EXHIBIT 10.11(b)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 1st day of
October, 2004, by CITIZENS INSURANCE COMPANY OF AMERICA, a Colorado insurance
corporation ("CICA"), in favor of REGIONS BANK, an Alabama banking corporation
("Bank").
BACKGROUND.
Pursuant to the Loan Agreement, Borrower will receive a loan from Bank in
the principal amount of $30,000,000 and will use the proceeds of such loan to
purchase a surplus debenture issued by CICA in the original principal amount of
$30,000,000. CICA will use the proceeds of such surplus debenture to pay a
portion of the purchase price for all of the authorized, issued and outstanding
capital stock of SPLIC. Upon the acquisition of such stock, SPLIC shall be a
wholly-owned Subsidiary of CICA. CICA is a wholly-owned Subsidiary of Borrower.
It is a condition precedent to the making of the loan by Bank to Borrower that
CICA execute and deliver this Agreement.
AGREEMENT.
For value received, CICA hereby agrees with Secured Party as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings indicated below:
(a) The term "Borrower" shall mean Citizens, Inc., a Colorado
corporation.
(b) The term "Code" shall mean the Uniform Commercial Code as in
effect in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(c) The term "Collateral" shall mean all of the following property
of CICA, whether now owned or hereafter acquired: (a) any and all shares
of capital stock and other equity interest of SPLIC (including but not
limited to the capital stock described on Schedule A), which shall be not
less than 100% of issued and outstanding capital stock or other equity
interests of SPLIC, (b) all certificates, instruments and/or other
documents evidencing the foregoing, (c) all renewals, replacements and
substitutions of all of the foregoing, (d) all Additional Property (as
hereinafter defined), and (e) all products and proceeds of all of the
foregoing. The designation of proceeds does not authorize CICA to sell,
transfer or otherwise convey any of the foregoing property. The delivery
at any time by CICA to Secured Party of any property as a pledge to secure
payment or performance of any indebtedness or obligation whatsoever shall
also constitute a pledge of such property as Collateral hereunder.
(d) The term "CICA" shall mean Citizens Insurance Company of
America, a Colorado insurance corporation.
(e) The term "Indebtedness" shall mean all indebtedness,
obligations and liabilities of Borrower to Secured Party of any kind or
character, now existing or
hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and several,
and regardless of whether such indebtedness, obligations and liabilities
may, prior to their acquisition by Secured Party, be or have been payable
to or in favor of a third party and subsequently acquired by Secured Party
(it being contemplated that Secured Party may make such acquisitions from
third parties), including without limitation all indebtedness, obligations
and liabilities of Borrower to Secured Party now existing or hereafter
arising by note, draft, acceptance, guaranty, endorsement, letter of
credit, assignment, purchase, overdraft, discount, indemnity agreement or
otherwise, including without limitation that certain promissory note of
Borrower, dated as of March 22, 2004, payable to the order of Secured
Party in the original principal amount of $30,000,000, and any and all
amendments, renewals, extensions, modifications, supplements and
restatements thereof, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Borrower to
Secured Party under any documents evidencing, securing, governing and/or
pertaining to all or any part of the indebtedness described in (i) and
(ii) above, (iv) all costs and expenses incurred by Secured Party in
connection with the collection and administration of all or any part of
the indebtedness and obligations described in (i), (ii) and (iii) above or
the protection or preservation of, or realization upon, the collateral
securing all or any part of such indebtedness and obligations, including
without limitation all reasonable attorneys' fees, (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above, and all amounts
that would be owed by Borrower under any Loan Document but for the fact
that such amounts are unenforceable or not allowable due to the existence
of a proceeding pursuant to any CICA Relief Law (as defined in the Loan
Agreement) involving CICA or any Person (including all such amounts that
would become due or would be secured but for the filing of any petition,
or the commencement of any proceeding, under CICA Relief Laws.
(f) The term "Loan Agreement" shall mean that certain Loan
Agreement between Borrower, as the borrower, and Secured Party, as the
lender, dated as of March 22, 2004, and any and all amendments, renewals,
extensions, modifications, supplements and restatements thereof.
(g) The term "Loan Documents" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness, as such instruments and documents may be amended,
renewed, extended, modified, supplemented, or restated from time to time.
(h) The term "Obligated Party" shall mean any party other than
CICA who secures, guarantees and/or is otherwise obligated to pay all or
any portion of the Indebtedness.
(i) The term "Secured Party" shall mean Bank, its successors and
assigns, including without limitation, any party to whom Bank, or its
successors or assigns, may assign its rights and interests under this
Agreement.
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(j) The term "SPLIC" means Security Plan Life Insurance Company, a
Louisiana insurance corporation.
All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201, Chapter 8 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, CICA, for
value received, hereby grants to Secured Party a continuing security interest in
the Collateral.
3. ADDITIONAL PROPERTY. Collateral shall also include the
following property (collectively, the "Additional Property") which CICA becomes
entitled to receive or shall receive in connection with any Collateral: (a) any
stock certificate including without limitation, any certificate representing a
stock dividend or any certificate in connection with any recapitalization,
reclassification, merger, consolidation, conversion, combination of shares,
stock split or spin-off; (b) any option, warrant, subscription or right, whether
as an addition to or in substitution of any Collateral; (c) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (d) any interest or principal payments; and (e) any conversion
or redemption proceeds; provided, however, that until the occurrence of an Event
of Default (as hereinafter defined), CICA shall be entitled to all cash
dividends and all principal and interest paid on the Collateral free of the
security interest created under this Agreement. All Additional Property received
by CICA shall be received in trust for the benefit of Secured Party. All
Additional Property and all certificates or other written instruments or
documents evidencing and/or representing the Additional Property that is
received by CICA, together with such instruments of transfer as Secured Party
may request, shall immediately be delivered to or deposited with Secured Party
and held by Secured Party as Collateral under the terms of this Agreement. If
the Additional Property received by CICA shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a bank or member firm of the New York Stock Exchange, all in form and substance
satisfactory to Secured Party. Secured Party shall be deemed to have possession
of any Collateral in transit to Secured Party or its agent.
4. VOTING RIGHTS. As long as no Event of Default shall have
occurred hereunder and subject to Section 11(i), any voting rights incident to
any stock or other securities pledged as Collateral may be exercised by CICA;
provided, however, that CICA will not exercise, or cause to be exercised, any
such voting rights, without the prior written consent of Secured Party, if the
direct or indirect effect of such vote will result in an Event of Default
hereunder.
5. MAINTENANCE OF COLLATERAL. Other than the exercise of
reasonable care to assure the safe custody of any Collateral in Secured Party's
possession from time to time, Secured Party does not have any obligation, duty
or responsibility with respect to the Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing CICA with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether
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conversion, redemption or otherwise) with respect to the Collateral unless (i)
CICA makes written demand to Secured Party to do so, (ii) such written demand is
received by Secured Party in sufficient time to permit Secured Party to take the
action demanded in the ordinary course of its business, and (iii) CICA provides
additional collateral, acceptable to Secured Party in its sole discretion; (c)
collect any amounts payable in respect of the Collateral (Secured Party being
liable to account to CICA only for what Secured Party may actually receive or
collect thereon); (d) sell all or any portion of the Collateral to avoid market
loss; (e) sell all or any portion of the Collateral unless and until (i) CICA
makes written demand upon Secured Party to sell the Collateral, and (ii) CICA
provides additional collateral, acceptable to Secured Party in its sole
discretion; or (f) hold the Collateral for or on behalf of any party other than
CICA.
6. REPRESENTATIONS AND WARRANTIES. CICA hereby represents and warrants
the following to Secured Party:
(a) Due Authorization. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by CICA have been duly
authorized by all necessary corporate action of CICA, to the extent CICA
is a corporation, or by all necessary partnership action, to the extent
CICA is a partnership.
(b) Enforceability. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of CICA, enforceable in
accordance with their respective terms, except as limited as to
enforcement of remedies by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited by
equitable principles.
(c) Ownership and Liens. CICA has good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances
or adverse claims, except for the security interest created by this
Agreement. No dispute, right of setoff, counterclaim or defense exists
with respect to all or any part of the Collateral. CICA has not executed
any other security agreement currently affecting the Collateral and no
financing statement or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording office except as
may have been executed or filed in favor of Secured Party.
(d) No Conflicts or Consents. Neither the ownership, the intended
use of the Collateral by CICA, the grant of the security interest by CICA
to Secured Party herein nor the exercise by Secured Party of its rights or
remedies hereunder, will (i) conflict with any provision of (A) any
domestic or foreign law, statute, rule or regulation, (B) the articles or
certificate of incorporation, charter, bylaws or partnership agreement, as
the case may be, of CICA, or (C) any agreement, judgment, license, order
or permit applicable to or binding upon CICA or otherwise affecting the
Collateral, or (ii) result in or require the creation of any lien, charge
or encumbrance upon any assets or properties of CICA or of any person
except as may be expressly contemplated in the Loan Documents. Except as
expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any court,
governmental authority or third party is required in connection with the
grant by CICA of
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the security interest herein or the exercise by Secured Party of its
rights and remedies hereunder.
(e) Security Interest. CICA has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any
lien, security interest or other charge or encumbrance. This Agreement
creates a legal, valid and binding security interest in favor of Secured
Party in the Collateral.
(f) Location/Identity. CICA's residence or chief executive office,
as the case may be, and the office where the records concerning the
Collateral are kept is located at its address set forth on the signature
page hereof. CICA's exact legal name, entity type, state of organization,
federal taxpayer identification number and organizational number issued by
the appropriate authority of the State of Colorado (the "Organizational
Information") are as set forth on the signature page hereof. CICA is not
organized in more than one jurisdiction. Except as specified herein, the
Organizational Information shall not change. During the five years
preceding the date of this Agreement, CICA has not had or operated under
any name other than its name as stated on the signature page of this
Agreement, has not been organized under the laws of any jurisdiction other
than Colorado, has not been organized as a type of entity other than an
insurance corporation and the chief executive office of CICA has not been
located at any address other than as set forth on the signature page
hereof.
(g) Solvency of CICA. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by CICA at the time of the execution of this Agreement, (i)
CICA is and will be solvent, (ii) the fair saleable value of CICA's assets
exceeds and will continue to exceed CICA's liabilities (both fixed and
contingent), (iii) CICA is and will continue to be able to pay its debts
as they mature, and (iv) if CICA is not an individual, CICA has and will
have sufficient capital to carry on CICA's businesses and all businesses
in which CICA is about to engage.
(h) Nature of Ownership. CICA is the registered owner of the
securities pledged as Collateral and a certificate has been issued in
CICA's name to evidence CICA's ownership in such securities.
(i) Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are
fully paid and non-assessable, and were not issued in violation of the
preemptive rights of any party or of any agreement by which CICA or the
issuer thereof is bound. No restrictions or conditions exist with respect
to the transfer or voting of any securities pledged as Collateral, except
as has been disclosed to Secured Party in writing. No issuer of such
securities has any outstanding stock rights, rights to subscribe, options,
warrants or convertible securities outstanding or any other rights
outstanding entitling any party to have issued to such party capital stock
of such issuer, except as has been disclosed to Secured Party in writing.
Schedule A contains a complete and correct description of each certificate
or other instrument included in or
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evidencing Collateral. Schedule B is a complete and correct list of the
exact name of the issuer of all Collateral described on Schedule A, its
jurisdiction of organization, its federal taxpayer identification number,
and the authorized, issued and outstanding capital stock of such issuer.
CICA's interest in such issuer is as stated on Schedule A.
(j) Benefit. This Agreement may reasonably be expected to benefit,
directly or indirectly, CICA, and the Board of Directors of CICA has
determined that this Agreement may reasonably be expected to benefit,
directly or indirectly, CICA. CICA is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral intended
to be security for the payment of all or any part of the Indebtedness;
provided, however, CICA is not relying on such financial condition or
collateral as an inducement to enter into this Agreement.
7. AFFIRMATIVE COVENANTS. CICA will comply with the covenants contained
in this Section at all times during the period of time this Agreement is
effective unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens. CICA will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created
by this Agreement and the security interests and other encumbrances
expressly permitted by the other Loan Documents. CICA will not permit any
dispute, right of setoff, counterclaim or defense to exist with respect to
all or any part of the Collateral. CICA will cause any financing statement
or other security instrument with respect to the Collateral to be
terminated, except as may exist or as may have been filed in favor of
Secured Party. CICA will defend at its expense Secured Party's right,
title and security interest in and to the Collateral against the claims of
any third party.
(b) Inspection of Books and Records. CICA will keep adequate
records concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect CICA's
books and records of or relating to the Collateral at any time during
normal business hours, to make and take away photocopies, photographs and
printouts thereof and to write down and record any such information.
(c) Adverse Claim. CICA covenants and agrees to promptly notify
Secured Party of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest created
hereunder and, at CICA's expense, defend Secured Party's security interest
in the Collateral against the claims of any third party. CICA also
covenants and agrees to promptly deliver to Secured Party a copy of all
written notices received by CICA with respect to the Collateral, including
without limitation, notices received from the issuer of any securities
pledged hereunder as Collateral.
(d) Delivery of Instruments and/or Certificates. Contemporaneously
herewith, CICA covenants and agrees to deliver to Secured Party any
certificates, documents or instruments representing or evidencing the
Collateral, together with
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CICA's endorsement thereon and/or accompanied by proper instruments of
transfer and assignment duly executed in blank with, if requested by
Secured Party, signatures guaranteed by a bank or member firm of the New
York Stock Exchange, all in form and substance satisfactory to Secured
Party. If required by Secured Party, CICA also covenants and agrees to
cooperate with Secured Party in registering the pledge of the securities
pledged as Collateral with the issuer of such securities.
(e) Further Assurances. CICA will from time to time at its expense
promptly execute and deliver all further instruments and documents and
take all further action necessary or appropriate or that Secured Party may
request in order (i) to perfect and protect the security interest created
or purported to be created hereby and the first priority of such security
interest, (ii) to enable Secured Party to exercise and enforce its rights
and remedies hereunder in respect of the Collateral, and (iii) to
otherwise effect the purposes of this Agreement, including without
limitation, executing and filing such financing or continuation
statements, or any amendments thereto.
8. NEGATIVE COVENANTS. CICA will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective,
unless Secured Party shall otherwise consent in writing.
(a) Transfer or Encumbrance. CICA will not (i) sell, assign (by
operation of law or otherwise) or transfer CICA's rights in any of the
Collateral, (ii) grant a lien or security interest in or execute, file or
record any financing statement or other security instrument with respect
to the Collateral to any party other than Secured Party, or (iii) deliver
actual or constructive possession of any certificate, instrument or
document evidencing and/or representing any of the Collateral to any party
other than Secured Party.
(b) Impairment of Security Interest. CICA will not take or fail to
take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
(c) Dilution of Ownership. As to any securities pledged as
Collateral, CICA will not consent to or approve of the issuance of (i) any
additional shares of any class of securities of such issuer (unless
immediately upon issuance additional securities are pledged and delivered
to Secured Party pursuant to the terms hereof to the extent necessary to
give Secured Party a security interest after such issuance in at least the
same percentage of such issuer's outstanding securities as Secured Party
had before such issuance), (ii) any instrument convertible voluntarily by
the holder thereof or automatically upon the occurrence or non-occurrence
of any event or condition into, or exchangeable for, any such securities,
or (iii) any warrants, options, contracts or other commitments entitling
any third party to purchase or otherwise acquire any such securities.
(d) Restrictions on Securities. CICA will not enter into any
agreement creating, or otherwise permit to exist, any restriction or
condition upon the transfer,
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voting or control of any securities pledged as Collateral, except as
consented to in writing by Secured Party.
9. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section at all times during the period of time this Agreement
is effective.
(a) Power of Attorney. CICA hereby irrevocably appoints Secured
Party as CICA's attorney-in-fact, such power of attorney being coupled
with an interest, with full authority in the place and stead of CICA and
in the name of CICA or otherwise, to take any action and to execute any
instrument which Secured Party may from time to time in Secured Party's
discretion deem necessary or appropriate to accomplish the purposes of
this Agreement (subject to Section 11(i)), including without limitation,
the following action: (i) transfer any securities, instruments, documents
or certificates pledged as Collateral in the name of Secured Party or its
nominee; (ii) use any interest, premium or principal payments, conversion
or redemption proceeds or other cash proceeds received in connection with
any Collateral to reduce any of the Indebtedness; (iii) exchange any of
the securities pledged as Collateral for any other property upon any
merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof, and, in connection therewith, to
deposit and deliver any and all of such securities with any committee,
depository, transfer agent, registrar or other designated agent upon such
terms and conditions as Secured Party may deem necessary or appropriate;
(iv) exercise or comply with any conversion, exchange, redemption,
subscription or any other right, privilege or option pertaining to any
securities pledged as Collateral; provided, however, except as provided
herein, Secured Party shall not have a duty to exercise or comply with any
such right, privilege or option (whether conversion, redemption or
otherwise) and shall not be responsible for any delay or failure to do so;
and (v) file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or appropriate for the collection
and/or preservation of the Collateral or otherwise to enforce the rights
of Secured Party with respect to the Collateral.
(b) Performance by Secured Party. If CICA fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by CICA on demand.
Notwithstanding any other provision herein to the contrary, Secured Party does
not have any duty to exercise or continue to exercise any of the foregoing
rights and shall not be responsible for any failure to do so or for any delay in
doing so.
10. EVENTS OF DEFAULT. Each of the following constitutes an "Event of
Default" under this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal or neglect
of Borrower to make any payment of principal or interest on the
Indebtedness, any other amounts due under the Loan Documents, or any
portion thereof, as the same shall become due and payable; or
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(b) Non-Performance of Covenants. The failure of Borrower or any
Obligated Party to punctually and properly perform, observe, or comply
with any covenant, agreement, warranty or condition required herein or in
any of the other Loan Documents; or
(c) Default Under other Loan Documents. The occurrence of a
default or an event of default under the Loan Agreement or any of the
other Loan Documents; or
(d) Misrepresentation. Any representation contained herein or in
any of the other Loan Documents made by Borrower or any Obligated Party is
false, misleading or erroneous in any material respect; or
(e) Default to Third Party. The occurrence of any event which
permits the acceleration of the maturity of any indebtedness owing by
Borrower or any Obligated Party to any third party under any agreement or
undertaking; or
(f) Execution on Collateral. The Collateral or any portion thereof
is taken on execution or other process of law in any action against CICA;
or
(g) Abandonment. CICA abandons the Collateral or any portion
thereof; or
(h) Action by Other Lienholder. The holder of any lien or security
interest on any of the assets of CICA, including without limitation, the
Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(i) Liquidation, Death and Related Events. If CICA or any
Obligated Party is an entity, the liquidation, dissolution, merger or
consolidation of any such entity or, if CICA or any Obligated Party is an
individual, the death or legal incapacity of any such individual; or
(j) Dilution of Ownership. The issuer of any securities
constituting Collateral hereafter issues any shares of any class of
capital stock (unless immediately upon issuance, additional securities are
pledged and delivered to Secured Party pursuant to the terms hereof to the
extent necessary to give Secured Party a security interest after such
issuance in at least the same percentage of such issuer's outstanding
securities as Secured Party had before such issuance) or any options,
warrants or other rights to purchase any such capital stock; or
(k) Bankruptcy of CICA or Issuer. (i) The issuer of any securities
constituting Collateral or CICA files a petition for relief under any CICA
Relief Law or it or any of its property is the subject of a
conservatorship, receivership or similar proceeding, (ii) an involuntary
petition for relief is filed against any such issuer or CICA under any
CICA Relief Law and such involuntary petition is not dismissed within
thirty (30) days after the filing thereof, or (iii) an order for relief
naming any such issuer or CICA is entered under any CICA Relief Law.
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11. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as expressly
provided in any of the Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code
applies to the affected Collateral);
(ii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted
hereunder by any available judicial procedure;
(iii) sell or otherwise dispose of, at its office, on the
premises of CICA or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale or other disposition of any
part of the Collateral shall not exhaust Secured Party's power of
sale, but sales or other dispositions may be made from time to time
until all of the Collateral has been sold or disposed of or until
the Indebtedness has been paid and performed in full), and at any
such sale or other disposition it shall not be necessary to exhibit
any of the Collateral;
(iv) buy the Collateral, or any portion thereof, at any
public sale;
(v) buy the Collateral, or any portion thereof, at any
private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely
distributed standard price quotations;
(vi) apply for the appointment of a receiver for the
Collateral, and CICA hereby consents to any such appointment; and
(vii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured
Party is entitled to do so under the Code or otherwise.
CICA agrees that in the event CICA is entitled to receive any notice under
the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any Collateral, reasonable
notice shall be deemed given when such notice is deposited in a depository
receptacle under the care and custody of the United States Postal Service,
postage prepaid, at CICA's address set forth on the signature page hereof,
five (5) days prior to the date of any public sale, or after which a
private sale, of any of such Collateral is to be held. Secured Party shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
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therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. CICA further acknowledges and
agrees that the redemption by Secured Party of any certificate of deposit
pledged as Collateral shall be deemed to be a commercially reasonable
disposition under Section 9.627(b) of the Code.
(b) Private Sale of Securities. CICA recognizes that Secured Party
may be unable to effect a public sale of all or any part of the securities
pledged as Collateral because of restrictions in applicable federal and
state securities or insurance laws and that Secured Party may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment
and not with a view to the distribution or resale thereof. CICA
acknowledges that each any such private sale may be at prices and other
terms less favorable then what might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that each such private sale
shall be deemed to have been made in a commercially reasonable manner and
that Secured Party shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer to
register such securities for public sale under any federal or state
securities laws. CICA further acknowledges and agrees that any offer to
sell such securities which has been made privately in the manner described
above to not less than five (5) bona fide offerees shall be deemed to
"commercially reasonable" for the purposes of Section 9.627(b) of the
Code, notwithstanding that such sale may not constitute a "public
offering" under any federal or state securities laws and that Secured
Party may, in such event, bid for the purchase of such securities.
(c) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held
by Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale or other disposition of, collection from, or
other realization upon, all or any part of the Collateral as follows in
such order and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable
costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by Secured Party in
connection with (A) the administration of the Loan Documents, (B)
the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (C)
the exercise or enforcement of any of the rights and remedies of
Secured Party hereunder;
(ii) to the payment or other satisfaction of any liens and
other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by
applicable law (including without limitation, Section 9.615 of the
Code or any other applicable statutory provision); and
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(vi) by delivery to CICA or any other party lawfully entitled
to receive such cash or proceeds whether by direction of a court of
competent jurisdiction or otherwise.
(d) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to which
Secured Party is legally entitled, Borrower and any party who guaranteed
or is otherwise obligated to pay all or any portion of the Indebtedness
shall be liable for the deficiency, together with interest thereon as
provided in the Loan Documents.
(e) Non-Judicial Remedies. In granting to Secured Party the power
to enforce its rights hereunder without prior judicial process or judicial
hearing, CICA expressly waives, renounces and knowingly relinquishes any
legal right which might otherwise require Secured Party to enforce its
rights by judicial process. CICA recognizes and concedes that non judicial
remedies are consistent with the usage of trade, are responsive to
commercial necessity and are the result of a bargain at arm's length.
Nothing herein is intended to prevent Secured Party or CICA from resorting
to judicial process at either party's option.
(f) Other Recourse. CICA waives any right to require Secured Party
to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with CICA
in any suit arising out of the Indebtedness or any of the Loan Documents,
or pursue any other remedy available to Secured Party. CICA further waives
any and all notice of acceptance of this Agreement and of the creation,
modification, rearrangement, renewal or extension of the Indebtedness.
CICA further waives any defense arising by reason of any disability or
other defense of any third party or by reason of the cessation from any
cause whatsoever of the liability of any third party. Until all of the
Indebtedness shall have been paid in full, CICA shall have no right of
subrogation and CICA waives the right to enforce any remedy which Secured
Party has or may hereafter have against any third party, and waives any
benefit of and any right to participate in any other security whatsoever
now or hereafter held by Secured Party. CICA authorizes Secured Party, and
without notice or demand and without any reservation of rights against
CICA and without affecting CICA's liability hereunder or on the
Indebtedness, to (i) take or hold any other property of any type from any
third party as security for the Indebtedness, and exchange, enforce, waive
and release any or all of such other property, (ii) apply such other
property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (iii) renew, extend, accelerate, modify,
compromise, settle or release any of the Indebtedness or other security
for the Indebtedness, (iv) waive, enforce or modify any of the provisions
of any of the Loan Documents executed by any third party, and (v) release
or substitute any third party.
(g) Voting Rights. Upon the occurrence of an Event of Default,
CICA will not exercise any voting rights with respect to securities
pledged as Collateral. CICA hereby irrevocably appoints Secured Party as
CICA's attorney-in-fact (such power of attorney being coupled with an
interest) and proxy to exercise any voting rights with
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respect to CICA's securities pledged as Collateral upon the occurrence of
an Event of Default.
(h) Dividend Rights and Interest Payments. Upon the occurrence of
an Event of Default:
(i) all rights of CICA to receive and retain the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 3 shall automatically cease,
and all such rights shall thereupon become vested with Secured Party
which shall thereafter have the sole right to receive, hold and
apply as Collateral such dividends and interest payments; and
(ii) all dividend and interest payments which are received by
CICA contrary to the provisions of clause (i) of this Subsection
shall be received in trust for the benefit of Secured Party, shall
be segregated from other funds of CICA, and shall be forthwith paid
over to Secured Party in the exact form received (properly endorsed
or assigned if requested by Secured Party), to be held by Secured
Party as Collateral.
(i) Insurance Holding Company Laws. Because of laws and
regulations governing change of control of insurance companies that may be
applicable (collectively, the "Insurance Holding Company Laws"), certain
purchasers of the Collateral at foreclosure may be required to obtain
regulatory approval prior to a final and binding acquisition of the
Collateral. The CICA acknowledges that such laws and regulations may
adversely affect the purchase price to be paid by a purchaser of the
Collateral, or any part thereof, at a private or public foreclosure sale,
and that the Secured Party may (and is hereby authorized by the CICA to)
modify the notices, advertisements, terms and procedures of any
foreclosure sale of the Collateral in order to comply with Insurance
Holding Company Laws. Without limiting the foregoing, the CICA
acknowledges that the Secured Party may accept bids at foreclosure sale on
a provisional basis, pending receipt by the successful bidder of necessary
regulatory approvals under the Insurance Holding Company Laws. In
addition, the CICA acknowledges that the Secured Party may (but shall not
be required to) limit bidding at foreclosure sales to those parties which
have demonstrated an ability to comply with requirements of the Insurance
Holding Company Laws. Moreover, the CICA acknowledges that the Secured
Party may require the successful bidder at a foreclosure sale to execute a
purchase agreement, deposit a portion of the purchase price, and take
other actions reflecting the requirements of the Insurance Holding Company
Laws and the resulting delay in consummating a foreclosure sale.
12. MISCELLANEOUS.
(a) Entire Agreement. This Agreement contains the entire agreement
of Secured Party and CICA with respect to the Collateral. If the parties
hereto are parties to any prior agreement, either written or oral,
relating to the Collateral, the terms of this Agreement shall amend and
supersede the terms of such prior agreements as to transactions on or
after the effective date of this Agreement, but all security agreements,
Page 13
financing statements, guaranties, other contracts and notices for the
benefit of Secured Party shall continue in full force and effect to secure
the Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be
valid or effective unless the same is in writing and signed by the party
against whom it is sought to be enforced.
(c) Actions by Secured Party. The lien, security interest and
other security rights of Secured Party hereunder shall not be impaired by
(i) any renewal, extension, increase or modification with respect to the
Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Indebtedness. The taking of additional security
by Secured Party shall not release or impair the lien, security interest
or other security rights of Secured Party hereunder or affect the
obligations of CICA hereunder.
(d) Waiver by Secured Party. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay
by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be
exercised at any time. No waiver of any provision hereof or consent to any
departure by CICA therefrom shall be effective unless the same shall be in
writing and signed by Secured Party and then such waiver or consent shall
be effective only in the specific instances, for the purpose for which
given and to the extent therein specified. No notice to or demand on CICA
in any case shall of itself entitle CICA to any other or further notice or
demand in similar or other circumstances.
(e) Costs and Expenses. CICA will upon demand pay to Secured Party
the amount of any and all costs and expenses (including without
limitation, attorneys' fees and expenses), which Secured Party may incur
in connection with (i) the preparation of this Agreement and the
perfection and preservation of the security interests granted under the
Loan Documents to which CICA is a party, (ii) the administration of the
Loan Documents, (iii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, the Collateral,
(iv) the exercise or enforcement of any of the rights of Secured Party
under the Loan Documents, or (v) the failure by CICA to perform or observe
any of the provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION
OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN
Page 14
RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.
(g) Choice of Forum: Service of Process and Jurisdiction. Any
suit, action or proceeding against CICA with respect to the Loan Documents
or any judgment entered by any court in respect thereof, may be brought in
the courts of the State of Texas, County of Travis, or in the United
States courts located in the State of Texas as Secured Party may elect and
CICA hereby submits to the non-exclusive jurisdiction of such courts for
the purpose of any such suit, action or proceeding. CICA hereby
irrevocably consents to the service of process in any suit, action or
proceeding in said court by the mailing thereof by Secured Party by
registered or certified mail, return receipt requested, postage prepaid,
to CICA's address set forth on the signature page of this Agreement or any
other address provided by CICA to Secured Party in writing. CICA hereby
irrevocably waives any objections which it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or
relating to the Loan Documents brought in the courts located in the State
of Texas, County of Travis, and hereby further irrevocably waives any
claim that any such suit, action or proceeding brought in any such court
has been brought in any inconvenient forum.
(h) Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be construed as
an obligation on the part of Secured Party to extend credit to CICA or
continue to extend credit to Borrower.
(j) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and shall be deemed to have been given or
made (a) when personally delivered, (b) if mailed, when sent by registered
or certified mail, postage prepaid, (c) if sent by a nationally recognized
overnight delivery service, on the next business day after delivery to
such service specifying delivery on the next business day or (d) if
transmitted by telex, telecopier or facsimile machine, on the day that
such notice is transmitted and received. The address of each party for the
purposes hereof is set forth on the signature page of this Agreement.
(k) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
CICA and the heirs, executors, administrators, personal representatives,
successors and assigns of CICA, and (iii) shall inure to the benefit of
Secured Party and its successors and assigns. Without limiting the
generality of the foregoing, Secured Party may pledge, assign or otherwise
transfer the Indebtedness and its rights under this Agreement and any of
the other Loan Documents to any other party. CICA's rights and obligations
hereunder may not be assigned or otherwise transferred without the prior
written consent of Secured Party.
Page 15
(l) Termination. It is contemplated by the parties hereto that
from time to time there may be no outstanding Indebtedness, but
notwithstanding such occurrences, this Agreement shall remain valid and
shall be in full force and effect as to subsequent outstanding
Indebtedness. Upon (i) the satisfaction in full of the Indebtedness, (ii)
the termination or expiration of any commitment of Secured Party to extend
credit to Borrower, (iii) written request for the termination hereof
delivered by to Secured Party, and (iv) written release delivered by
Secured Party to CICA, this Agreement and the security interests created
hereby shall terminate. Upon termination of this Agreement and CICA's
written request, Secured Party will, at CICA's sole cost and expense,
return to CICA such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and execute
and deliver to CICA such documents as CICA shall reasonably request to
evidence such termination.
(m) JURY TRIAL WAIVER. CICA AND SECURED PARTY EACH HEREBY WAIVE
ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING OR RELATING
TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
(n) Cumulative Rights. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any of
the other Loan Documents, and the exercise of one or more of such rights
or remedies shall not prejudice or impair the concurrent or subsequent
exercise of any other rights or remedies.
(o) Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and
words in the plural number shall be held and construed to include the
singular, unless in each instance the context requires otherwise.
(p) Descriptive Headings. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
(q) Financing Statements. By signing below, CICA authorizes
Secured Party to authenticate and file financing statements and/or
amendments thereto and continuations thereof under the provisions of the
Code.
(r) Limitation. Notwithstanding anything in this Agreement to the
contrary, the obligations of CICA under this Agreement shall be limited to
a maximum aggregate amount equal to the largest amount that would not
render CICA's obligations hereunder subject to avoidance as a fraudulent
transfer or fraudulent conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving
effect to all other liabilities of CICA, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws and after giving effect as
assets to the value (as determined under the
Page 16
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, reimbursement or contribution of CICA pursuant to applicable
law, or any agreement providing for rights of subrogation, reimbursement
or contribution in favor of CICA, or for an equitable allocation among
CICA, Borrower, any other Obligated Party, and any other Person of
obligations arising under guaranties or grants of collateral by such
Persons.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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EXECUTED as of the date first written above.
CICA's Address: CICA:
Citizens Insurance Company of America CITIZENS INSURANCE COMPANY OF
400 East Anderson Lane AMERICA,
Austin, Texas 78752 a Colorado insurance corporation
Attention: Mark A. Oliver, President
Federal taxpayer identification no.: ________ By: /s/ Mark A. Oliver
Organizational identification no.: __________ -------------------------
Name: Mark A. Oliver
Title: President
Secured Party's Address:
Regions Bank
4314 West Braker Lane, Suite 110
Austin, Texas 78759
Attention: Todd A. Self
Page 18
SCHEDULE A TO
SECURITY AGREEMENT
DATED OCTOBER 1, 2004
The following property is a part of the Collateral as defined in Subsection
1(c):
10,000 shares of common stock of Security Plan Life Insurance Company, a
Louisiana insurance corporation, as evidenced by certificate no. 12 issued in
the name of Citizens Insurance Company of America.
As of the date of this Agreement, such common stock represents all of the
authorized, issued and outstanding shares of common stock of Security Plan Life
Insurance Company.
SCHEDULE B TO
SECURITY AGREEMENT
DATED OCTOBER 1, 2004
Issuer Name: Security Plan Life Insurance Company
Jurisdiction of Incorporation: Louisiana
Federal Taxpayer I.D. Number: 72-1308780
Authorized Capital Stock: 10,000 shares of common stock
Issued Capital Stock: 10,000 shares of common stock
Outstanding Capital Stock: 10,000 shares of common stock