Exhibit 10.10
SECURITY AGREEMENT
This SECURITY AGREEMENT (the "Agreement") is made and entered into as
of August 31, 2001 by and between Ameritrend Corporation, a Florida corporation
("Ameritrend") and Danka Holding Company, a Delaware corporation (the "Secured
Party").
WHEREAS, Secured Party has sold all of the capital stock of Ameritrend
to Method Products Corp., a Florida corporation ("Buyer") pursuant to that
certain Stock Purchase Agreement dated as of the date hereof (the "Stock
Purchase Agreement);
WHEREAS, as partial consideration for such purchase of Ameritrend's
capital stock, Buyer has delivered to Secured Party a Promissory Note (the
"Note") in the principal amount of One Million Dollars ($1,000,000);
WHEREAS, as a condition to entering into the Stock Purchase Agreement
and accepting the Note, Secured Party requires Ameritrend to enter into this
Agreement, and in order to induce Secured Party to enter into the Stock Purchase
Agreement and accept the Note, Ameritrend has agreed to grant Secured Party a
security interest in Ameritrend's assets in order to guaranty full and complete
payment of the Note, all on the terms and conditions herein stated; and
WHEREAS, by reason of Ameritrend's new status as a wholly-owned
subsidiary of the Buyer, Ameritrend will directly benefit from the extension of
credit by Secured Party to Buyer under the Note.
NOW THEREFORE, based upon the consideration described above, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Creation of Security Interest and Related Matters.
(a) Grant of Security Interest. Ameritrend hereby grants
Secured Party a continuing security interest of up to $1,000,000 and any
obligation of indebtedness arising from or relating to the Note (as defined
below) or otherwise as further described in paragraph 1(b)(i) below in and to
all of the following assets (collectively, the "Assets"), wherever located:
(i) All contract rights, leases, rental agreements
and conditional sales contracts of or owing to Ameritrend
whether now existing or hereafter arising, including, without
limitation: (A) all accounts and other rights to payment of
money which arise or result from Ameritrend's selling,
renting, leasing, or other disposition of Ameritrend's goods
or the providing of services by Ameritrend after the date of
this Agreement, whether or not earned by performance or
recognized or billed by Ameritrend, (B) proceeds of any
insurance covering the Ameritrend's equipment and
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inventory, (C) deposits and bank accounts and (D) all of
Ameritrend's books and records relating to any or all of the
foregoing.
(ii) All inventory of whatever kind or nature of
Ameritrend, now owned or hereafter acquired by Ameritrend
including, without limitation, all goods held for sale or
lease or furnished or to be furnished under contracts, and any
raw materials, work in process, or finished goods, and all
goods and materials used or consumed in Ameritrend's business,
including, without limitation, parts and supplies inventory,
and all of Ameritrend's books and records relating to any or
all of the foregoing.
(iii) All equipment of whatever kind or nature now
owned or hereafter acquired by Ameritrend, and whether kept at
Ameritrend's business premises or elsewhere, including,
without limitation, all machinery, "Rolling Stock" (as
hereinafter defined), tools, furniture, furnishings, office
machines and equipment, material handling equipment,
forklifts, conveyors, machine systems, computers, and all
other goods used with all accessories, parts and additions now
or hereafter affixed thereto or used in connection therewith.
"Rolling Stock" includes, without limitation, all trucks,
vans, tractors, trailers and other titled vehicles, whether
now owned or hereafter acquired and wherever such vehicles may
be located, and including, specifically and without
limitation, together with all replacements for any of such
vehicles and all proceeds thereof.
(iv) All furniture, furnishings, appliances and all
other tangible personal property now or hereafter owned or
acquired by Ameritrend and wherever the same may be located,
together with all accessories and parts now attached to or
used in connection with any such Assets or which may hereafter
at any time be placed in or added thereto and also any and all
replacements and proceeds of any such Assets.
(v) All of Ameritrend's general intangibles,
including, without limitation, copyrights, trademarks, trade
names, service marks, patent drawings, designs and formulas,
fictitious or other names and all related marks, logos, and
insignia now or hereafter used in connection with the
operation of Ameritrend's business.
(vi) All present and future rents, issues, profits
and income from the Assets, and each and every part and parcel
thereof, and also all present and future right, title and
interest of Ameritrend under and by virtue of each and every
franchise, license, permit, lease, contract for deed or
purchase and sale agreement, or any other document or
contractual right, written or verbal, whether now or hereafter
made, and any and all amendments to or modifications,
extensions or renewals thereof and all proceeds thereof, all
present and future rents, issues, profits, income, accounts,
accounts receivable and the proceeds thereof of any business
activity conducted by Ameritrend after the date of this
Agreement; all bank accounts and deposit accounts into which
any of the proceeds of the foregoing are deposited; and
proceeds of all of the foregoing.
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In addition, the "Assets" secured by this Agreement include all of the
following, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
(1) All attachments, accessions, accessories, tools,
parts, supplies, increases, and additions to and all
replacements of and substitutions for any of the Assets.
(2) All products and produce of any of the Assets.
(3) All accounts, contract rights, general
intangibles, instruments, rents, monies, revenues, issues,
profits, payments, and all other rights, arising out of a
sale, lease, trade, exchange or other disposition of any of
the Assets.
(4) All proceeds from the sale, destruction, loss,
condemnation or other disposition of any of the Assets.
(5) All proceeds, refunds or rebates from the
cancellation of any insurance policies with respect to the
property described above or from any warranty, service,
disability or credit insurance product or policy of
Ameritrend, for the benefit of Ameritrend or for any of the
Assets.
(6) All records and data relating to the Assets,
whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of
Ameritrend's right, title, and interest in and to all computer
software required to utilize, create, maintain, and process
any such records or data on electronic media.
(b) Obligations Secured. The parties hereto acknowledge and
agree that:
(i) The Assets are and shall be security for Buyer's
timely and full payment of the Note.
(ii) The Assets shall also secure the Ameritrend's
prompt and faithful performance of all of the Ameritrend's
obligations, covenants, representations and warranties
contained in this Agreement.
(c) Perfection of Security Interest. Ameritrend hereby agrees
to execute and Secured Party may file in any appropriate public offices such
documents as may be necessary to perfect Secured Party's security interest,
including, without limitation, any Uniform Commercial Code ("UCC") financing
statements as may be reasonably required by Secured Party.
(d) Term of Agreement. The term of this Agreement shall
commence as of the date
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hereof and terminate upon the payment in full of the Note, or the discharge
thereof by the Secured Party (the "Term").
2. Ameritrend's Representations and Warranties. To induce Secured Party
to enter into this Agreement, Ameritrend covenants, represents and warrants to
Secured Party as follows:
(a) Ameritrend has the right and power to grant a security
interest in the Assets to Secured Party pursuant to the terms hereof, which
security interest Ameritrend agrees not to amend or expand upon during the Term
of this Agreement, Ameritrend will not grant or permit any other security
interests, liens, claims, encumbrances or charges against any of the Assets.
There are no other security interests of any type or nature in the Assets which
could otherwise, directly or indirectly, affect the Assets.
(b) In the event that the Assets shall hereafter become
subject to any material lien, encumbrance, security interest or claim of any
other person or entity, Ameritrend warrants that it will immediately secure the
release of the Assets from such lien, encumbrance, security interest or claim at
Ameritrend's own cost and expense. Ameritrend will appear in and defend any
action or proceeding which may adversely affect the security interest of Secured
Party in the Assets. Notwithstanding the foregoing, Ameritrend may utilize the
Assets in the ordinary course of its business.
(c) Ameritrend shall: (i) reasonably maintain and repair the
Assets; (ii) use the Assets lawfully; (ii) not use the Assets so as to cause or
result in any waste, unreasonable deterioration or depreciation; and (iii) keep
the Assets at: 0000 XX 00xx Xxxxxx, Xxxxx 000X, Xxxxxxx Xxxxx, Xxxxxxx 00000,
0000 Xxxx Xxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxx 00000, 0000 Xxxxx 00xx
Xxxxxx, Xxxxx, Xxxxxxx 00000, 0000-X Xxxxxxxxxxx Xxx, Xxxxxxxxxxx, Xxxxxxx
00000, 0000 XX 00xx Xxxxxx, Xxxxx 000X, Xxxxx, Xxxxxxx 00000, 0000 Xxxxxx Xxxx,
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, and/or 0000 Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxx
Xxxxxxxx 00000, except for: (1) the temporary removal of Assets for purposes of
service and repairs, (2) the sale of inventory comprising a portion of the
Assets in the ordinary course of business and (3) the sale or transfer of
customer and supplier lists and other information relating to customers and
suppliers.
(d) Ameritrend shall not sell, contract to sell, lease,
encumber or dispose of the Assets (with the exception of inventory sold in the
ordinary course of business and customer and supplier lists and other
information relating to customers and suppliers) until the indebtedness to
Secured Party has been completely discharged, or the prior written consent of an
officer of Secured Party is obtained.
(e) Ameritrend shall pay, prior to delinquency, all taxes,
assessments, charges, liens or encumbrances now or hereafter assessed against
the Assets by any governmental agency.
(f) Ameritrend shall promptly execute and deliver to Secured
Party from time to time as requested, all UCC financing statements and renewal
UCC financing statements that Secured
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Party may reasonably request to perfect and maintain the security interest of
the Secured Party in the Ameritrend granted or created whether now or in the
future, under this Agreement.
(h) Ameritrend shall notify Secured Party promptly of:
(0)1 any attachment or legal process levied against any of
the Assets or any other of Ameritrend's property; and
(0)2 any information received by or known to Ameritrend
which in any way may materially affect the value of
the Assets or the rights of Security Party in the
Assets.
(i) Ameritrend shall promptly reimburse Secured Party for any
and all legal and accounting expenses, including reasonable attorneys' and
accountants' fees, disbursements and court costs, incurred in collecting any
sums payable by Ameritrend and/or in enforcing this Agreement or any obligations
secured hereby, or in verifying, handling, retrieving, repossessing, selling or
otherwise disposing of the Assets, all of which sums shall become part of the
indebtedness secured by this Agreement.
(j) Ameritrend shall keep the Assets continuously insured
against loss by fire, flood, theft, and other casualty, as may from time to time
be reasonably required by Secured Party, by insurance companies and in amounts
as may be reasonably approved by and reasonably acceptable to Secured Party, in
any event not to exeed the insurance policy coverage in effect on the Closing
Date as such term is defined in the Stock Purchase Agreement. The form of all
such insurance policies shall be in form reasonably acceptable to Secured Party
with loss payable to Secured Party as its interest may appear, and copies of
each and every such policy shall be promptly delivered to Secured Party. Not
less than thirty (30) days in advance of the expiration of each such policy,
Ameritrend shall deliver to Secured Party evidence of renewal thereof, together
with the receipt or copy thereof, for the premium for such renewal. Any
insurance proceeds, or any part thereof, may be applied by Secured Party, at its
option, either to the indebtedness secured hereby or to the restoration, repair
or replacement of the Assets damaged.
3. Default. Any one of the following events shall constitute a default
("Default") of Ameritrend's performance hereunder.
(a) Any material breach and/or misrepresentation by Ameritrend
of any of the covenants, warranties or representations contained in Section 2
hereof.
(b) Failure by Ameritrend to perform and observe any of the
terms, conditions, covenants, representations or warranties contained in this
Agreement or the Stock Purchase Agreement and failure to cure such default
within thirty (30) days after receipt of written notice specifying such failure
to perform.
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(c) Failure by Buyer to perform and observe any of the terms,
conditions, covenants, representations or warranties contained in the Stock
Purchase Agreement and failure to cure such default within thirty (30) days
after receipt of written notice specifying such failure to perform.
(d) Failure by Buyer to make any payment when due under the
Note.
(e) Failure by Ameritrend to assist Secured Party, as
reasonably requested, in perfecting Secured Party's security interest in the
Assets (and proceeds and receivables thereof).
(f) The filing by or against Ameritrend or Buyer of a petition
under any section or chapter of Title 11 of the United States Code, as amended;
the making by Ameritrend or Buyer of an assignment for the benefit of creditors
(other than in favor of Secured Party under this Agreement); the filing by or
against Ameritrend or Buyer of a proceeding for dissolution or liquidation; the
appointment of or the application for the appointment of a receiver, a trustee,
controller or custodian for all or part of the assets of Ameritrend or Buyer.
(e) Ameritrend's or Buyer's becoming insolvent, becoming
unable to meet its obligations as they come due, or the cessation of
Ameritrend's or Buyer's respective business operations for a period of five (5)
consecutive days.
(f) The issuance of a writ of attachment, writ of possession
or similar legal process against Ameritrend or Buyer or any material portion of
Ameritrend's or Buyer's respective properties, unless dismissed or bonded within
thirty (30) days at Ameritrend's and/or Buyer's sole effort and expense.
(g) The making of any material assessment for taxes against
the Ameritrend by the United States of America, any state or any subdivision of
either.
4. Remedies. Upon the occurrence of any Default under this Agreement
and during the continuance thereof, Secured Party may, at its option, declare
all obligations secured hereby, or any of them, immediately due and payable
without demand or notice of any kind and the same thereupon shall immediately
become and be due and payable without demand or notice. Secured Party shall have
and may exercise from time to time any and all rights and remedies of a Secured
Party under the Uniform Commercial Code and any and all other rights and
remedies available to it under any other applicable law, including the right to
foreclose this Security Agreement upon any and all Assets. After a Default has
occurred and upon request or demand of Secured Party, Ameritrend shall, at
Ameritrend's expense, assemble the Assets and make the Assets available to the
Secured Party and Ameritrend shall promptly pay all costs of Secured Party
relating to reasonable expenses of any necessary repairs to any realty or other
property to which any of the Assets may be affixed or be a part other than
arising as a result of Secured Party's negligence or willful misconduct.
5. Attorneys' Fees. If at any time hereafter Secured Party reasonably
employs counsel: (i) to intervene, file a petition, answer motion or otherwise
plead in any suit or proceeding relating
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to this Agreement or to the Assets, or any other agreement, instrument or
document now or hereafter executed by Ameritrend and delivered to Secured Party;
(ii) to protect, take possession of or liquidate any of the Assets; (iii) to
attempt to enforce any security interest or lien in the Assets; (iv) to
represent Secured Party in any pending or threatened litigation with respect to
the affairs of the Ameritrend in any way relating to the Assets; or (v) to
enforce any rights of Secured Party of liabilities of Ameritrend hereunder, then
all reasonable attorneys' fees arising from such services, and any expenses,
costs and charges relating thereto, including such reasonable fees, costs and
expenses incurred in bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals and any anticipated
post-judgment collection services, shall become part of the Ameritrend's
obligation secured by the Assets hereunder.
6. Miscellaneous.
(a) All notices and other communications required or permitted herein
shall be in writing and shall be delivered personally (which shall include
delivery by courier or reputable overnight delivery service) or sent by
certified or registered mail, postage and fee prepaid, return receipt requested,
or sent by telecopier or other similar facsimile transmission to the address or
telecopier number set forth on the signature page hereof. Items delivered
personally shall be deemed delivered on the date of actual delivery. Items sent
electronically or by telecopier or facsimile shall be deemed delivered on the
date of transmission. Items sent by certified or registered mail shall be deemed
delivered three (3) business days after mailing. Any party may change its or his
address or any of the foregoing information by a written notice delivered in
accordance with this Section.
(b) Secured Party's failure at any time or times hereunder to require
strict performance by Ameritrend of any of the provisions, warranties, or terms
and conditions contained in this Agreement shall not constitute a waiver of any
other default, whether prior or subsequent thereto.
(c) This Agreement and all other agreements, instruments or documents
executed and delivered pursuant hereto or in connection herewith, shall be
binding upon and inure to the benefit of the heirs, successors and assignees of
the parties hereto.
(d) The internal laws and judicial decisions of the State of Florida,
without regard to conflict or choice of law provisions, shall govern and control
the construction, enforceability, validity and interpretation of this Agreement
and all of the agreements, instruments or documents now or at any time hereafter
executed and delivered by Ameritrend to Secured Party.
(e) If any action and/or proceeding is brought in connection with the
enforcement of this Agreement, Ameritrend consents solely to jurisdiction of the
federal and/or state courts located in Broward County, Florida, and waives any
defense based upon lack of jurisdiction or venue to having the matter heard
before the federal and/or state courts located in Broward County, Florida.
(f) In the event that any dispute between the parties concerning the
matters provided for herein should result in litigation or mediation, the
prevailing party in such dispute shall be entitled
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to recover from the other party all reasonable fees, costs and expenses incurred
in such litigation or mediation, including without limitation, reasonable
attorneys' fees and expenses (including such reasonable fees, costs and expenses
incurred in bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals and any anticipated post-judgment
collection services), all of which shall be paid whether or not such action
and/or proceeding is prosecuted to judgment.
(g) In that all parties have had an opportunity to have their
respective counsel review this Agreement, the Note, and the Stock Purchase
Agreement, the rule of construction that ambiguities shall be construed against
the drafter shall not be applicable to this Agreement.
(h) This Agreement may be executed via telecopier and in counterparts.
(i) Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duty executed as of the date first above written.
AMERITREND:
AMERITREND CORPORATION
By: /s/ Xxxx Xxxxx
------------------------------------------
Xxxx Xxxxx, Its Authorized Representative
0000 XX 00xx Xxxxxx, Xxxxx
000X Xxxxxxx Xxxxx, XX
00000 Telecopier No.
978-2508
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STATE OF GEORGIA )
)SS:
COUNTY OF Fulton_ )
The foregoing instrument was acknowledged before me this 31 day of
August, 2001 by Xxxx Xxxxx, the Authorized Representative of Ameritrend
Corporation, a Florida corporation, on behalf of the corporation. He is
personally known to me or has produced _________________ as identification and
did/did not take an oath.
Notary Public:
sign /s/ Xxxxx Xxxxxx
-------------------------------
print Xxxxx Xxxxxx
-----------------------------
State of Florida at Large (Seal)
My Commission Expires: 6/15/03
SECURED PARTY:
DANKA HOLDING COMPANY
By:/s/ Xxxx Xxxxx
------------------------------------------
Xxxx Xxxxx, Its Authorized Representative
00000 Xxxxx Xxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Telecopier No.(000)000-0000
STATE OF GEORGIA )
)SS:
COUNTY OF _______ )
The foregoing instrument was acknowledged before me this _____ day of
_________, 2001 by Xxxx Xxxxx, the Authorized Representative of Danka Holding
Company, a Delaware corporation, on behalf of the corporation. He is personally
known to me or has produced _________________ as identification and did/did not
take an oath.
Notary Public:
sign_______________________________
print_______________________________
State of Florida at Large (Seal)
My Commission Expires:
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