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EXHIBIT 10.20
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is effective as of
the 15th day of May, 2001, by Saf-T-Hammer Corporation, a Nevada corporation
("Debtor"), whose corporate headquarters' address is 00000 X. Xxxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000, in favor of Xxxxx & Wesson
Corporation, a Delaware corporation ("Secured Party"), whose corporate
headquarters' address is 0000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx
00000.
1. Security Interest. Debtor hereby grants to Secured Party a
security interest (hereinafter called the "Security Interest") in all of
Debtor's right, title and interest in the property and property rights more
fully described on Exhibit A attached hereto and incorporated herein by
reference (collectively, the "Collateral").
2. Obligation Secured. The Security Interest shall secure, in
such order of priority as Secured Party may elect:
(a) Payment in cash of all principal, interest and
any other fees, late charges and attorneys' fees related to the
Promissory Note & Loan Agreement of even date herewith executed by
Debtor in the original principal amount of One Million Six Hundred
Thousand Dollars ($1,600,000.00) (the "Note"), and all addenda,
modifications and amendments thereto, if any; and
(b) Payment, performance and observance by Debtor of
each covenant, condition, provision and agreement contained herein and
of all monies expended or advanced by Secured Party pursuant to the
terms hereof, or to preserve any right of Secured Party hereunder, or
to protect or preserve the Collateral or any part thereof; and
(c) Any and all other obligations of Debtor to
Secured Party arising in any manner in connection with the issuance of
and performance under the Note.
(collectively, the "Obligation").
3. Use; Location.
(a) The Collateral is and will be primarily used for
business of Debtor.
(b) Debtor's records concerning the Collateral will
be kept at Debtor's address set forth at the beginning of this
Agreement.
4. Representations and Warranties of Debtor. Debtor hereby
represents and warrants that:
(a) Debtor: (i) is duly organized, validly existing
and in good standing under the laws of the State of Nevada; (ii) is
qualified to do business and is in good standing under the laws of the
state in which the Collateral is located and in each state in which it
is doing business; (iii) has full power and authority to own its
properties and assets and to carry on its business as now conducted;
and (iv) is fully authorized and permitted to execute and deliver this
Agreement and to enter into any transactions
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evidenced by any portion of the Collateral. The execution, delivery and
performance by Debtor of this Agreement and all other documents and
instruments relating to the Obligation will not result in any breach of
the terms and conditions or constitute a default under any agreement or
instrument under which Debtor is a party or is obligated. Debtor is not
in default in the performance or observance of any covenants,
conditions or provisions of any such agreement or instrument.
(b) Debtor is the owner of the Collateral.
(c) The Collateral is, and is intended to be, used,
produced or acquired by Debtor for use primarily for the purpose set
forth in Section 3 above.
(d) To the knowledge of Debtor, each account included
in the Collateral is genuine and enforceable in accordance with its
terms against the party named therein which is obligated to pay the
same ("Obligor").
5. Covenants of Debtor.
(a) Except in the normal course of business, Debtor
shall not sell, transfer, assign, or otherwise dispose of any
Collateral or any interest therein without obtaining the prior written
consent of Secured Party. Although proceeds of Collateral are covered
by this Agreement, this shall not be construed to mean that Secured
Party consents to any sale of the Collateral.
(b) Debtor shall pay when due all taxes, assessments
and other charges that may be levied or assessed against the
Collateral.
(c) Debtor shall give Secured Party immediate written
notice of any change in the location of: (i) Debtor's chief office; or
(ii) Debtor's records concerning the Collateral.
(d) Debtor shall keep records concerning the
Collateral in accordance with generally accepted accounting principles.
Secured Party shall have reasonable access to Debtor's records and
shall have the right to make extracts therefrom or copies thereof.
(e) Debtor, at its sole cost and expense, shall
protect and defend this Agreement, all of the rights of Secured Party
hereunder, and the Collateral against all claims and demands of other
parties other than Permitted Liens. Debtor shall promptly notify
Secured Party of any levy, distraint or other seizure by legal process
or otherwise of any part of the Collateral and of any threatened or
filed claims or proceedings that might in any way affect or impair the
terms of this Agreement.
(f) The Security Interest, at all times, shall be
perfected, and shall be prior to any other interests in the Collateral
other than Permitted Liens (as defined below). Debtor shall act and
perform as necessary and shall execute, file and record all security
agreements, financing statements, deeds of trust, mortgages,
continuation statements and other documents reasonably requested by
Secured Party to establish, maintain and continue the perfected
Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches,
deemed
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necessary by Secured Party from time to time to establish and determine
the validity and the continuing priority of the Security Interest.
(g) If Debtor shall fail to pay any taxes,
assessments, expenses or charges, to keep all of the Collateral free
from other security interests, encumbrances or claims, or to perform
otherwise as required herein, Secured Party may advance the monies
necessary to pay the same, or to so perform; Secured Party is hereby
authorized to enter upon any property in the possession or control of
Debtor for such purposes.
(h) All rights, powers and remedies granted Secured
Party herein, or otherwise available to Secured Party, are for the sole
benefit and protection of Secured Party, and Secured Party may exercise
any such right, power or remedy at its option and in its sole and
absolute discretion without any obligation to do so. In addition, if
under the terms hereof, Secured Party is given two or more alternative
courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof
and all amounts paid, suffered or incurred by Secured Party in
exercising, any authority granted herein, including reasonable
attorneys' fees, shall be added to the Obligation, shall be secured by
the Security Interest, shall bear interest at the highest rate payable
on any of the Obligation until paid, and shall be due and payable by
Debtor to Secured Party immediately without demand.
(i) Debtor, upon reasonable demand, shall promptly
deliver to Secured Party all invoices, shipping or delivery records,
purchase orders, contracts, endorsements or other items related to the
Collateral. Debtor shall notify Secured Party immediately of any
default by any Obligor in the payment or performance of its Obligations
with respect to any collateral.
6. Notification and Payments; Collection of Collateral; Use of
Collateral by Debtor.
(a) Secured Party, after the occurrence of any Event
of Default (as hereinafter defined) with notice to Debtor, may notify
any or all Obligors of the existence of the Security Interest and may
direct the Obligors to make all payments on the Collateral to Secured
Party. All agents used in such collections shall be agents of Debtor
and not agents of Secured Party. Unless Secured Party notifies Debtor
in writing that it waives one or more of the requirements set forth in
this sentence, any payments or other proceeds of Collateral received by
Debtor, before or after notification to Obligors, shall be held by
Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned
over to Secured Party not later than the next business day following
the day of receipt. In addition, Debtor shall promptly notify Secured
Party of the return to or possession by Debtor of goods underlying any
Collateral; Debtor shall hold the same in trust for Secured Party and
shall dispose of the same as Secured Party directs.
(b) Secured Party, after the occurrence of an Event
of Default and without notice to Debtor, may demand, collect and xxx on
the Collateral (either in Debtor's or Secured Party's name), enforce,
compromise, settle or discharge the Collateral and endorse Debtor's
names on any instruments, documents, or chattel paper pertaining to
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the Collateral; Debtor hereby irrevocably appoints Secured Party its
attorney-in-fact for all such purposes.
7. Preservation of Rights. Debtor shall be solely responsible
for taking any and all actions to preserve rights against all Obligors; Secured
Party shall not be obligated to take any such actions whether or not the
Collateral is in Secured Party's possession.
8. Events of Default; Remedies.
(a) The occurrence of any of the following events or
conditions shall constitute and is hereby defined to be an "Event of
Default":
(i) The occurrence of a breach or default
under the Note.
(ii) Any levy or execution upon, or judicial
seizure of, any portion of the Collateral which is not cured
within ninety (90) days.
(iii) Any attachment or garnishment of, or
the existence or filing of any lien or encumbrance against,
any portion of the Collateral which is not released within
ninety (90) days.
(iv) The institution of any legal action or
proceedings to enforce any lien or encumbrance upon any
portion of the Collateral that is not dismissed within ninety
(90) days after its institution.
(v) Any failure or neglect to perform or
observe any of the terms, provisions or covenants of this
Agreement, after notice of and a reasonable period to cure the
same.
(b) Upon the occurrence of any Event of Default and
at any time while such Event of Default is continuing, Secured Party
shall have the following rights and remedies and may do one or more of
the following:
(i) Declare all or any part of the
Obligation to be immediately due and payable, and the same,
with all costs and charges, shall be collectible thereupon by
action at law.
(ii) Without further notice or demand and
without legal process, take possession of the Collateral
wherever found and, for this purpose, enter upon any property
occupied by or in the control of Debtor. Debtor, upon demand
by Secured Party, shall assemble the Collateral and deliver it
to Secured Party or to a place designated by Secured Party
that is reasonably convenient to both parties.
(iii) Pursue any legal or equitable remedy
available to collect the Obligation, to enforce its title in
and right to possession of the Collateral and to enforce any
and all other rights or remedies available to it.
(iv) Upon obtaining possession of the
Collateral or any part thereof, after notice to Debtor, sell
such Collateral at public or private sale either with or
without having such Collateral at the place of sale. The
proceeds of such sale, after deducting therefrom all expenses
of Secured Party in taking, storing, repairing and selling the
Collateral (including reasonable attorneys' fees) shall be
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applied to the payment of the Obligation, and any surplus
thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the
Collateral and the total amount of the Obligation, Debtor,
upon demand, shall promptly pay the amount of such deficiency
to Secured Party.
(c) Secured Party, so far as may be lawful, may
purchase all or any part of the Collateral offered at any public or
private sale made in the enforcement of Secured Party's rights and
remedies hereunder.
(d) Any demand or notice of sale, disposition or
other intended action hereunder or in connection herewith, whether
required by the Uniform Commercial Code or otherwise, shall be deemed
to be commercially reasonable and effective if such demand or notice is
given to Debtor at least fifteen (15) days prior to such sale,
disposition or other intended action, in the manner provided herein for
the giving of notices.
(e) Debtor shall pay all costs and expenses,
including without limitation costs of Uniform Commercial Code searches,
court costs and reasonable attorneys' fees, incurred by Secured Party
in enforcing payment and performance of the Obligation or in exercising
the rights and remedies of Secured Party hereunder. All such costs and
expenses shall be secured by this Agreement and by all deeds of trust
and other lien and security documents securing the Obligation. In the
event of any court proceedings, court costs and attorneys' fees shall
be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
(f) In addition to any remedies provided herein for
an Event of Default, Secured Party shall have all the rights and
remedies afforded a secured party under the Uniform Commercial Code and
all other legal and equitable remedies allowed under applicable law. No
failure on the part of Secured Party to exercise any of its rights
hereunder arising upon any Event of Default shall be construed to
prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise
thereof at any time while that Event of Default is continuing. Secured
Party may enforce any one or more rights or remedies hereunder
successively or concurrently. By accepting payment or performance of
any of the Obligation after its due date, Secured Party shall not
thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the
Obligation or its right to consider the failure to so pay or perform an
Event of Default.
(g) In the event of the commencement of a bankruptcy
case by or against Debtor or involving any of the Collateral, Secured
Party, to the extent not already provided for herein, shall be entitled
to recover, and Debtor shall be obligated to pay, Secured Party's
reasonable attorneys' fees and costs incurred in connection with: (a)
any determination of the applicability of the bankruptcy laws to the
terms of this Agreement or Secured Party's rights hereunder; (b) any
attempt by Secured Party to enforce or preserve its rights under the
bankruptcy laws, or to prevent Debtor or any other person
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from seeking to deny Secured Party its rights thereunder; (c) any
effort by Secured Party to protect, preserve, or enforce its rights
against the Collateral, or seeking authority to modify the automatic
stay of 11 U.S.C. Section 362 or otherwise seeking to engage in such
protection, preservation, or enforcement; of (d) any civil
proceeding(s) arising under the bankruptcy laws, or arising in or
related to a case under the bankruptcy laws.
9. Miscellaneous Provisions.
(a) The acceptance of this Agreement by Secured Party
shall not be considered a waiver of or in any way to affect or impair
any other security that Secured Party may have, acquire simultaneously
herewith, or hereafter acquire for the payment or performance of the
Obligation, nor shall the taking by Secured Party at any time of any
such additional security be construed as a waiver of or in any way to
affect or impair the Security Interest; Secured Party may resort, for
the payment or performance of the Obligation, to its several securities
therefor in such order and manner as it may determine.
(b) Without notice or demand, without affecting the
obligations of Debtor hereunder or the personal liability of any person
for payment or performance of the Obligation, and without affecting the
Security Interest or the priority thereof, Secured Party, from time to
time, may: (i) extend the time for payment of all or any part of the
Obligation or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or
performance of the Obligation and enforce, exchange, substitute,
subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the
Collateral from the Security Interest. Debtor hereby agrees to
cooperate and assist Secured Party in achieving all of the
aforementioned purposes.
(c) Debtor waives and agrees not to assert: (i) any
right to require Secured Party to proceed against any guarantor, to
proceed against or exhaust any other security for the Obligation, to
pursue any other remedy in any particular order or manner; (ii) the
benefits of any legal or equitable doctrine or principle of marshaling;
(iii) the benefits of any statute of limitations affecting the
enforcement hereof; (iv) demand, diligence, presentment for payment,
protest and demand, and notice of extension, dishonor, protest, demand
and nonpayment, relating to the Obligation; and (v) any benefit of, and
any right to participate in, any other security now or hereafter held
by Secured Party.
(d) The terms herein shall have the meanings in and
be construed under the Uniform Commercial Code as enacted in the State
of Arizona. This Agreement shall be governed by and construed according
to the laws of the State of Arizona without regard to conflicts of law
principles. Each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if
any provision of this Agreement is held to be void or invalid, the same
shall not affect the remainder hereof which shall be effective as
though the void or invalid provision had not been contained herein.
(e) No modification, rescission, waiver, release or
amendment of any provision of this Agreement shall be made except by a
written agreement executed by a duly authorized officer of Debtor and
Secured Party.
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(f) No setoff or claim that Debtor now has or may in
the future have against Secured Party shall relieve Debtor from paying
or performing the Obligation.
(g) All notices required or permitted to be given
hereunder shall be in writing and may be given in person or by United
States mail, by delivery service or by electronic transmission. Any
notice directed to a party to this Agreement shall become effective
upon the earliest of the following: (i) actual receipt by that party;
(ii) delivery to the designated address of that party, addressed to
that party; or (iii) if given by certified or registered United States
mail, three days after deposit with the United States Postal Service,
postage prepaid, addressed to that party at its designated address. The
designated addresses of the parties shall be as follows:
DEBTOR: Saf-T-Hammer Corporation
00000 X. Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxx, CEO
SECURED PARTY: Xxxxx & Wesson Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxx Xxxxx, CFO
(h) An executed copy of this Agreement or any
financing statement relating hereto shall be sufficient for filing or
recording as financing statement.
(i) Time is of the essence hereof. This Agreement
shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and
assigns. The provisions hereof shall apply to the parties according to
the context thereof and without regard to the number or gender of words
or expressions used.
(j) "Permitted Liens" shall mean the Security
Interest granted hereunder.
In Witness Whereof, these presents are executed as of the date
indicated above.
SECURED PARTY: DEBTOR:
XXXXX & WESSON CORP., a Delaware SAF-T-HAMMER CORPORATION, a
corporation Nevada corporation
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------- ---------------------------
Its: Chief Financial Officer Its: CEO
---------------------------- ----------------------
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EXHIBIT A
COLLATERAL
A. All equipment of Debtor, whether now owned or hereafter
acquired and wherever located, including, but not limited to, all present and
future machinery, vehicles, furniture, fixtures, manufacturing equipment, farm
machinery and equipment, shop equipment, office and record keeping equipment,
parts, and tools;
B. All general intangibles of Debtor, whether now owned or
hereafter acquired, including, but not limited to, applications for patents,
patents, copyrights, trademarks, trade secrets, good will, trade names, customer
lists, permits and franchises, and the right to use Debtor's name;
C. All inventory of Debtor, whether now owned or hereafter
acquired and wherever located, including, without limitation, all inventory
wherever located in which Debtor now has or hereafter may acquire any right,
title or interest, including, without limitation, all goods and other personal
property now or hereafter owned by Debtor which are held for sale or lease or
are furnished or are to be furnished under a contract of service or which
constitute raw materials, stock-in-trade, work in process or materials used or
consumed or to be used or consumed in Debtor's business, or in the processing,
packaging or shipping of the same, and all finished goods;
D. Each and every right of Debtor to the payment of money,
including, but not limited to, all present and future debt instruments, chattel
paper, accounts, loans and obligations receivable, and tax refunds, whether such
right to payment now exists or hereafter arises, whether such right to payment
arises out of a sale, lease or other disposition of goods or other property by
Debtor, out of a rendering of services by Debtor, out of a loan by Debtor, out
of the overpayment of taxes or other liabilities of Debtor, or otherwise arises
under any contract or agreement, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which Debtor may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any of the property of such account debtor or other obligor;
E. All of Debtor's right, title and interest in and to any
fixtures;
Together with all substitutions and replacements for and
products of any of the foregoing property and together with all proceeds of the
sale, lease or other disposition of any and all of the foregoing property, any
and all proceeds of insurance thereon and, in the case of all Tangible
Collateral, together with all accessions and, together with (i) all accessories,
attachments, additions, parts, equipment and repairs now or hereafter attached
or affixed to or used in connection with any such collateral, and (ii) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering such collateral.
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