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Exhibit
10.5
SECURITY
AGREEMENT
This SECURITY AGREEMENT (this
“ Security Agreement ”) is made as of the 19th
day of June, 2008, by Brooke Agency Services Company LLC, a
Delaware limited liability company (the “ Pledgor
”), in favor of Autobahn Funding Company LLC, as Lender (the
“ Lender ”), and DZ Bank AG Deutsche
Zentral-Genossenschaftsbank, as Agent (the “ Agent
”), in connection with that certain Amended and Restated
Credit and Security Agreement, dated as of August 29, 2006, by
and among Brooke Credit Funding, LLC, a Delaware limited liability
company, as Borrower (the “ Borrower ”),
Aleritas Capital Corp., a Delaware corporation (f/k/a Brooke Credit
Corporation) (“ Brooke Credit ”), as Seller and
Subservicer, Brooke Corporation, a Kansas corporation, as Master
Agent Servicer and Performance Guarantor (the “ Parent
”), the Lender and the Agent. Such Amended and Restated
Credit and Security Agreement, as it may be amended, restated,
supplemented or otherwise modified from time to time, is
hereinafter referred to as the “ Credit and Security
Agreement ”.
1. Definitions .
Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Credit and Security
Agreement. All terms defined in Article 9 of the UCC in the State
of New York as in effect on the date hereof, and not specifically
defined herein or in the Credit and Security Agreement, are used
herein as defined in such Article 9. In addition, the following
terms have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms
defined):
“ Brooke
Obligations ” means all present and future indebtedness
and other liabilities and obligations (howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent,
or due or to become due) of Brooke Credit and/or the Parent to the
Lender, the Agent and/or any other Secured Party, arising under or
in connection with the Performance Guaranty, the Sale and Servicing
Agreement, the Credit and Security Agreement or any other Related
Document or the transactions contemplated hereby or thereby and
shall include, without limitation, all liability for costs,
expenses, indemnifications, repurchase obligations and all other
amounts due or to become due from Brooke Credit or the Parent under
the Related Documents, including, without limitation, interest,
fees and other obligations that accrue after the commencement of a
bankruptcy, insolvency or similar proceeding (in each case whether
or not allowed as a claim in such proceeding).
“ Collateral
” has the meaning specified in Section 2.
2. Security Agreement
. (i) To secure the payment and performance of the Brooke
Obligations and the payment and performance by the Pledgor of all
of the covenants and obligations to be paid or performed by it
pursuant to this Security Agreement and each other Related
Document, the Pledgor hereby grants to the Agent, on behalf of the
Secured Parties (and their respective successors and assigns), a
security interest in all of the Pledgor’s right, title and
interest in and to all of the following property and interests in
property (collectively, the
Signature Page to
Security Agreement
“ Collateral ”), in
each case whether tangible or intangible and whether now owned or
existing or hereafter arising or acquired and wheresoever
located:
(a) all right, title and
interest of the Pledgor in, to and under all Brooke Franchise
Agreements now or hereafter existing, including, without
limitation, all moneys due and to become due under or in connection
with any such Brooke Franchise Agreement (whether in respect of
Sales Commissions, fees, expenses, indemnities or
otherwise);
(b) all other accounts,
equipment, inventory, general intangibles, payment intangibles,
instruments, investment property, documents, chattel paper, goods,
moneys, letters of credit, letter of credit rights, certificates of
deposit, deposit accounts and all other property and interests in
property of the Pledgor, whether tangible or intangible, whether
real property or personal property and whether now owned or
existing or hereafter arising or acquired and wheresoever located;
and
(c) all proceeds of the
foregoing property described in clauses (a) and
(b) above, including, without limitation, proceeds which
constitute property of the type described in clauses (a) and
(b) above and, to the extent not otherwise included, all
(i) payments under any insurance policy (whether or not the
Agent or the Lender is the loss payee thereof), indemnity, warranty
or guaranty payable by reason of loss or damage to or otherwise
with respect to any of the foregoing and (ii) interest,
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for or on account of the sale or other disposition of any
or all of the then existing Collateral;
provided that, to the
extent the Pledgor is required to remit the proceeds of any Sales
Commissions to The Bank of New York, as trustee under any Term
Securitization entered into by the Pledgor prior to the date hereof
(The Bank of New York in such capacity being the “
Trustee ”) pursuant to a security agreement in effect
on the date hereof (a “ Term Securitization Security
Agreement ”), the Agent’s security interest in such
proceeds shall be subject and subordinate to the Trustee’s
security interest for so long as the Trustee’s security
interest therein remains in effect and such proceeds have not been
released to the Pledgor or any of its Affiliates.
(ii) Upon the occurrence of
an Event of Default or a default in respect of any obligation of
the Pledgor to be performed by it pursuant to this Security
Agreement or any other Related Document, the Agent shall have, in
addition to all other rights and remedies under this Security
Agreement or otherwise, all other rights and remedies provided to a
secured party under the UCC of the applicable jurisdiction and
other applicable laws, which rights shall be cumulative. The rights
and remedies of a secured party which may be exercised by the Agent
shall include, without limitation, the right, without notice except
as specified below, to solicit and accept bids for and sell the
Collateral or any part thereof in one or more parcels at a public
or private sale, at any exchange, broker’s board or at any of
the Agent’s offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, 10 days’ notice to
the Pledgor of the time and place of any public sale or the time
after
which any private sale is to be made
shall constitute reasonable notification and that it shall be
commercially reasonable for the Agent to sell the Collateral on an
“as is” basis, without representation or warranty of
any kind. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given and may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefore, and such sale
may, without further notice, be made at the time and place to which
it was so adjourned.
(iii) Notwithstanding
anything herein to the contrary, the proceeds of the Collateral
remitted to the Agent and applied to satisfy the Brooke Obligations
shall not exceed $25,000,000.
3. Obligations
Unconditional . The Pledgor hereby agrees that its obligations
under this Security Agreement shall be unconditional, irrespective
of:
(i) the validity,
enforceability, avoidance or subordination of any of the Brooke
Obligations or any of the Related Documents;
(ii) the absence of any
attempt by, or on behalf of, the Lender or the Agent to collect, or
to take any other action to enforce, all or any part of the Brooke
Obligations whether from or against Brooke Credit or the Parent,
any other guarantor of the Brooke Obligations or any other
party;
(iii) the election of any
remedy by, or on behalf of, the Lender or the Agent with respect to
all or any part of the Brooke Obligations;
(iv) the waiver, amendment,
consent, extension, forbearance or granting of any indulgence by,
or on behalf of, the Lender or the Agent with respect to any
provision of any of the Related Documents;
(v) the failure of the Lender
or the Agent to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or
collateral for the Brooke Obligations or any rights as against any
other guarantor of the Brooke Obligations or any release of any
collateral security for or release of any other guarantor in
respect of the Brooke Obligations;
(vi) the election by, or on
behalf of, the Lender or the Agent, in any proceeding
instituted under Chapter 11 of Title 11 of the United
States Code (11 U.S.C. 101 et seq.) (the “ Bankruptcy
Code ”), of the application of Section 1111(b)(2) of
the Bankruptcy Code;
(vii) any borrowing or grant
of a security interest by Brooke Credit or the Parent, as a
debtor-in-possession, under Section 364 of the Bankruptcy
Code;
(viii) the disallowance,
under Section 502 of the Bankruptcy Code, of all or any
portion of the claims of the Lender or the Agent for repayment of
all or any part of the Brooke Obligations, including any amount due
hereunder; or
(ix) any actual or alleged
fraud by any party (other than the Lender or the Agent);
or
(x) any other circumstance
which might otherwise constitute a legal or equitable discharge or
defense of Brooke Credit, the Parent or a guarantor (other than the
defense of payment or performance).
4. Pledgor Representations
and Warranties . The Pledgor represents and warrants as
follows:
(i) Corporate Existence
and Power . The Pledgor is a limited liability company duly
incorporated, validly existing and in good standing under the laws
of the State of Delaware, and has all necessary powers and all
governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which the
nature of its business requires such authorization, except for any
such governmental license, authorization, consent or approval the
absence of which would not be reasonably likely to have a Material
Adverse Effect.
(ii) No Conflict . The
execution, delivery and performance by the Pledgor of this Security
Agreement and each other Related Document to which it is a party
are within the powers granted by the Pledgor’s organizational
documents, have been duly authorized by all necessary action, do
not contravene or violate (i) its organizational documents,
(ii) any law, rule or regulation applicable to it in any
material respect, (iii) any restrictions under any material
agreement, contract or instrument to which it is a party or by
which it or any of its property is bound, or (iv) any order,
writ, judgment, award, injunction or decree binding on or affecting
it or its property, and do not result in the creation or imposition
of any Adverse Claim on assets of the Pledgor. This Security
Agreement and each other Related Document to which the Pledgor is
named as a party has been duly authorized, executed and delivered
by the Pledgor.
(iii) Governmental
Authorization . Other than the filing of the financing
statements required hereunder, no authorization or approval or
other action by, and no notice to or filing with, any Governmental
Authority is required for the due execution, delivery and
performance by the Pledgor of the Related Documents to which it is
a party. No injunction, writ, restraining order or other order of
any nature adversely affects the Pledgor’s performance of its
obligations under this Security Agreement or any other Related
Document to which it is a party.
(iv) Binding Effect .
The Related Documents to which the Pledgor is a party constitute
its legal, valid and binding obligations enforceable against the
Pledgor in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting
creditors’ rights generally.
(v) Accuracy of
Information . All information heretofore furnished by the
Pledgor or any of its Affiliates to the Agent in writing for
purposes of or in connection with this Security Agreement, any of
the other Related Documents or any transaction contemplated hereby
or thereby is, and all such information hereafter furnished by the
Pledgor or any of its Affiliates to the Agent in writing will be,
true and accurate in all material respects, on the date as of which
such information is stated or certified and does not and will not
contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements
contained therein, taken as a whole and in context, not
misleading.
(vi) Actions, Suits .
There are no actions, suits or proceedings pending or, to its
knowledge, threatened against or adversely affecting the Pledgor or
any of its properties, in or before any court, arbitrator or other
body, which, if adversely determined, would be reasonably likely to
have a Material Adverse Effect. The Pledgor is not in default with
respect to any order of any court, arbitrator or governmental
body.
(vii) Security
Interest . This Agreement, together with the financing
statements filed on or prior to the date hereof, is effective to
create a valid and perfected first priority security interest
(subject only to the security interests granted under the Term
Securitization Security Agreements entered into by the Pledgor
prior to the date hereof) in (i) all Brooke Franchise
Agreements in which the Pledgor has acquired or may hereafter
acquire an interest and (ii) all other Collateral now existing
or hereafter arising or acquired.
(viii) Not an Investment
Company . The Pledgor is not an “investment
company” or a company “controlled” by an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended from time to time, or
any successor statute.
(ix) Taxes . The
Pledgor has paid when due all taxes payable by it other than those
taxes which are being contested in good faith and by proper
proceedings and as to which appropriate reserves are being
maintained in accordance with GAAP. The Pledgor has filed (on a
consolidated basis or otherwise) on a timely basis all tax returns
(including, without limitation, all foreign, federal, state, local
and other tax returns) required to be filed and is not liable for
taxes payable by any other Person. No tax lien or similar adverse
claim has been filed, and no claim is being asserted, with respect
to any such tax, assessment or other governmental
charge.
(x) Places of Business;
Jurisdiction of Incorporation . The principal places of
business and chief executive office of the Pledgor and the offices
where the Pledgor keeps all its Records are located at the
address(es) listed on Exhibit I hereto. The Federal Employer
Identification Number for the Pledgor is correctly set forth on
Exhibit I hereto. The Pledgor’s sole jurisdiction of
incorporation is the State of Delaware.
(xi) Names . In the
past five years, the Pledgor has not used any legal names, trade
names or assumed names other than Brooke Agency Services Company
LLC and has not engaged in any merger or consolidation, except as
set forth on Exhibit I hereto.
(xii) Solvency . The
Pledgor is solvent and will not become insolvent after giving
effect to the transactions contemplated hereby; the Pledgor is
paying its debts as they become due; and the Pledgor, after giving
effect to the transactions contemplated hereby, will have adequate
capital to conduct its business.
(xiii) ERISA . The
Pledgor is in compliance in all material respects with ERISA and
has not incurred and does not expect to incur any liabilities to
the Pension Benefit Security Agreement Corporation (or any
successor thereto) under ERISA.
5. Affirmative Covenants
of the Pledgor . Until the Final Payout Date, the Pledgor
agrees that it will perform and observe its covenants and
agreements set forth in this Section 5.
(i) Reporting . The
Pledgor will maintain a system of accounting established and
administered in accordance with GAAP, and will furnish to the
Agent:
(a) Annual Financial
Reporting . Within 120 days after the close of each of its
fiscal years, financial statements for the Pledgor and its
consolidated Subsidiaries for such fiscal year prepared in
accordance with GAAP and certified in a manner acceptable to the
Agent by independent public accountants acceptable to the
Agent.
(b) Quarterly
Reporting . Within 45 days after the close of each of the
quarterly periods of each of its fiscal years, balance sheets for
the Pledgor and its consolidated Subsidiaries as at the close of
each such period and statements of income and retained earnings and
a statement of cash flows for the Pledgor and its consolidated
Subsidiaries for the period from the beginning of such fiscal year
to the end of such quarter, all prepared in accordance with GAAP
(subject to normal year-end adjustments and without footnotes) and
certified by the Pledgor’s chief financial
officer.
(c) S.E.C. Filings .
Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Pledgor or any of their respective Affiliates files with
the Securities and Exchange Commission if any of such Persons shall
have a class of security that is publicly traded.
(d) Other Information
. Such other information (including non-financial information) as
the Agent or the Lender may from time to time reasonably
request.
(ii) Notices . The
Pledgor will notify the Agent in writing of any of the following
within one Business Day of learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken with
respect thereto:
(a) Judgment . The
entry of any judgment or decree against the Pledgor or any of its
Affiliates.
(b) Litigation . The
institution of any litigation, arbitration proceeding or
governmental proceeding against the Pledgor or any of its
Subsidiaries or to which the Pledgor or any of its Affiliates
becomes a party if such litigation, arbitration proceeding or
governmental proceeding, if adversely determined against the
Pledgor or any of its Affiliates, would be reasonably likely to
have a Material Adverse Effect.
(iii) Compliance with
Laws . The Pledgor will comply in all material respects with
all applicable laws, rules, regulations, orders writs, judgments,
injunctions, decrees or awards to which it may be
subject.
(iv) Information;
Compliance Reviews . The Pledgor will furnish to the Agent from
time to time such information with respect to it and its Affiliates
as the Agent may reasonably request. The Pledgor shall, from time
to time during regular business hours as requested by the Pledgor
or the Agent permit the Agent, or any of their respective
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