EXHIBIT 10.7
SECURITY AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, by DEFENSE
TECHNOLOGY CORPORATION OF AMERICA, a Delaware corporation (the "Debtor"),
whose address is 000 Xxxxxx Xxxxx Xxxx, Xxxxx, Xxxxxxx 00000, in favor of
XXXXXXX BANK, N.A. (the "Secured Party"), whose address is 00 X. Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxx 00000.
For good and valuable consideration, the Debtor agrees as follows:
I. Security Interest. In consideration of and as an inducement for
the Secured Party's extending or continuing to extend credit to Armor
Holdings, Inc. (the "Borrower"), the Debtor hereby gives the Secured Party a
continuing and unconditional security interest (the "Security Interest") in,
and assigns to the Secured Party, the assets described below and all parts,
accessories, attachments, additions, replacements, accessions, substitutions,
increases, profits, income, distributions, proceeds and products thereof and
thereto in any form (including, without limitation, insurance proceeds)
together with all records (including, without limitation, computer tapes,
disks and records) relating thereto (the "Collateral"):
A. All of the Debtor's inventory (whether now owned or
hereafter acquired), including without limitation all goods held for
sale or lease or to be furnished under contracts of service, raw
materials, work in process and materials to be used or consumed in
the Debtor's business.
B. All of the Debtor's right to receive payments from
any source and for any reason (whether characterized as accounts,
chattel paper, choses-in-action, contract rights, general
intangibles, instruments, notes or otherwise) (whether now existing
or hereafter arising) including, without limitation, the Debtor's
right to receive payments for goods and other products sold or leased
or for services rendered, whether or not earned by performance or
recognized or billed by the Debtor.
C. All of the Debtor's receivables and accounts
(whether now existing or hereafter arising).
The Collateral also includes other assets of the same class or
classes hereafter owned or acquired by the Debtor and the Secured Party shall
have a security interest in all such after acquired assets and all parts,
accessories, attachments, additions, replacements, accessions, substitutions,
increases, profits, income, distributions, proceeds and products thereof in
any form.
II. Indebtedness Secured. This Agreement, together with the
Security Interest, secures payment of all obligations of any kind
owing by the Debtor to the Secured Party (the "Indebtedness"). The
Indebtedness includes, without limitation, those obligations of the Debtor
which: (a) are now existing or hereafter incurred; (b) are direct or indirect;
or (c) arise from loans, guaranties, endorsements, letters of credit,
reimbursement agreements, drafts, acceptances or otherwise. The Indebtedness
may be: (a) related or unrelated to the extension of credit contemplated in
that certain Loan Agreement dated as of the date hereof between the Borrower
and the Secured Party (as amended or restated from time to time, the "Loan
Agreement"), or any extensions, renewal or modifications thereof; (b) of the
same or a different class as the primary obligation; and (c) from time to time
reduced or extinguished and thereafter increased or re-incurred. The
Indebtedness specifically includes, without limitation, the following: (a) all
amounts now or hereafter due under that certain Guaranty of Payment of even
date herewith, as amended or restated from time to time, executed by the
Debtor in favor of the Secured Party; (b) any sums advanced and any expenses
or obligations incurred by the Secured Party pursuant to this Agreement or any
other agreement concerning, evidencing or securing obligations of the Debtor
to the Secured Party; and (c) any liabilities of the Debtor to the Secured
Party arising from any sources whatsoever.
III. Warranties of Debtor. The Debtor warrants and so long as this
Agreement continues in force shall be deemed continuously to warrant that:
A. The Debtor is the owner of the Collateral free of
all security interests or other encumbrances, except the
Security Interest and except for liens and other matters set
forth on Exhibit "A" attached hereto.
B. The Debtor is authorized to enter into the Security
Agreement.
C. The Collateral is used or bought for use primarily
in business or professional operations.
D. The Collateral is or will be located at the Debtor's
addresses specified on Exhibit "B" attached hereto.
E. The chief executive office of the Debtor is at the
address set forth above. The Debtor does not operate under
any trade names.
F. Each instrument, account, general intangible, receivable
and chattel paper constituting the Collateral is genuine and
enforceable in accordance with its terms against the party obligated
to pay the same (the "Account Debtor"), and each Account Debtor has
no defense, setoff, claim or counterclaim against the Debtor.
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G. The amount represented by the Debtor to the Secured
Party as owing by each Account Debtor or by all Account
Debtors is the correct amount actually and unconditionally
owing by such Account Debtor or Debtors, except for normal cash
discounts where applicable.
H. If the Collateral is or will become a fixture, it will be
affixed to or located on real property at the Debtor's addresses
specified in Exhibit "B". The real property to or on which the
Collateral will be affixed is owned by the persons and described as
set forth in Exhibit "B" attached hereto.
IV. Covenants of Debtor. So long as this Agreement has not been
terminated as provided hereafter, the Debtor: (a) will defend the Collateral
against the claims of all other persons except for liens and other matters set
forth on Exhibit "A" attached hereto; (b) will keep the Collateral free from
all security interests or other encumbrances, except the Security Interest and
except for liens and other matters set forth on Exhibit "A" attached hereto;
(c) will not assign, deliver, sell, transfer, lease or otherwise dispose of
any of the Collateral or any interest therein without the prior written
consent of the Secured Party, except that prior to an Event of Default, the
Debtor may sell or lease inventory in the ordinary course of the Debtor's
business; (d) will keep in accordance with generally accepted accounting
principles consistently applied, accurate and complete records concerning the
Collateral and upon the Secured Party's request will xxxx any of such
records and all or any other Collateral to give notice of the Security
Interest and will permit the Secured Party or its agents to inspect the
Collateral and to audit and make abstracts of such records or any of the
Debtor's books, ledgers, reports, correspondence and other records; (e)
upon demand, will deliver to the Secured Party any documents of title and any
chattel paper representing or relating to the Collateral or any part thereof,
schedules, invoices, shipping or delivery receipts, purchase orders, contracts
or other documents representing or relating to purchases or other acquisitions
or sales or leases or other dispositions of the Collateral and proceeds
thereof and any and all other schedules, documents and statements which the
Secured Party may from time to time reasonably request; (f) will notify the
Secured Party immediately of any default by Account Debtors in payment or
other performance of material obligations with respect to any Collateral; (g)
without the Secured Party's written consent, will not make or agree to
make any alteration, modification or cancellation of or substitution for or
credits adjustments or allowances on any Collateral; (h) will keep the
Collateral at the addresses specified in Exhibit "B" until the Secured Party
is notified in writing of any change in its location, and the Debtor will not
change the location of the Debtor's chief executive office without the
written consent of the Secured Party (which consent shall not be unreasonably
withheld or delayed ), except that the Debtor shall be entitled to change its
chief executive office to a
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location in Jacksonville, Florida without the Secured Party's prior consent;
(i) will notify the Secured Party promptly in writing of any change in the
Debtor's address, name, trade names or identity from that specified above or of
any change in the location of the Collateral; (j) will permit the Secured Party
or its agents to inspect the Collateral; (k) will keep the Collateral in good
condition and repair and will not use the Collateral in violation of any
provisions of this Agreement, any applicable statute, regulation or ordinance
or any policy of insurance insuring the Collateral; (l) will execute and
deliver to the Secured Party such financing statements, landlord waivers and
other documents reasonably requested by the Secured Party, and take such other
action and provide such further assurances as the Secured Party may reasonably
deem advisable to evidence, perfect or enforce the Security Interest created by
this Agreement; (m) will pay all taxes, assessments and other charges of every
nature which may be levied or assessed against the Collateral (unless the same
are being contested in good faith); (n) will insure the Collateral against
risks by obtaining policies (none of which shall be cancellable without at
least 30 days prior written notice to the Secured Party) in coverage, form and
amount and with companies reasonably satisfactory to the Secured Party,
containing a loss payee provision in favor of the Secured Party, and at the
Secured Party's request will deliver each policy or certificate of insurance
therefor to the Secured Party; (o) will prevent any part of the Collateral from
becoming an accession to other goods not covered by this Agreement; (p) will
prevent the Collateral or any part of the Collateral from becoming a fixture
(unless the Collateral is specified as a fixture); and (q) if any certificate
of title may be issued with respect to any of the Collateral, will cause the
Secured Party's interest under this Agreement to be noted on the certificate
and will deliver the original certificate to the Secured Party.
V. Verification. The Secured Party may verify any Collateral in any
manner and through any medium which the Secured Party may deem appropriate, and
the Debtor shall furnish such assistance as the Secured Party may reasonably
require in connection therewith.
VI. Default.
A. Each of the following shall constitute an "Event of
Default" hereunder: (i) the occurrence of an Event of Default under
the Loan Agreement; (ii) failure by the Debtor to perform any
material obligations under this Agreement or under any other
agreement between the Debtor and the Secured Party or by the Debtor
in favor of the Secured Party, time being of the essence (subject,
however, to any applicable notice and cure periods); (iii) material
falsity in any certificate, statement, representation, warranty or
audit at any time furnished by or on behalf of the Debtor or any
endorser or guarantor or any other party liable for payment of all or
part
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of the Indebtedness, pursuant to or in connection with this
Agreement or otherwise to the Secured Party, including warranties in
this Agreement and including any omission to disclose any substantial
contingent or liquidated liabilities required to be disclosed) or any
material adverse change in facts disclosed by any certificate,
statement, representation, warranty or audit furnished to the Secured
Party; or (iv) any attachment or levy against the Collateral or any
other occurrence which inhibits the Secured Party's free access to the
Collateral (including, without limitation, the Secured Party's receipt
of any notice from a lessor of real property where collateral is
located indicating that the lease will be terminated prior to its
scheduled termination date) (except, however, that the relocation of
the Debtor's principal offices to Jacksonville, Florida shall not be
deemed an Event of Default hereunder or under any other Loan
Document).
B. Upon the occurrence of an Event of Default, the Secured
Party may exercise such remedies and rights as are available
hereunder, under the Loan Agreement or otherwise (including without
limitation, acceleration of the Indebtedness or any part thereof).
C. Upon the occurrence of any Event of Default, the Secured
Party's rights with respect to the Collateral shall be those of a
secured party under the Uniform Commercial Code and any other
applicable law in effect from time to time. The Secured Party shall
also have any additional rights granted herein and in any other
agreement now or hereafter in effect between the Debtor and the
Secured Party. If requested by the Secured Party, the Debtor will
assemble the Collateral and make it available to the Secured Party at
a place to be designated by the Secured Party.
D. The Debtor agrees that any notice by the Secured Party of
the sale or disposition of the Collateral or any other intended
action hereunder, whether required by the Uniform Commercial Code or
otherwise, shall constitute reasonable notice to the Debtor if the
notice is mailed by regular or certified mail, postage prepaid, at
least five days before the action to the Debtor's address as
specified in this Agreement or to any other address which the Debtor
has specified in writing to the Secured Party as the address to which
notices shall be given to the Debtor.
E. The Debtor shall pay all costs and expenses incurred by
the Secured Party in enforcing this Agreement, realizing upon any
Collateral and collecting any Indebtedness (including a reasonable
attorney's fee) whether suit is brought or not and whether
incurred in connection with collection, trial, appeal or otherwise
and, to the extent of the Debtor's liability for repayment of any
of the Indebtedness, shall be liable for any deficiencies in the
event the proceeds of
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disposition of the Collateral do not satisfy the Indebtedness in full.
Nothing contained herein shall be deemed to require the Secured Party
to proceed against the Collateral or any part thereof before or as a
condition to the pursuit of any of its other rights and remedies in
respect of the Indebtedness.
VII. Miscellaneous.
A. The Debtor authorizes the Secured Party at the
Debtor's expense to file any financing statements relating to the
Collateral (without the Debtor's signature thereon) which the
Secured Party deems appropriate and the Debtor irrevocably appoints
the Secured Party as the Debtor's attorney-in-fact to execute any
such financing statements in the Debtor's name and to perform all
other acts which the Secured Party deems appropriate to perfect and
to continue perfection of the Security Interest.
B. The Debtor hereby irrevocably consents to any act by the
Secured Party or its agents in entering upon any premises for the
purposes of either (i) inspecting the Collateral or (ii) taking
possession of the Collateral after any Event of Default in any
commercially reasonable manner; and the Debtor hereby waives its
right to assert against the Secured Party or its agents any claim
based upon trespass or any similar cause of action for entering upon
any premises where the Collateral may be located.
(c) The Debtor authorizes the Secured Party to collect and
apply against the Indebtedness any refund of insurance premiums or
any insurance proceeds payable on account of the loss or damage to
any of the Collateral and appoints the Secured Party as the
Debtor's attorney-in-fact to endorse any check or draft
representing such proceeds or refund.
(d) Upon the Debtor's failure to perform any of its
duties hereunder, the Secured Party may, but it shall not be
obligated to, perform any of the duties and the Debtor shall
forthwith upon demand reimburse the Secured Party for any expenses
incurred by the Secured Party in so doing.
(e) No delay or omission by the Secured Party in exercising
any right hereunder or with respect to any Indebtedness shall operate
as a waiver of that or any other right, and no single or partial
exercise of any right shall preclude the Secured Party from any other
or further exercise of the right or the exercise of any other right
or remedy. The Secured Party may cure any Event of Default by the
Debtor in any reasonable manner without waiving the Event of Default
so cured and without waiving any other prior or subsequent Event of
Default by the Debtor. All rights and remedies of the Secured Party
under this Agreement and under the Uniform Commercial Code shall be
deemed cumulative.
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(f) The Secured Party shall exercise reasonable care in the
custody and preservation of the Collateral to the extent required by
law and it shall be deemed to have exercised reasonable care if it
takes such action for that purpose as the Debtor shall reasonably
request in writing; however, no omission to do any act not requested
by the Debtor shall be deemed a failure to exercise reasonable care
and no omission to comply with any requests by the Debtor shall of
itself be deemed a failure to exercise reasonable care. The Secured
Party shall have no obligation to take and the Debtor shall have the
sole responsibility for taking any steps to preserve rights against
all prior parties to any instrument or chattel paper in the Secured
Party's possession as Collateral or as proceeds of the
Collateral. The Debtor waives notice of dishonor and protest of any
instrument constituting Collateral at any time held by the Secured
Party on which the Debtor is in any way liable and waives notice of
any other action taken by the Secured Party.
(g) After the occurrence of any Event of Default, the
Secured Party may notify any Account Debtor of the Security Interest
and may also direct such Account Debtor to make all payments on the
Collateral to the Secured Party. All payments on and other proceeds
from the Collateral received by the Secured Party directly or from
the Debtor shall be applied to the Indebtedness in such order and
manner and at such time as the Secured Party shall in its sole
discretion determine. Unless the Secured Party notifies the Debtor in
writing that it dispenses with one or more of the following
requirements, any payments on or other proceeds of the Collateral
received by the Debtor after notification to any Account Debtor in
accordance with the terms hereof shall be held by the Debtor in trust
for the Secured Party in the same medium in which received, shall not
be commingled with any assets of the Debtor and shall be turned over
to the Secured Party not later than the next business day following
the day of their receipt. The Debtor shall also promptly notify the
Secured Party of the return to or repossession by the Debtor of goods
underlying any Collateral.
(h) The Debtor authorizes the Secured Party without
affecting the Debtor's obligations hereunder from time to time
(i) to take from any party and hold collateral (other than the
Collateral) for the payment of the Indebtedness or any part thereof,
and to exchange, enforce or release such collateral or any part
thereof, (ii) to accept and hold the endorsement or guaranty of
payment of the Indebtedness or any part thereof and to release or
substitute any such endorser or guarantor or any party who has given
any security interest in any collateral as security for the payment
of the Indebtedness or any part thereof or any party in any way
obligated to pay the Indebtedness or any part thereof; and (iii) upon
the occurrence of any Event of Default to direct the manner of the
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disposition of the Collateral and any other collateral and the
enforcement of any endorsements or guaranties relating to the
Indebtedness or any part thereof as the Secured Party in its sole
discretion may determine.
(i) The Secured Party may demand, collect and xxx for all
proceeds (either in the Debtor's name or the Secured Party's
name at the Secured Party's option), with the right to enforce,
compromise, settle or discharge any proceeds. The Debtor irrevocably
appoints the Secured Party as the Debtor's attorney-in-fact to
endorse the Debtor's name on all checks, commercial paper and
other instruments pertaining to the proceeds before or after the
occurrence of an Event of Default.
(j) The rights and benefits of the Secured Party under this
Agreement shall, if the Secured Party agrees, inure to any party
acquiring an interest in the Indebtedness or any part thereof.
(k) The terms "Secured Party" and "Debtor" as used in this
Agreement include the heirs, personal representatives and successors
or assigns of those parties.
(l) If more than one Debtor executes this Agreement, the
term "Debtor" includes each of the Debtors as well as all of them,
and their obligations under this Agreement shall be joint and
several.
(m) This Agreement may not be modified or amended nor shall
any provision of it be waived except in writing signed by the Debtor
and by an authorized officer of the Secured Party.
(n) This Agreement shall be construed under the Florida
Uniform Commercial Code and any other applicable laws in effect from
time to time.
(o) This Agreement is a continuing agreement which shall
remain in force until the Secured Party shall actually receive
written notice of its termination and thereafter until all of the
Indebtedness contracted for or created before receipt of the notice
and any extensions or renewals of that Indebtedness (whether made
before or after receipt of the notice) including without limitation
all interest thereon both before and after receipt of the notice
shall be paid in full.
8. Pledged Instruments and Securities. If any part of the Collateral
is instruments, securities or certificates (including, without limitation,
certificates of deposit), the following provisions apply in addition to and not
in lieu of the other provisions of this Agreement:
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(a) If any part of the Collateral is securities, the Debtor
irrevocably constitutes and appoints the Secured Party, whether or
not the securities have been transferred into the name of the Secured
Party or its nominee, as the Debtor's proxy with full power to
(i) attend all meetings of securities holders of the issuer of the
securities (the "Issuer") held after the date of this Agreement and
to vote the securities at those meetings in such manner as the
Secured Party shall in its sole discretion deem appropriate,
including without limitation, in favor of liquidation of the Issuer;
(ii) to consent in the sole discretion of the Secured Party to any
action by or concerning the Issuer for which the consent of the
securities holders of the Issuer is or may be necessary or
appropriate; and (iii) without limitation to do all things which the
Debtor could do as a securities holder of the Issuer with full power
of substitution. Notwithstanding the foregoing, the Debtor alone
shall have the rights under this paragraph and the Secured Party may
not exercise those rights (whether or not the securities have been
transferred into the name of the Secured Party or its nominee) so
long as no Event of Default has occurred. The proxy contained in this
paragraph shall terminate when this Agreement terminates as provided
hereafter. The Debtor hereby revokes all proxies heretofore given to
any person or persons and agrees not to give any other proxies in
derogation of this proxy so long as this Agreement is in force.
(b) The Debtor authorizes and appoints the Secured Party as
the Debtor's attorney-in-fact to transfer, from and after the
occurrence of an Event of Default, all or any part of any
instruments, securities or certificates constituting Collateral into
the Secured Party's name or that of its nominee so that the
Secured Party or its nominee may appear of record as the sole owner
of the instruments, securities or certificates. After the occurrence
of any Event of Default, the Debtor waives all rights to be advised
or to receive any notices, statements or communications received by
the Secured Party or its nominee as the record owner, and agrees that
no proxy or proxies issued by the Secured Party to the Debtor or its
designee shall thereafter be effective.
(c) (i) Until the occurrence of an Event of Default, the
Debtor reserves the right to receive all income from the
instruments, securities or certificates and if the Secured
Party receives any of that income prior to default it will
pay the income promptly to the Debtor.
(ii) After the occurrence of an Event of Default, the
Debtor will not demand or receive any income from the
instruments, securities or certificates and if the Debtor
receives any of that income, without demand the Debtor will
pay it promptly to the Secured Party. The Secured Party may
apply the net cash receipts of such income to
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payment of any of the Indebtedness but the Secured Party
shall account for and pay over to the Debtor any income
remaining after full payment of the Indebtedness.
(d) (i) Whether or not an Event of Default has occurred, the
Debtor authorizes the Secured Party to receive any increase
in or dividends-in-kind on the securities, instruments or
certificates and any distribution upon the dissolution and
liquidation of the Issuer of the securities, instruments or
certificates, to surrender such securities, instruments or
certificates or any part thereof in exchange therefor, and
to hold the receipt from any distribution or increase as
part of the Collateral. However, the Secured Party or its
nominee need not collect interest on or principal of any
instruments, securities or certificates or give any notice
of nonpayment with respect to such principal or interest.
(ii) If the Debtor receives any such increase, profits
or distribution, the Debtor will deliver such receipts
promptly to the Secured Party to be held by the Secured
Party as provided in this paragraph.
9. Waiver. IF AN EVENT OF DEFAULT SHOULD OCCUR, THE DEBTOR WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THE DEBTOR MAY HAVE TO
NOTICE AND A HEARING BEFORE THE SECURED PARTY TAKES POSSESSION OF THE
COLLATERAL BY SELF-HELP, REPLEVIN, ATTACHMENT, SETOFF OR OTHERWISE.
EXECUTED and delivered as of the day and year first above written.
DEFENSE TECHNOLOGY CORPORATION OF
AMERICA
By:__________________________________
Its:______________________________
(CORPORATE SEAL)
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