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Exhibit
10.2
SUBSIDIARY SECURITY
AGREEMENT
THIS SUBSIDIARY SECURITY
AGREEMENT (the “Security Agreement”) is made and
entered into as of December 7, 2007, by EACH OF THE
UNDERSIGNED SUBSIDIARIES (each a “Grantor” and
collectively the “Grantors”) for the benefit of U.S.
BANK NATIONAL ASSOCIATION , a national banking association, as
agent (the “Agent”) for each of the lenders (the
“Lenders”) now or hereafter party to the Amended and
Restated Credit Agreement (as defined below). All capitalized terms
used but not otherwise defined herein or pursuant to Section
1 hereof shall have the respective meanings assigned thereto
in the Amended and Restated Credit Agreement (as defined
below).
WITNESSETH:
WHEREAS, the Lenders
have agreed to provide to QC Holdings, Inc., a Kansas corporation
(“Borrower”) certain credit facilities pursuant to the
Amended and Restated Credit Agreement dated as of December 7,
2007 by and among the Borrower, the Agent and the Lenders (as from
time to time amended, revised, modified, supplemented or amended
and restated, the “Amended and Restated Credit
Agreement”); and
WHEREAS, each Grantor
is, directly or indirectly, a Subsidiary of the Borrower and will
materially benefit from the Loans made and the Letter of Credits
issued and to be issued under the Amended and Restated Credit
Agreement; and
WHEREAS,
contemporaneously with the execution of this Security Agreement,
each Grantor is executing and delivering to Agent for the benefit
of the Lenders a guaranty agreement (the “Subsidiary
Guaranty”) pursuant to which such Grantor has guaranteed
payment and performance of Borrower’s obligations under the
Amended and Restated Credit Agreement and the other Loan Documents;
and
WHEREAS, each Grantor
is required to enter into this Security Agreement pursuant to the
terms of the Amended and Restated Credit Agreement; and
WHEREAS, a material
part of the consideration given in connection with and as an
inducement to the execution and delivery of the Amended and
Restated Credit Agreement by the Agent and the Lenders was the
obligation of the Borrower to cause each Grantor to enter into this
Security Agreement; and
WHEREAS, the Lenders
are unwilling to extend and/or maintain the credit facilities
provided under the Loan Documents unless each Grantor enters into
this Security Agreement; and
WHEREAS , each
Grantor will materially benefit from the Loans to be made, and the
Letters of Credit to be issued, under the Amended and Restated
Credit Agreement and the Agent and the Lenders are unwilling to
enter into the Loan Documents unless the Grantor enters into this
Security Agreement;
NOW, THEREFORE, in
order to induce the Agent and the Lenders to enter into the Loan
Documents and to make Loans and issue Letters of Credit pursuant to
the Amended and Restated Credit Agreement, and in further
consideration of the premises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Certain
Definitions . Terms used in this Security Agreement, not
otherwise expressly defined herein or in the Amended and Restated
Credit Agreement, and for which meanings are provided in the
Uniform Commercial Code of the State of Kansas (the
“UCC”), shall have such meanings. The parties agree
that with respect to terms that describe items or types of
Collateral, the parties intend to and do hereby give effect, upon
their respective effective dates, to revisions to the UCC effective
after the date hereof to the extent, but only to the extent, such
revisions either (i) provide meanings of terms not previously
defined as items or types of property or (ii) expand the items
of or interests in property that are included within a previously
defined term, with the effect that each of such terms describing
items or types of property shall at all times be interpreted in its
broadest sense.
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2. Grant of Security
Interest . Each Grantor hereby grants, as collateral
security for the payment, performance and satisfaction of all of
its obligations and liabilities under the Subsidiary Guaranty
(collectively, the “Secured Obligations”), to the Agent
for the benefit of the Lenders a continuing security interest in
and to, and collaterally assigns to the Agent for the benefit of
the Lenders, the following property of such Grantor or in which
such Grantor has or may have or acquire an interest, whether now
owned or existing or hereafter created, acquired or arising and
wheresoever located, including the following:
(a) All accounts, and
including accounts receivable, contracts, bills, acceptances,
choses in action, and other forms of monetary obligations at any
time owing to such Grantor arising out of property sold, leased,
licensed, assigned or otherwise disposed of or for services
rendered or to be rendered by such Grantor and all of such
Grantor’s rights with respect to any property represented
thereby, whether or not delivered, property returned by customers
and all rights as an unpaid vendor or lienor, including rights of
stoppage in transit and of recovering possession by proceedings
including replevin and reclamation (collectively referred to
hereinafter as “Accounts”);
(b) All inventory, including
all goods manufactured or acquired for sale or lease, and any piece
goods, raw materials, work in process, finished merchandise,
component materials, and all supplies, goods, incidentals, office
supplies, packaging materials and any and all items used or
consumed in the operation of the business of such Grantor or which
may contribute to the finished product or to the sale, promotion
and shipment thereof, in which such Grantor now or at any time
hereafter may have an interest, whether or not the same is in
transit or in the constructive, actual or exclusive occupancy or
possession of such Grantor or is held by such Grantor or by others
for such Grantor’s account (collectively referred to
hereinafter as “Inventory”);
(c) All goods, including all
machinery, equipment, motor vehicles (including those subject to
and not subject to motor vehicle certificate of title statutes),
parts, supplies, apparatus, appliances, tools, patterns, molds,
dies, blueprints, fittings, furniture, furnishings, fixtures and
articles of tangible personal property of every description
(collectively referred to hereinafter as
“Equipment”);
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(d) All general intangibles,
including all rights now or hereafter accruing to such Grantor
under contracts, leases, agreements or other instruments to perform
or receive services, to purchase or sell goods, to hold or use land
or facilities, and to enforce all rights thereunder, all causes of
action, corporate or business records, inventions, designs,
goodwill, trademarks, trade names, trade secrets, trade processes,
licenses, permits, franchises, customer lists, computer programs
and software, all payment intangibles, all claims under guaranties,
tax refund claims, all rights and claims against carriers and
shippers, leases, all claims under insurance policies, all
interests in general and limited partnerships, limited liability
companies, and other Persons not constituting Investment Property
(as defined below), all rights to indemnification and all other
intangible personal property and intellectual property of every
kind and nature (collectively referred to hereinafter as
“General Intangibles”);
(e) All chattel paper,
including tangible chattel paper, electronic chattel paper, or any
hybrid thereof (collectively referred to hereinafter as
“Chattel Paper”);
(f) All investment property,
all other securities, security entitlements, securities accounts,
commodity contracts and commodity accounts of or maintained for the
benefit of such Grantor (collectively referred to hereinafter as
“Investment Property”);
(g) All instruments,
including all promissory notes and payday loan notes (collectively
referred to hereinafter as “Instruments”);
(h) All documents, including
warehouse receipts, bills of lading and other documents of title
(collectively referred to hereinafter, as
“Documents”);
(i) All supporting
obligations pertaining to any of the foregoing, including all
letter of credit rights (including rights to proceeds of letters of
credit), personal or other checks, and all guaranties and other
Contingent Obligations of any Person (collectively referred to
hereinafter as “Supporting Obligations”);
(j) The commercial tort
claims, if any, identified on Schedule 2(j) hereto, as such
Schedule may be supplemented from time to time in accordance with
the terms hereof (collectively referred to hereinafter as
“Commercial Tort Claims”);
(k) All deposits and deposit
accounts;
(l) All books and records
relating to any of the forgoing (including customer data, credit
files, ledgers, computer programs, printouts, and other computer
materials and records (and all media on which such data, files,
programs, materials and records are or may be stored));
and
(m) All proceeds, products
and replacements of, accessions to, and substitutions for, any of
the foregoing, including without limitation proceeds of insurance
policies insuring any of the foregoing.
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All of the property and
interests in property described in subsections (a) through
(l) are herein collectively referred to as the
“Collateral”.
3. Perfection .
At the time of execution of this Security Agreement, each Grantor
shall have, to the extent expressly required by the terms hereof or
of the Amended and Restated Credit Agreement, or otherwise as the
Agent may request, furnished the Agent with properly executed
control agreement, registrars’ certificates, issuer
acknowledgments of the Agent’s interest in letter of credit
rights, and evidence of the electronic identification of the
Agent’s interest in electronic chattel paper and of the
placement of a restrictive legend on tangible chattel paper, as
appropriate, with respect to Collateral in which either (i) a
security interest can be perfected only by control or such
electronic identification or restrictive legending, or (ii) a
security interest perfected by control or accompanied by such
electronic identification or restrictive legending shall have
priority as against a security interest perfected by Persons not
having control or not accompanied by such electronic identification
or restrictive legending, in each case in form and substance
acceptable to the Agent and sufficient under applicable law so that
the Agent, for the benefit of the Lenders, shall have a security
interest in all such Collateral perfected by control, subject only
to Liens allowed to exist under Section 7.02(e) of the
Amended and Restated Credit Agreement. All financing statements
(including all amendments thereto and continuations thereof),
control agreements, certificates, acknowledgments, stock powers and
other documents, electronic identification, restrictive legends,
and instruments furnished in connection with the creation,
enforcement, protection, perfection or priority of the
Agent’s security interest in Collateral, including such items
as are described above in this Section 3 are sometimes
referred to herein as “Perfection Documents”. The
delivery of possession of items of or evidencing Collateral,
causing other Persons to execute and deliver Perfection Documents
as appropriate, the filing or recordation of Perfection Documents,
and the taking of such other actions as may be necessary or
advisable in the determination of the Agent to create, enforce,
protect, perfect, or establish or maintain the priority of, the
security interest of the Agent for the benefit of the Lenders in
the Collateral is sometimes referred to herein as “Perfection
Action”.
4. Maintenance of
Security Interest; Further Assurances .
(a) Each Grantor will from
time to time at its own expense, deliver specific assignments of
Collateral or such other Perfection Documents, and take such other
or additional Perfection Action, as may be required by the terms of
the Loan Documents or as the Agent may reasonably request in
connection with the administration or enforcement of this Security
Agreement or related to the Collateral or any part thereof in order
to carry out the terms of this Security Agreement, to perfect,
protect, maintain the priority of or enforce the Agent’s
security interest in the Collateral, or otherwise to better assure
and confirm unto the Agent its rights, powers and remedies for the
benefit of the Lenders hereunder. Without limiting the foregoing,
each Grantor hereby irrevocably authorizes the Agent to file (with,
or to the extent permitted by applicable law, without the signature
of the Grantor appearing thereon) financing statements or other
Perfection Documents (including copies thereof) showing such
Grantor as “debtor” at such time or times and in all
filing offices as the Agent may from time to time determine to be
necessary or advisable to perfect or protect the rights of the
Agent and the Lenders hereunder, or otherwise to give effect to the
transactions herein contemplated.
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(b) Notwithstanding anything
herein or in the other Loan Documents to the contrary, each Grantor
may retain possession of all payday loan promissory notes payable
to such Grantor; provided, however, that so long as any Event of
Default is in effect, each Grantor shall promptly deliver to the
Agent, if the Agent so requests, the originals of all such
promissory notes together with any checks and supporting
obligations held for the payment of such promissory
notes.
(c) With respect to any and
all Collateral, each Grantor agrees to do and cause to be done all
things necessary to perfect, maintain the priority of and keep in
full force the security interest granted in favor of the Agent for
the benefit of the Lenders, including, but not limited to, the
prompt payment upon demand therefor by the Agent of all fees and
expenses (including documentary stamp, excise or intangibles taxes)
incurred in connection with the preparation, delivery, or filing of
any Perfection Document or the taking of any Perfection Action to
perfect, protect or enforce a security interest in Collateral in
favor of the Agent for the benefit of the Lenders, subject only to
Permitted Liens. All amounts not so paid when due shall constitute
additional Secured Obligations and (in addition to other rights and
remedies resulting from such nonpayment) shall bear interest from
the date of demand until paid in full at the Default
Rate.
(d) Each Grantor agrees to
maintain among its books and records appropriate notations or
evidence of, and to make or cause to be made appropriate disclosure
upon its financial statements of, the security interest granted
hereunder to the Agent for the benefit of the Lenders.
5. Receipt of
Payment. In the event an Event of Default shall occur and
be continuing and a Grantor (or any of its Affiliates,
Subsidiaries, stockholders, directors, officers, employees or
agents) shall receive any proceeds of Collateral, including without
limitation monies, checks, notes, drafts or any other items of
payment, each Grantor shall hold all such items of payment in trust
for the Agent for the benefit of the Lenders, and as the property
of the Agent for the benefit of the Lenders, separate from the
funds and other property of such Grantor, and no later than the
first Business Day following the receipt thereof, at the election
of the Agent, such Grantor shall cause such Collateral to be
forwarded to the Agent for its custody, possession and disposition
on behalf of the Lenders in accordance with the terms hereof and of
the other Loan Documents.
6. Preservation and
Protection of Collateral .
(a) The Agent shall be under
no duty or liability with respect to the collection, protection or
preservation of the Collateral, or otherwise, except for the use of
reasonable care in the custody and preservation thereof while in
its possession and to the extent expressly contemplated under
Section 25 . Each Grantor shall be responsible for the
safekeeping of its Collateral, and in no event shall the Agent have
any responsibility for (i) any loss or damage thereto or
destruction thereof occurring or arising in any manner or fashion
from any cause, (ii) any diminution in the value thereof, or
(iii) any act or default of any carrier, warehouseman, bailee
or forwarding agency thereof or other Person in any way dealing
with or handling such Collateral.
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(b) Each Grantor shall keep
and maintain its tangible personal property Collateral in good
operating condition and repair, ordinary wear and tear
excepted.
(c) Each Grantor agrees
(i) to pay when due all taxes, charges and assessments against
the Collateral in which it has any interest, unless being contested
in good faith by appropriate proceedings diligently conducted and
against which adequate reserves have been established in accordance
with GAAP applied on a consistent basis and evidenced to the
satisfaction of the Agent in the nature of levy or foreclosure are
effectively stayed, and (ii) to cause to be terminated and
released all Liens on the Collateral other than Liens in respect of
such Collateral expressly permitted under
Section 7.02(e) of the Amended and Restated Credit
Agreement (“Permitted Liens”).
Upon the failure of any Grantor to so
pay or contest such taxes, charges, or assessments, or cause such
Liens to be terminated, the Agent at its option may pay or contest
any of them or amounts relating thereto (the Agent having the sole
right to determine the legality or validity and the amount
necessary to discharge such taxes, charges, Liens or assessments)
but shall not have any obligation to make any such payment or
contest. All sums so disbursed by the Agent, including reasonable
attorneys’ fees, court costs, expenses and other charges
related thereto, shall be payable on demand by the applicable
Grantor to the Agent and shall be additional Secured Obligations
secured by the Collateral, and any amounts not so paid on demand
(in addition to other rights and remedies resulting from such
nonpayment) shall bear interest from the date of demand until paid
in full at the Default Rate.
7. Status of Grantors
and Collateral Generally . Each Grantor represents and
warrants to, and covenants with, the Agent for the benefit of the
Lenders, with respect to itself and the Collateral as to which it
has or acquires any interest, that:
(a) It is (or as to
Collateral acquired after the date hereof will be upon the
acquisition of the same) and, except as permitted by the Amended
and Restated Credit Agreement and subsection (b) of this
Section 7 , will continue to be, the owner of the
Collateral, free and clear of all Liens, other than the security
interest hereunder in favor of the Agent for the benefit of the
Lenders and Permitted Liens, and that it will at its own cost and
expense defend such Collateral and any products and proceeds
thereof against all claims and demands of all Persons (other than
holders of Permitted Liens) at any time claiming the same or any
interest therein adverse to the Agent. Upon the failure of any
Grantor to so defend, the Agent may do so at its option but shall
not have any obligation to do so. All sums so disbursed by the
Agent, including reasonable attorneys’ fees, court costs,
expenses and other charges related thereto, shall be payable on
demand by the applicable Grantor to the Agent and shall be
additional Secured Obligations secured by the Collateral, and any
amounts not so paid on demand (in addition to other rights and
remedies resulting from such nonpayment) shall bear interest from
the date of demand until paid in full at the Default
Rate.
(b) It shall not
(i) sell, assign, transfer, lease, license or otherwise
dispose of any of, or grant any option with respect to, the
Collateral, except for dispositions permitted under the Amended and
Restated Credit Agreement, (ii) create or
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suffer to exist any Lien upon
or with respect to any of the Collateral except for the security
interests created by this Security Agreement and Permitted Liens,
or (iii) take any other action in connection with any of the
Collateral that would materially impair the value of the interest
or rights of such Grantor in the Collateral taken as a whole or
that would materially impair the interest or rights of the Agent
for the benefit of the Lenders.
(c) It has full power, legal
right and lawful authority to enter into this Security Agreement
and to perform its terms, including the grant of the security
interests in the Collateral herein provided for.
(d) No authorization,
consent, approval or other action by, and no notice to or filing
with, any Governmental Authority or any other Person is required
either (i) for the grant by such Grantor of the security
interests granted hereby or for the execution, delivery or
performance of this Security Agreement by such Grantor, or
(ii) for the perfection of or the exercise by the Agent, on
behalf of the Lenders, of its rights and remedies hereunder, except
for action required by the Uniform Commercial Code to perfect the
security interest conferred hereunder.
(e) No effective financing
statement or other Perfection Document similar in effect, nor any
other Perfection Action, covering all or any part of the Collateral
purported to be granted or taken by or on behalf of such Grantor
(or by or on behalf of any other Person and which remains effective
as against all or any part of the Collateral) has been filed in any
recording office, delivered to another Person for filing (whether
upon the occurrence of a contingency or otherwise), or otherwise
taken, as the case may be, except such as pertain to Permitted
Liens and such as may have been filed for the benefit of, delivered
to, or taken in favor of, the Agent for the benefit of the Lenders
in connection with the security interests conferred
hereunder.
(f) Schedule 7(f)
attached hereto contains true and complete information as to each
of the following: (i) the exact legal name of each Grantor as
it appears in its organizational documents as of the date hereof
and at any time during the five (5) year period ending as of
the date hereof (the “Covered Period”), (ii) the
jurisdiction of formation and form of organization of each Grantor,
(iii) each address of the chief executive office of each
Grantor as of the date hereof and at any time during the Covered
Period, (iv) all trade names or trade styles used by such
Grantor as of the date hereof, (v) the address of each
location of such Grantor at which any tangible personal property
Collateral is located as of the date hereof and, with respect to
each location that is not owned beneficially and of record by such
Grantor, such Grantor will provide to Agent, upon the request of
Agent, the name and address of the owner thereof. No Grantor shall
change its name or its jurisdiction of formation without providing
Agent fifteen (15) days prior written notice
thereof.
(g) No Grantor shall engage
in any consignment transaction in respect of any of the Collateral,
whether as consignee or consignor, without the prior written
consent of the Agent in each instance.
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8. Inspection .
The Agent (by any of its officers, employees and agents), on behalf
of the Lenders, shall have the right upon prior notice to an
executive officer of any Grantor, and at any reasonable times
during such Grantor’s usual business hours, to inspect the
Collateral, all records related thereto (and to make extracts or
copies from such records), and the premises upon which any of the
Collateral is located, to discuss such Grantor’s affairs and
finances with any Person and to verify with any Person the amount,
quality, quantity, value and condition of, or any other matter
relating to, the Collateral. Upon or after the occurrence and
during the continuation of an Event of Default, the Agent, acting
in a com
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