**EXHIBIT 10.6****SECOND AMENDED AND RESTATED****SECURITY AGREEMENT**     This SECOND AMENDED AND RESTATED SECURITY AGREEMENT (“Security Agreement”) is made as of this30th day of June, 2006 by and among N.P. Premium Finance Company, a Michigancorporation, North Pointe Financial Services, Inc., a Michigan corporation, South Pointe FinancialServices, Inc., a Michigan corporation, Home Pointe Managing General Agency, Inc., a Floridacorporation, Alliance Surety Holdings, Inc., a Delaware corporation and such other persons orentities which from time to time become parties hereto (collectively, the “Debtors” andindividually each a “Debtor”) and Comerica Bank, a Michigan banking corporation, as Agent for andon behalf of the Banks (as defined below) (“Secured Party”).**RECITALS**     A. WHEREAS, pursuant to that certain Second Amended and Restated Credit Agreement dated as ofJune 30, 2006 (as amended or otherwise modified from time to time, the “Credit Agreement”), amongNorth Pointe Holdings Corporation (“Borrower”), each of the financial institutions party thereto(collectively, the “Banks”) and Secured Party, as Agent for the Banks, the Banks have agreed,subject to the satisfaction of certain terms and conditions, to make Advances to Borrower (as suchterms are defined in the Credit Agreement), as provided therein; and     B. WHEREAS, each of the Debtors has executed and delivered a guaranty (as amended or otherwisemodified from time to time, the “Guaranty”) of the obligations of the Borrower under the CreditAgreement; and     C. WHEREAS, the obligations of the Borrower under the Credit Agreement and the obligations ofeach other Debtor under the their respective guaranties are to be secured pursuant to thisAgreement.     D. WHEREAS, N.P. Premium Finance Company and North Pointe Financial Services, Inc. executedand delivered to Agent an Amended and Restated Security Agreement dated January 26, 2004 (“ExistingSecurity Agreement”) and Agent and Debtors desire to amend and restate the Existing SecurityAgreement in its entirety and to add South Pointe Financial Services, Inc., Home Pointe ManagingGeneral Agency, Inc. and Alliance Surety Holdings, Inc. as Debtors.     NOW, THEREFORE, for and in consideration of the mutual promises, covenants and agreementshereinafter set forth, the parties hereto agree that the Existing Security Agreement is amended andrestated as follows:     I. Creation of Security Interest
 

 
     As security for the Indebtedness (hereinafter defined), each Debtor hereby pledges and grantsto Secured Party, as Agent for and on behalf of Banks, a security interest in the followingdescribed property of Debtor (the “Collateral”):     (a) all inventory, goods (including returned or repossessed goods and all goods thesale of which gives rise to accounts receivable, contract rights, chattel paper, generalintangibles or instruments), merchandise and other personal property, in each case (i)whether now owned or hereafter produced, manufactured or acquired by such Debtor which areheld for sale or lease or are furnished or to be furnished under a contract of service orare raw materials, work in process or materials used or consumed or to be used or consumedin such Debtor’s business, and (ii) wherever located;     (b) all accounts; accounts receivable; contract rights; general intangibles; chattelpaper and instruments (including without limitation instruments evidencing any obligation tosuch Debtor for payment for goods sold or leased or services rendered or otherwise); depositaccounts; documents; rights to payment evidenced by chattel paper, documents or instruments;letters of credit; letter of credit rights; supporting obligations; and the rights topayment for money or funds advanced or sold together with all payments thereon orthereunder; tax refunds; goodwill; licenses, permits and privileges; customer lists; rightsof indemnification;     (c) all machinery, equipment, furniture and other tangible personal property andfixtures of such Debtor, together with all accessions, additions, accessories, parts andequipment now or hereafter affixed thereto or used in connection therewith;     (d) all patents, trademarks, copyrights and other intellectual property and proprietaryrights;     (e) all investment property of such Debtor; and     (f) the balance from time to time in all bank and depository accounts of such Debtorand all amounts in any lockbox or in any collateral account, including all funds on deposittherein, all investments arising out of such funds, all claims thereunder or in connectiontherewith, and all cash, instruments, securities, rights and other property at any time andfrom time to time received, receivable, or otherwise distributed in respect of suchaccounts, such funds or such investments;     (g) all Software (for purposes of this Agreement, “Software” consists of all (i)computer programs and supporting information provided in connection with a transactionrelating to the program, and (ii) computer programs embedded in goods and any supportinginformation provided in connection with a transaction relating to the program whether or notthe program is associated with the goods in such a manner that it customarily is consideredpart of the goods, and whether or not, by becoming the owner of the goods, a person acquiresa right to use the program in connection with the goods, and whether or not the program isembedded in goods that consist solely of the medium in which the program is embedded);
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whether any such property is now owned or hereafter acquired or existing by such Debtor, and allrecords (including computer software) pertaining to the foregoing, and all substitutions for, allproceeds and all products of the foregoing, including insurance proceeds, to the fullest extentpermitted by law, subject in each case only to the Permitted Encumbrances. The pledge and grant ofa security interest in proceeds hereunder shall not be deemed to give such Debtor any right todispose of any of the Collateral, except in accordance with the terms of the Credit Agreement.     II. Debtors’ Obligations     A. Payment of Secured Indebtedness. The security interest created herein by eachDebtor is given as security for the discharge and performance of the following obligations: all ofsuch Debtor’s and the Borrower’s obligations contained in or arising under or in connection withthe Credit Agreement, any Note, the Guaranty, any Interest Rate Protection Agreements, any otherLoan Document or any other document or instrument executed in connection therewith, howsoevercreated, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafterexisting, or due to become due, together with interest thereon; and also as security for all otherindebtedness and liabilities, whether direct, indirect, absolute or contingent, owing by suchDebtor or the Borrower to the Banks in any manner and at any time, whether due or hereafter tobecome due, now owing or that may hereafter be incurred by such Debtor or the Borrower to oracquired by the Banks, and any judgments that may hereafter be rendered on such indebtedness or anypart thereof, with interest according to the rates and terms specified, or as provided by law, andany and all replacements, consolidations, amendments, renewals or extensions of the foregoing(collectively herein called the “Indebtedness”).     B. Protection of Collateral. Each Debtor shall take any and all reasonable stepsrequired to protect the Collateral, and in pursuance thereof, each such Debtor agrees that:          (1) The Collateral will not be misused, wasted or allowed to deteriorate, except for theordinary wear and tear of its intended primary use or to the extent no longer useful or necessaryto such Debtor’s business, and will at all times be maintained in accordance with the applicableterms of the Credit Agreement.          (2) The Collateral described in Section I.(a) and (c) will be insured with insurance coverageby financially sound and reputable insurers and in such forms and amounts and against such risks asprudent business judgment and then current practice would dictate for companies or professionalenterprises engaged in the same or a similar business and owning and operating similar properties.In the case of all such insurance policies, each such Debtor shall designate the Secured Party, onbehalf of Banks, as mortgagee and loss payee and such policies shall provide that any loss bepayable to each such Debtor and Secured Party, on behalf of Banks, as mortgagee and loss payee, astheir respective interests may appear. Further, upon the request of the Secured Party acting at therequest of the Banks, each such Debtor shall deliver copies of all said policies, including allendorsements thereon and those required hereunder, to Secured Party; and each such Debtor assignsto Secured Party, on behalf of Banks, as additional security hereunder, all its rights to receiveproceeds of insurance with respect to the Collateral, subject to clause (i) of this subsectionII.B.(2). All such insurance shall, by its terms, provide that no cancellation, lapse (includingwithout limitation any lapse for non-payment of premiums) or material change in coverage shallbecome effective until thirty (30) days after receipt by Secured
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Party of written notice from the applicable carrier. Each Debtor further shall provide SecuredParty upon request with evidence reasonably satisfactory to Secured Party that each such Debtor isat all times in compliance with this paragraph. During the continuance of an Event of Default,Secured Party may act as each such Debtor’s attorney-in-fact in obtaining, adjusting, settling andcompromising such insurance and endorsing any drafts. Upon default in this covenant, Secured Partymay procure such insurance and its costs therefor shall be charged to Borrower, payable on demand,with interest at the highest rate set forth in the Credit Agreement and added to the Indebtednesssecured hereby. The disposition of proceeds of any insurance on the Collateral (“InsuranceProceeds”) shall be governed by the following:             (i) provided that no Event of Default has occurred and is continuing hereunder, (a) ifthe amount of Insurance Proceeds in respect of any loss or casualty does not exceed TwentyFive Thousand Dollars ($25,000), such Debtor shall be entitled, in the event of such loss orcasualty, to receive all such Insurance Proceeds and to apply the same toward thereplacement of the Collateral affected thereby; and (b) if the amount of Insurance Proceedsin respect of any loss or casualty exceeds Twenty Five Thousand Dollars ($25,000), suchInsurance Proceeds shall be paid to and received by Secured Party, for release to suchDebtor for the replacement of the Collateral affected thereby or, upon written request ofsuch Debtor (accompanied by reasonable supporting documentation), for such other use orpurpose as approved by the Majority Banks, in their reasonable discretion, it beingunderstood and agreed in connection with any release of funds under this subparagraph (B),that the Secured Party and Majority Banks may impose reasonable and customary conditions onthe disbursement of such Insurance Proceeds; and             (ii) if an Event of Default has occurred or is continuing hereunder, all InsuranceProceeds in respect of any loss or casualty shall be paid to and received by the SecuredParty, to be applied by the Secured Party against the Indebtedness and/or to be held by theSecured Party as cash collateral for the Indebtedness, as the Majority Banks may direct intheir sole discretion and/or for replacement of the Collateral affected thereby, as theMajority Banks may direct in their sole discretion.               (3) The Collateral is located in the premises set forth on Schedule I, and will not be movedto premises other than those set forth on Schedule I, and such other locations with respect towhich each such Debtor shall have executed and delivered to Secured Party all financing statementsand other documents and instruments necessary to perfect or continue the perfection of the SecuredParty’s security interest in the Collateral. Subject to the applicable terms of the CreditAgreement, upon request therefor by the Secured Party, each such Debtor will inform the SecuredParty in writing of the whereabouts of the Collateral and Debtor will promptly arrange for anyinspections requested by the Secured Party, on behalf of Banks pursuant to the terms of the CreditAgreement;               (4) Each such Debtor shall comply with all applicable laws, rules, ordinances, regulations andorders of any governmental authority, whether federal, state, local or foreign in effect from timeto time with respect to the Collateral, to the full extent required under the Credit Agreement.
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          (5) Secured Party, on behalf of the Banks, may, subject to the applicable terms of the CreditAgreement, examine and inspect the Collateral at any time wherever located.     C. Protection of Security Interest. Each Debtor agrees that:          (1) Except as permitted by the Credit Agreement, it will not sell, transfer, lease orotherwise dispose of any of the Collateral or any interest therein or offer to do so (other thanthe sale or lease of inventory in the ordinary course of business or as otherwise permitted by theCredit Agreement) without the prior written consent of Secured Party, given at the writtendirection or with the written approval of the requisite Banks, and will not create, incur, assumeor suffer to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kindupon any of the Collateral (or any interest therein or portion thereof), other than in favor ofSecured Party, on behalf of the Banks and liens permitted under the Credit Agreement.          (2) It will, to the full extent required under the Credit Agreement, pay all taxes including,without limitation, any maintenance fees payable on any registered patents and any fees inconnection with any required filings in connection with any pending or registered trademarks,assessments, governmental charges and levies upon the Collateral or for its use or operation.          (3) It will sign and execute alone or with Secured Party any financing statement or otherdocument (including without limitation, filings required in connection with any pending orregistered trademark) or procure any documents and pay all connected costs, necessary to protectthe security interest under this Security Agreement against the rights or interests of thirdpersons.          (4) It will reimburse Secured Party for all reasonable costs, including reasonable attorneys’fees, incurred for any action taken by Secured Party to remedy an Event of Default of Debtor whichSecured Party elects to remedy pursuant to its rights under Paragraph IV hereof.          (5) It will,         (i) subject to Section 6.5 of the Credit Agreement, allow Secured Party, or any Bank,to examine, audit and inspect such Debtor’s books, accounts, and other records relating tothe Collateral wherever located at all reasonable times during normal business hours, uponoral or written request of Secured Party, and to make and take away copies of any and allsuch books, accounts, records and ledgers;         (ii) punctually and properly perform all of its covenants and duties under any othersecurity agreement, mortgage, collateral document, pledge agreement or contract of any kindnow or hereafter existing as security for or in connection with payment of the Indebtedness,or any part thereof;         (iii) perform its obligations under and comply with the terms and provisions of theCredit Agreement and the other Loan Documents to which it is or may become a party;
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            (iv) keep, at the addresses designated on Schedule II and such additional addresses asmay be provided from time to time for its records, all records concerning the Collateral,which records will be of such character as will enable Secured Party or its designees todetermine at any time the status of the Collateral;            (v) give Secured Party not less than 30 days prior written notice of all contemplatedchanges in such Debtor’s name, legal structure, location, jurisdiction of formation, orchief executive office, or in the location of the Collateral or such Debtor’s recordsconcerning same and, prior to making any such changes, file or cause to be filed allfinancing statements or amendments or other documents or instruments determined by SecuredParty to be necessary or appropriate to establish and maintain a valid first prioritysecurity interest in all the Collateral in accordance with the terms hereof;            (vi) promptly furnish Secured Party with any information in writing which Secured Partymay reasonably request concerning the Collateral;            (vii) to the extent required under the Credit Agreement, promptly notify Secured Partyof any material claim, action or proceeding affecting the Collateral and title therein, orin any part thereof, or the security interest created herein, and, at the request of theSecured Party, appear in and defend, at such Debtor’s expense, any such action orproceeding;            (viii) promptly, after being requested by Secured Party, pay to Secured Party theamount of all reasonable expenses, including reasonable attorneys’ fees and other legalexpenses, incurred by Secured Party pursuant to and in accordance with the Credit Agreementin protecting and maintaining the Collateral or its rights hereunder, or in connection withany audit or inspection of the Collateral pursuant to the terms hereof, and in enforcing thesecurity interest created herein;            (ix) allow Secured Party, upon and so long as there exists any Default or Event ofDefault, to correspond with its account debtors to confirm its accounts receivable andObligors under any contracts;            (x) take such actions as Secured Party, in its sole discretion, deems necessary orappropriate to establish exclusive control (as defined in the UCC) over any Collateral ofsuch nature that perfection of Secured Party’s security interest may be established bycontrol.            (6) With respect to any Collateral of a kind requiring an additional security agreement,financing statement, or other writing to perfect a security interest therein in favor of SecuredParty, on behalf of Banks, such Debtor will forthwith upon demand by Secured Party execute anddeliver to Secured Party on behalf of Banks, whatever documentation the Secured Party or therequisite Banks shall reasonably deem necessary or proper for such purpose. Should any covenant,duty or agreement of such Debtor fail to be performed in accordance with its terms hereunderresulting in an Event of Default, Secured Party may, but shall never be obligated to, perform orattempt to perform such covenant, duty or agreement on behalf of such Debtor, and any amountexpended by Secured Party in such performance or attempted performance shall
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become part of the Indebtedness, and, at the request of Secured Party, such Debtor agrees topay such amount to Secured Party upon demand at Secured Party’s office in Detroit, Michigantogether with interest thereon at the highest rate at which interest accrues on amounts after thesame become due pursuant to the terms of the Credit Agreement, from the date of such expenditure bySecured Party until paid. With respect to any Collateral (other than goods) in which such Debtoracquires any rights subsequent to the date hereof and which, under applicable law, a securityinterest is or can be perfected by possession, upon request of the Secured Party or the MajorityBanks, such Debtor agrees to deliver possession of such Collateral to Secured Party immediatelyupon its acquisition of rights therein.               (7) It will hold the proceeds of any of the Collateral (including accounts receivable andcontracts) which is sold other than in the ordinary course of such Debtor’s business (or otherwiseas permitted under the Credit Agreement or this Agreement, subject to the terms thereof) in trustfor Secured Party on behalf of the Banks, will not commingle said proceeds with any other funds,and, after and during the continuance of an Event of Default, will deliver such proceeds to SecuredParty immediately upon its request.               (8) It will not, except as permitted under the Credit Agreement, grant any rebate, refund,allowance or credit on any account receivable, or on any amounts due under any accounts receivable,other than in the ordinary course of business, without Secured Party’s prior written consent.               (9) If Secured Party, acting in its sole discretion, redelivers any Collateral to such Debtoror such Debtor’s designee for the purpose of (i) the ultimate sale or exchange thereof, or(ii)presentation, collection, renewal, or registration of transfer thereof, or (iii) loading,unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealingtherewith preliminary to sale or exchange; such redelivery shall not constitute a release ofSecured Party’s security interest therein or in the proceeds thereof unless Secured Party, with theconsent of the Banks, specifically so agrees in writing. If such Debtor requests any suchredelivery, such Debtor will deliver with such request a duly executed financing statement in formand substance satisfactory to Secured Party.               (10) Subject to the applicable terms of the Credit Agreement, Debtor shall at the direction ofthe Secured Party take any and all other steps reasonably required under applicable law to perfectthe lien and security interest established hereby in favor of Secured Party, on behalf of theBanks, including without limitation the execution, delivery and/or performance of appropriateacknowledgments, governmental acknowledgments, registrations or approvals, financing statements andother documents and instruments, and the registration, recording and/or filing of such instrumentswith such Persons and in such jurisdictions as necessary to perfect the security interest and lienestablished hereby.               (11) Secured Party or any agent of Secured Party may execute and file in the name of and onbehalf of such Debtor all financing statements or other filings deemed necessary or desirable bySecured Party to evidence, perfect or continue Secured Party’s security interests in theCollateral.
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            (12) Secured Party may take such actions in its own name or in such Debtor’s names as SecuredParty, in its sole discretion, deems necessary or appropriate to establish exclusive control (asdefined in the UCC) over any Collateral of such nature that perfection of Secured Party’s securityinterest may be established by control.            (13) It will take any and all actions required or reasonably requested by the Secured Party,from time to time, to (i) cause the Secured Party to obtain exclusive control of any investmentproperty owned by such Debtor in a manner reasonably acceptable to the Secured Party and (ii)obtain from any issuers of investment property and such other Persons, for the benefit of theSecured Party, written confirmation of the Secured Party’s control over such investment property.For purposes of this Section C(13), the Secured Party shall have exclusive control of investmentproperty if (i) such investment property consists of certificated securities and a Debtor deliverssuch certificated securities to the Secured Party (with appropriate endorsements if suchcertificated securities are in registered form); (ii) such investment property consists ofuncertificated securities and either (x) a Debtor causes the issuer to register the Debtor’s pledgeof the investment property on the issuer’s books and records or (y) the issuer thereof agrees,pursuant to documentation in form and substance satisfactory to the Secured Party, that it willcomply with instructions originated by the Secured Party without further consent by such Debtor;and (iii) such investment property consists of security entitlements either (x) the Secured Partybecomes the entitlement holder thereof or (y) the appropriate securities intermediary agrees,pursuant to the documentation in form and substance satisfactory to the Secured Party, that it willcomply with entitlement orders originated by the Secured Party without further consent by anyDebtor.     III. Collection of Proceeds — Remittance Basis.    (a) At any time upon the request of Secured Party, each Debtor shall at its soleexpense maintain until the Agent acting in its sole discretion shall notify Debtors that theIndebtedness is no longer required to be on a Remittance Basis a United States post officelock box (the “Lock Box”), to which Secured Party shall have exclusive access, and to whichDebtors shall have no access. Each Debtor expressly authorizes Secured Party, from time totime, to remove all contents from the Lock Box, for disposition in accordance with thisAgreement. Each Debtor agrees to notify all account debtors and other parties obligated toit that all payments made on any account, invoice or other Collateral (other than paymentsby electronic funds) shall be remitted, for the credit of such Debtor, to the Lock Box, andeach such Debtor shall include a like statement on all invoices. Payments made byelectronic funds transfer shall be made directly to the Cash Collateral Account (definedbelow), and each such Debtor shall so instruct its account debtors and other partiesobligated to it. Each Debtor shall execute all documents, authorizations and otheragreements necessary to establish the Lock Box, and Secured Party’s exclusive accessthereto.    (b) Any and all cash, checks, drafts and other instruments for the payment of moneyreceived by each Debtor at any time, in full or partial payment of any of the Collateralshall forthwith, upon receipt, be transmitted and delivered to Secured Party (properlyendorsed, where required, so that such items may be collected by Secured Party). Any suchitems received by a Debtor shall not be commingled with any other of
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such Debtor’s funds or property, but will be held separate and apart from such Debtor’sown funds or property, and upon express trust for the benefit of Secured Party and the Banksuntil delivery is made to Secured Party.     (c) All items or amounts which are remitted to the Lock Box or otherwise delivered byor for the benefit of a Debtor to Secured Party on account of partial or full payment of, orany other amount payable with respect to, any of the Collateral shall, at Secured Party’ soption, (i) be applied when received first to the payment of the Revolving Credit Advancesand then the other Indebtedness, whether then due or not, or (ii) shall be deposited to thecredit of a non-interest bearing deposit account in the name of Comerica Bank, as SecuredParty, for the benefit of the applicable Debtor (the “Cash Collateral Account”) to beestablished by each Debtor with Secured Party pursuant to this paragraph, as security forpayment of the Indebtedness, provided, however, prior to the occurrence of an Event ofDefault, collected funds in the Cash Collateral Account shall be applied to the payment ofthe Indebtedness each Business Day unless no Prime-based Advances of the Revolving Creditare then outstanding in which case such funds shall be held in the Cash Collateral Accountuntil they can be applied to Prime-based Advances of the Revolving Credit or, at the optionof Debtor, deposited to an interest bearing account maintained in the name of Debtor withAgent. No Debtor shall have any right whatsoever to withdraw any funds so deposited. EachDebtor further grants to Secured Party a first security interest in and lien on all funds ondeposit in such account. To the extent collected funds remain at any time on deposit in theCash Collateral Account after payment and discharge in full of the Indebtedness, SecuredParty shall release such surplus collected funds to Debtor. Each Debtor hereby irrevocablyauthorizes and directs Secured Party to endorse all items received for deposit to the CashCollateral Account, notwithstanding the inclusion on any such item of a restrictivenotation, e.g., “paid in full”, “balance of account”, or other restriction.     (d) Each Debtor agrees that neither Secured Party nor any Bank shall be liable for anyloss or damage which Debtor suffer or may suffer as a result of Secured Party’s processingof items or its exercise of any other rights or remedies under this Agreement, includingwithout limitation indirect, special or consequential damages, loss of revenues or profits,or any claim, demand or action by any third party arising out of or in connection with theprocessing of items or the exercise of any other fights or remedies hereunder, except fordirect damages which arise from Secured Party’s or any Bank’s gross negligence or willfulmisconduct. Each Debtor further agrees to indemnity and hold Secured Party and the Banksharmless from and against all such third party claims, demands or actions, including withoutlimitation litigation costs and reasonable attorney fees, except with respect to suchclaims, demands and actions which arise from Secured Party’s or any Bank’s gross negligenceor willful misconduct.IV. Default       The terms “Default” and “Event of Default”, as used herein, shall mean the occurrence andcontinuance of a Default or an Event of Default, as the case may be, under the Credit Agreement.
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     V. Secured Party’s Rights and Remedies.     In addition to its rights and remedies under the Credit Agreement and the other LoanDocuments, and under applicable law, Secured Party shall have available to it the following rightsand remedies upon occurrence and during the continuance of an Event of Default:     A. Right to Discharge Debtor’s Obligations. Secured Party may, with the approval ofthe Majority Banks, discharge taxes, liens or security interests or other encumbrances at any timelevied or placed on the Collateral in violation of the terms hereof, whether senior or junior tothe security interest herein granted, may remedy or cure any default of a Debtor under the terms ofany lease, rental agreement, land contract or other document which in any way pertains to oraffects such Debtor’s title to or interest in any of the Collateral, may pay for insurance on theCollateral, and may pay for the maintenance and preservation of the Collateral, unless such Debtoris contesting in good faith such obligations, and such Debtor agrees to reimburse Secured Party, ondemand, for any payment made or any expense incurred by Secured Party pursuant to the foregoingauthorization, with interest, which payments and expenses shall be secured by the Collateral.     B. Remedies and Enforcement. Secured Party shall have and may exercise, at thedirection or with the approval of the Majority Banks, any and all rights of enforcement andremedies afforded to a secured party under the UCC or other applicable uniform commercial code (orother applicable law), to the full extent permitted by applicable law, on the date of this SecurityAgreement or the date of such Debtor’s default, together with any and all other rights and remediesotherwise provided and available to Secured Party by applicable law unless such application wouldresult in the invalidity or unenforceability of any provision hereof, in which case the law of thestate in which any of the Collateral is located shall apply to the extent necessary to render suchprovision valid and enforceable; and, in conjunction with, in addition to, or substitution forthose rights, Secured Party may, at the direction or with the approval of the Majority Banks, orwith respect to subparagraph (3) below), all of the Banks:           (1) Enter upon such Debtor’s premises to take possession of, assemble, collect and/or disposeof the Collateral and, if Secured Party elects to do, to apply any of the Collateral against any ofthe Indebtedness secured hereby;           (2) Require such Debtor to assemble the Collateral and make it available at a place SecuredParty designates to allow Secured Party to take possession or dispose of the Collateral;           (3) Waive any default, or remedy any default, without waiving its rights and remedies upondefault and without waiving any other prior or subsequent default;           (4) Without any notice to any Debtor, notify any parties obligated on any of the Collateral tomake payment to the Secured Party, on behalf of the Banks, of any amounts due or to become duethereunder and enforce collection of any of the Collateral by suit or otherwise and surrender,release or exchange all or any part thereof, or compromise or extend or renew for any period(whether or not longer than the original period) the indebtedness thereunder or evidenced thereby.Upon request of the Secured Party, each Debtor will, at its own expense,
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notify any parties obligated to such Debtor on any of the Collateral to make payment to theSecured Party of any amounts due or to become due thereunder, and indicate on all billings to suchaccount debtors that their accounts must be paid to or as directed by Secured Party. Each Debtoragrees that neither Secured Party nor the Banks shall be liable for any loss or damage which suchDebtor suffers or may suffer as a result of Secured Party’s processing of items or its exercise ofany other rights or remedies under this Security Agreement, including without limitation indirect,special or consequential damages, loss of revenues or profits, or any claim, demand or action byany third party not related to or affiliated with such Debtor arising out of or in connection withthe processing of items (excluding only the claims of such third parties in connection with theprocessing of items based solely upon the gross negligence or willful misconduct of Secured Party)or the exercise of any other rights or remedies hereunder. Each Debtor further agrees to indemnifyand hold Secured Party and the Banks harmless from and against all such third party claims, demandsor actions, including without limitation litigation costs and reasonable attorneys’ fees, exceptingonly those claims, demands and actions arising solely as a result of the gross negligence orwillful misconduct of Secured Party or any of the Banks;           (5) Appoint any officer or agent of Secured Party as a Debtor’s true and lawful proxy andattorney-in-fact, with power, upon the occurrence and during the continuance of any Event ofDefault; to endorse such Debtor’s name or any of its officers or agents upon any notes, checks,drafts, money orders, or other instruments of payment (including payments payable under any policyof insurance on the Collateral) or Collateral that may come into possession of the Secured Party infull or part payment of any amounts owing to the Banks; to sign and endorse the name of such Debtorand/or any of its officers or agents upon any invoice, freight or express bill, bill of lading,storage or warehouse receipts, drafts against debtors, assignments, verifications and notices inconnection with accounts, and any instrument or document relating thereto or to such Debtor’srights therein; to execute on behalf of such Debtor any financing statements, amendments,subordinations or other filings pursuant to the Credit Agreement, this Security Agreement or theother Loan Documents; each Debtor hereby granting unto Secured Party on behalf of the Banks uponthe occurrence and during the continuance of an Event of Default, as the proxy and attorney-in-factof such Debtor, full power to do any and all things necessary to be done in and about the premisesas fully and effectually as such Debtor might or could do, and hereby ratifying all that said proxyand attorney shall lawfully do or cause to be done by virtue hereof. The proxy and power ofattorney described herein shall be deemed to be coupled with an interest and shall be irrevocablefor the entire term of the Credit Agreement, the Notes and all transactions thereunder andthereafter as long as any Indebtedness or any of the commitments to lend (whether optional orobligatory) remain outstanding. The Secured Party shall have full power to collect, compromise,endorse, sell or otherwise deal with the Collateral or proceeds thereof on behalf of the Banks inits own name or in the name of such Debtor.     C. Right of Sale.         (1) Each Debtor agrees that upon the occurrence and continuance of an Event of Default,Secured Party may, at its option, sell and dispose of the Collateral at public or private salewithout any previous demand of performance. Each Debtor agrees that notice of such sale sent tosuch Debtor’s address, as set forth on the signature pages attached hereto, by certified or
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registered mail sent at least five (5) Business Days prior to such sale, shall constitutereasonable notice of sale. The foregoing shall not require notice if none is necessary underapplicable law. The proceeds of sale shall be applied in the following order:               (i) to all reasonable costs and charges incurred by Secured Party in the taking andcausing the removal and sale of said property, including such reasonable attorneys’ fees asshall have been incurred by Secured Party;               (ii) to the Indebtedness, including without limitation all accrued interest thereon,premiums and make whole amounts, if any, in the order set forth in the Credit Agreement; and               (iii) any surplus of such proceeds remaining shall be paid to such Debtor, or to suchother party who shall lawfully be entitled thereto.       Each Debtor agrees that Secured Party shall be under no obligation to accept any noncashproceeds in connection with any sale or disposition of Collateral unless failure to do so would becommercially unreasonable. If Secured Party agrees in its sole discretion to accept noncashproceeds (unless the failure to do so would be commercially unreasonable), Secured Party mayascribe any commercially reasonable value to such proceeds. Without limiting the foregoing,Secured Party may apply any discount factor in determining the present value of proceeds to bereceived in the future or may elect to apply proceeds to be received in the future only as and whensuch proceeds are actually received in cash by Bank.               (2) At any sale or sales made pursuant to this Security Agreement or in a suit to foreclosethe same, the Collateral may be sold en masse or separately, at the same or at different times, atthe option of the Secured Party or its assigns. Such sale may be public or private with notice asrequired by the Uniform Commercial Code as then in effect in the state in which the Collateral islocated, and the Collateral need not be present at the time or place of sale. At any such sale, theSecured Party may bid for and purchase any of the property sold, notwithstanding that such sale isconducted by the Secured Party or its attorneys, agents, or assigns. At any sale or otherdisposition of Collateral pursuant to this Agreement, Bank disclaims all warranties which wouldotherwise be given under the UCC, including without limit a disclaimer of any warranty relating totitle, possession, quiet enjoyment or the like, and Bank may communicate these disclaimers to apurchaser at such disposition. This disclaimer of warranties will not render the sale commerciallyunreasonable.               (3) The following shall be the basis for any finder of fact’s determination of the value ofany Collateral which is the subject matter of a disposition giving rise to a calculation of anysurplus or deficiency under Section 9-615 (f) of the UCC: (a) the Collateral which is the subjectmatter of the disposition shall be valued in an “as is” condition as of the date of thedisposition, without any assumption or expectation that such Collateral will be repaired orimproved in any manner; (b) the valuation shall be based upon an assumption that the transferee ofsuch Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days)following the disposition; (c) all reasonable closing costs customarily borne by the seller incommercial sales transactions relating to property similar to such Collateral shall be deductedincluding, without limitation, brokerage commissions, tax prorations, attorneys’ fees, whether
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inside or outside counsel is used, and marketing costs; (d) the value of the Collateral whichis the subject matter of the disposition shall be further discounted to account for any estimatedholding costs associated with maintaining such Collateral pending sale (to the extent not accountedfor in (c) above), and other maintenance, operational and ownership expenses; and (e) any expertopinion testimony given or considered in connection with a determination of the value of suchCollateral must be given by persons having at least 5 years experience in appraising propertysimilar to the Collateral and who have conducted and prepared a complete written appraisal of suchCollateral taking into consideration the factors set forth above. The “value” of any suchCollateral shall be a factor in determining the amount of proceeds which would have been realizedin a disposition to a transferee other than a secured party, a person related to a secured party ora secondary obligor under Section 9-615(f).     D. Miscellaneous. Secured Party shall have the right at all times to enforce theprovisions of this Security Agreement, on behalf of Banks, in strict accordance with the termshereof, notwithstanding any conduct or custom on the part of Secured Party or any of the Banks inrefraining from so doing at any time or times. The failure of Secured Party or any of the Banks atany time or times to enforce its rights under said provisions strictly in accordance with the sameshall not be construed as having created a custom in any way or manner contrary to the specificprovisions of this Security Agreement or as having in any way or manner modified the same. Allrights and remedies of Secured Party and Banks hereunder shall be cumulative and concurrent, andthe exercise of one right or remedy shall not be deemed a waiver or release of any other right orremedy.     VI. Representations, Warranties and Covenants of Debtors.     Each Debtor represents and warrants, and, after the date hereof, covenants so long as any ofthe Credit Agreement, the Notes or Letter of Credit Agreements remain in effect other than withrespect to contingent indemnification obligations to the extent no claim has been asserted, that:     A. Such Debtor is a registered organization under the laws of one of the states comprising theUnited States and such Debtor is located (as determined under the UCC) in the state under the lawsof which it was organized, which is set forth in Schedule II hereto;     B. Each other location where Debtor maintains a place of business is set forth on ScheduleIII;     C. No financing statement covering the Collateral, or any part thereof, has been or will befiled with any filing officer, except as permitted under the Credit Agreement. No person, otherthan Secured Party, has possession or control (as defined in the UCC) of any Collateral of suchnature that perfection of a security interest may be accomplished by control.     D. No other agreement, pledge or assignment covering the Collateral, or any part thereof, hasbeen or will be made and no security interest, other than the one created hereby or pursuant tosecurity agreements and pledges previously made in favor of Secured Party on behalf of the Banks,has or will be attached or has been or will be perfected in the Collateral or in any part thereof,except as permitted under the Credit Agreement.
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     E. No material dispute, right of setoff, counterclaim or defenses exist with respect to anypart of the Collateral (excluding accounts, accounts receivable and rights to payment for servicesrendered), except as permitted under the Credit Agreement.     F. At the time Secured Party’s security interest attaches to any of the Collateral or itsproceeds, such Debtor will be the lawful owner thereof with the right to transfer any interesttherein, such Collateral is free and clear of all liens other than the one created hereby orpermitted by the Credit Agreement and that such Debtor will make such further assurances to proveits title to the Collateral as may be reasonably required, will keep such Collateral free and clearof all liens other than the one created hereby and liens permitted by the Credit Agreement, andwill take such action to defend the Collateral and its proceeds against the lawful claims anddemands of all persons whomsoever. The delivery at any time by such Debtor to Secured Party ofCollateral, or financing statements covering any Collateral shall constitute a representation andwarranty by such Debtor under this Security Agreement that, with respect to such Collateral, andeach item thereof, such Debtor is owner of the Collateral and the matters heretofore warranted inthis paragraph are true and correct in all material respects.     G. The representations and warranties contained in any of the Credit Agreement and theGuaranty are incorporated by reference herein and are all made as of the date hereof.     VII. Mutual Agreements.     Each Debtor and Secured Party mutually agree as follows:     A. “Debtor” and “Secured Party” as used in this Security Agreement include the successors andpermitted assigns of those parties.     B. To the extent permitted by applicable law, except as otherwise provided herein, the lawgoverning this Security Agreement shall be that of the State of Michigan.     C. This Security Agreement includes all amendments and supplements hereto and all assignmentshereof, provided, that such Debtor and Secured Party shall not be bound by any amendment heretounless such amendment is expressed in a writing executed by each of them.     D. All capitalized or other terms not specifically defined herein are used as defined in theCredit Agreement. To the extent not inconsistent therewith, all such terms shall also be construedin conformity with the UCC or other applicable Uniform Commercial Code.     E. The security interest granted under this Security Agreement shall be a continuing securityinterest in every respect (whether or not the outstanding balance of the Indebtedness is from timeto time temporarily reduced to zero) and Secured Party’s security interest in the Collateral asgranted herein shall continue in full force and effect for the entire duration that the CreditAgreement remains in effect (other than to the extent in effect only with respect to contingentindemnification obligations with respect to which no claim has been asserted) and until all of theIndebtedness is repaid and discharged in full, and no commitment (whether optional or obligatory)to extend any credit under the Credit Agreement or any of the Notes remains outstanding.
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     F. **THE PARTIES HERETO ACKNOWLEDGE THAT THIS SECURITY AGREEMENT IS SUBJECT TO THE MUTUAL WAIVEROF JURY TRIAL CONTAINED IN THE APPLICABLE PROVISIONS OF THE CREDIT AGREEMENT AND THE GUARANTY, ASAPPLICABLE.**     G. Each of the Debtors hereby irrevocably submits to the non-exclusive jurisdiction of anyUnited States Federal Court or Michigan state court sitting in Detroit, Michigan in any action orproceeding arising out of or relating to this Security Agreement and hereby irrevocably agrees thatall claims in respect of such action or proceeding may be heard and determined in any such UnitedStates Federal Court or Michigan state court. Each Debtor irrevocably consents to the service ofany and all process in any such action or proceeding brought in any court in or of the State ofMichigan by the delivery of copies of such process to such Debtor at its address specified inSchedule II hereto or by certified mail directed to such address. Nothing in this paragraph shallaffect the right of the Banks and the Secured Party to serve process in any other manner permittedby law or limit the right of the Banks or the Secured Party (or any of them) to bring any suchaction or proceeding against any of the Debtors or any of its or their property in the courts ofany other jurisdiction. Each of the Debtors hereby irrevocably waives any objection to the layingof venue of any such suit or proceeding in the above described courts.**[signatures follow on succeeding pages]**
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     IN WITNESS WHEREOF, each of the undersigned Debtors and Secured Party have executed thisSecurity Agreement as of the day and year first above written.         DEBTORS:           **N.P. PREMIUM FINANCE COMPANY**           By:         John H. Berry           Its: Treasurer           **NORTH POINTE FINANCIAL SERVICES, INC.**           By:         Brian J. Roney           Its: Vice President           **SOUTH POINTE FINANCIAL SERVICES, INC.**           By:         John H. Berry           Its: Treasurer           **ALLIANCE SURETY HOLDINGS, INC.**           By:         John H. Berry           Its: Treasurer  
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         **HOME POINTE MANAGING GENERAL AGENCY, INC.**           By:                   John H. Berry     Its: Treasurer       ACCEPTED BY SECURED PARTY:       **COMERICA BANK**, as Agent for the Banks       By:          Michael P. Stapleton   Its: Vice President  
 

 
Schedule ILocation of CollateralEach Debtor’s assets are located at 28819 Franklin Road, Southfield, Michigan 48034
 

 
Schedule IIEach Debtor’s chief executive office,