Security Agreement with Collateral Pledge and Appointment of Escrow Agent
This Security Agreement with Collateral Pledge and Appointment of Escrow Agent is made by [name], Secured Party, and [name], Debtor. The parties agree as follows:
Under the terms of the [Final Decree of Divorce/Agreement Incident to Divorce] entered in Cause No. [number], styled “[style of case],” filed of record in the [designation] Court of [county] County, Texas, Debtor is indebted to Secured Party as evidenced by [a promissory note of even date herewith in the original principal sum of $[amount]/[describe other indebtedness, such as alimony, contained in the decree or agreement]], called “Debtor’s obligations” in this agreement.
2.Security
Debtor and Secured Party desire to have Debtor grant to Secured Party a security interest in the collateral as security for Debtor’s performance of the terms and conditions of Debtor’s obligations.
3.Security Interest
Debtor grants to Secured Party a security interest in the collateral described in paragraph 4. to secure the payment and performance of Debtor’s obligations to Secured Party set forth in paragraph 5.
The collateral in which the security interest is created is the following: [describe specifically the shares of stock, jewelry, certificates of deposit, or other items of collateral pledged] or any substitute collateral deposited under the terms of paragraph 11.
The security interest created secures the following:
a.payment of Debtor’s obligations and performance and discharge of every covenant, condition, and agreement contained in [the promissory note and any and all modifications, extensions, or renewals thereof, whether hereafter evidenced by the promissory note or otherwise/[describe other obligation, such as alimony, contained in the decree or agreement]]; and
b.performance and discharge of every obligation, covenant, and agreement of Debtor contained in this agreement.
6.Warranty and Representation of Debtor
Debtor warrants and represents that the collateral is free and clear of any security interest (other than the security interest granted in this agreement), liens, restrictions, or encumbrances and that Debtor has full right and power to transfer the collateral to Secured Party free and clear and to enter into and carry out the security agreement.
7.Events of Default
“Event of default” is any or all of the following:
a.Debtor’s failure to punctually and promptly observe, keep, or perform any covenant, agreement, or condition required by this agreement to be observed, kept, or performed;
b.Debtor’s failure to punctually and promptly pay Debtor’s obligations evidenced by [the promissory note in accordance with its terms/[describe other obligation, such as alimony, contained in the decree or agreement]];
c.the making or furnishing to Secured Party by or on behalf of Debtor of any warranty, representation, or statement that proves to have been false in any material respect when made or furnished;
d.any event that results in acceleration in the maturity of Debtor’s obligation;
e.the making of any levy, seizure, or attachment of any collateral;
f.Secured Party’s reasonable belief that the prospect of payment of any indebtedness secured by this agreement or the performance of the security agreement is impaired; or
g.death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver for any part of the collateral, assignment for the benefit of creditors, or commencement of any proceeding in any bankruptcy or under any insolvency law by or against Debtor or any guarantor or surety for Debtor.
8.Rights of Secured Party on Occurrence of an Event of Default
On the occurrence of an event of default, Secured Party may foreclose the security interest in either of the following ways:
a.Retention of Collateral. Secured Party may retain in satisfaction of Debtor’s obligation that portion of the collateral that has a “fair value” equal to the amount of Debtor’s obligations that Debtor has failed to pay. “Fair value” of the collateral is defined as follows: [if stock, include the following: Book value per share of common stock of [name], a corporation, multiplied by the number of shares of the stock constituting the collateral/[describe the face amount of any certificate of deposit, savings account, or other measure of the value of the collateral]].
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Book value per share must be determined by subtracting the gross liabilities of the corporation from the gross assets (excluding goodwill and other intangible assets) of the corporation as determined in accordance with generally accepted accounting principles and multiplying the remainder by a fraction, the numerator of which shall be one and the denominator of which shall be the total number of shares of common stock of the corporation outstanding, all as of the date of the default.
b.Sale of Collateral. Subject to the provisions of subchapter F, chapter 9, of the Texas Business and Commerce Code, Secured Party may instruct the escrow agent to offer the collateral at a public or private sale after ten days’ written notice to Debtor.
9.Escrow Agent and Voting Rights
Debtor appoints [name] of [city], Texas, as escrow agent for the collateral. Concurrently with the delivery by the escrow agent of a receipt for the collateral, Debtor must deliver to the escrow agent collateral instruments of transfer, executed in blank, covering the collateral.
a.Terms of Escrow. When satisfactory proof has been presented to the escrow agent that Debtor’s obligations referred to in paragraph 1. above have been paid in full, the escrow agent must redeliver the [certificates of stock/[describe other collateral pledged]] held by the escrow agent to Debtor, and all obligations between Secured Party and Debtor and of the escrow agent will cease. If Debtor defaults in the payment of Debtor’s obligations, Secured Party may give written notice of the default to the escrow agent. The escrow agent must then, with reasonable dispatch, deliver the collateral to Secured Party for retention or offer the collateral for sale as provided in paragraph 8.
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b.Voting. As long as the collateral is held by the escrow agent and until Debtor defaults in Debtor’s obligations, Debtor has the right to exercise all voting rights granted therein for all purposes. If requested by Debtor, Secured Party and the escrow agent must execute and deliver to Debtor the proxies and authorizations that are reasonably required to confirm the voting rights of Debtor during this period.
c.Dividends. As long as the collateral is held by the escrow agent and until Debtor defaults in Debtor’s obligations, all dividends, interest, and other income generated by the collateral belong to Debtor.
d.Voting Trust. As long as the collateral is held by the escrow agent and until Debtor defaults in Debtor’s obligations, Debtor has the right to assign the collateral to a voting trust, if available, in which event the escrow agent must accept certificates of the voting trust as substitution of collateral. In the event of default, the escrow agent must deliver the certificates of the voting trust to Secured Party in the same manner as in the case of the collateral.
10.Substitution of Escrow Agent
Debtor has the right at any time Debtor is not in default to remove the existing escrow agent and appoint any state or national bank chartered in Texas as substitute escrow agent. The substitute escrow agent must perform subject to the terms and conditions of this agreement as they may apply to the duties and functions of the original escrow agent.
Debtor has the right at any time to substitute certificates of deposit issued by any state or national bank chartered in Texas as security for Debtor’s obligations in an amount equal to the then balance of Debtor’s obligations secured by this agreement.
12.No Waiver of Rights or Remedies
a.No Waiver. No failure or delay by Secured Party in exercising any rights, power, or privilege under this agreement operates as a waiver, and no single or partial exercise of any such power or privilege precludes any other or further exercise of any other right, power, or privilege.
b.Severability. If any provision of this agreement is for any reason found to be unenforceable, all other provisions nevertheless remain enforceable.
c.Notices. Any notices or other communications required or remitted under this agreement are sufficiently given if delivered personally or sent by certified mail, postage prepaid, to [name and address of debtor] and [name and address of secured party or representative], or at such other addresses as shall be furnished in writing by either party to the other, and will be deemed to have been given as of the date so delivered or deposited in the United States mail.
d.Assignment of Secured Party. This agreement and the security interest it creates are assignable by Secured Party and inure to the benefit of Secured Party’s heirs, executors, or administrators and bind Debtor and Debtor’s heirs, executors, administrators, legal representatives, and assigns.
e.Choice of Law. This agreement must be construed, and its performance enforced, under Texas law.
SIGNED on ________________________________.
[Name], Secured Party
[Name], Debtor
State of Texas)
County of)
This instrument was acknowledged before me on ________________________ by [name of secured party].
Notary Public, State of Texas
State of Texas)
County of)
This instrument was acknowledged before me on ________________________ by [name of debtor].
Notary Public, State of Texas