purchased by the Administrative Agent, but only after providing the
Administrative Agent with evidence that the Debtor has obtained the insurance
coverage required by this Section. If the Administrative Agent purchases
insurance for the Collateral, the Debtor will be responsible for the costs of
that insurance, including interest and any other charges that may be imposed
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to the principal amount of the Loans owing hereunder. The costs of the
insurance may be more than the cost of the insurance the Debtor may be able to
obtain on its own.
4.6 Field Audits. The Debtor shall permit the Administrative Agent to
inspect the Inventory and other Collateral, to perform appraisals of the
Equipment of the Debtor, and to inspect, audit, check and make copies of, and
extracts from, the books, records, computer data, computer programs, journals,
orders, receipts, correspondence and other data relating to Inventory, Accounts
and any other Collateral, the results of which must be satisfactory to the
Administrative Agent in the Administrative Agent's sole and absolute discretion.
All such inspections or audits by the Administrative Agent shall be at the
Debtor's sole expense.
4.7 Collateral Records. The Debtor shall keep full and accurate books and
records relating to the Collateral and shall mark such books and records to
indicate the Administrative Agent's Lien in the Collateral, including placing a
legend, in form and content acceptable to the Administrative Agent, on all
Chattel Paper created by the Debtor indicating that the Administrative Agent has
a Lien in such Chattel Paper.
SECTION 5 REMEDIES.
Upon the occurrence of an event of default under any of the Obligations or
any default in the payment or performance of any of the covenants, conditions
and agreements contained in this Security Agreement (an "Event of Default"), the
Administrative Agent shall have all rights, powers and remedies set forth in
this Security Agreement or the other Loan Documents or in any other written
agreement or instrument relating to any of the Obligations or any security
therefor, as a secured party under the UCC or as otherwise provided at law or in
equity. Without limiting the generality of the foregoing, the Administrative
Agent may, at its option upon the occurrence of an Event of Default, declare its
commitments to the Borrower or the Debtor to be terminated
11
and all Obligations to be immediately due and payable, or, if provided in the
Loan Documents, all commitments of the Administrative Agent to the Borrower or
the Debtor shall immediately terminate and all Obligations shall be
automatically due and payable, all without demand, notice or further action of
any kind required on the part of the Administrative Agent . The Debtor hereby
waives any and all presentment, demand, notice of dishonor, protest, and all
other notices and demands in connection with the enforcement of Administrative
Agent's rights under the Loan Documents, and hereby consents to, and waives
notice of release, with or without consideration, of any Collateral,
notwithstanding anything contained herein or in the Loan Documents to the
contrary. In addition to the foregoing:
5.1 Possession and Assembly of Collateral. The Administrative Agent may,
without notice, demand or legal process of any kind, take possession of any or
all of the Collateral (in addition to Collateral of which the Administrative
Agent already has possession), wherever it may be found, and for that purpose
may pursue the same wherever it may be found, and may at any time enter into any
of the Debtor's premises where any of the Collateral may be or is supposed to
be, and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of and the
Administrative Agent shall have the right to store and conduct a sale of the
same in any of the Debtor's premises without cost to the Administrative Agent .
At the Administrative Agent's request, the Debtor will, at the Debtor's sole
expense, assemble the Collateral and make it available to the Administrative
Agent at a place or places to be designated by the Administrative Agent which is
reasonably convenient to the Administrative Agent and the Debtor.
5.2 Sale of Collateral. The Administrative Agent may sell any or all of
the Collateral at public or private sale, upon such terms and conditions as the
Administrative Agent may deem proper, and the Administrative Agent may purchase
any or all of the Collateral at any such sale. The Debtor acknowledges that the
Administrative Agent may be unable to effect a public sale of all or any portion
of the Collateral because of certain legal and/or practical restrictions and
provisions which may be applicable to the Collateral and, therefore, may be
compelled to resort to one or more private sales to a restricted group of
offerees and purchasers. The Debtor consents to any such private sale so made
even though at places and upon terms less favorable than if the Collateral were
sold at public sale. The Administrative Agent shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. The Administrative Agent
may apply the net proceeds, after deducting all costs, expenses, attorneys' and
paralegals' fees incurred or paid at any time in the collection, protection and
sale of the Collateral and the Obligations, to the payment of the Obligations,
returning the excess proceeds, if any, to the Debtor. The Debtor and/or the
Borrower shall remain liable for any amount remaining unpaid after such
application, with interest at the Default Rate. Any notification of intended
disposition of the Collateral required by law shall be conclusively deemed
reasonably and properly given if given by the Administrative Agent at least ten
(10) calendar days before the date of such disposition. The Debtor hereby
confirms, approves and ratifies all acts and deeds of the Administrative Agent
relating to the foregoing, and each part thereof, and expressly waives any and
all claims of any nature, kind or description which it has or may hereafter have
against the Administrative Agent or its representatives, by reason of taking,
selling or collecting any portion of the Collateral. The Debtor consents to
releases of the Collateral at any time (including prior to default) and to sales
of the Collateral in groups, parcels or portions, or as an entirety, as the
Administrative Agent
12
shall deem appropriate. The Debtor expressly absolves the Administrative Agent
from any loss or decline in market value of any Collateral by reason of delay in
the enforcement or assertion or nonenforcement of any rights or remedies under
this Security Agreement.
5.3 Standards for Exercising Remedies. To the extent that applicable law
imposes duties on the Administrative Agent to exercise remedies in a
commercially reasonable manner, the Debtor acknowledges and agrees that it is
not commercially unreasonable for the Administrative Agent (a) to fail to incur
expenses reasonably deemed significant by the Administrative Agent to prepare
Collateral for disposition or otherwise to complete raw material or
work-in-process into finished goods or other finished products for disposition,
(b) [intentionally omitted], (c) to remove liens or encumbrances on or any
adverse claims against Collateral, (d) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f)
[intentionally omitted], (g) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the collateral is of a
specialized nature, (h) to dispose of Collateral by utilizing internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, including any warranties of
title, (k) to purchase insurance or credit enhancements to insure the
Administrative Agent against risks of loss, collection or disposition of
Collateral or to provide to the Administrative Agent a guaranteed return from
the collection or disposition of Collateral, or (l) to the extent deemed
appropriate by the Administrative Agent, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Administrative Agent in the collection or disposition of any of the Collateral.
The Debtor acknowledges that the purpose of this section is to provide
non-exhaustive indications of what actions or omissions by the Administrative
Agent would not be commercially unreasonable in the Administrative Agent's
exercise of remedies against the Collateral and that other actions or omissions
by the Administrative Agent shall not be deemed commercially unreasonable solely
on account of not being indicated in this section. Without limitation upon the
foregoing, nothing contained in this section shall be construed to grant any
rights to the Debtor or to impose any duties on the Administrative Agent that
would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this section.
5.4 UCC and Offset Rights. The Administrative Agent may exercise, from
time to time, any and all rights and remedies available to it under the UCC or
under any other applicable law in addition to, and not in lieu of, any rights
and remedies expressly granted in this Security Agreement or in any other
agreements between any Obligor and the Administrative Agent , and may, without
demand or notice of any kind, appropriate and apply toward the payment of such
of the Obligations, whether matured or unmatured, including costs of collection
and attorneys' and paralegals' fees, and in such order of application as the
Administrative Agent may, from time to time, elect, any indebtedness of the
Administrative Agent to any Obligor, however created or arising, including
balances, credits, deposits, accounts or moneys of such Obligor in the
possession, control or custody of, or in transit to the Administrative Agent .
The Debtor, on behalf of itself and each Obligor, hereby waives the benefit of
any law that would otherwise
13
restrict or limit the Administrative Agent in the exercise of its right, which
is hereby acknowledged, to appropriate at any time hereafter any such
indebtedness owing from the Administrative Agent to any Obligor.
5.5 Additional Remedies. In addition to the foregoing, following the
occurrence and continuance of Event of Default, the Administrative Agent shall
have the right and power to:
(a) instruct the Debtor, at its own expense, to notify any parties
obligated on any of the Collateral, including any Account Debtors, to make
payment directly to the Administrative Agent of any amounts due or to
become due thereunder, or the Administrative Agent may directly notify
such obligors of the security interest of the Administrative Agent ,
and/or of the assignment to the Administrative Agent of the Collateral and
direct such obligors to make payment to the Administrative Agent of any
amounts due or to become due with respect thereto, and thereafter, collect
any such amounts due on the Collateral directly from such Persons
obligated thereon;
(b) enforce collection of any of the Collateral, including any
Accounts, by suit or otherwise, or make any compromise or settlement with
respect to any of the Collateral, or surrender, release or exchange all or
any part thereof, or compromise, extend or renew for any period (whether
or not longer than the original period) any indebtedness thereunder;
(c) take possession or control of any proceeds and products of any
of the Collateral, including the proceeds of insurance thereon;
(d) extend, renew or modify for one or more periods (whether or not
longer than the original period) the Obligations or any obligation of any
nature of any other obligor with respect to the Obligations;
(e) grant releases, compromises or indulgences with respect to the
Obligations, any extension or renewal of any of the Obligations, any
security therefor, or to any other obligor with respect to the
Obligations;
(f) transfer the whole or any part of securities which may
constitute Collateral into the name of the Administrative Agent or the
Administrative Agent 's nominee without disclosing, if the Administrative
Agent so desires, that such securities so transferred are subject to the
security interest of the Administrative Agent , and any corporation,
association, or any of the managers or trustees of any trust issuing any
of such securities, or any transfer agent, shall not be bound to inquire,
in the event that the Administrative Agent or such nominee makes any
further transfer of such securities, or any portion thereof, as to whether
the Administrative Agent or such nominee has the right to make such
further transfer, and shall not be liable for transferring the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under Section
1111 of the Bankruptcy Code or take action under Section 364 or any other
section of the Bankruptcy
14
Code; provided, however, that any such action of the Administrative Agent
as set forth herein shall not, in any manner whatsoever, impair or affect
the liability of the Debtor hereunder, nor prejudice, waive, nor be
construed to impair, affect, prejudice or waive the Administrative Agent
's rights and remedies at law, in equity or by statute, nor release,
discharge, nor be construed to release or discharge, the Debtor, any
guarantor or other Person liable to the Administrative Agent for the
Obligations; and
(i) at any time, and from time to time, accept additions to,
releases, reductions, exchanges or substitution of the Collateral, without
in any way altering, impairing, diminishing or affecting the provisions of
this Security Agreement, the Loan Documents, or any of the other
Obligations, or the Administrative Agent's rights hereunder, under the
Obligations.
The Debtor hereby ratifies and confirms whatever the Administrative Agent may do
with respect to the Collateral and agrees that the Administrative Agent shall
not be liable for any error of judgment or mistakes of fact or law with respect
to actions taken in connection with the Collateral.
5.6 Attorney-in-Fact. The Debtor hereby irrevocably makes, constitutes and
appoints the Administrative Agent (and any officer of the Administrative Agent
or any Person designated by the Administrative Agent for that purpose) as the
Debtor's true and lawful proxy and attorney-in-fact (and agent-in-fact) in the
Debtor's name, place and stead, with full power of substitution, to (i) take
such actions as are permitted in this Security Agreement, (ii) execute such
financing statements and other documents and to do such other acts as the
Administrative Agent may require to perfect and preserve the Administrative
Agent 's security interest in, and to enforce such interests in the Collateral,
and (iii) carry out any remedy provided for in this Security Agreement,
including endorsing the Debtor's name to checks, drafts, instruments and other
items of payment, and proceeds of the Collateral, executing change of address
forms with the postmaster of the United States Post Office serving the address
of the Debtor, changing the address of the Debtor to that of the Administrative
Agent , opening all envelopes addressed to the Debtor and applying any payments
contained therein to the Obligations. The Debtor hereby acknowledges that the
constitution and appointment of such proxy and attorney-in-fact are coupled with
an interest and are irrevocable. The Debtor hereby ratifies and confirms all
that such attorney-in-fact may do or cause to be done by virtue of any provision
of this Security Agreement.
5.7 No Marshaling. The Administrative Agent shall not be required to
marshal any present or future collateral security (including this Security
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order. To the extent that it lawfully
may, the Debtor hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause delay in or impede the enforcement of
the Administrative Agent 's rights under this Security Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, the Debtor hereby irrevocably waives the benefits of all such
laws.
15
5.8 Application of Proceeds. The Administrative Agent will within three
(3) Business Days after receipt of cash or solvent credits from collection of
items of payment, proceeds of Collateral or any other source, apply the whole or
any part thereof against the Obligations secured hereby. The Administrative
Agent shall further have the exclusive right to determine how, when and what
application of such payments and such credits shall be made on the Obligations,
and such determination shall be conclusive upon the Obligors. Any proceeds of
any disposition by the Administrative Agent of all or any part of the Collateral
may be first applied by the Administrative Agent to the payment of expenses
incurred by the Administrative Agent in connection with the Collateral,
including attorneys' fees and legal expenses as provided for in Section 7
hereof.
5.9 No Waiver. No Event of Default shall be waived by the Administrative
Agent except in writing. No failure or delay on the part of the Administrative
Agent in exercising any right, power or remedy hereunder shall operate as a
waiver of the exercise of the same or any other right at any other time; nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder. There shall be no obligation on the part of the
Administrative Agent to exercise any remedy available to the Administrative
Agent in any order. The remedies provided for herein are cumulative and not
exclusive of any remedies provided at law or in equity. The Debtor agrees that
in the event that the Debtor fails to perform, observe or discharge any of its
Obligations or liabilities under this Security Agreement or any other agreements
with the Administrative Agent, no remedy of law will provide adequate relief to
the Administrative Agent, and further agrees that the Administrative Agent shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
SECTION 6 MISCELLANEOUS.
6.1 Entire Agreement. This Security Agreement and the other Loan Documents
(i) are valid, binding and enforceable against the Debtor and the Administrative
Agent in accordance with their respective provisions and no conditions exist as
to their legal effectiveness; (ii) constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof; and (iii) are the
final expression of the intentions of the Debtor and the Administrative Agent.
No promises, either expressed or implied, exist between the Debtor and the
Administrative Agent, unless contained herein or therein. This Security
Agreement, together with the other Loan Documents, supersedes all negotiations,
representations, warranties, commitments, term sheets, discussions,
negotiations, offers or contracts (of any kind or nature, whether oral or
written) prior to or contemporaneous with the execution hereof with respect to
any matter, directly or indirectly related to the terms of this Security
Agreement and the other Loan Documents. This Security Agreement and the other
Loan Documents are the result of negotiations among the Administrative Agent ,
the Debtor and the other parties thereto, and have been reviewed (or have had
the opportunity to be reviewed) by counsel to all such parties, and are the
products of all parties. Accordingly, this Security Agreement and the other Loan
Documents shall not be construed more strictly against the Administrative Agent
merely because of the Administrative Agent's involvement in their preparation.
16
6.2 Amendments; Waivers. No delay on the part of the Administrative Agent
in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by the Administrative Agent of any
right, power or remedy preclude other or further exercise thereof, or the
exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Security Agreement
or the other Loan Documents shall in any event be effective unless the same
shall be in writing and acknowledged by the Administrative Agent, and then any
such amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
6.3 WAIVER OF DEFENSES. THE DEBTOR, ON BEHALF OF ITSELF AND ANY GUARANTOR
OF ANY OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF
ACTION, COUNTERCLAIM OR SETOFF WHICH THE DEBTOR MAY NOW HAVE OR HEREAFTER MAY
HAVE TO ANY ACTION BY THE ADMINISTRATIVE AGENT IN ENFORCING THIS SECURITY
AGREEMENT. PROVIDED THE ADMINISTRATIVE AGENT ACTS IN GOOD FAITH, THE DEBTOR
RATIFIES AND CONFIRMS WHATEVER THE ADMINISTRATIVE AGENT MAY DO PURSUANT TO THE
TERMS OF THIS SECURITY AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE ADMINISTRATIVE AGENT GRANTING ANY FINANCIAL ACCOMMODATION TO THE DEBTOR.
6.4 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS SECURITY AGREEMENT
OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF MICHIGAN OR IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF MICHIGAN; PROVIDED THAT NOTHING IN THIS SECURITY AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. THE DEBTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE
OF MICHIGAN AND OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
MICHIGAN FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE DEBTOR
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF MICHIGAN.
THE DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
6.5 WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT AND THE DEBTOR, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING
17
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT, ANY NOTE, ANY
OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE ADMINISTRATIVE AGENT AND THE
DEBTOR ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT GRANTING ANY FINANCIAL
ACCOMMODATION TO THE DEBTOR.
6.6 Assignability. The Administrative Agent may at any time assign the
Administrative Agent's rights in this Security Agreement, the other Loan
Documents, the Obligations, or any part thereof and transfer the Administrative
Agent's rights in any or all of the Collateral, and the Administrative Agent
thereafter shall be relieved from all liability with respect to such Collateral.
This Security Agreement shall be binding upon the Administrative Agent and the
Debtor and their respective legal representatives and successors. All references
herein to the Debtor shall be deemed to include any successors, whether
immediate or remote. In the case of a joint venture or partnership, the term
"Debtor" shall be deemed to include all joint venturers or partners thereof, who
shall be jointly and severally liable hereunder.
6.7 Binding Effect. This Security Agreement shall become effective upon
execution by the Debtor and the Administrative Agent. If this Security Agreement
is not dated or contains any blanks when executed by the Debtor, the
Administrative Agent is hereby authorized, without notice to the Debtor, to date
this Security Agreement as of the date when it was executed by the Debtor, and
to complete any such blanks according to the terms upon which this Security
Agreement is executed.
6.8 Governing Law. This Security Agreement shall be delivered and accepted
in and shall be deemed to be a contract made under and governed by the internal
laws of the State of Michigan (but giving effect to federal laws applicable to
national banks) applicable to contracts made and to be performed entirely within
such state, without regard to conflict of laws principles.
6.9 Enforceability. Wherever possible, each provision of this Security
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by, unenforceable or invalid under any jurisdiction, such provision
shall as to such jurisdiction, be severable and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
this Security Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
6.10 Time of Essence. Time is of the essence in making payments of all
amounts due the Administrative Agent under this Security Agreement and in the
performance and observance by the Debtor of each covenant, agreement, provision
and term of this Security Agreement.
18
6.11 Counterparts; Facsimile Signatures. This Security Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Security Agreement. Receipt of an executed signature page to this Security
Agreement by facsimile or other electronic transmission shall constitute
effective delivery thereof. Electronic records of executed Loan Documents
maintained by the Administrative Agent shall be deemed to be originals thereof.
6.12 Notices. Except as otherwise provided herein, the Debtor waives all
notices and demands in connection with the enforcement of the Administrative
Agent's rights hereunder. All notices, requests, demands and other
communications provided for hereunder shall be in writing and addressed as
follows:
If to the Debtor: c/o Meadowbrook Insurance Group, Inc.
26600 Telegraph Road
Southfield, Michigan 48034
Attention: Michael Costello
If to the Administrative Agent: Standard Federal Bank National Association
2600 West Big Beaver Road
Troy, Michigan 48084
Attention: Laura Kalil
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. All notices addressed as above shall be deemed to have been
properly given (i) if served in person, upon acceptance or refusal of delivery;
(ii) if mailed by certified or registered mail, return receipt requested,
postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by
recognized overnight courier, on the first (1st) day following the day such
notice is delivered to such carrier. No notice to or demand on the Debtor in any
case shall entitle the Debtor to any other or further notice or demand in
similar or other circumstances.
6.13 Costs, Fees and Expenses. The Debtor shall pay or reimburse the
Administrative Agent for all reasonable costs, fees and expenses incurred by the
Administrative Agent or for which the Administrative Agent becomes obligated in
connection with the enforcement of this Security Agreement, including reasonable
attorneys' fees and time charges of counsel to the Administrative Agent , which
shall also include attorneys' fees and time charges of attorneys who may be
employees of the Administrative Agent or any Affiliate of the Administrative
Agent , plus costs and expenses of such attorneys or of the Administrative Agent
; search fees, costs and expenses; and all taxes payable in connection with this
Security Agreement. In furtherance of the foregoing, the Debtor shall pay any
and all stamp and other taxes, UCC search fees, filing fees and other costs and
expenses in connection with the execution and delivery of this Security
Agreement and the other Loan Documents to be delivered hereunder, and agrees to
save and hold the Administrative Agent harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such costs and expenses. That portion of
19
the Obligations consisting of costs, expenses or advances to be reimbursed by
the Debtor to the Administrative Agent pursuant to this Security Agreement or
the other Loan Documents which are not paid on or prior to the date hereof shall
be payable by the Debtor to the Administrative Agent on demand. If at any time
or times hereafter the Administrative Agent : (a) employs counsel for advice or
other representation (i) with respect to this Security Agreement or the other
Loan Documents, (ii) to represent the Administrative Agent in any litigation,
contest, dispute, suit or proceeding or to commence, defend, or intervene or to
take any other action in or with respect to any litigation, contest, dispute,
suit, or proceeding (whether instituted by the Administrative Agent , the
Debtor, or any other Person) in any way or respect relating to this Security
Agreement, or (iii) to enforce any rights of the Administrative Agent against
the Debtor or any other Person under of this Security Agreement; (b) takes any
action to protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces any of the Administrative Agent
's rights or remedies under this Security Agreement, the costs and expenses
incurred by the Administrative Agent in any manner or way with respect to the
foregoing, shall be part of the Obligations, payable by the Debtor to the
Administrative Agent on demand.
[Remainder of Page Intentionally Left Blank]
20
IN WITNESS WHEREOF, the Debtor and the Administrative Agent have executed
this Security Agreement as of the date first above written.
DEBTOR:
MEADOWBROOK INSURANCE
GROUP, INC.,
a Michigan corporation
By: ___________________________________
___________________________________
Its: ___________________________________
MEADOWBROOK, INC.,
a Michigan corporation
By: ___________________________________
___________________________________
Its: ___________________________________
CREST FINANCIAL CORPORATION,
a Nevada corporation
By: ___________________________________
___________________________________
Its: ___________________________________
21
DEBTOR (continued):
PREFERRED INSURANCE
AGENCY, INC.,
a Massachusetts corporation
By: ___________________________________
___________________________________
Its: ___________________________________
PREFERRED COMP INSURANCE
AGENCY OF NEW HAMPSHIRE,
a New Hampshire corporation
By: ___________________________________
___________________________________
Its: ___________________________________
TPA INSURANCE AGENCY, INC.,
a Massachusetts corporation
By: ___________________________________
___________________________________
Its: ___________________________________
TPA INSURANCE AGENCY OF
NEW HAMPSHIRE, INC.,
a New Hampshire corporation
By: ___________________________________
___________________________________
Its: ___________________________________
MEADOWBROOK
INTERMEDIARIES, INC.,
a New York corporation
By: ___________________________________
___________________________________
Its: ___________________________________
22
DEBTOR (continued):
MEADOWBROOK RISK
MANAGEMENT, INC.,
a New York corporation
By: ___________________________________
___________________________________
Its: ___________________________________
MEADOWBROOK OF NEVADA, INC.,
d/b/a MEADOWBROOK
INSURANCE SERVICES,
a Nevada corporation
By: ___________________________________
___________________________________
Its: ___________________________________
MEADOWBROOK
INSURANCE AGENCY, INC.,
an Ohio corporation
By: ___________________________________
___________________________________
Its: ___________________________________
MARKET PLACE RESOURCES, INC.,
a Michigan corporation
By: ___________________________________
___________________________________
Its: ___________________________________
MEADOWBROOK OF FLORIDA, INC.,
a Florida corporation
By: ___________________________________
___________________________________
Its: ___________________________________
23
DEBTOR (continued):
MEADOWBROOK INSURANCE, INC.,
an Alabama corporation
By: ___________________________________
___________________________________
Its: ___________________________________
NATIONAL OSTEOPATHIC PHYSICIANS
PURCHASING
GROUP, INC.,
a Florida corporation
By: ___________________________________
___________________________________
Its: ___________________________________
NATIONAL REALTY LIABILITY ALLIANCE,
INC.,
a Florida corporation
By: ___________________________________
___________________________________
Its: ___________________________________
ASSOCIATION SELF INSURANCE SERVICES,
INC.,
an Alabama corporation
By: ___________________________________
___________________________________
Its: ___________________________________
24
DEBTOR (continued):
FLORIDA PREFERRED
ADMINISTRATORS, INC.,
a Florida corporation
By: ___________________________________
___________________________________
Its: ___________________________________
CASE MANAGEMENT
RESOURCES, INC.,
a Florida corporation
By: ___________________________________
___________________________________
Its: ___________________________________
AMERICAN HIGHWAY
CARRIERS ASSOCIATION,
a California corporation
By: ___________________________________
___________________________________
Its: ___________________________________
INTERLINE INSURANCE
SERVICES, INC.,
a California corporation
By: ___________________________________
___________________________________
Its: ___________________________________
25
DEBTOR (continued):
COMMERCIAL CARRIERS
INSURANCE AGENCY, INC.,
a California corporation
By: ___________________________________
___________________________________
Its: ___________________________________
Agreed and accepted:
ADMINISTRATIVE AGENT:
STANDARD FEDERAL BANK NATIONAL
ASSOCIATION,
a national banking association
By: ___________________________________
___________________________________
Its: ___________________________________
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SCHEDULE 1
List of Debtors and the Addresses of each of their Chief Executive Offices
PRINCIPAL PLACE OF
ADDRESS OF CHIEF BUSINESS AND BOOKS AND JURISDICTION OF ORGANIZATIONAL
NAME OF DEBTOR EXECUTIVE OFFICE RECORDS TYPE OF ENTITY ORGANIZATION IDENTIFICATION NUMBER
- --------------------- ------------------------ ----------------------- -------------- --------------- ----------------------
Meadowbrook Insurance 26600 Telegraph Rd. 26600 Telegraph Rd. corporation Michigan
Group, Inc. Southfield, MI 48034 Southfield, MI 48034
Meadowbrook, Inc. 26600 Telegraph Rd. 26600 Telegraph Rd. corporation Michigan 38-1798156
Southfield, MI 48034 Southfield, MI 48034
Crest Financial 12641 East 166th St 12641 East 166th St corporation Nevada 33-0000063
Corporation Cerritos, CA 90703 Cerritos, CA 90703
Market Place 26600 Telegraph Rd. 26600 Telegraph Rd. corporation Michigan 38-3476522
Resources, Inc. Southfield, Mi 48034 Southfield, Mi 48034
Preferred Insurance 10 New England Business 10 New England Business corporation Massachusetts 04-3279903
Agency, Inc. Center, Ste. 303 Center, Ste. 303
Andover, MA 01810 Andover, MA 01810
Preferred Comp 10 New England Business 10 New England Business corporation New Hampshire 04-3356998
Insurance Center, Ste 303 Center, Ste 303
Andover, MA 01810 Andover, MA 01810
TPA Insurance Agency, 10 New England Business 10 New England Business corporation Massachusetts 04-3296168
Inc. Center, Ste 303 Center, Ste 303
Andover, MA 01810 Andover, MA 01810
TPA Insurance Agency 10 New England Business 10 New England Business corporation New Hampshire 04-3356996
of New Hampshire, Inc. Center, Ste 303 Center, Ste 303
Andover, MA 01810 Andover, MA 01810
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Meadowbrook 26600 Telegraph Rd. 26600 Telegraph Rd. corporation New York 38-2573624
Intermediaries, Inc. Southfield, Mi 48034 Southfield, Mi 48034
Meadowbrook Risk 26600 Telegraph Rd. 26600 Telegraph Rd. corporation New York 38-2573592
Management, Inc. Southfield, Mi 48034 Southfield, Mi 48034
Meadowbrook of Nevada, 1645 Village Ctr Circle, 1645 Village Ctr Circle, corporation Nevada 88-0340758
Inc., d/b/a Ste 180 Ste 180
Meadowbrook Insurance Las Vegas, NV 89134 Las Vegas, NV 89134
Services
Meadowbrook Insurance 1300 E. 9th, Street 26600 Telegraph Rd. corporation Ohio 38-2725059
Agency, Inc. Cleveland, OH 44114 Southfield, MI 48034
Meadowbrook of 7250 S. Beneva Rd 7250 S. Beneva Rd corporation Florida 65-0839780
Florida, Inc Sarasota, FL 34238 Sarasota, FL 34238
Meadowbrook Insurance, 2500 Fairlane Dr., Ste 2500 Fairlane Dr., Ste corporation Alabama 63-1223412
Inc. 100 100
Montgomery, AL 36116 Montgomery, AL 36116
National Osteopathic 7250 S. Beneva Rd 7250 S. Beneva Rd corporation Florida 65-0789177
Physicians Purchasing Sarasota, FL 34238 Sarasota, FL 34238
Group, Inc
National Realty 7250 S. Beneva Rd 7250 S. Beneva Rd corporation Florida 65-0082905
Liability Alliance, Sarasota, FL 34238 Sarasota, FL 34238
Inc.
Association Self 2500 Fairlane Dr., Ste 2500 Fairlane Dr., Ste corporation Alabama 57-0847488
Insurance Services, 100 100
Inc. Montgomery, AL 36116 Montgomery, AL 36116
Florida Preferred 7250 S. Beneva Rd 7250 S. Beneva Rd corporation Florida 65-0150469
Administrators, Inc. Sarasota, FL 34238 Sarasota, FL 34238
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Case Management 7250 S. Beneva Rd 7250 S. Beneva Rd corporation Florida 65-0284549
Resources, Inc. Sarasota, FL 34238 Sarasota, FL 34238
American Highway 12641 East 166th St 12641 East 166th St corporation California 33-0000979
Carriers Association Cerritos, CA 90703 Cerritos, CA 90703
Interline Insurance 12641 East 166th St 12641 East 166th St corporation California 94-2828166
Services, Inc Cerritos, CA 90703 Cerritos, CA 90703
Commercial Carriers 12641 East 166th St 12641 East 166th St corporation California 95-3328008
Insurance Agency Cerritos, CA 90703 Cerritos, CA 90703
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