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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 28, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ________
Commission File Number 0-18863
ARMOR HOLDINGS, INC.
(Name of small business issuer in its charter)
Delaware 59-3392443
(State of Incorporation) (I.R.S. Employer I.D. No.)
191 Nassau Place Road
Yulee, Florida 32097
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (904) 261-4035
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Name of exchange on which registered:
Common Stock, par value of $.01 per share American Stock Exchange
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ending December 28, 1996 were
$18,011,014.
As of March 21, 1997, the registrant has 10,551,795 shares of Common Stock, par
value of $.01 per share, outstanding, and the aggregate market value of
outstanding voting stock (based upon closing of such stock on the American
Stock Exchange at the close of business on March 3, 1997) held by
non-affiliates was approximately $43,000,000.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [X] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT FORM 10-KSB PART
-------- ----------------
Proxy Statement for 1997 Annual Meeting III
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
Yes [ ] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
The predecessor of Armor Holdings, Inc. was incorporated in January
1969, under the laws of the State of New York under the name American Body
Armor & Equipment, Inc. (the "New York Corporation"). In February 1983, the New
York Corporation moved its operations to Florida. Effective January 1, 1984,
the New York Corporation was merged with and into Armour of Fernandina Beach,
Inc. ("Armour"), a Florida corporation incorporated in October 1980, which
prior to such merger (the "Armour Merger") had been a separate but affiliated
entity of the New York Corporation. Pursuant to the Armour Merger, Armour
remained as the surviving entity and subsequently changed its name to American
Body Armor & Equipment, Inc. ("ABA"). On August 21, 1996 (the "Effective
Time"), in order to effect a change in domicile from Florida to Delaware (the
"Reincorporation"), ABA was merged with and into Armor Holdings, Inc., a
Delaware corporation. Prior to the Effective Time, Armor Holdings, Inc. had
been a wholly-owned subsidiary corporation of ABA organized for the purpose of
effecting the Reincorporation. At the Effective Time, Armor Holdings, Inc. (the
"Company" or "AHI") became the surviving entity of the merger pursuant to which
the Reincorporation was completed.
In May 1992, the Company filed for relief under Chapter 11 of the
United States Bankruptcy Code. The bankruptcy filing was the result of a
general decline in the Company's operations, which included significant
operating losses in 1989 and 1991, and the inability to collect a $1,500,000
receivable related to the shipment of vests to a Middle East customer in April
1991. The Company emerged from bankruptcy protection effective September 20,
1993, upon confirmation by the United States Bankruptcy Court for the Middle
District of Florida, Jacksonville Division (the "Bankruptcy Court") of the
Company's Third Amended and Restated Plan of Reorganization (the "Plan of
Reorganization").
On January 18, 1996, the Company underwent a change in control in
connection with the purchase by Kanders Florida Holdings, Inc. ("KFH") and
certain other investors (the "Investors") of all of the capital stock of the
Company (the "Purchase") owned by Clark Schwebel, Inc. ("Clark Schwebel"), a
supplier of raw materials to the Company, and Hexcel Corporation ("Hexcel").
Prior to the closing of the Purchase (the "Closing"), at a meeting held on
January 18, 1996, the then existing Board of Directors, which consisted of
Jonathan M. Spiller, Julius Lasnick, Gardner F. Davis, John Innes and Robert
Sullivan, authorized the officers of the Company to take such actions as the
officers deemed necessary, prudent and appropriate to facilitate the Purchase
by KFH and the Investors. Following such action, Messrs. Lasnick, Davis, Innes
and Sullivan conditionally resigned from the Board of Directors, effective
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upon the Closing. Such resignations were conditioned upon the occurrence of the
Closing. Contemporaneously with the tendering by Messrs. Lasnick, Davis, Innes
and Sullivan of their conditional resignations, the Board of Directors
appointed Warren B. Kanders, who was elected Chairman of the Board of
Directors, Burtt R. Ehrlich and Nicolas Sokolow to the vacancies to be created
by such resignations. Mr. Kanders is the sole stockholder and sole director of
KFH. Upon assuming office, Messrs. Kanders, Ehrlich and Sokolow constituted a
majority of the Board of Directors. The Board of Directors was expanded twice
during 1996 to add a total of three additional directors. On May 13, 1996,
Thomas W. Strauss and Richard C. Bartlett were elected to serve as members of
the Board of Directors, and on December 9, 1996, Alair A.
Townsend was elected to the Board.
The shares of capital stock of the Company acquired by KFH were paid
for out of KFH's working capital funds. KFH acquired an aggregate of 2,880,217
shares of the Company's common stock, which at the time of the Purchase had a
par value of $.03 per share, and an aggregate of 1,131,075 shares of the
Company's 3% Convertible, $1.00 stated value Preferred Stock (the "Old
Preferred Stock"), for an aggregate purchase price of $3,190,000, of which an
aggregate of $2,340,000 was paid in cash. The remaining $850,000 of the
purchase price was paid by promissory notes. To secure the payment of the
promissory notes, KFH pledged to Springs Industries, Inc., the parent
corporation of Clark Schwebel, 900,000 shares of the Company's common stock. In
addition, Mr. Kanders individually acquired 28,141 shares of the Company's
common stock. Mr. Kanders acquired an additional 1,000 shares of common stock
upon the listing of the Company's common stock on the American Stock Exchange
on March 18, 1996.
Upon assuming their positions, the newly constituted Board of
Directors of the Company elected to require the holders of the Company's Old
Preferred Stock to convert such shares to common stock at 110% of the aggregate
stated value of the Old Preferred Stock, at a conversion price of $.77 per
share (fair market value as determined by an independent valuation firm), as
required by the Company's then-effective Florida Amended and Restated Articles
of Incorporation. All shares of the Company's Old Preferred Stock were deemed
to have been converted upon such election by the Board of Directors. See Item
5, "Market for Common Equity and Related Stockholder Matters."
Following the Closing, and assuming the conversion of the shares of
Old Preferred Stock owned by KFH, KFH and Mr. Kanders collectively owned
4,524,178 of the total outstanding shares of common stock of the Company, which
at the time constituted approximately 66.4% of the total outstanding shares of
common stock of the Company.
Subsequently, as of July 1, 1996, the Company, through its
wholly-owned subsidiary, NIK Public Safety, Inc., a Delaware corporation
("NIK") acquired certain assets of the NIK Public Safety Product Line ("NIK
Public Safety") from Ivers-Lee Corporation ("Ivers-Lee"), and on September 30,
1996, the Company, through its wholly-owned subsidiary,
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Defense Technology Corporation of America, a Delaware corporation ("DTC"),
acquired substantially all of the assets of Defense Technology Corporation of
America, a Wyoming corporation ("DTCoA"). As a result of the completion of
these acquisitions, the Company is engaged in three product areas: (i) body
armor, explosive ordnance device (EOD) equipment, armored cars and related
products; (ii) portable narcotic identification kits, Flex-Cuf disposable
restraints, specimen and evidence collection kits and evidence tape; and (iii)
less-than-lethal and anti-riot products.
GENERAL
Since its founding, the Company has been engaged in the development,
manufacture and distribution of ballistic protective equipment. Such equipment
includes bullet resistant and sharp instrument penetration resistant vests,
bullet resistant blankets, bomb disposal suits and helmets, bomb protection and
disposal equipment and certain custom armored products, including armored cars
and vans.
Immediately after the Purchase by KFH, the Company created a strategy
to become the leading provider of law enforcement and security products and
services. The first stages of the implementation of this strategy were the
acquisitions of NIK Public Safety and DTCoA in 1996, and will continue in the
future as the Company identifies businesses to purchase which are consistent
with the Company's overall philosophy and strategy. Through its 1996
acquisition of NIK Public Safety, the Company has become engaged in the
packaging, mixing and distribution of portable narcotic identification kits,
the distribution of Flex-Cuf disposable restraints, specimen and evidence
collection kits and evidence tape. Through its 1996 acquisition of
substantially all of the assets of DTCoA, the Company is also engaged in the
manufacture and distribution of tear gas, less-than-lethal munitions and
anti-riot products including defensive aerosol sprays, distraction devices,
chemical agents, flameless expulsion grenades, specialty impact munitions and
other similar products. Following the acquisition of DTCoA, the Company,
through DTC, now also distributes gas guns, gas masks, batons, shields, riot
helmets and gun holsters. The scope of these latter products involve a
less-than-lethal approach for crowd and riot control.
The Company's products are marketed almost exclusively to municipal,
state, federal and foreign law enforcement agencies, private security entities,
United States and foreign military and correctional services.
PRODUCTS OF ARMOR HOLDINGS, INC.
Body Armor
AHI manufactures two basic types of body armor: (i) concealable armor,
which is generally intended to be worn beneath the user's clothing, and (ii)
tactical armor, which is worn externally and is designed to protect more
coverage area and defeat higher level ballistic
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threats incorporating ballistic hard armor plates. Both types of armor are
manufactured using multiple layers of an aramid or polyethylene ballistic
fabric, stitched for integrity, covered and finally enclosed in an outer
carrier. The Company's lines of ballistic protective vests each provide varying
degrees of protection and are certified under federal guidelines established by
the National Institute of Justice (the "NIJ"). All of AHI's body armor products
sold in the United States are certified under the NIJ's Body Armor Standard
0101.03. See Item 1, "Description of Business-Raw Materials, Sources and
Availability."
AHI's concealable vests are contoured to closely fit the user's body
shape. Most of the Company's concealable vests are sold with a shock plate,
which is an insert designed to improve the protection of vital organs against
sharp instrument attack and to provide enhanced blunt trauma protection. These
vests may be supplemented with additional armor plates made of metal, ceramic
or Comspec(Trademark), to withstand greater ballistic threat levels than the
vest is otherwise designed to deter.
AHI's tactical vests are designed to give maximum all around
protection and incorporate additional coverage around the neck, shoulders and
kidneys than that provided by the Company's concealable vests. A groin
protector is often supplied as an accessory. These vests usually contain
pockets to incorporate panels constructed from small high-alumina ceramic tiles
or pressed polycarbonate Comspec(Trademark), which provides additional
protection against rifle fire. The Company's tactical vests are offered in a
variety of styles, including tactical assault vests, tactical police jackets,
floatation vests, high-coverage armor and flak jackets, each of which is
manufactured to protect against varying degrees of ballistic threats.
Sharp Instrument Penetration Armor
AHI manufactures knife resistant vests designed primarily for use by
personnel in correctional facilities and other law enforcement employees who
are exposed to threats from sharp instruments. These vests are constructed
using an aramid ballistic fiber and titanium foil and are available in both
concealable and tactical versions. In addition, these vests can be combined
with ballistic armor configurations to provide combined ballistic resistant and
sharp instrument penetration resistant protection.
Explosive Ordnance Disposal Equipment ("EOD")
AHI manufactures and distributes a wide range of EOD disposal and
handling equipment and distributes EOD detection equipment manufactured by
another company. This equipment includes bomb disposal suits, which are
primarily constructed of an aramid ballistic fabric covered by a
Nomex(Registered Trademark) brand fire-retardant cover. These suits cover the
user's entire body (except the hands) and include a fitted helmet that provides
protection and communication capabilities. Other EOD equipment manufactured by
the Company includes bomb protection blankets and letter bomb suppression
pouches.
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Hard Armor and Shields
AHI manufactures a variety of hard armor and ballistic shields, which
are manufactured using aramid ballistic fibers, polyethylene ballistic
material, ballistic steel, ceramic tiles, ballistic glass or a combination of
any one or more of these materials. These products include tactical face masks
and helmets, Comspec(Trademark) shields, barrier shields and blankets as well as
upgrade armor plates. Upgrade armor plates are designed to fit into pockets
available on most of the AHI's tactical vests. When used in conjunction with
the ballistic vests, these plates provide additional ballistic protection
against increased ballistic threats, including assault rifle ballistic
protection.
Other Products
Other specialty products manufactured by AHI include armored press
vests, executive vests, raincoats and fireman turnout coats. These specialty
products are designed to provide various levels of ballistic protection. The
Company also designs and manufactures specialty armor applications for vehicles
and aircraft. Such applications include the manufacture of customized armored
cars. AHI also custom manufactures patented, lightweight and removable soft
armor panels for aircraft of any dimension or configuration. In addition, the
Company designs and manufactures armor used in stationary protection
applications. Such armor can be custom designed for each individual application
or provided as a "kit" that can be installed on-site worldwide.
The Company has the exclusive rights in the United States to
distribute Gallet(Registered Trademark) helmets, which are protective
ballistic helmets used by law enforcement agencies and military services. The
Company also has the non-exclusive rights to distribute Scanna(Registered
Trademark) letter bomb and Madis(Registered Trademark) car bomb detectors.
Other specialty products manufactured and distributed by the Company include
gas guns, gas pistols and gun locks. In addition, the Company also distributes
certain items manufactured by others, such as gas masks, batons and holsters.
PRODUCTS OF DEFENSE TECHNOLOGY CORPORATION OF AMERICA
Less-than-Lethal Products
DTC manufactures four distinct categories of less-than-lethal and
anti-riot products. These categories are aerosol sprays, chemical agents,
specialty impact munitions and distraction devices.
Aerosol Sprays
DTC manufactures several sizes of aerosol sprays containing the active
ingredient oleoresin capsicum. The formulation used is patented and carries the
trademark name of First
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Defense(Registered Trademark). The products range from small "key-ring" and
hand-held units available for both civilian and law enforcement use to large
volume canister for crowd and riot control. The large volume canisters used
for crowd and riot control are not available to the general public.
Chemical Agents
The chemical agents manufactured by DTC contain tear producing active
ingredients available for use only by authorized public safety agencies. These
agents consist of the traditional tear gases Orthochlorobenzalmalonontirle (CS)
and Chloroacetophenone (CN), as well as oleoresin capsicum. These products are
packaged in hand-held or launchable grenades, both pyrotechnic and
non-pyrotechnic, as well as 37 mm, 40 mm and 12 gauge munitions. The munitions
include barricade rounds, blast dispersions and pyrotechnic canisters. DTC
holds a patented design covering two of its non-pyrotechnic grenades.
Specialty Impact Munitions
DTC manufactures a wide range of munitions also referred to as Kinetic
Energy Rounds. These munitions can be fired from standard 12 gauge shotguns, 37
mm gas guns and 40 mm launchers. These products can be used for either
individual target acquisitions or the multiple target acquisitions commonly
associated with riot and crowd control situations. The products range from
single projectiles such as bean bags, rubber balls, wood batons and rubber
batons to products containing multiple projectiles. The multiple projectile
products include rounds containing several rubber pellets or rubber balls, to
foam and wood batons. All of these munitions are designed to be used in a
less-than-lethal approach, where it is not necessary to use deadly force.
Distraction Devices
DTC also manufactures a patented device that is used for dynamic
entries by specially trained forces where it is necessary to draw the attention
of individuals away from an entry area. This trademark product is referred to
as a Distraction Device(Registered Trademark), which emits a loud bang and
brilliant flash of light.
PRODUCTS OF NIK PUBLIC SAFETY, INC.
Narcotic Identification Products
NIK packages, mixes and distributes portable narcotic identification
kits used for the identification of narcotic substances by law enforcement
agencies.
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Other Products
NIK also manufactures and distributes specimen collection kits,
evidence collection kits and tamper guard evidence tape. In addition, NIK has
the exclusive rights to distribute the Flex-Cuf restraint, a patented restraint
manufactured by Thomas & Betts.
MANUFACTURING
AHI manufactures substantially all of its bullet, bomb and projectile
resistant garments and other ballistic protection devices at its Florida
facility. DTC manufactures at its Wyoming facilities virtually all of its
less-than-lethal products, other than piece parts which are assembled and used
in finished goods. In addition, NIK packages, mixes and distributes its
portable narcotic identification kits. See Item 1, "Description of Business-Raw
Materials, Sources and Availability."
The manufacturing processes and techniques of AHI, DTC and NIK are in
accordance with guidelines established by various regulatory agencies, and the
Company believes it and its subsidiaries are currently in compliance with all
applicable material environmental regulations. See Item 1, "Description of
Business-Government and Industry Regulations and Standards."
RESEARCH AND DEVELOPMENT
AHI continually develops new armor-related products to meet the
demands of the marketplace. Customer needs, including specific use requirements
and cost, drive the development process. The Company's product development
process involves combining state-of-the-art ballistic fibers, cover materials
and unique weaves with improved design and manufacturing processes to produce
competitively priced products which provide the maximum comfort at the lowest
possible weight, while meeting the customer's ballistic threat requirements.
DTC is also committed to research and development of less-than-lethal
products. The combination of end user feedback and tactical use applications
enhance the development process. DTC's research combines current technology in
evaluating and developing its products as well as utilizing quality
manufacturing processes that underscore product safety and reliability. During
the fiscal year ended December 28, 1996, the Company had expenditures related
to new product development and testing of $513,760, as compared with $444,118
during the fiscal year ended December 31, 1995. See Item 6, "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Year
Ended December 28, 1996 Compared to Year Ended December 31, 1995."
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RAW MATERIALS, SOURCES AND AVAILABILITY
The primary raw materials used by AHI in manufacturing ballistic
resistant garments are aramid ballistic fibers and polyethylene ballistic
materials, including Kevlar(Registered Trademark), Twaron(Registered
Trademark) and SpectraShield(Registered Trademark). AHI purchases cloth woven
out of aramid yarn from a number of independent weaving companies, including
Clark Schwebel, a former stockholder of the Company. The Company has begun to
use SpectraShield(Registered Trademark) as a new, alternative ballistic-
resistant fabric to reduce its dependence on Kevlar(Registered Trademark).
SpectraShield(Registered Trademark) has been used in combination with
Kevlar(Registered Trademark) in approximately 20% of all vests sold by the
Company. SpectraShield(Registered Trademark) is not, however expected to become
a complete substitute for Kevlar(Registered Trademark) in the near future due
to the fabric's physical characteristics. In the opinion of management, AHI
enjoys a good relationship with its suppliers and would not experience
significant delays in the delivery of its products if Kevlar(Registered
Trademark) cloth or any other raw material from any one of the mills the
Company does business with were to become unavailable. Kevlar(Registered
Trademark), AHI's most important raw material, is not a scarce resource and
there are adequate supplies of Kevlar(Registered Trademark) to meet AHI's
needs. See Item 12, "Certain Relationships and Related Transactions."
The raw materials used by DTC in the production of chemical agents are
supplied by several sources. The raw chemicals used in the production of CS
tear gas are obtained readily with the exception of Malononitrile, which is
limited in sources. If DTC were ever unable to obtain Malononitrile, its
production of CS tear gas could be severely curtailed until an alternate source
could be located. The remainder of the chemicals and piece parts used by DTC
for chemical agents are readily available from other suppliers.
DTC purchases other raw materials used in the manufacture of its
various products from a variety of sources, and it believes additional sources
of supply of these materials are readily available. DTC also owns several molds
which are used throughout its less-than-lethal product line.
CUSTOMERS
The products of AHI, DTC and NIK (hereinafter, collectively, the
"Company") are sold nationally and internationally, primarily to law
enforcement agencies and military and correctional services. Sales to domestic
law enforcement agencies, including police departments, state correctional
facilities, highway patrols and sheriffs' departments comprise the largest
portion of the Company's business. Sales to the United States federal law
enforcement and military branches, including federal correctional facilities,
also comprise a significant portion of the Company's business. Sales to
international customers are made through a network of international
distributors who then sell primarily to military and law enforcement agencies.
Most international sales are made on terms requiring the Company to receive
payment in advance of shipment or payment through a letter of credit confirmed
by a major United States bank. All sales are made under terms requiring payment
in United States currency. During 1996, the Company had no sales to individual
customers which exceeded 10% of total sales.
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MARKETING AND DISTRIBUTION
The Company's distribution network consists of independent domestic
distributors and independent international agents, who in turn resell the
products to the end user. In certain rare situations, the Company sells
directly to end users. The Company has many independent domestic distributor
locations as well as many independent international agent representatives.
The Company employs regional sales managers who are responsible for
marketing the Company's products to domestic distributors and law enforcement
agencies in the United States. These regional sales managers are responsible
for calling upon the individuals within the distributor organization or agency
who are responsible for making purchasing decisions in order to provide product
demonstrations and information, including specifications, concerning the
Company's products. These regional sales managers employed by the Company are
compensated on a salary plus commission basis with commission amounts subject
to review based upon the profitability of the contract. The Company also
employs the services of agents in various other countries to support
international sales.
The Company's primary marketing emphasis is on the development of
relationships with key distributors and agents in order to improve the quality
of the distribution network. In conjunction with this effort, the Company may
work on joint marketing efforts with distributors for special promotions and
direct mailings. The Company's national advertising is generally targeted
toward increased name recognition and new product introduction, primarily for
domestic law enforcement agencies. This form of advertising consists of
advertisements in law enforcement trade magazines and attendance at trade
shows. During the fiscal years ended December 28, 1996 and December 31, 1995,
advertising and marketing expenditures were approximately $220,000 and
$240,000, respectively.
The Company has a comprehensive Training Division to support the
necessary education of its customer base in the proper use of its various
product lines. The Company also contractually employs police officers for
technical support and as instructors.
The Company is involved with and supports several significant law
enforcement associations, including the National Tactical Officer's
Association, the International Law Enforcement Firearms Instructors, the
American Society of Law Enforcement Trainers and the International Association
of Chiefs of Police.
BACKLOG
The Company's backlog of orders consists of orders received but not
yet manufactured. In the case of orders from new customers or international
customers, such
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backlog includes only orders where management believes an acceptable assurance
of payment has been received. Such assurance is normally in the form of a
substantial prepayment prior to placing the order into production along with
payment of the remaining balance prior to shipment, or a confirmed letter of
credit or other acceptable form of bank guarantee of payment.
As of December 28, 1996, the Company had an estimated backlog of
$1,800,000, as compared to $3,058,000 as of December 31, 1995. As of March 3,
1997, the Company had an estimated backlog of $1,222,000. The large backlog at
December 31, 1995 was due primarily to a $1,800,000 contract with the City of
Philadelphia which was substantially completed as of December 28, 1996.
Management believes that a backlog of approximately four weeks production
provides for reasonable production scheduling. The Company may reduce or
increase production in the future as a result of changes in the level or mix of
backlog. See Item 6, "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Results of Operations-Year Ended December
28, 1996 Compared to Year Ended December 31, 1995."
GOVERNMENT AND INDUSTRY REGULATIONS AND STANDARDS
The bullet, sharp instrument penetration and bomb resistant garments
and accessories manufactured and sold by AHI are not currently subject to
government regulations. However, law enforcement agencies and the military
publish invitations for bidding which specify certain standards of performance
which bidders' products must meet. The NIJ, under the auspices of the United
States Department of Justice, has issued a voluntary ballistic standard (NIJ
0101.03) for bullet resistant vests. AHI regularly submits its vests to
independent laboratories for ballistic testing under this voluntary ballistic
standard.
AHI's products utilize different "applications" or combinations of
material to produce equipment which provides protection against fragments or
gunshots fired from a variety of firearms at each "Threat Level," as defined by
the NIJ's Standard 0101.03 ("Threat Levels"). The NIJ conducts a series of
tests designed to verify that armor used by domestic law enforcement officers
meets a designated standard of protection.
Threat Levels are defined in recognition of the trade-off between
protection and wearability. The weight and bulk of body armor are generally
proportioned to the protection it provides. The Threat Level protection that a
police officer will desire in a vest is determined by the types of threats he
will face on the streets, including the officer's own weapon, should it be used
against the officer. As criminals continue to use heavier weapons, officers
will require protection at a higher Threat Level. AHI believes that police
departments and other purchasers will seek vests that provide an adequate level
of protection without being so heavy and uncomfortable that the user is
discouraged from wearing it.
The Company believes that it has created a competitive advantage in
"wearability." Wearability tests conducted by AHI have convinced management
that the
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Company's vests are more comfortable to wear, fit better and can be worn for
longer periods of time than similar products from competitors. Management
believes that the Company's products offer higher protection at lower weight
and bulk. AHI also offers designs that provide greater vital-area coverage than
other equipment on the market. The Company custom manufactures each vest to
specific measurements of individual wearers. At least seven different body
measurements are taken, after which the basic design is then further modified
by weight, height and gender of the prospective wearer.
The manufacturing operations of DTC are subject to the regulation of
several regulatory agencies. Within the State of Wyoming, DTC operates under
the guidelines of the Wyoming Department of Employment Workers' Safety and
Compensation Division. DTC has enrolled in an Employer Voluntary Technical
Assistance Program (EVTAP), which monitors the manufacturing processes to
ensure that DTC is free of any adverse work conditions. Currently, DTC is in
good standing within the EVTAP program. Furthermore, DTC adheres to the
guidelines for emissions as regulated by the Wyoming Department of
Environmental Quality.
DTC's operations are also regulated by the Bureau of Alcohol, Tobacco
and Firearms. DTC ships hazardous goods, and in doing so, is subject to the
regulations of the United States Department of Transportation for packaging and
labeling. Certain of DTC's international shipments are subject to the
regulations of the United States Departments of Commerce and State.
PROPRIETARY INFORMATION AND LICENSES
Several of the products manufactured and sold by the Company are
subject to manufacturing processes for which the Company holds United States
and foreign patents having varying durations. The Company also relies on trade
secrets, proprietary know-how and continuing technological innovation
(collectively, "Proprietary Information") to develop and maintain its
competitive position. The Company also has, pursuant to various royalty-bearing
licensing agreements, the right to distribute and sell products manufactured by
other companies. These licenses include: (i) the exclusive rights in the United
States to distribute Gallet(Registered Trademark) helmets, which are
protective ballistic helmet used by law enforcement and military services;
(ii) the non-exclusive rights to distribute Scanna(Registered Trademark)
letter bomb and Madis(Registered Trademark) car bomb detectors; and (iii) the
exclusive rights, which are held by NIK, to distribute the Flex-Cuf restraint,
a patented disposable restraint manufactured by Thomas & Betts.
COMPETITION
The Company's business is highly competitive in all product lines. In
the United States law enforcement, government, military and correctional
markets, the Company has several competitors. The Company believes that the
principal elements of competition are price and quality. The Company believes
that its products are priced competitively and that the quality
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of its products is competitive with products manufactured by other companies
having similar capabilities. In the international market, the Company's
competition consists primarily of its larger American competitors as well as
certain international companies and, depending upon the market, smaller local
manufacturers. In certain international markets, the Company's ability to be
competitive is adversely affected by import duties imposed on its products.
EMPLOYEES
As of December 28, 1996, the consolidated Company had approximately
200 employees, five of whom were executive officers of the Company. Of the
remaining employees, approximately 25 were office personnel, approximately 150
were employed in manufacturing, quality assurance, research and development,
purchasing, shipping and warehousing and approximately 20 were sales personnel.
As of December 31, 1995, the total number of employees of the Company was
approximately 131. The increase of employees was due primarily to the
acquisition of NIK Public Safety and DTCoA.
POSSIBLE FUTURE ACQUISITIONS AND INVESTMENTS
The Company intends to diversify and expand its business operations
through the possible acquisition of one or more operating companies, which may
or may not be related to its current businesses, and is actively seeking to
acquire additional operating companies or interests therein. In furtherance of
this strategy, the Company may consider a public offering of its shares or an
acquisition or merger with a company that has a public trading market for its
securities. Other than the acquisitions of NIK Public Safety and DTCoA and
except as otherwise set forth below, the Company has no binding commitments
with respect to any such acquisition at the present time, and it is uncertain
as to when or if any acquisition will be made.
On February 7, 1997, the Company executed a non-binding letter of
intent pursuant to which the Company has agreed to negotiate the terms and
conditions of an agreement pursuant to which the Company would acquire all of
the outstanding capital stock of a leading European manufacturer and
distributor of military apparel, high visibility garments and bullet resistant
vests to law enforcement and military agencies throughout Europe, the Middle
East and Asia. In 1996, the target company (the "Target") had revenues of
approximately $5,500,000. Consummation of the acquisition is subject to, among
other things, the completion of due diligence and other customary requirements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital during the fiscal
year ended December 28, 1996 were bank borrowings from LaSalle Business Credit,
Inc. ("LaSalle") until April 1996 and the net proceeds from its offering of its
5% Convertible Subordinated Notes due April 30, 2001 (the "Notes"). As of
May 1, 1996, the Company reduced its credit facility with
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LaSalle to a zero balance. Effective June 30, 1996, the financing agreement
with LaSalle expired and was not renewed. On November 14, 1996, the Company
entered into a loan agreement with Barnett Bank, N.A. ("Barnett Bank") for a
revolving credit facility of up to $10,000,000 for working capital purposes
(the "Barnett Loan"). The Barnett Loan is secured by the Company's and its
subsidiaries' inventory and accounts receivable and guaranteed by the Company's
subsidiaries. As of December 28, 1996, no borrowings had been made by the
Company under the Barnett Loan.
On April 30, 1996, the Company completed a private placement of the
Notes pursuant to which $11,500,000 aggregate principal amount of Notes were
sold by the Company under that certain Convertible Subordinated Note Purchase
Agreement dated as of April 30, 1996 (the "Convertible Subordinated Note
Purchase Agreement"). All of the Notes were redeemed by the Company on December
18, 1996. In connection with such redemption, each Noteholder converted their
Note into shares of Common Stock. The following description of the Note
offering, the Convertible Subordinated Note Purchase Agreement and the Notes is
not intended to be complete and is qualified in its entirety by the complete
texts of the form of the Convertible Subordinated Note Purchase Agreement and
the form of the Note.
The Notes, which carried interest at 5% per annum and were due to
mature on April 30, 2001, were subordinated to all existing and future Senior
Indebtedness of the Company, as defined and as more fully set forth in the
Convertible Subordinated Note Purchase Agreement. In addition, pursuant to
their terms, the Notes were convertible into shares of common stock of the
Company, $.01 par value per share (the "Common Stock") at the option of the
holder thereof at any time prior to the maturity date at a conversion price of
$5.00 per share, subject to adjustment as set forth in the Convertible
Subordinated Note Purchase Agreement.
The Notes were redeemable by the Company at par at any time two years
after issuance, or at any time after their issuance if the closing price of the
Common Stock exceeded $7.50 per share for ten (10) consecutive trading days and
the shares of Common Stock underlying the Notes were registered under the
Securities Act of 1933, as amended (the "Securities Act"). On November 1, 1996,
the shares of Common Stock underlying the Notes were registered under the
Securities Act pursuant to a registration statement declared effective by the
Securities and Exchange Commission (the "Commission") on such date. In the
event the Company elected to redeem the Notes, the holders of the Notes had the
option to convert the Notes into shares of the Company's Common Stock at a
conversion price of $5.00 per share prior to such redemption, subject to
adjustment as set forth in the Convertible Subordinated Note Purchase
Agreement. All of the Notes were redeemed by the Company on December 18, 1996.
In connection with such redemption, each Noteholder converted their Note into
shares of Common Stock.
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ITEM 2. DESCRIPTION OF PROPERTY
AHI and NIK occupy a 50,000 square foot office, sales, manufacturing
and warehouse facility in Nassau County, Florida (the "Yulee Facility"). The
Yulee Facility has been utilized as the Company's primary manufacturing
facility and headquarters since 1987. As a result of a sale leaseback
transaction, the Company has leased this facility since July 1989. The
Company's current lease is for a six year term ending April 30, 1999, at an
annual base rental of $110,000 (plus annual inflationary escalations). The
lease provides the Company with options to extend the lease for two additional
five year terms at prevailing market rental rates; however, to the extent the
Company makes certain improvements to the facility, the Company may elect to
extend the lease at the present rental rate. In addition, the lease requires
the Company to pay all utilities and maintenance expenses incurred in
connection with the premises, as well as all real estate taxes, insurance,
water and sewer charges. The Company believes that it has adequate insurance
coverage for this property and its contents.
The Company presently intends to relocate its operations to the
Jacksonville International Tradeport (the "Tradeport"), located in
Jacksonville, Florida, on or before April 1, 1997. On October 22, 1996, the
Company through its wholly-owned subsidiary, Armor Holdings Properties, Inc., a
Delaware corporation ("AHPI"), purchased approximately 7.07 acres of land at
the Tradeport from Wilma/Skyland Joint Venture, Ltd. The aggregate purchase
price for the property was $495,930. The Company is building a 70,000 square
foot facility, with the ability to expand to 142,000 square feet. The new
facility will cost approximately $3,000,000 to construct and will be utilized
as the Company's primary manufacturing and distribution center, as well as its
corporate headquarters. The Company plans to sublease the Yulee Facility until
the expiration of the current lease on April 30, 1999.
To help defray the cost of new equipment to be purchased in connection
with the Company's relocation to the Tradeport, and as an inducement to
encourage the Company to relocate, the Jacksonville International Airport
Community Redevelopment Authority and the Jacksonville City Council have
approved a federal grant in the amount of approximately $600,000. The Company
is awaiting final approval of the grant from the United States Department of
Housing and Urban Development. To qualify for the grant, the Company has
pledged that 51% of the new jobs generated over a specified period of time will
be held by low-to moderate-income employees.
DTC's operations currently occupy four properties in Casper, Wyoming
consisting of over 60 acres and seven buildings with a combined square footage
of 61,686. Of the total number of square feet available, there is 29,811 square
feet of manufacturing space and 25,200 square feet of storage and warehousing
capacity. The remaining 6,675 square feet is office space. Of these four
properties, two are owned by DTC. The third property occupied by DTC is
encumbered by a $144,000 mortgage carrying interest at a rate of 9% on the
outstanding principal amount. DTC is required to make repayments of principal
and interest amortized over a period of 20 years, with a balloon payment due on
May 1, 1997, at which time the balance of the unpaid principal and interest are
due in full. As of March 21, 1997 principal in the
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amount of approximately $128,400 remained to be paid on the mortgage. The
fourth property occupied by DTC consists of two buildings, of which one is
owned by and the other leased by DTC. The real property upon which these two
buildings are situated is also leased. The leased building and the real
property carry an annual rental of $26,400. The Company believes that DTC has
adequate insurance coverage for all of its Wyoming properties.
ITEM 3. LEGAL PROCEEDINGS
In November 1989, the Federal Trade Commission (the "FTC") conducted
an investigation into the accuracy of the Company's claims that body armor it
sold between 1988 and 1990 complied with testing sand certification procedures
promulgated by the National Institute of Justice (the "NIJ").
On November 2, 1994, the FTC issued a consent order embodying a
voluntary settlement of the FTC's charges that the Company engaged in false
advertising. Under the consent order, the Company admitted no violations of law
but agreed to establish a Body Armor Replacement Program (the "Program") under
which persons who had purchased body armor covered by the Program would be
identified and offered the chance to buy new, replacement body armor at a
reduced price. The consent order sets forth many detailed requirements
governing the conduct of the Program, the retention of records and the
avoidance of false or misleading advertising. Failure to comply with the
requirements could make the Company liable for civil penalties.
On January 4, 1995, the Company filed with the FTC a comprehensive
Compliance Report detailing the manner in which it was performing the
obligations imposed upon it by the consent order. In February 1997, the FTC
asked for additional information which the Company believes will be the final
request for information for the FTC to close the case.
On January 30, 1997, the Company and DTC (collectively, the
"Plaintiffs") commenced a proceeding in the Supreme Court of the State of New
York, New York County, against XM Corporation, f/k/a DTCoA, Robert L. Oliver
and Sandra A. Oliver (collectively, the "Defendants"). This lawsuit relates to
that certain Asset Purchase Agreement entered into by the aforementioned
parties on August 23, 1996 (the "Asset Purchase Agreement"), pursuant to which
the Plaintiffs acquired substantially all of the assets and properties of DTCoA
in exchange for cash, shares of Common Stock of the Company, and the assumption
by the Plaintiffs of certain liabilities, and that certain Authorized
Distributor Agreement dated September 30, 1996 between the Company, XM
Corporation ("XMC") and Robert L. Oliver (the "Authorized Distributor
Agreement"), pursuant to which XMC agreed to act as a non-exclusive distributor
of products manufactured by DTC in the international markets.
In their complaint, the Plaintiffs have alleged that the Defendants
breached the terms of the Asset Purchase Agreement by, among other things: (i)
failing to pay certain
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receivables payment for which was guaranteed by the Defendants; (ii) failing to
pay certain unassumed liabilities, and (iii) continuing to represent themselves
as "Defense Technology" after the closing of the transaction. The Plaintiffs
have also alleged in their complaint that the Defendants have breached the
terms of the Authorized Distributor Agreement by, among other things: (i)
failing to pay certain invoices within 30 days of issuance; (ii) failing to
provide adequate service to customers; (iii) shipping goods in violation of
applicable export laws and regulations; (iv) using the "Defense Technology"
name on export licenses and otherwise falsely claiming to be the owners of DTC.
In their complaint, the Plaintiffs have asserted claims for, among
other things, breach of contract, declaratory judgment, conversion, breach of
fiduciary duty and a permanent injunction. The relief sought by the Plaintiffs
includes, among other things, monetary damages totalling approximately
$513,680, plus accruals thereto and interest thereon, punitive damages, and
such other damages as the court may deem just and proper. Subsequent to the
filing of the complaint, the Plaintiffs have asserted claims for additional
damages of approximately $1,000,000. As of March 14, 1997, therefore, the
Company's total damage claims against the Defendants equalled approximately
$1,500,000. The Plaintiffs are also seeking a permanent injunction enjoining
the Defendants from the unauthorized use of the "Defense Technology" name.
In May 1992, the Company filed for relief under Chapter 11 of the
United States Bankruptcy Code. The Company emerged from bankruptcy protection
effective September 20, 1993, upon confirmation by the Bankruptcy Court of the
Company's Plan of Reorganization. See Item 1, "Description of
Business-History."
In addition to the above, the Company, in the normal course of its
business, is subject to claims and litigation in the areas of product and
general liability. The Company believes that it has adequate insurance coverage
for most claims that are incurred in the normal course of business. In such
cases, the effect on the Company's financial statements is generally limited to
the amount of its insurance deductibles. Management does not believe at this
time that any such claims have a material impact on the Company's financial
position, operations and liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the last quarter of the fiscal year ended December 28, 1996.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Effective March 18, 1996, the Company's Common Stock began trading on
the American Stock Exchange under the symbol "ABE". Prior to March 18, 1996,
the Company's Common Stock was traded in the over-the-counter market, and was
listed in the bid and ask quotes of brokers as reported by the National
Quotation Bureau, Inc. (the "Bulletin Board") under the symbol "ABOA."
The following table sets forth the range of reported high and low bid
quotations for the Company's Common Stock as listed on the Bulletin Board for
the fiscal year ended December 31, 1995 and for the period January 1, 1996 to
March 17, 1996, as well as the range of high and low sales prices on the
American Stock Exchange for the remainder of the fiscal year ended December 28,
1996. Such quotations reflect inter-dealer prices without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
The bid quotations were determined from information provided by a majority of
the market makers for the Company's Common Stock to the Bulletin Board.
FISCAL YEAR HIGH LOW
- ----------- ---- ---
1996
Fourth Quarter $8.00 $6.50
Third Quarter $7.875 $6.00
Second Quarter $9.00 $5.125
3/18/96 to 3/31/96 $5.50 $5.0625
1/1/96 to 3/17/96 $5.75 $2.75
1995
Fourth Quarter $3.25 $1.00
Third Quarter $0.9375 $0.875
Second Quarter $1.00 $0.625
First Quarter $1.25 $0.75
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HOLDERS
As of March 21, 1997, the number of holders of record of the Company's
Common Stock was approximately 1,218. Holders of shares held in "nominee" or
street names are included in this number.
DIVIDENDS AND RELATED MATTERS
The Company did not declare any cash dividends on its Common Stock
during the last two fiscal years, and does not anticipate paying cash dividends
on its Common Stock in the foreseeable future. Any earnings in the near future
will be utilized to fund the growth of the Company's business. In addition,
except under certain conditions, the Company is precluded from paying dividends
on its Common Stock pursuant to its loan agreement with Barnett Bank.
On January 19, 1996, the Board of Directors of the Company elected to
require the remaining holders of the Company's Old Preferred Stock to convert
such shares to shares of the Company's Common Stock at 110% of the aggregate
stated value of the Old Preferred Stock, at a conversion price of $.77 per
share (fair market value, as determined by an independent valuation firm), as
required by the Company's then-effective Florida Amended and Restated Articles
of Incorporation. All shares of the Company's Old Preferred Stock were deemed
to have been converted upon such election by the Board of Directors. See Item
1, "Description of Business-General."
RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to unregistered securities sold by
the Company during the past three years.
5% CONVERTIBLE SUBORDINATED NOTES
On April 30, 1996, the Company completed a private placement of the
Notes pursuant to which $11,500,000 aggregate principal amount of Notes were
sold by the Company solely to accredited investors pursuant to the Convertible
Subordinated Note Purchase Agreement. The Notes were sold for the Company by
placement agents. The placement agents received an aggregate of $576,000 in
commissions on the placement of the Notes. The Note offering was deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act. The
Notes were convertible into shares of Common Stock. On December 18, 1996, all
of the Notes were redeemed by the Company. In connection with such redemption,
each Noteholder converted their Note into shares of Common Stock. A
Registration Statement on Form S-3 of the Company registering the shares of
Common Stock into which the Notes are convertible was declared effective by the
Commission on November 1, 1996. See Item 1, "Description of Business-Liquidity
and Capital Resources."
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ACQUISITION OF NIK PUBLIC SAFETY
Pursuant to the terms of that certain Asset Purchase Agreement dated
as of July 2, 1996, between the Company, NIK, Ivers-Lee and LFC No. 46 Corp., a
wholly-owned subsidiary of Ivers-Lee, the Company, through its subsidiary NIK,
acquired certain assets of NIK Public Safety from Ivers-Lee as of July 1, 1996
in exchange for 310,931 unregistered shares of the Company's Common Stock. Such
shares were deemed exempt from registration pursuant to Sections 4(2) and/or
4(6) of the Securities Act. Such shares were registered pursuant to the
Company's Registration Statement on Form SB-2, which was declared effective by
the Commission on November 1, 1996.
ACQUISITION OF DTCOA
Pursuant to the terms of that certain Asset Purchase Agreement dated
as of August 3,1996, between the Company, DTC, Robert L. Oliver, Sandra A.
Oliver and DTCoA, the Company, through its subsidiary DTC, acquired
substantially all of the assets of DTCoA on September 30, 1996 in exchange for
$838,025 in cash, 270,728 unregistered shares of the Company's Common Stock and
the agreement by the Company to assume certain specified liabilities of DTCoA.
Such shares were deemed exempt from registration pursuant to Sections 4(2)
and/or 4(6) of the Securities Act.
SHARES ISSUED TO KEY BANK OF WYOMING
In connection with the Company's acquisition of DTCoA, pursuant to the
terms of that certain letter agreement dated August 16, 1996, between the
Company, Key Bank of Wyoming ("Key Bank"), DTCoA, Robert L. Oliver and Sandra
A. Oliver, the Company issued to Key Bank 358,714 unregistered shares of the
Company's Common Stock and delivered $662,500 as a cash advance against the
future proceeds from the sale of the 358,714 shares in exchange for Key Bank's
agreement to release its security interest in substantially all of the assets
of DTCoA. Such shares were deemed exempt from registration pursuant to Sections
4(2) and/or 4(6) of the Securities Act. Such shares were registered pursuant to
the Company's Registration Statement on Form SB-2, which was declared effective
by the Commission on November 1, 1996.
OPTIONS GRANTED TO RICHMONT CAPITAL PARTNERS I, L.P.
On May 15, 1996, the Company granted to Richmont Capital Partners I,
L.P. an option to purchase 300,000 shares of the Company's Common Stock, at a
price of $7.50 per share, subject to adjustment, for a term of up to ten years
(the "Richmont Options"). At the present time, neither the Richmont Options nor
the shares underlying the Richmont Options are registered under the Securities
Act, but the Company reserves the right to register such shares at any time.
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The Richmont Options and the underlying shares, whether vested or
unvested, are callable by the Company in the event that the closing price per
share of the Company's Common Stock is equal to or greater than $10 for a
period of ten consecutive trading days after December 31, 1997, upon written
notice to Richmont given within 30 days of the conclusion of such ten
consecutive trading days during which the closing price per share of the
Company's Common Stock was equal to or greater than $10. In such event, the
Company may require Richmont to exercise the Richmont Options in whole with
respect to all such shares within ten days of such notice to Richmont. In the
event that Richmont does not exercise the Richmont Options, the Richmont
Options will lapse and be of no further force or effect. The foregoing sale of
securities made pursuant to the sale by the Company of the Richmont Options was
made in reliance upon an exemption from the registration provisions of the
Securities Act set forth in Section 4(2) thereof as a transaction by an issuer
not involving any public offering.
1996 STOCK OPTION PLAN
On July 24, 1996, pursuant to the Company's 1996 Stock Option Plan
(the "1996 Plan"), the Company granted to Robert R. Schiller, the Vice
President-Corporate Development of the Company, an option to purchase 150,000
shares of the Company's Common Stock at an exercise price of $6.06 per share,
the market price of the Common Stock on the date of the grant. These options
vest equally over a period of three years from the date of the grant, and all
of such options become exercisable on July 24, 1999. The vesting of the options
may be accelerated on a pro rata basis in the event of the occurrence of
certain events. During Fiscal 1996, the Company also granted options to
purchase an aggregate of 184,000 shares of Common Stock under the 1996 Plan at
exercise prices ranging from $7.1875 to $8.00 per share, the market price of
the Common Stock on the date of the grant. These options vest equally over a
period of three years from the date of the grant. The vesting of the options
may be accelerated in the event of the occurrence of certain events. The
foregoing sale of securities made pursuant to the grant of options under the
1996 Plan were made in reliance upon an exemption from the registration
provisions of the Securities Act set forth in Section 4(2) thereof as a
transaction by an issuer not involving any public offering and/or Section 4(6)
thereof as a sale to an accredited investor not exceeding on an aggregate basis
per issuance of such securities, $5,000,000. The shares of Common Stock
underlying options granted under the 1996 Plan are unregistered.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company has granted an option to purchase 75,000 shares of Common
Stock to each of Messrs. Ehrlich, Sokolow and Strauss and Ms. Townsend, each a
director of the Company, pursuant to the Company's 1996 Non-Employee Directors
Stock Option Plan (the "1996 Directors Plan"). The 1996 Directors Plan was
approved by the stockholders at the annual meeting of stockholders held on July
16, 1996.
The 1996 Directors Plan is a formula plan pursuant to which
non-qualified options to acquire 75,000 shares of the Company's Common Stock
will be automatically granted to each Non-Employee Director upon the date of
his or her initial election or appointment to the Board
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of Directors in consideration for service as a Director. There are 300,000
shares of Common Stock reserved for issuance under the 1996 Directors Plan.
Under the 1996 Directors Plan formula, the exercise price for all 75,000
options granted to each Non-Employee Director under the 1996 Directors Plan
will be the closing price on the date of the grant of the Company's Common
Stock as quoted on the composite tape of the American Stock Exchange, or on
such exchange as the Company's Common Stock may then be trading. Of the 75,000
options granted to each Non-Employee Director, options to acquire 25,000 shares
become exercisable upon each of the first three anniversary dates following the
date of the grant and all 75,000 options granted to each Non-Employee Director
shall expire ten years from the date of grant. The exercise price must be paid
in cash. If, on the day of the grant, counsel for the Company determines, in
her/his sole discretion, that the Company is in possession of material,
undisclosed information that would prevent it from issuing securities, then the
grant of options to Non-Employee Directors will be suspended until the second
day after public dissemination of the information (or the first trading day
thereafter). The amount, pricing and other terms of the grant will remain as
set forth in the 1996 Directors Plan, with the exercise price of the option to
be determined in accordance with the formula on the date the option is finally
granted.
Upon retirement, a Non-Employee Director's options will continue to
become exercisable and must be exercised by the earlier of (i) 36 months
following the date of retirement or (ii) the expiration of the applicable
option period, or such options shall be forfeited. Upon a Non-Employee
Director's disability or death, those options held by the Non-Employee Director
for at least one year prior to the date of death or the date of cessation of
service following disability shall become immediately exercisable; the
Non-Employee Director or his/her legal representatives or heirs must exercise
such options by the earlier of (i) six months or 36 months from the date of
cessation of service due to disability or death, respectively, as the case may
be, or (ii) the expiration of the applicable option period, or such options
shall be forfeited. Should an individual cease to serve as a Non-Employee
Director for any reason other than retirement, disability, death or cause,
he/she will have 90 days within which to exercise only those options which were
exercisable as of the date he/she ceased to serve as a director.
Upon their initial election to the Board of Directors on January 18,
1996, each of Messrs. Ehrlich and Sokolow, both of whom are Non-Employee
Directors, were granted 75,000 stock options pursuant to the terms of the 1996
Directors Plan, subject to stockholder approval of such plan. Such options vest
in three equal annual installments on January 18, 1997, 1998 and 1999, at an
exercise price of $3.75 per share, the closing trading price of the Company's
Common Stock on the National Association of Securities Dealers Automated
Quotation System on January 18, 1996.
Upon his initial election to the Board of Directors on May 13, 1996,
Mr. Strauss, a Non-Employee Director, was granted 75,000 stock options pursuant
to the terms of the 1996 Directors Plan, subject to stockholder approval of
such plan. Such options vest in three equal annual installments on May 13,
1997, 1998, and 1999, at an exercise price of $7.50 per share, the closing
trading price of the Company's Common Stock on the American Stock Exchange on
May 13, 1996.
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Upon her initial election to the Board of Directors on December 9,
1996, Ms. Townsend, a Non-Employee Director, was granted 75,000 stock options
pursuant to the terms of the 1996 Directors Plan. Such options vest in three
equal annual installments on December 9, 1997, 1998 and 1999, at an exercise
price of $8.00 per share, the closing trading price of the Company's Common
Stock on the American Stock Exchange on December 9, 1996.
The sale of securities made pursuant to the grant of options under the
1996 Directors Plan were made in reliance upon an exemption from the
registration provisions of the Securities Act set forth in Section 4(2) thereof
as transactions by an issuer not involving any public offering and/or Section
4(6) thereof as sales to accredited investors not exceeding, on an aggregate
basis per issuance of such securities, $5,000,000. The shares of Common Stock
underlying options granted under the 1996 Directors Plan are unregistered.
OTHER STOCK OPTION GRANTS
Since January 1996, the Company has issued options to purchase 76,500
shares of Common Stock outside of the 1994 Incentive Stock Plan and the 1996
Plan and exclusive of the Richmont Options and those options granted under the
1996 Directors Plan. Such options were awarded at exercise prices ranging from
$0.97 to $1.00 per share. The shares of Common Stock underlying the options are
restricted from further sale, transfer or disposition unless registered or an
exemption is available from the registration requirements of the Securities
Act.
The foregoing sales of securities and were made in reliance upon an
exemption from the registration provisions of the Securities Act set forth in
Section 4(2) thereof as transactions by an issuer not involving any public
offering and/or Section 4(6) thereof as sales to accredited investors not
exceeding, on an aggregate basis per issuance of such securities, $5,000,000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This analysis of the Company's results of operations and financial
condition should be read in conjunction with the accompanying financial
statements, including the notes thereto, contained in Item 7 of this Annual
Report on Form 10-KSB.
RESULTS OF OPERATIONS
FRESH-START REPORTING
The Company emerged from Chapter 11 bankruptcy reorganization on
September 20, 1993 as a result of the confirmation of the Company's Plan of
Reorganization by the Bankruptcy Court. In connection with the confirmation of
the Plan of Reorganization, the Company adopted "fresh-start reporting" in
accordance with the American Institute of Certified
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Public Accountants Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code." Accordingly, since September 20,
1993, the Company's financial statements have been prepared as if it were a new
reporting entity.
YEAR ENDED DECEMBER 28, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales for the fiscal year ended December 28, 1996 ("Fiscal 1996")
amounted to $18,011,014, as compared to $11,741,367 for the fiscal year ended
December 31, 1995 ("Fiscal 1995"). This increase of $6,269,647 (53%) between
periods results primarily from a 35% increase in sales of the core business of
the Company in both the international and domestic markets, coupled with the
sales generated from the DTC and NIK operations for one and two quarters,
respectively.
The Company's gross profit amounted to $7,134,040 (40% of sales) in
Fiscal 1996, as compared to $4,298,287 (37% of sales) in Fiscal 1995. The
increase of $2,835,753 (or 66%) is due primarily to the increase in revenues as
well as the impact of higher margin products being sold by NIK and DTC.
Selling, general and administrative expenses ("SG&A Expenses")
amounted to $4,939,784 (27% of sales) in Fiscal 1996, as compared to $2,976,975
(25% of sales) in Fiscal 1995. The increase in SG&A Expenses amounted to
$1,962,809 or 66%. Increases in commissions (due to the increase in sales)
comprised the majority of the overall increase in SG&A Expenses. In addition,
increased SG&A Expenses were incurred due to the acquisitions of NIK Public
Safety and DTCoA. Amortization expenses associated with intangibles purchased
and debt offering costs incurred with respect to the Notes are also included in
the Fiscal 1996 SG&A Expenses.
The consolidated Company's research and development expenses increased
during Fiscal 1996 primarily due to product development and testing costs
incurred in all businesses of the Company.
There was $1,943 of non-operating income in Fiscal 1996. Non-operating
income amounted to $227,500 in Fiscal 1995. The non-operating income for Fiscal
1995 relates to the termination of a non-compete agreement entered into in 1990
between the Company and a competitor.
Interest expense of $253,518 in Fiscal 1996 is $27,373 (or 10%), lower
than in Fiscal 1995. This decrease resulted primarily from the elimination of
the Company's financing agreement with LaSalle, which is offset by interest
expense associated with the Notes.
Income before income taxes for Fiscal 1996 amounted to $1,426,921, as
compared to $823,803 for Fiscal 1995. This $603,118 (or 73%) increase in
pre-tax profit reflects the ongoing strong results from the core business, plus
the impact the NIK and DTC operations had on the consolidated Company.
23
<PAGE>
Income tax expense for Fiscal 1996 represents the federal and
statutory rates. The Company's operating loss carry forward at December 28,
1996 amounted to approximately $4,400,000, as compared to approximately
$4,700,000 at January 1, 1996. Due to the Company's change in control in
January 1996, the allowed annual usage of this tax benefit became restricted to
approximately $300,000 per year. During Fiscal 1996, the Company's net income
increased to $834,921 from $520,153 for Fiscal 1995. This increase reflects the
effect of increased sales in Fiscal 1996 as well as the positive effects on net
income from the NIK and DTC operations, being partially offset by non-recurring
non-operating income received in Fiscal 1995 and no such income being received
in Fiscal 1996.
Effective September 20, 1993 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). In accordance with this standard, the Company recorded a
deferred tax asset, representing its cumulative net operating loss carryforward
and deductible temporary differences, subject to applicable limits and an asset
valuation allowance. Any future benefit obtained from the realization of this
asset will be applied to reduce the reorganization value in excess of amounts
allocable to identifiable assets. As of December 28, 1996, the gross amount of
this deferred tax asset was $1,800,000, of which the entire amount has been
offset by a valuation allowance.
As of December 28, 1996, the Company had an estimated backlog of
$1,800,000, as compared to $3,058,000 as of December 31, 1995. The high backlog
in 1995 was due primarily to a $1,800,000 contract with the City of
Philadelphia which was substantially completed as of December 28, 1996. As of
March 3, 1997, the Company had an estimated backlog of $1,222,000. Management
believes that a backlog of approximately four weeks production provides for
reasonable production scheduling. The Company may reduce or increase production
in the future as a result of changes in the level or mix of backlog. See Item
1, "Description of Business-Backlog."
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital during the fiscal
year ended December 28, 1996 were bank borrowings from LaSalle until April 1996
and the net proceeds from its offering of the Notes. As of May 1, 1996, the
Company reduced its credit facility with LaSalle to a zero balance. Effective
June 30, 1996, the financing agreement with LaSalle expired and was not
renewed. On November 14, 1996, the Company entered into the loan agreement with
Barnett Bank for a revolving credit facility of up to $10,000,000 for working
capital purposes (the "Barnett Loan"). The Barnett Loan is secured by the
Company's and its subsidiaries' inventory and accounts receivable and
guaranteed by the Company's subsidiaries. As of December 28, 1996, no
borrowings had been made by the Company under the Barnett Loan.
The loan agreement contains certain restrictive covenants, including
limitations on the encumbrance and transfer of assets, the creation of
indebtedness and the maintenance of certain levels of tangible net worth and
working capital. In addition, the loan agreement restricts the payment of
dividends. The loan agreement expires on November 13, 1997.
24
<PAGE>
On April 30, 1996, the Company completed a private placement of the
Notes pursuant to which $11,500,000 aggregate principal amount of Notes were
sold by the Company under the Convertible Subordinated Note Purchase Agreement.
All of the Notes were redeemed by the Company on December 18, 1996. In
connection with such redemption, each Noteholder converted their Note into
shares of Common Stock. The following description of the Note offering, the
Convertible Subordinated Note Purchase Agreement and the Notes is not intended
to be complete and is qualified in its entirety by the complete texts of the
form of Convertible Subordinated Note Purchase Agreement and the form of Note.
The Notes, which carried interest at 5% per annum and were due to
mature on April 30, 2001, were subordinated to all existing and future Senior
Indebtedness of the Company, as defined and as more fully set forth in the
Convertible Subordinated Note Purchase Agreement. In addition, pursuant to
their terms, the Notes were convertible into shares of Common Stock of the
Company, at the option of the holder thereof at any time prior to the maturity
date at a conversion price of $5.00 per share, subject to adjustment as set
forth in the Convertible Subordinated Note Purchase Agreement.
The Notes were redeemable by the Company at par at any time two years
after issuance, or at any time after their issuance if the closing price of the
Common Stock exceeded $7.50 per share for 10 consecutive trading days and the
shares of Common Stock underlying the Notes were registered under the
Securities Act. On November 1, 1996, the shares of Common Stock underlying the
Notes were registered under the Securities Act. In the event the Company
elected to redeem the Notes, the holders of the Notes had the option to convert
the Notes into shares of the Company's Common Stock at a conversion price of
$5.00 per share prior to such redemption, subject to adjustment as set forth in
the Convertible Subordinated Note Purchase Agreement. All of the Notes were
redeemed by the Company on December 18, 1996. In connection with such
redemption, each Noteholder converted their Note into shares of Common Stock.
In conjunction with the Plan of Reorganization, the Company retained
or incurred administrative claims liabilities amounting to $925,000. This
amount included unsecured creditors electing cash payments upon the effective
date of the Plan of Reorganization, professional fees awarded by the Bankruptcy
Court for services provided during the pendency of the proceeding, amounts set
aside for contingent or disputed claims and deferred claims payments required
by the Confirmation Order. As of December 28, 1996, $784,151 of these
liabilities had been paid and the remaining balance of $140,849 is included in
current liabilities as of December 28, 1996.
As of December 28, 1996, the Company had working capital of
$13,518,528, which reflects the gross proceeds of $11,500,000 from the issuance
of the Notes and the continued profitability of operations for the Company and
its subsidiaries NIK and DTC.
The Company had an income tax net operating loss carryforward ("NOL")
of approximately $4,400,000 as of December 28, 1996. Until January 18, 1996,
this loss carryforward was relatively unrestricted as to the amount which could
have been utilized in any
25
<PAGE>
year to offset future income tax liabilities of the Company. However, due to
the sale of all of the issued and outstanding shares of capital stock owned by
Clark Schwebel and Hexcel on January 18, 1996 to KFH, which sale resulted in a
change in control of the Company, the amount of the NOL that can be utilized in
any one year is restricted to approximately $300,000.
The Company anticipates that continuing profitable operations and
utilization of its line of credit borrowing capacity with Barnett Bank will
enable the Company to meet its liquidity, working capital and capital
expenditure requirements during the fiscal year ending December 27, 1997
("Fiscal 1997").
The Company finalized its capital expenditure plan for Fiscal 1997,
which was approved by the Company's Board of Directors on December 9, 1996.
Such expenditures approximate $3,500,000, which will include, among other
things, construction and other costs related to the Company's new manufacturing
and office facility at the Tradeport as well as upgrading the Company's
Management Information Systems during the next twelve month period.
EFFECT OF INFLATION AND CHANGING PRICES
The Company is affected by changes in the cost of its raw materials,
primarily fabric woven from Kevlar(Registered Trademark) and Twaron(Registered
Trademark) yarn and SpectraShield(Registered Trademark), which costs have not
increased substantially over the past year. Such increases can normally be
passed on to customers in the normal course of business. The Company does not
expect inflation to have a material impact on either the Company's ability to
obtain raw materials or its results of operations.
26
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The following financial statements for the fiscal years ended December
28, 1996 and December 31, 1995 are furnished as part of this Annual Report on
Form 10-KSB:
INDEX TO FINANCIAL STATEMENTS PAGES
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
Consolidated Income Statements F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to
F-20
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Armor Holdings, Inc.
Fernandina Beach, Florida
We have audited the accompanying consolidated balance sheets of Armor
Holdings, Inc. (the "Company") as of December 28, 1996 and December 31, 1995
and the related consolidated statements of income, stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 28, 1996
and December 31, 1995, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Jacksonville, Florida
February 21, 1997
F-2
<PAGE>
ARMOR HOLDINGS, INC.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1996 AND DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,062,369 $ 272,972
Accounts receivable, net of allowance for
doubtful accounts of $186,000 and $100,000 5,752,704 2,319,754
Inventories 4,160,782 1,101,935
Prepaid expenses and other current assets 588,039 287,000
------------ ----------
Total current assets 17,563,894 3,981,661
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $513,550 and $270,450 3,391,289 474,359
REORGANIZATION VALUE IN EXCESS OF AMOUNTS
ALLOCABLE TO IDENTIFIABLE ASSETS, net 3,423,590 3,586,574
PATENTS AND TRADEMARKS, net 4,196,081
OTHER ASSETS 156,301 117,867
------------ ----------
TOTAL ASSETS $ 28,731,155 $8,160,461
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capitalized lease obligation $ 281,322 $2,082,398
Accounts payable, accrued expenses and other current liabilities 3,764,044 1,103,893
------------ ----------
Total current liabilities 4,045,366 3,186,291
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATION, less current portion 119,216 27,550
------------ ----------
Total liabilities 4,164,582 3,213,841
------------ ----------
COMMITMENTS AND CONTINGENCIES
(Notes 9 and 10)
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized
Convertible preferred stock, $1
stated value, 1,700,000 shares
authorized, 0 and 1,214,292 shares issued and outstanding 1,214,292
Common stock, $.01 par value and $.03 par value, 50,000,000 and 15,000,000 shares
authorized, 10,417,015 and 5,091,133 shares issued and outstanding 104,170 152,734
Additional paid-in capital 22,651,920 2,592,761
Retained earnings 1,810,483 986,833
------------ ----------
Total stockholders' equity 24,566,573 4,946,620
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,731,155 $8,160,461
============ ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
ARMOR HOLDINGS, INC.
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
NET SALES $18,011,014 $11,741,367
COST AND EXPENSES:
Cost of sales 10,878,974 7,443,080
Selling, general and administrative expenses 4,939,784 2,976,975
Research and development costs 513,760 444,118
Interest expense, net 253,518 280,891
----------- -----------
16,586,036 11,145,064
----------- -----------
OPERATING INCOME 1,424,978 596,303
NON-OPERATING INCOME 1,943 227,500
----------- -----------
INCOME BEFORE INCOME TAXES 1,426,921 823,803
INCOME TAXES 592,000 303,650
NET INCOME $ 834,921 $ 520,153
=========== ===========
NET EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $ 0.10 $ 0.08
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ARMOR HOLDINGS, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- --------------------- ADDITIONAL
STATED PAR PAID-IN RETAINED
SHARES VALUE SHARES VALUE CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 1,457,143 $ 1,457,143 4,697,255 $ 140,918 $2,318,890 $510,003 $4,426,954
Dividends on preferred stock (43,323) (43,323)
Conversion of preferred stock (242,851) (242,851) 346,922 10,408 232,443
Issuance of stock in lieu of
directors' fees 14,000 420 13,580 14,000
Issuance of stock granted under
stock plans 32,956 988 27,848 28,836
Net income 520,153 520,153
---------- ---------- ---------- ---------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1995 1,214,292 1,214,292 5,091,133 152,734 2,592,761 986,833 4,946,620
Change in par value of
common stock (101,823) 101,823
Dividends on preferred stock (11,271) (11,271)
Conversion of preferred stock (1,214,292) (1,214,292) 1,734,702 17,347 1,196,945
Exercise of stock options 26,467 265 62,386 62,651
Exercise of stock grants 71,481 715 54,326 55,041
Issuance of stock in lieu
of directors' fees 2,859 29 14,924 14,953
Conversion of convertible notes,
net of related debt issuance costs 2,300,000 23,000 10,610,136 10,633,136
Issuance of stock for acquisitions 940,373 9,403 6,451,177 6,460,580
Issuance of common stock 250,000 2,500 1,567,442 1,569,942
Net income 834,921 834,921
---------- ---------- ---------- ---------- ----------- ---------- -----------
BALANCE, DECEMBER 28, 1996 - $ - 10,417,015 $ 104,170 $22,651,920 $1,810,483 $24,566,573
========== ========== ========== ========== =========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ARMOR HOLDINGS, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 834,921 $ 520,153
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation and amortization 514,456 148,071
Deferred income taxes 112,000 300,000
Directors' fees 14,953 14,000
Increase in accounts receivable (989,550) (744,764)
Increase in inventories (423,056) (59,530)
Decrease (increase) in prepaid expenses and other assets 15,219 (256,503)
Increase (decrease) in accounts payable, accrued liabilities
and other current liabilities 877,570 (168,479)
------------ ------------
Net cash provided by (used in) operating activities 956,513 (247,052)
------------ ------------
INVESTING ACTIVITIES:
Purchase of property and equipment (1,235,883) (119,495)
Purchase of patents and trademarks (2,828,267)
------------ ------------
Net cash used in investing activities (4,064,150) (119,495)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 1,569,942
Preferred stock dividends (11,271) (43,323)
Exercise of stock options 25,673
Net (payments) borrowings under capital expenditures facility (52,000) 52,000
Repayments of long-term debt and capitalized lease obligation (33,340) (13,388)
Proceeds from the issuance of long-term debt (238,046)
Net (payments) borrowings under line of credit (1,997,060) 328,999
Net proceeds from issuance of 5% convertible subordinated notes 10,633,136
------------ ------------
Net cash provided by financing activities 9,897,034 324,288
------------ ------------
NET INCREASE (DECREASE) IN CASH 6,789,397 (42,259)
CASH, BEGINNING OF YEAR 272,972 315,231
------------ ------------
CASH, END OF YEAR $ 7,062,369 $ 272,972
============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Armor Holdings, Inc. acquired certain assets of the NIK
Public Safety Product Line ("NIK Public Safety") on July 1, 1996 and
substantially all of the assets of Defense Technology Corporation of
America, a Wyoming corporation ("DTCoA") on September 30, 1996. The
acquisitions were accounted for by the purchase method, and the purchase
price was assigned to assets acquired and liabilities assumed based on
their fair value at the date of acquisition.
COMPANY'S BUSINESS - Since its founding, the Company has been engaged in
the development, manufacture and distribution of ballistic protective
equipment. Such equipment includes bullet resistant and sharp instrument
penetration resistant vests, bullet resistant blankets, bomb disposal
suits and helmets, bomb protection and disposal equipment and load
bearing vests. In addition to these products, the Company develops,
manufactures and distributes other ballistic protection and security
equipment, including explosive ordinance device ("EOD") handling and
detection equipment, EOD suppression and disposal equipment, helmets,
face masks, shields, hard armor ballistic plates, customized armor for
vehicles and other custom armored products. Through its recent
acquisitions, the Company is also engaged in the packaging, mixing and
distribution of portable narcotic identification kits, the distribution
of Flex-Cuf disposable restraints, specimen and evidence collection kits
and evidence tape, and the manufacture and distribution of
less-than-lethal and anti-riot products including defensive aerosol
sprays, distraction devices, chemical agents, flameless expulsion
grenades, specialty impact munitions and other similar products
including the distribution of gas guns, gas masks, batons, shields, riot
helmets and gun holsters. The scope of these latter products involve a
less-than-lethal approach for crowd and riot control.
The Company's products are marketed to municipal, state, federal and
foreign law enforcement agencies, private security entities, United
States and foreign military and correctional services.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Armor Holdings, Inc., its wholly-owned
subsidiaries Armor Holdings Properties, Inc., a Delaware corporation
("AHPI"), NIK Public Safety, Inc., a Delaware corporation ("NIK") and
Defense Technology Corporation of America, a Delaware corporation
("DTC") (collectively the "Company"). All material intercompany balances
and transactions have been eliminated in consolidation.
CASH EQUIVALENTS - The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
CONCENTRATION OF CREDIT RISK - The Company's accounts receivable consist
of amounts due from customers and distributors located throughout the
United States. International sales generally require cash in advance or
confirmed letters of credit on U.S. banks.
INVENTORIES - Inventories are stated at the lower of cost or market
determined on the first-in, first-out ("FIFO") basis.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of the
Company's various financial instruments reflected in the accompanying
statements of financial position approximate their estimated fair values
at December 28, 1996 and December 31, 1995.
F-7
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost less
accumulated depreciation. Property and equipment acquired prior to
September 21, 1993 were recorded at their estimated fair values as the
result of the emergence from bankruptcy. Depreciation is computed using
the straight-line method based on estimated lives of 3 to 30 years.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS - Reorganization value in excess of amounts allocable to
identifiable assets is amortized or otherwise reduced in amounts not
less than those which would be recognized on a straight-line basis over
twenty-five years.
PATENTS AND TRADEMARKS - Patents and trademarks were acquired through
acquisitions accounted for by the purchase method of accounting. Such
assets are amortized on a straight line basis over their remaining lives
of 10 to 15 years.
NEW ACCOUNTING STANDARD - Effective January 1, 1996, the Company adopted
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS 123
establishes a fair value based method of accounting for stock-based
employee compensation plans; however, it also allows an entity to
continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
Under the intrinsic value based method, compensation costs is the
excess, if any, of the quoted market price of the stock at the grant
date or other measurement date over the amount an employee must pay to
acquire the stock. The Company has elected to continue to account for
its employee stock compensation plans under APB Opinion No. 25 with pro
forma disclosures of net earnings and earnings per share, as if the fair
value based method of accounting defined in SFAS No. 123 had been
applied.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
INCOME TAXES - In connection with the adoption of fresh-start reporting,
the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). Under the asset and
liability method specified thereunder, deferred taxes are determined
based on the difference between the financial reporting and tax bases of
assets and liabilities. Deferred tax liabilities are offset by deferred
tax assets representing the tax-effected cumulative net operating loss
carryforwards and deductible temporary differences, subject to
applicable limits and an asset valuation allowance. Future benefits
obtained from utilization of net operating loss carryforwards or from
the reduction in the income tax asset valuation allowance existing on
September 20, 1993 have been and will be applied to reduce
reorganization value in excess of amounts allocable to identifiable
assets.
REVENUE RECOGNITION - The Company records sales at gross amounts to be
received, including amounts to be paid to agents as commissions.
Non-operating income for 1995 includes amounts received in settlement of
a non-competition agreement.
F-8
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
RECLASSIFICATIONS - Certain reclassifications have been made to the 1995
financial statements in order to conform to the presentation adopted for
1996.
2. ACQUISITIONS
DEFENSE TECHNOLOGY CORPORATION OF AMERICA
On September 30, 1996, the Company acquired, through its newly formed
wholly-owned subsidiary, substantially all of the assets of DTCoA. The
purchase price consisted of $838,025 paid in cash, the issuance of
629,442 shares (the "Total Shares") of the Company's common stock having
a value of $4,650,000, the assumption of certain liabilities totaling
approximately $2,300,000 and costs of $1,115,000 associated with
completing the transaction. The total purchase price was assigned to the
acquired assets based on their fair market values.
In order to secure the obligations of DTCoA and its seller in connection
with the transaction, 270,728 of the Total Shares were delivered to
Union Bank of Switzerland, New York Branch ("UBS"), as escrow agent
pursuant to an escrow agreement dated September 30, 1996. One half of
the shares held in escrow are subject to release March 15, 1998 and the
remainder are subject to release June 30, 1999.
Subject to a letter agreement dated August 16, 1996 (the "Key Bank
Letter Agreement") and in connection with the DTC transaction, 358,714
of the Total Shares (the "Key Bank Shares"), having a value of
$2,650,000 (the "Amount Due"), were issued to Key Bank of Wyoming ("Key
Bank") in consideration for the release by Key Bank of its security
interest in substantially all of the assets of DTCoA. Key Bank held such
security interest pursuant to certain financings previously made
available to DTCoA. On the closing date, the Company advanced to Key
Bank $662,500 cash (the "Initial Amount") as an advance against the
Amount Due. Also on the closing date, the Company deposited $1,987,500
in an interest bearing Certificate of Deposit ("CD") account at Key Bank
(the "Deposit Account"). Subsequent to closing, any amounts paid to Key
Bank on account of the Amount Due, including the Initial Amount, or
advances from the Deposit Account will result in a reduction of the then
outstanding balance of the Amount Due by a like amount.
Pursuant to the Key Bank Letter Agreement, Key Bank agreed that upon the
registration of the Key Bank Shares, the Key Bank Shares would be sold,
provided that the Company would control, in its sole discretion, the
timing, manner and amount of Key Bank Shares to be sold; and in
connection therewith, the Company agreed to ensure that Key Bank
realizes net proceeds from such sales (the "Net Sale Proceeds"), which,
together with any advances from the Deposit Account and the Initial
Amount will, in the aggregate, equal the Amount Due, on or before
September 30, 1997 (the "Maturity Date").
The acquisition of DTCoA has been accounted for under the purchase
method. Accordingly, the results of its operations are included in the
consolidated financial statements from the date of acquisition.
F-9
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
The following unaudited pro forma consolidated results of operations for
the years ended December 28, 1996 and December 31, 1995 are presented as
if the DTCoA acquisition had been made at the beginning of each period
presented. The unaudited pro forma information is not necessarily
indicative of either the results of operations that would have occurred
had the purchase been made during the periods presented or the future
results of the combined operations.
YEARS ENDED
-------------------------
DECEMBER 28, DECEMBER 31,
1996 1995
Net sales $24,783,497 $22,094,968
Net earnings $ 1,430,838 $ 1,209,979
Earnings per common share and common share equivalent $ 0.17 $ 0.17
NIK PUBLIC SAFETY PRODUCT LINE
On July 15, 1996, the Company acquired, effective as of July 1, 1996,
certain assets of the NIK Public Safety Product Line from Ives-Lee
Corporation (the "NIK Assets"). The purchase price of the acquisition
was 310,931 shares (the "NIK Shares") of the Company's Common Stock
valued at $2,400,000, plus $374,000 in costs incurred related to the
purchase. The Company acquired inventory, receivables and certain
intangibles. The total purchase price was assigned to the NIK Assets
based on their fair market values.
3. INVENTORIES
Inventories are summarized as follows for the years ended December 28,
1996 and December 31, 1995:
1996 1995
Raw materials $ 1,737,761 $ 546,707
Work-in-process 859,196 382,680
Finished goods 1,563,825 172,548
----------- -----------
$ 4,160,782 $ 1,101,935
=========== ===========
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 28, 1996 and December 31, 1995
are summarized as follows:
1996 1995
Land and improvements $ 581,763
Buildings and improvements 1,254,553 $ 62,544
Machinery and equipment 1,482,888 682,265
Construction in progress 585,635
----------- -----------
Total 3,904,839 744,809
Accumulated depreciation (513,550) (270,450)
----------- -----------
$ 3,391,289 $ 474,359
=========== ===========
F-10
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- ------------------------------------------------------------------------------
Depreciation expense for 1996 and 1995 was $243,100 and $148,071.
5. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities are
summarized as follows for the years ended December 28, 1996 and December
31, 1995:
1996 1995
Trade and other payables $2,005,511 $ 466,441
Accrued expenses 1,169,112 572,897
Other current liabilities 589,421 64,555
---------- ----------
$3,764,044 $1,103,893
========== ==========
6. INDEBTEDNESS
Debt: 1996 1995
Line-of-credit under revolving credit and
security agreement expiring June 30, 1996 $ 1,997,060
Note payable to Finoff & Associates, payable
in monthly installments of $10,000 including
interest at 8% through October 5, 1998 $ 200,400
Mortgage loan payable in monthly installments
of $1,296 at 9% through April 1, 1997, with
a balloon installment of $127,739 due on
May 1, 1997, collateralized by a first
mortgage on a building 129,389
Capital expenditure facility under
revolving credit and security agreement
expiring June 30, 1996 52,000
Mortgage loan payable in monthly installments of
$310 including interest at 8.5% through August
1996, with a balloon installment of $23,684 due
September 1996, collateralized by a first
mortgage on a condominium apartment 24,886
Other installment loans 43,199 839
----------- -----------
372,988 2,074,785
Less current portion (272,839) (2,074,785)
----------- -----------
$ 100,149 $ --
=========== ===========
F-11
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
1996 1995
Capitalized lease obligation:
Equipment lease bearing interest at 10.88%,
expiring November, 1999, collateralized by
equipment with an amortized cost of
approximately $35,000 at December 28, 1996 $ 27,550 $ 35,163
Less current portion (8,483) (7,613)
-------- ---------
$ 19,067 $ 27,550
======== ========
The Company entered into a Credit Facility and Bankers Acceptance
Facility ("Credit Agreement") on November 14, 1996 with Barnett Bank,
N.A., which provides for total borrowings up to $10,000,000 (the
"Obligation"), with maximum availability based upon 50% of eligible
inventories (with a cap of $1,000,000 for work in process inventory and
$6,000,000 for inventory in total) and 85% of eligible accounts
receivable. The Credit Agreement has various covenants which, among
other things, require the Company to maintain certain financial ratios,
tangible net worth and working capital, as defined; and limit the
Company's ability to pay dividends on its common stock, encumber and
transfer assets, incur indebtedness or merge into another corporation.
The Company had no borrowings outstanding under the Credit Agreement at
December 28, 1996. The Credit Agreement expires November 13, 1997.
Aggregate principal maturities on indebtedness are as follows:
OBLIGATION
UNDER
CAPITALIZED
YEAR ENDING DEBT LEASE
1997 $ 272,839 $ 11,065
1998 100,149 11,065
1999 10,143
---------- ----------
$ 372,988 32,273
Less amount representing interest on ==========
obligation under capitalized lease (4,723)
----------
$ 27,550
==========
F-12
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
7. SALES INFORMATION AND SIGNIFICANT CUSTOMERS
Information with respect to sales to principal geographic areas for the
years ended December 28, 1996 and December 31, 1995 is as follows:
1996 1995
Foreign $ 3,110,287 $ 1,370,003
Domestic 14,900,727 10,371,364
----------- -----------
$18,011,014 $11,741,367
============ ===========
8. INCOME TAXES
Income tax expense for the years ended December 28, 1996 and December
31, 1995 consisted of the following components:
1996 1995
Current $480,000 $ 3,650
Deferred 112,000 300,000
-------- --------
Total provision for income taxes $592,000 $303,650
======== ========
Significant components of the Company's net deferred tax asset are as
follows:
1996 1995
Deferred tax assets:
Reserves not currently deductible $ 255,000 $ 206,000
Operating loss carryforwards 1,507,000 1,783,000
Other 38,000 48,000
----------- -----------
1,800,000 2,037,000
Deferred tax asset valuation allowance (1,800,000) (2,037,000)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
The Company provided a valuation allowance of $1,800,000 and $2,037,000
against deferred tax assets recorded as of December 28, 1996 and
December 31, 1995 in view of, among other things, the expiration dates
and other limitations on usage of the net operating loss carryforwards.
F-13
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
The Company emerged from bankruptcy on September 20, 1993 pursuant to a
Plan of Reorganization which resulted in an ownership change since a
substantial portion of the new stock was issued to the creditors of the
Company. However, since the ownership change occurred pursuant to
Chapter 11 proceedings and because more than 50% of the new stock was
issued to qualifying creditors and shareholders, the Company was
required to use the rules contained in Section 382(1)(5) relating to
usage of net operating losses. After an ownership change, Section
382(1)(5) requires a reduction in the amount of net operating loss
carryforwards and other tax attributes.
As of January 1, 1996, the Company had an income tax net operating loss
carryforward ("NOL") of approximately $4.7 million. Effective with the
change in control of the Company by Kanders Florida Holdings, Inc. on
January 18, 1996, the utilization of the NOL became restricted to
approximately $300,000 per year. As a result, the Company has income
taxes currently payable. In previous years, the future benefits obtained
by the Company from utilization of the NOL had been applied to reduce
the reorganization value in excess of amounts allocable to identifiable
assets. Beginning in 1996, and for future years, amortization expenses
related to this intangible will be a minimum of approximately $50,000
and a maximum of approximately $160,000 per year which is non-deductible
for income tax purposes.
As of December 28, 1996 the Company's net operating losses approximate
$4,400,000 and expire in varying amounts in fiscal years 2006 to 2010.
9. OPERATING LEASES
The Company leases its manufacturing facilities under a six year
operating lease expiring in 1999, with an option to renew. The Company
is also party to various other equipment and vehicle leases. Approximate
total future minimum annual lease payments under all such arrangements
are as follows:
YEAR ENDING
1997 $ 170,318
1998 145,380
1999 135,817
2000 46,930
----------
$ 498,445
==========
The Company incurred rent expense of approximately $189,000 and $161,000
during the years ended December 28, 1996 and December 31, 1995.
F-14
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
10. COMMITMENTS AND CONTINGENCIES
CHAPTER 11 PROCEEDINGS - The Company has provided for payment of certain
classes of bankruptcy related claims. Such amounts include amounts with
respect to claims that have been allowed by the Bankruptcy Court, as
well as amounts with respect to claims that are still being disputed by
the Company. Among the disputed claims is one in which an unsecured
creditor did not originally exercise its opportunity to elect to receive
stock in satisfaction of its claim, but has since asserted that it is so
entitled. While there can be no assurance that the actual amounts of any
such claims that are ultimately allowed by the Bankruptcy Court will not
exceed the amounts reserved, the Company does not expect that any
variance between such actual and reserved amounts will have a material
adverse effect on the Company's financial position.
EMPLOYMENT CONTRACTS - The Company is party to several employment
contracts with its management. Such contracts are for varying periods
and include restrictions on competition after termination. These
agreements provide for salaries, bonuses and other benefits and also
specify and delineate the granting of various stock options.
CONSTRUCTION CONTRACT - At December 28, 1996, the Company has an
outstanding commitment related to a new manufacturing facility
construction contract of approximately $2,400,000.
LEGAL/LITIGATION MATTERS - In November 1989, the Federal Trade
Commission ("FTC") conducted an investigation into the accuracy of the
Company's claims that body armor sold by the Company between 1988 and
1990 complied with testing and certification procedures promulgated by
the National Institute of Justice ("NIJ"). On November 2, 1994, the FTC
issued a consent order embodying a voluntary settlement of the FTC's
charges that the Company engaged in false advertising. Under the consent
order, the Company admitted no violations of law but agreed to establish
a Body Armor Replacement Program (the "Program") under which persons who
had purchased body armor covered by the Program would be identified and
offered the chance to buy new, replacement body armor at a reduced
price. The consent order sets forth many detailed requirements governing
the conduct of the Program, the retention of records and the avoidance
of false or misleading advertising. Failure to comply with the
requirements could make the Company liable for civil penalties. On
January 4, 1995, the Company filed with the FTC a comprehensive
Compliance Report detailing the manner in which it was performing the
obligations imposed upon it by the consent order. Management has
established reserves to cover the estimated cost of the above program.
During the year ended December 28, 1996 the Company completed
notification of persons pursuant to the program and has provided
replacement armor to those persons making such request.
In addition to the above, the Company, in the normal course of business,
is subjected to claims and litigation in the areas of product and
general liability. Management does not believe any of such claims will
have a material impact on the Company's financial position.
F-15
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
11. STOCKHOLDERS' EQUITY AND PREFERRED STOCK
CONVERTIBLE PREFERRED STOCK - The Plan of Reorganization provided for
the filing by the Company of its Restated Articles of Incorporation
which authorized the issuance of 1,700,000 shares of $1 stated value, 3%
convertible preferred stock ("preferred stock"). Pursuant to the Plan of
Reorganization, the Company issued 1,700,000 shares of preferred stock.
In 1996 and 1995, the Company elected to convert 1,214,292 and 242,851
shares, respectively, of preferred stock to common stock at $.77 per
share under conversion provisions calling for the issuance of common
stock, the fair market value of which represents 110% of the aggregate
stated value of the preferred stock then subject to redemption.
The Company has authorized a series of preferred stock with such rights,
privileges and preferences as the Board of Directors shall from time to
time determine.
ISSUANCE AND CONVERSION OF CONVERTIBLE DEBT - On April 30, 1996, the
Company completed a private placement of its 5% Convertible Subordinated
Notes due April 30, 2001 (the "Notes") pursuant to which $11,500,000
aggregate principal amounts of Notes were sold by the Company.
On December 18, 1996 the Company converted the Notes to 2,300,000 shares
of common stock at a conversion price of $5.00 per share.
STOCK OPTIONS AND GRANTS - In 1994, the Company implemented an incentive
stock plan and an outside directors' stock plan, which plans
collectively provide for the granting to certain key employees of
options to acquire the Company's common stock as well as providing for
the grant of common stock to outside directors and to all full time
employees. Pursuant to such plans, 1,050,000 shares of common stock were
reserved and made available for distribution. The option prices of stock
which may be purchased under the incentive stock plan are not less than
the fair market value of common stock on the dates of the grants.
Effective January 19, 1996, all stock grants awarded under the 1994
incentive stock plan were accelerated and considered fully vested.
During 1996, the Company implemented a new incentive stock plan and a
new outside directors' stock plan. Pursuant to the new plans, 1,800,000
shares of common stock were reserved and made available for
distribution.
SFAS NO. 123 REQUIRED DISCLOSURES - If compensation cost for stock
option grants had been determined based on the fair value on the grant
dates for 1995 and 1996 consistent with the method prescribed by SFAS
No. 123, the Company's net earnings and earnings per share would have
been adjusted to the pro forma amounts indicated below:
F-16
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
1996 1995
Net earnings As reported $834,921 $520,153
Pro forma $622,140 $519,734
Earnings per share As reported $ 0.10 $ 0.08
Pro forma $ 0.08 $ 0.08
Outstanding options, consisting of ten-year incentive and non-qualified
stock options, vest and become exercisable over a three year period from
the date of grant. The outstanding options expire ten years from the
date of grant or upon retirement from the Company, and are contingent
upon continued employment during the applicable ten-year period.
Under SFAS No. 123, the fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996 and 1995:
dividend yield of 0%, expected volatility of 33%, risk-free interest
rates of 5.12%-6.44% and 5.46%, and expected lives of 3 years.
A summary of the status of stock option grants as of December 28, 1996
and December 31, 1995, and changes during the years ending on those
dates is presented below:
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
Outstanding at December 31, 1994 658,500 $ 0.92
Granted 136,000 0.97
Forfeited (11,000) 0.97
-----------
Outstanding at December 31, 1995 783,500 0.93
Granted 1,068,000 5.97
Exercised (26,467) 0.97
-----------
Outstanding at December 28, 1996 1,825,033 3.88
===========
Options exercisable at December 28, 1996 727,566 $ 0.92
Weighted-average fair value of
options granted during 1996 $ 982,978
F-17
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 28, 1996:
WEIGHTED
AVERAGE
EXERCISE OPTIONS OPTIONS REMAINING
PRICE OUTSTANDING EXERCISABLE LIFE
$ 0.79 304,000 304,000 7.50
0.97 297,033 133,566 7.70
1.00 24,000 24,000 9.06
1.05 266,000 266,000 7.50
3.75 150,000 9.05
6.06 150,000 9.60
7.19 74,000 9.75
7.25 60,000 9.69
7.38 15,000 9.71
7.50 375,000 9.35
8.00 110,000 9.95
--------- -------- ------
Total 1,825,033 727,566 8.56
========= ======== ======
Remaining non-exercisable options as of December 28, 1996 become exercisable
as follows:
1997 401,467
1998 348,000
1999 348,000
----------
1,097,467
==========
F-18
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
EARNINGS PER SHARE - The following table details the number of shares
used in computing primary and fully diluted earnings per share:
1996 1995
Primary:
Weighted average common shares outstanding 7,223,506 4,753,999
Effect of shares issuable under stock option
and stock grant plans, based on the treasury
stock method 819,223 325,290
Effect of shares issuable under conversion of
preferred stock 90,548 1,290,383
---------- ----------
8,133,277 6,369,672
========== ==========
Fully diluted:
Weighted average common shares outstanding 7,223,506 4,753,999
Effect of shares issuable under stock option
and stock grant plans, based on the treasury
stock method 892,326 598,191
Effect of shares issuable under conversion of
preferred stock 90,548 1,290,383
---------- ----------
8,206,380 6,642,573
========== ==========
Primary and fully diluted earnings per share are the same amounts.
Fully diluted earnings per share does not include the effect of shares
issuable under conversion of the convertible notes as such effect is
antidilutive. The weighted average common shares outstanding includes
2,300,000 shares of common stock issued on December 18, 1996 upon the
conversion of the convertible notes.
F-19
<PAGE>
ARMOR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 AND DECEMBER 31, 1995 (CONTINUED)
- -------------------------------------------------------------------------------
12. SUPPLEMENTAL CASH FLOW INFORMATION:
1996 1995
Cash paid during the year for:
Interest $ 249,053 $ 273,538
Income taxes $ -- $ 3,400
Noncash investing and financing activities:
Issuance of stock under stock plan $ 117,692 $ 28,836
Conversion of preferred stock to common stock $ 1,214,292 $ 242,851
Conversion of convertible debt to common stock $ 10,633,136
Acquisitions:
Fair value of assets acquired $ 9,672,241
Liabilities assumed (2,373,636)
Stock issued (6,460,580)
------------
Total cash paid $ 838,025
============
F-20
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information called for pursuant to this Part III, Items 9, 10, 11
and 12, is incorporated by reference from the Company's definitive proxy
statement which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the end of the fiscal year ended
December 28, 1996.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are hereby filed as part of this Annual Report
on Form 10-KSB:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1** Order confirming Debtor's Third Amended and Restated Plan of
Reorganization with the Third Amended and Restated Plan of
Reorganization attached thereto (incorporated by reference from
Exhibit 2 to Form 8-K, Current Report of the Company, dated
October 1, 1993).
26
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.2** Asset Purchase Agreement, dated as of July 2, 1996, between the
Company, NIK, Ivers-Lee and LFC No. 46 Corp. (filed as Exhibit
2.1 to Form 8-K, Current Report of the Company, dated July 30,
1996 and incorporated herein by reference).
2.3** Asset Purchase Agreement, dated as of August 23, 1996, between
the Company, DTC, Robert L. Oliver, Sandra A. Oliver and DTCoA
(filed as Exhibit 2.1 to Form 8-K, Current Report of the
Company, dated October 9, 1996 and incorporated herein by
reference).
3.1** Certificate of Incorporation of the Company (filed as Exhibit
3.3 to Form 8-K, Current Report of the Company, dated September
3, 1996 and incorporated herein by reference).
3.2** Certificate of Merger of ABA and the Company (filed as Exhibit
3.2 to Form 8-K, Current Report of the Company, dated September
3, 1996 and incorporated herein by reference).
3.3** Bylaws of the Company (filed as Exhibit 3.3 to Form 8-K, Current
Report of the Company, dated September 3, 1996 and incorporated
herein by reference).
4.1** Form of Convertible Subordinated Note Purchase Agreement, dated
as of April 30, 1996, between the Company and the Purchaser
parties thereto (filed as Exhibit 4.1 to Form 8-K, Current
Report of the Company, dated May 14, 1996 and incorporated
herein by reference).
4.2** Form of 5% Convertible Subordinated Note due April 30, 2001
(filed as Exhibit 4.2 to Form 8-K, Current Report of the
Company, dated May 14, 1996 and incorporated herein by
reference).
10.1* Loan Agreement between the Company and Barnett Bank, dated
November 14, 1996.
10.2* Promissory Note, dated November 14, 1996, in the principal
amount of $10,000,000, made by the Company for the benefit of
Barnett Bank.
10.3* Acceptance Credit Agreement, dated November 14, 1996, between
the Company and Barnett Bank.
10.4* Security Agreement, dated November 14, 1996, between the Company
and Barnett Bank.
10.5* Environmental Agreement, dated November 14, 1996 between the
Company and Barnett Bank.
10.6* Waiver of Jury Trial, dated November 14, 1996, between Barnett
Bank and the Company, NIK, DTC and Armor Holdings Properties,
Inc.
10.7* Security Agreement, dated November 14, 1996, between DTC and
Barnett Bank.
10.8* Security Agreement, dated November 14, 1996, between NIK and
Barnett Bank.
10.9* Security Agreement, dated November 14, 1996, between Armor
Holdings Properties, Inc. and Barnett Bank.
10.10* Guaranty of Payment, dated November 14, 1996, by DTC for the
benefit of Barnett Bank.
10.11* Guaranty of Payment, dated November 14, 1996, by NIK for the
benefit of Barnett Bank.
27
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.12* Guaranty of Payment, dated November 14, 1996, by Armor Holdings
Properties, Inc. for the benefit of Barnett Bank.
10.13** Letter Agreement, dated July 12, 1996, between Ivers-Lee and
Union Bank of Switzerland, New York Branch (filed as Exhibit
10.1 to Registration Statement No. 333-10307 on Form SB-2 of the
Company, declared effective by the Commission on November 1,
1996 and incorporated herein by reference).
10.14** Irrevocable Power of Attorney, dated July 12, 1996, granted by
Ivers-Lee in favor of Jonathan M. Spiller (filed as Exhibit 10.2
to Registration Statement No. 333-10307 on Form SB-2 of the
Company, declared effective by the Commission on November 1,
1996 and incorporated herein by reference).
10.15** Letter Agreement, dated August 16, 1996, between the Company,
Key Bank, DTCoA, Robert L. Oliver and Sandra A. Oliver (filed as
Exhibit 10.6 to Form 8-K, Current Report of the Company, dated
October 9, 1996 and incorporated herein by reference).
10.16** Letter Agreement, dated September 30, 1996, between Key Bank and
Union Bank of Switzerland, New York Branch (filed as Exhibit
10.2 to Form 8-K, Current Report of the Company, dated October
9, 1996 and incorporated herein by reference).
10.17** Irrevocable Power of Attorney, dated September 30, 1996, granted
by Key Bank in favor of Jonathan M. Spiller (filed as Exhibit
10.3 to Form 8-K, Current Report of the Company, dated October
9, 1996 and incorporated herein by reference).
10.18** Escrow Agreement, dated September 30, 1996, between the Company,
DTC, Robert L. Oliver, Sandra A. Oliver, DTCoA and Union Bank of
Switzerland, New York Branch (filed as Exhibit 10.4 to Form 8-K,
Current Report of the Company, dated October 9, 1996 and
incorporated herein by reference).
10.19** Guaranty Agreement, dated August 26, 1996, by Robert L. Oliver
and Sandra A. Oliver for the benefit of the Company (filed as
Exhibit 10.5 to Form 8-K, Current Report of the Company, dated
October 9, 1996 and incorporated herein by reference).
10.20** Lock-Up Agreement, dated August 23, 1996, by DTCoA for the
benefit of the Company (filed as Exhibit 10.6 to Form 8-K,
Current Report of the Company, dated October 9, 1996 and
incorporated herein by reference).
10.21** Authorized Distributor Agreement, dated September 30, 1996, by
and among DTC, XM Corporation, f/k/a DTCoA, a Wyoming
corporation, and Robert L. Oliver (filed as Exhibit 10.7 to Form
8-K, Current Report of the Company, dated October 9, 1996 and
incorporated herein by reference).
10.22** Form of Indemnification Agreement for Directors of the
Registrant, dated September 21, 1993 (filed as Exhibit 10.4 to
Form 10-KSB, Annual Report of the Company for the fiscal year
ended December 31, 1993 and incorporated herein by reference).
28
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.23** Form of Indemnification Agreement for Officers of the
Registrant, dated February 28, 1994 (filed as Exhibit 10.5 to
Form 10-KSB, Annual Report of the Company for the fiscal year
ended December 31, 1993 and incorporated herein by reference).
10.24** Employment Agreement between Jonathan M. Spiller and the
Company, Inc., effective January 18, 1996 (filed as Exhibit 10.6
to Form 10-KSB, Annual Report of the Company for the fiscal year
ended December 31, 1995 and incorporated herein by
reference).***
10.25** Employment Agreement between Richard T. Bistrong and the
Company, effective January 18, 1996 (filed as Exhibit 10.8 to
Form 10-KSB, Annual Report of the Company for the fiscal year
ended December 31, 1995 and incorporated herein by
reference).***
10.26* Employment Agreement between Robert R. Schiller and the Company,
effective July 24, 1996.***
10.27** American Body Armor & Equipment, Inc. 1994 Incentive Stock Plan
(incorporated by reference from Form S-8 filed on October 10,
1994, Reg. No. 33-018863).****
10.28** American Body Armor & Equipment, Inc. 1994 Directors Stock Plan
(incorporated by reference from Form S-8 filed on October 31,
1994, Reg. No. 33-018863).****
10.29** Armor Holdings, Inc. 1996 Stock Option Plan (incorporated by
reference from the Company's 1996 Definitive Proxy Statement
with respect to the Company's 1996 Annual Meeting of
Stockholders, held July 16, 1996, as filed with the Commission
on July 1, 1996).****
10.30** Armor Holdings Inc. 1996 Non-Employee Directors Stock Option
Plan (incorporated by reference from the Company's 1996
Definitive Proxy Statement with respect to the Company's 1996
Annual Meeting of Stockholders, held July 16, 1996, as filed
with the Commission on July 1, 1996).****
10.31** Lease for the Company's primary facility located in Yulee,
Florida, dated July 26, 1993, effective May 1, 1993 (filed as
Exhibit 28.1 to Form 10-KSB, Annual Report of the Company, for
the fiscal year ended December 31, 1993 and incorporated herein
by reference).
10.32* Jacksonville International Tradeport Purchase and Sale
Agreement, dated October 22, 1996, between the Company and
Wilma/Skyland Joint Venture, Ltd.
10.33* Assignment of Purchase and Sale Agreement, dated October 22,
1996, between the Company and AHPI.
10.34* Construction Escrow Agreement, dated October 22, 1996, between
the Company, AHPI, GB Investment & Company, Inc. and Kent, Ridge
& Crawford, as escrow agent.
10.35* Agreement between Owner and Construction Manager, dated
October 10, 1996, between the Company, AHPI and GB Investment &
Company, Inc., as construction manager.
11.1* Statement regarding computation of per share earnings.
20.1** 1997 Definitive Proxy Statement to be filed with the Commission
not later than 120 days after the end of the fiscal year ended
December 28, 1996 (incorporated by reference).
29
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
21.1* Subsidiaries of the Company.
23.1* Consent of Deloitte & Touche LLP.
27.1* Financial Data Schedule.
* Filed herewith.
** Incorporated herein by reference.
*** This Exhibit represents a management contract.
**** This Exhibit represents a compensatory plan.
(b) Reports on Form 8-K
During the fourth quarter of Fiscal 1996, on October 9, 1996, the
Company filed a Current Report on Form 8-K announcing its acquisition of
substantially all of the assets of DTCoA.
30
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ARMOR HOLDINGS, INC.
/s/ Jonathan M. Spiller
----------------------------------
Jonathan M. Spiller
President, Chief Executive Officer
and Director
Dated: March 25, 1997
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
/s/ Jonathan M. Spiller /s/ Warren B. Kanders
- -------------------------------------- ------------------------------------
Jonathan M. Spiller Warren B. Kanders
President and Chief Executive Officer Chairman of the Board of Directors
and Director March 25, 1997
Principal Executive Officer
March 25, 1997
/s/ Carol T. Burke /s/ Nicolas Sokolow
- -------------------------------------- ------------------------------------
Carol T. Burke Nicolas Sokolow
Vice President-Finance Director
Principal Financial Officer March 25, 1997
March 25, 1997
/s/ Burtt R. Ehrlich /s/ Thomas W. Strauss
- -------------------------------------- ------------------------------------
Burtt R. Ehrlich Thomas W. Strauss
Director Director
March 25, 1997 March 25, 1997
/s/ Richard C. Bartlett /s/ Alair A. Townsend
- -------------------------------------- ------------------------------------
Richard C. Bartlett Alair A. Townsend
Director Director
March 25, 1997 March 25, 1997
31
<PAGE>
EXHIBIT INDEX
The following Exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1* Loan Agreement between the Company and Barnett Bank, dated
November 14, 1996.
10.2* Promissory Note, dated November 14, 1996, in the principal
amount of $10,000,000, made by the Company for the benefit of
Barnett Bank.
10.3* Acceptance Credit Agreement, dated November 14, 1996, between
the Company and Barnett Bank.
10.4* Security Agreement, dated November 14, 1996, between the Company
and Barnett Bank.
10.5* Environmental Agreement, dated November 14, 1996 between the
Company and Barnett Bank.
10.6* Waiver of Jury Trial, dated November 14, 1996, between Barnett
Bank and the Company, NIK, DTC and Armor Holdings Properties,
Inc.
10.7* Security Agreement, dated November 14, 1996, between DTC and
Barnett Bank.
10.8* Security Agreement, dated November 14, 1996, between NIK and
Barnett Bank.
10.9* Security Agreement, dated November 14, 1996, between Armor
Holdings Properties, Inc. and Barnett Bank.
10.10* Guaranty of Payment, dated November 14, 1996, by DTC for the
benefit of Barnett Bank.
10.11* Guaranty of Payment, dated November 14, 1996, by NIK for the
benefit of Barnett Bank.
10.12* Guaranty of Payment, dated November 14, 1996, by Armor Holdings
Properties, Inc. for the benefit of Barnett Bank.
10.26* Employment Agreement between Robert R. Schiller and the Company,
effective July 24, 1996.***
10.32* Jacksonville International Tradeport Purchase and Sale
Agreement, dated October 22, 1996, between the Company and
Wilma/Skyland Joint Venture, Ltd.
10.33* Assignment of Purchase and Sale Agreement, dated October 22,
1996, between the Company and AHPI.
10.34* Construction Escrow Agreement, dated October 22, 1996, between
the Company, AHPI, GB Investment & Company, Inc. and Kent, Ridge
& Crawford, as escrow agent.
10.35* Agreement between Owner and Construction Manager, dated
October 10, 1996, between the Company, AHPI and GB Investment &
Company, Inc., as construction manager.
11.1* Statement regarding computation of per share earnings.
21.1* Subsidiaries of the Company.
23.1* Consent of Deloitte & Touche LLP.
27.1* Financial Data Schedule.
* This Exhibit represents a management contract.
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EXHIBIT 10.1
LOAN AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, between ARMOR
HOLDINGS, INC., a Delaware corporation (the "Borrower"), and BARNETT BANK,
N.A. (the "Bank").
RECITALS
The Borrower wishes to obtain credit from the Bank on the terms and
conditions set forth herein.
NOW THEREFORE, for good and valuable consideration, the parties agree
as follows:
ARTICLE I
BORROWING AND PAYMENT
1.01 Revolving Credit Advances.
(a) The Bank hereby establishes in favor of the Borrower a
revolving line of credit. The Borrower shall be entitled to borrow,
repay and reborrow funds from the Bank in accordance with the terms
hereof so long as the total principal amount owed to the Bank under
the revolving line of credit does not exceed $10,000,000.00 (or such
lesser amount as is set forth herein) from the date hereof through
November 14, 1997. The Bank's obligation to make advances
hereunder shall terminate on November 14, 1997, or such earlier date
as is set forth herein.
(b) The Borrower's indebtedness under the revolving line
of credit shall be evidenced by a promissory note of even date
herewith (as amended, extended or renewed from time to time, the
"Note") executed by the Borrower in favor of the Bank in the original
principal amount of $10,000,000.00. The Note shall bear interest at
the rate set forth therein and shall be payable as set forth therein.
(c) The Bank shall make each advance under the revolving
line of credit upon notice from the Borrower to the Bank specifying
the date and amount of the advance. The Bank must receive the notice
not later than 12:00 noon (Eastern time) on the business day of the
advance. Alternatively, the Borrower may request advances by drawing
checks on a deposit account which is linked to the credit facility
hereunder in accordance with disbursement arrangements that are
mutually satisfactory to the parties. The Bank will make each
requested advance available to the Borrower not later than the close
of business on the business day of the request by crediting the
Borrower's account maintained with the Bank in the amount of the
advance if as of such time: (i) the Bank's obligation to make
advances hereunder has not terminated or expired; (ii) a Default or
Event of Default (as defined herein) has not
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occurred; and (iii) all conditions to the advance set forth herein or
in any other Loan Documents (as defined herein) have been satisfied.
1.02 Acceptances. Subject to the terms set forth herein and in that
certain Acceptance Credit Agreement (as amended or restated from time to time,
the "Acceptance Agreement") of even date herewith between the Borrower and the
Bank, the Bank shall from time to time prior to November 14, 1997, make
available to the Borrower an acceptance facility pursuant to which the Bank
may accept drafts drawn upon it by the Borrower (each, an "Acceptance"). The
aggregate face amount of outstanding Acceptances shall not at any one time
exceed $5,000,000 (or such lesser amount as is set forth herein). The Bank
shall not be required to create any Acceptance which has a maturity date after
November 14, 1997. Upon the Bank's payment of an Acceptance upon maturity
thereof, the Bank may at its option obtain an advance under the Note (without
further notice to or consent of the Borrower) to reimburse the Bank for such
payment. If the Bank elects not to obtain an advance under the Note or if
credit in the amount of the Acceptance is not then available under the Note,
the Borrower shall immediately upon demand reimburse the Bank for the face
amount of each Acceptance upon the maturity thereof together with such other
amounts as may be due in connection therewith in accordance with the
Acceptance Agreement. The parties acknowledge that the Bank may at any time
sell, discount, rediscount or otherwise dispose of any Acceptances. The
Borrower shall pay the Bank such fees and costs in connection with the
Acceptances as are set forth in the Acceptance Agreement.
1.03 Loan Documents and Related Terms.
(a) The indebtedness (the "Indebtedness") now or hereafter
evidenced by the Note and the Acceptance Agreement shall: (i) be
secured by a first priority lien pursuant to the Security Agreement
(as amended or restated from time to time, the "Security Agreement")
of even date herewith executed by the Borrower in favor of the Bank
covering the Borrower's inventory, accounts receivable and other
assets described therein; and (ii) be guaranteed by each of the
Borrower's current Subsidiaries pursuant to guaranties
(collectively, as amended or restated from time to time, the
"Guaranties") of even date herewith executed by such Subsidiaries in
favor of the Bank. The Guaranties and the Indebtedness shall be
secured by security agreements (collectively, as amended or restated
from time to time, the "Subsidiary Security Agreements") of even date
herewith executed by each of the Borrower's current Subsidiaries
in favor of the Bank covering the inventory, receivables and other
assets of such Subsidiaries described therein. The Borrower and each
such Subsidiary shall execute and deliver such financing statements
and other documents as the Bank may reasonably request to
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perfect and continue perfection of the Bank's liens. In addition,
the Borrower shall execute and deliver an Environmental Agreement (as
amended or restated from time to time the "Environmental Agreement")
of even date herewith in favor of the Bank. The Guaranties and the
Subsidiary Security Agreements shall include, in addition to the
Guaranties and Subsidiary Security Agreements contemplated in this
subparagraph, all guaranties and security agreements, as the case may
be, now or hereafter executed by any Subsidiaries pursuant to
subparagraph (b) below.
(b) For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "Loan Documents" shall mean and include this
Agreement (as amended from time to time), the Note, the
Acceptance Agreement, the Acceptances, the Security
Agreement, the Guaranties, the Subsidiary Security
Agreements, the Environmental Agreement and all documents
related to the foregoing documents.
(ii) "Included Subsidiary" shall mean and include
each Subsidiary that has satisfied the following
conditions:
(aa) The Subsidiary has granted
the Bank a perfected security interest in its
inventory and accounts receivable subject only to
such prior liens and claims as the Bank, in its
discretion, may approve; and
(bb) The Subsidiary has executed
the following documents in favor of the Bank
substantially in the form of such documents
executed by the Borrower's current Subsidiaries
on the date hereof: (1) Guaranty of Payment; (2)
Security Agreement; (3) Waiver of Jury Trial; and
(4) financing statements (conforming in each case
to the requirements of the applicable jurisdictions
where such statements will be filed). Each such
document shall be deemed to be a Loan Document
hereunder.
(iii) "Subsidiary" shall mean and include any
partnership, corporation or other entity if the Borrower now
or hereafter directly or indirectly owns or controls a
majority of the equity or voting interests in such
partnership, corporation or entity.
(c) For purposes of this Agreement, the plural shall
include the singular, and vice versa, as the context requires.
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1.04 Borrowing Limitations.
(a) Notwithstanding any contrary provision set forth herein
or in any other Loan Document, the Borrower agrees that the
outstanding principal balance of the Note, when combined with the
aggregate face amount of outstanding Acceptances, shall not at any
time exceed the lesser of: (i) $10,000,000; or (ii) the Borrowing
Base (as defined herein) then in effect. The outstanding principal
balance of the Note, together with the aggregate face amount of
outstanding Acceptances, is referred to herein as the "Outstanding
Credit."
(b) For purposes hereof, the "Borrowing Base" shall mean the
sum of: (i) 85% of the face amount of Eligible Receivables; and (ii)
50% of the book value of Eligible Inventory. The Borrower
specifically agrees that: (i) the book value of Eligible Inventory
included in the Borrowing Base shall not in any event exceed
$6,000,000; and (ii) the book value of Eligible Inventory consisting
of work in process included in the Borrowing Base shall not in any
event exceed $1,000,000. For purposes hereof, the book value of
Eligible Inventory shall be calculated on a first in, first out basis
in accordance with generally accepted accounting principles.
Notwithstanding any contrary provision set forth herein, the portion
of the Borrowing Base attributable to the inventory or accounts
receivable of any Included Subsidiary shall not at any time exceed
the maximum liability of such Included Subsidiary under any Guaranty
(as defined herein) executed by such Included Subsidiary. The amount
of Eligible Receivables and Eligible Inventory shall be determined as
follows:
(i) "Eligible Receivables" shall mean all
accounts receivable then outstanding for goods, merchandise
and other items of tangible property (collectively,
"Products") sold by the Borrower or any Included Subsidiary
in the ordinary course of business. However, Eligible
Receivables shall not include any account receivable with
respect to which: (aa) a final invoice has not been issued;
(bb) delivery of the Products has not been substantially
completed; (cc) the invoice is conditional, permits returns
or restricts collection rights or assignments in any respect
(except, however, that the invoice may permit returns in the
ordinary course of business with respect to defective
goods); (dd) the invoice permits payment: (1) in any
currency other than United States dollars; or (2) at any
location outside the United States (except for foreign
receivables permitted under subparagraph (nn) below); (ee)
the obligation to pay is evidenced by chattel paper or any
note or other instrument (unless duly endorsed and delivered
to the Bank); (ff) the Products have been rejected, returned
or disputed in any material respect,
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whether in whole or in part, in which case the receivable
shall be ineligible to the extent of such rejection, return
or dispute; (gg) the customer has attempted to renegotiate
the invoiced price or asserted any material right of
reduction, set-off, recoupment, counterclaim or defense;
(hh) the account is outstanding 90 days or more after the
invoice date (except, however, that the account of Aardvark,
Inc. evidenced by an agreement disclosed by the Borrower to
the Bank prior to the date hereof may be outstanding for
more than 90 days from the invoice date so long as Aardvark,
Inc. is not more than 60 days delinquent in the payment of
any amount due under such agreement); (ii) the account is 60
days or more past due from the due date; (jj) the obligor
under the receivable is also a creditor or supplier of the
Borrower or any Subsidiary (in which case the amount of the
receivable shall be reduced, for eligibility purposes, by
the amount owed by the Borrower or such Subsidiary to such
obligor); (kk) the Bank does not have a perfected first
priority security interest in the receivable; (ll) the
customer has a history of late payments, returns,
rejections, renegotiations or disputes; (mm) the customer is
an affiliate of the Borrower or any Subsidiary; (nn) the
customer is located outside the continental United States,
its territories or possessions (except, however, that
Eligible Receivables may include other receivables having an
aggregate face amount of not more than $500,000 owed by
customers located in any of the countries listed on Exhibit
"A" attached hereto so long as such receivables otherwise
constitute "Eligible Receivables" in accordance with the
other provisions of this paragraph (i)); (oo) the customer
does not meet the established credit standards of the
Borrower and its Subsidiaries; (pp) the account receivable
exceeds 15% of the Borrower's Tangible Net Worth (as
defined herein) (in which case, the amount of the excess
shall be deemed ineligible); (qq) the account receivable is
owed by a customer who is 90 days or more past due on 50% or
more of its obligations owed to the Borrower and its
Subsidiaries (in which event all receivables owed by the
customer to the Borrower and its Subsidiaries shall be
deemed ineligible); or (rr) the Bank otherwise determines in
its reasonable discretion that the receivable is ineligible
hereunder. Eligible Receivables shall not in any event
include any receivables owed by governmental agencies,
departments or authorities other than: (aa) receivables
otherwise qualifying as Eligible Receivables that are owed
by municipalities located in the United States whose
long-term debt is rated BBB or better by Standard &
Poor's Corporation; and (bb) other governmental
receivables otherwise qualifying as Eligible Receivables to
the extent that such receivables do not at any one
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time exceed an aggregate of $500,000. All receivables owed
by United States agencies, departments and authorities shall
be assigned to the Bank under the federal Assignment of
Claims Act.
(ii) "Eligible Inventory" shall mean all
inventory of raw materials, work in process and finished
goods then owned by the Borrower or any Included Subsidiary
and held for sale in the ordinary course of business as then
conducted. However, Eligible Inventory shall not include any
item of inventory that: (aa) is not of merchantable quality;
(bb) is defective or does not meet the established
specifications of the Borrower or any Included Subsidiary
for its type; (cc) is obsolete or has been held by the
Borrower or any Included Subsidiary for more than twelve
months (unless subject to a current purchase order); (dd)
together with other items of its type exceed reasonably
expected sales over the next 12 months by more than 50%;
(ee) is held by any person other than the Borrower, any
Included Subsidiary or a party to a bailment agreement with
the Bank (in such form and substance as may be reasonably
acceptable to the Bank); (ff) is located at any location
other than those locations set forth in Exhibit "B" attached
hereto; (gg) is subject to any prior lien, encumbrance or
claim so that the Bank does not hold a perfected first
priority security interest in the inventory; (hh) is the
subject of any financing statement, lien or other
encumbrance other than in favor of the Bank; (ii) is the
subject of any other person's claim of ownership,
whether legal, beneficial or otherwise; or (jj) is otherwise
deemed ineligible by the Bank in its reasonable discretion.
In addition, Eligible Inventory shall exclude any inventory
on which the Bank, for any reason, does not hold a perfected
security interest subject to no prior liens or claims. The
Bank may elect to treat as ineligible any inventory located
at leased premises if the landlord is not a party to a
subordination and access agreement reasonably acceptable to
the Bank (except, however, that the Borrower shall not be
required to provide, prior to December 31, 1997, any such
agreement for the premises located at 191 Nassau Place Road,
Yulee, Florida).
(c) The Bank has the right to deem any inventory or
receivable as ineligible for lending purposes if it is not in the
Bank's reasonable judgment adequately documented by the books and
records of the Borrower or its Included Subsidiaries or if the Bank
otherwise reasonably deems such inventory or receivable as
ineligible. If at any time the Outstanding Credit exceeds the
Borrowing Base, the Borrower shall immediately pay to the Bank the
amount of such excess. The Borrower shall not be entitled to obtain
any advance under the
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Note or other credit hereunder if the advance or credit would result
in a violation of the lending limits set forth herein. The Borrower
shall deliver a borrowing base certificate to the Bank demonstrating
compliance with the lending limits set forth herein: (i) on the
fifteenth day of each calendar month based upon the then Outstanding
Credit and the Borrowing Base as of the end of the immediately
preceding calendar month; and (ii) at such other times as the Bank
may reasonably request.
1.05 Facility Fees. The Borrower shall pay the Bank a fee on the
daily average unused amount of the revolving line of credit under the Note for
a period commencing on the date hereof and continuing until the expiration or
termination of the line of credit. The fee shall accrue at the rate of
one-eighth of one percent (0.125%) per annum calculated on the basis of a
360-day year (based on actual days elapsed). The Borrower shall pay the fee
quarterly in arrears: (a) within 15 days after the end of each calendar
quarter; and (b) on the expiration or termination of the line of credit. In
calculating the fee: (a) the amount of outstanding Acceptances shall be
treated as amounts outstanding under the Note; and (b) the maximum amount of
borrowings available under the line of credit shall be $10,000,000 without
reduction for Borrowing Base limitations set forth herein.
ARTICLE II
CONDITIONS
2.01 Conditions to Initial Advance. The obligation of the
Bank to make an initial extension of credit hereunder is subject,
without limitation, to satisfaction of the following conditions
precedent:
(a) The Bank shall have received on or before the date
hereof and the date of such extension of credit in form reasonably
satisfactory to it: (i) the duly executed Loan Documents; (ii) such
evidence of corporate authorization from the Borrower and each
Subsidiary as the Bank may reasonably require; (iii) good standing
certificates indicating that the Borrower and each Subsidiary are in
good standing in their respective states of incorporation and in any
other states where they are required to qualify to do business; and
(iv) certified articles of incorporation and bylaws of the Borrower
and each Subsidiary.
(b) The Bank shall have received on or before the date
hereof, from attorneys for the Borrower reasonably acceptable to the
Bank, an opinion addressed to the Bank in form and substance
reasonably satisfactory to the Bank.
2.02 Conditions to Advances. The obligation of the Bank to
make any advances hereunder or under the Note, or to create any
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Acceptances, is subject, without limitation, to satisfaction of the
following additional conditions precedent:
(a) The representations and warranties of the Borrower and
each Subsidiary set forth in this Agreement and in the Loan Documents
shall be true and correct in all material respects on and as of the
date of each such advance or extension of credit.
(b) On the date of each such advance or extension of credit,
the Borrower shall be in compliance with all the material terms and
provisions set forth in this Agreement on its part to be observed or
performed, and no Default or Event of Default shall have occurred.
2.03 Other Documents. The Bank shall have received on or before the
date hereof or the date of any advance or credit extension hereunder such
other documents or items as the Bank may reasonably request.
ARTICLE III
AFFIRMATIVE COVENANTS
The Borrower as to itself and as to any Subsidiaries covenants and
agrees that from the date hereof:
3.01 Financial Statements of the Borrower. The Borrower will
deliver to the Bank the following:
(a) Within forty-five (45) days after the end of each
quarter of the Borrower's fiscal year: (i) a balance sheet,
income statement and statement of cash flows for the Borrower and its
Subsidiaries on a consolidated basis as of the end of and for such
period in reasonable detail certified by an authorized officer of the
Borrower; and (ii) a balance sheet and income statement for each of
the Borrower and its Subsidiaries on a stand alone basis for each
such entity as of the end of and for such period in reasonable detail
certified by an authorized officer of the Borrower.
(b) Within ninety (90) days after the end of each fiscal
year of the Borrower, a balance sheet, income statement and statement
of cash flows for the Borrower and its Subsidiaries on a consolidated
basis as of the end of and for such period in reasonable detail,
audited and certified by independent certified public accountants of
recognized national standing, whose opinion thereon shall be
reasonably satisfactory to the Bank in scope and substance.
(c) Within fifteen (15) days after the end of each calendar
quarter, accounts receivable aging schedules and inventory status
reports for the Borrower and each Subsidiary
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as of the end of such quarter certified to the Bank by an authorized
officer of the Borrower.
(d) Promptly upon receipt thereof, copies of all management
letters submitted to the Borrower by independent certified public
accountants in connection with each annual or interim audit of the
books of the Borrower by such accountants.
(e) With each delivery required under subparagraphs (a) and
(b) above, a compliance certificate in form approved by the Bank
executed by an executive officer of the Borrower demonstrating
compliance with the Loan Documents.
(f) Promptly upon the occurrence of any Default or Event
of Default, a notice thereof, specifying the nature thereof.
(g) Promptly upon becoming available, a copy of all: (i)
reports, registration statements and other materials filed with the
Securities and Exchange Commission; (ii) all offering circulars made
in connection with any distribution or sale of the Borrower's
securities; and (iii) all notices, proxy statements and other
materials mailed or distributed to the Borrower's shareholders.
(h) Such other material information as the Bank may from
time to time reasonably request.
3.02 Financial Information. All financial information submitted by
the Borrower or any Subsidiary hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect as of the time that such
financial statements are prepared. The Borrower and its Subsidiaries will
maintain books of account in accordance with generally accepted accounting
principles.
3.03 Taxes and Other Charges. The Borrower and the Subsidiaries, as
applicable, will pay and discharge or cause to be paid and discharged all
taxes, charges, liabilities or claims of any type at any time assessed against
or incurred by the Borrower or any Subsidiary, or which could become a lien
against the Borrower or any Subsidiary or any of their properties. Nothing in
this subsection shall require the payment of any such sum if the Borrower by
appropriate proceedings contests the same in good faith and so long as the
Borrower, if required by generally accepted accounting principles, creates a
funded reserve in an amount required by generally accepted accounting
principles.
3.04 Insurance. The Borrower and its Subsidiaries will maintain
adequate insurance with responsible insurers with coverage normally obtained
by businesses similar to that of the Borrower or its Subsidiaries, but
covering at least: (i) damage to physical
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property from fire and other hazards; (ii) liability on account of injury to
persons; (iii) product liability risks; and (iv) insurance against theft,
forgery or embezzlement or other illegal acts of officers or employees in
reasonable amounts. If requested by the Bank, the Borrower will provide the
Bank, within ninety (90) days after the end of each fiscal year, a certificate
of the Borrower specifying the types and amounts of insurance in force and the
insurers of each risk covered by such insurance.
3.05 Maintenance of Corporate Existence. The Borrower and its
Subsidiaries will do or cause to be done all things necessary to preserve and
keep in full force and effect their existence, franchises, rights and
privileges as corporations under the laws of their states of incorporation and
any other jurisdiction where the conduct of their business or the ownership of
their properties would require them to be qualified to do business (except
where the failure to be so qualified would not have a material adverse effect
on the Borrower and its Subsidiaries, taken as a whole).
3.06 Use of Proceeds. The funds borrowed under the Note shall be used
for working capital purposes and for such other purposes as the Bank may
approve from time to time.
3.07 Notice of Litigation. Promptly after the commencement thereof,
the Borrower shall furnish the Bank notice of all material actions, suits and
proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Borrower
or any Subsidiary.
3.08 Notice of ERISA Requirements. As soon as possible and in any
event within thirty (30) days after the Borrower knows or has reason to know
that any reportable event, accumulated funding deficiency, prohibited
transaction, disqualification or termination (as such terms are defined in the
Employee Retirement Income Security Act of 1974, as amended) with respect to
any Plan has occurred, the Borrower shall furnish the Bank with the statement
of the chief financial officer of the Borrower setting forth details as to
such event and the action which the Borrower proposes to take with respect
thereto, together with a copy of the notice of such event to the Pension
Benefit Guaranty Corporation. For purposes of this Agreement, "Plan" shall
mean any employee benefit plan maintained in whole or in part for employees of
the Borrower or its Subsidiaries which is subject to the provisions of Title
IV of the Employee Retirement Income Security Act of 1974, as amended from
time to time, or subject to the minimum funding standards under Section 412 of
the Internal Revenue Code of 1986, as amended from time to time.
3.09 Other Events. The Borrower shall promptly notify the Bank of any
material default under or violation of any material agreement, law or
regulation to which the Borrower or any Subsidiary is a party or by which it is
bound. The Borrower and
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its Subsidiaries shall promptly perform all of their material obligations under
any material agreements to which any of them is a party, and each of them shall
use its best efforts to ensure compliance by other parties in all material
respects with such agreements.
3.10 Compliance with Laws. The Borrower and its Subsidiaries shall
comply in all material respects at all times with all statutes, regulations,
orders and judgments to which they, or any of them, are subject.
3.11 Access. The Bank (by any of its officers, employees or agents)
shall have the right, exercisable as frequently as the Bank reasonably
determines to be appropriate, to inspect and make extracts from all of the
records, files and books of account of the Borrower or its Subsidiaries. All
reasonable costs, fees and expenses incurred by the Bank, or for which the
Bank has become obligated, in connection with any such inspection, and
verification shall be payable by the Borrower to the Bank. Notwithstanding the
foregoing provisions of this Section, the Bank shall not exercise its right of
inspection hereunder more than once per calendar year for so long as no Event
of Default is continuing hereunder.
3.12 Deposits. The Borrower and the Included Subsidiaries shall
maintain their primary operating accounts with the Bank (except, however, that
the Borrower and its Included Subsidiaries shall be entitled to maintain
deposit accounts with other banks in market areas where the Bank does not
maintain a banking office to the extent reasonably necessary to support the
operations of the Borrower and its Subsidiaries in those market areas).
3.13 Landlord's Agreements. The Borrower and the Included
Subsidiaries shall at all times use their best efforts to obtain and maintain
in effect subordination and access agreements executed by any lessor or
sublessor who holds any interest in premises utilized by the Borrower or any
Included Subsidiary if the aggregate value of property of the Borrower and its
Included Subsidiaries located thereon exceeds $100,000 (except, however, that
no such agreement shall be required prior to December 31, 1997, for the
premises located at 191 Nassau Place Road, Yulee, Florida). The agreements
shall be in form and substance reasonably satisfactory to the Bank.
3.14 Further Assurances. If at any time counsel for the Bank is of
the reasonable opinion that any portion of the Outstanding Credit is not
secured by a first priority lien on the property described in the Security
Agreement, or as contemplated herein, subject only to exceptions described in
the Security Agreement, and has so advised the Bank in writing, then the
Borrower shall, after written notice of such opinion from the Bank, do all
things and matters necessary to assure to the reasonable satisfaction of
counsel for the Bank that any part of the Outstanding Credit is
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secured or will be secured as contemplated by this Agreement and the Security
Agreement.
ARTICLE IV
NEGATIVE COVENANTS
The Borrower and its Subsidiaries shall comply with the following
covenants during the term hereof:
4.01 Liens. Neither the Borrower nor any Subsidiary will create,
incur, assume or suffer to exist any mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of the assets of the Borrower or
any Subsidiary now or hereafter owned, or enter into or suffer to exist any
conditional sales contracts or other title retention agreements except for
Permitted Liens. For purposes hereof, Permitted Liens shall mean:
(a) liens in favor of the Bank;
(b) existing liens described on Exhibit "C" attached hereto
(together with any replacement lien arising out of any extension,
renewal or refinancing of any such lien provided that: (i) the
indebtedness secured by each such replacement lien shall not exceed
the indebtedness secured by the lien theretofore existing; and (ii)
such replacement lien attaches only to the same property theretofore
securing the indebtedness so extended, renewed or refinanced);
(c) liens on equipment to secure indebtedness permitted
hereunder to finance the acquisition thereof;
(d) the lien of ad valorem and other taxes and
assessments not yet due and payable;
(e) liens arising out of pledges, deposits, or other amounts
owed under worker's compensation laws, unemployment insurance,
old age pensions or other social security or retirement benefits, or
similar legislation, or to secure payment of premiums for insurance
purchased in the usual course of operations or in connection with
self-insurance or to secure the performance of bids, tenders or trade
contracts incurred in the ordinary course of operations and not in
connection with the borrowing of money;
(f) deposits for indemnity bonds and other bonds
required in the ordinary course of the Borrower's or any
Subsidiary's business, and not in connection with borrowed
money;
(g) inchoate materialmen's, suppliers', operators', mechanics',
workmen's, repairmen's, employees', carriers', warehousemen's or
attorneys' liens or other like statutory
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liens arising in the ordinary course of business and securing
obligations (i) which are not delinquent or (ii) the amounts or
validity of which are being contested in good faith as to which the
Borrower has established appropriate funded reserves to the extent
required by generally accepted accounting principles;
(h) deposits made by the Borrower or any Subsidiary in
the ordinary course of business;
(i) liens of financial institutions arising in the
ordinary process of collection of instruments;
(j) statutory landlord's liens, and contractual landlord's
liens created prior to this date provided that amounts secured
thereby are not past due by more than 30 days; and
(k) liens securing Permitted Acquisition Debt (as defined
herein) so long as such liens do not encumber any assets of the
Borrower or any Included Subsidiary.
4.02 Obligations.
(a) Neither the Borrower nor any Subsidiary is or will
become directly or indirectly obligated in any way for any obligation
for borrowed money except for Permitted Obligations. For purposes
hereof, Permitted Obligations shall mean:
(i) any and all obligations now or hereafter owed
by the Borrower or any Subsidiary to the Bank;
(ii) indebtedness incurred solely to finance the
acquisition of equipment in the ordinary course of business
so long as no Default or Event of Default has occurred and
is continuing hereunder and so long as such indebtedness
will not result in a default in the financial covenants
hereunder: (aa) at the time such indebtedness is incurred
after giving effect to such indebtedness; and (bb) on a
projected basis based upon reasonable projections for the
term of such indebtedness after giving effect to such
indebtedness;
(iii) customer deposits in the ordinary course of
business;
(iv) obligations described on Exhibit "D" attached
hereto;
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(v) obligations subordinated to the Indebtedness
pursuant to subordination agreements reasonably
acceptable to the Bank;
(vi) Permitted Acquisition Debt (as defined herein);
and
(vii) Obligations resulting from loans and advances
permitted under Section 4.04 hereof.
(b) Neither the Borrower nor any Subsidiary shall without
the Bank's prior written consent: (i) guarantee or purchase any
obligations of any other person or entity (except pursuant to the
Guaranties and except that any such entity shall be entitled to
guarantee any Permitted Obligations of the Borrower or any other
Subsidiary); (ii) enter into any credit support, financial
maintenance, credit enhancement or similar arrangement in favor of
any person or entity; or (iii) enter into any other transaction which
is intended to assure performance of the obligations of any other
person or entity.
(c) For purposes hereof, "Permitted Acquisition Debt" shall
mean any indebtedness incurred by the Borrower or any of its
Subsidiaries to finance any Permitted Acquisition (as defined in
Section 4.04 hereof) or assumed by the Borrower or any such
Subsidiary in connection with any Permitted Acquisition.
4.03 Merger; Consolidation; Sale of Substantial Assets. Neither the
Borrower nor any Subsidiary will: (a) merge into, consolidate with, or sell or
transfer all or a substantial part of its assets to, any other person or
entity; (b) sell or transfer any stock or equity interest in any Subsidiary to
any other person or entity (except for transfers to the Borrower or any other
wholly owned Included Subsidiary); (c) take any action which would reduce the
ownership or voting interest of the Borrower and its Subsidiaries in any
Subsidiary; or (d) pledge or encumber any stock of any Subsidiary (except for
pledges in favor of the Bank). Notwithstanding the foregoing, each of the
Borrower and its Subsidiaries shall be entitled to sell or transfer assets to
wholly owned Included Subsidiaries.
4.04 Loans, Investments and Acquisitions.
(a) Neither the Borrower nor any Subsidiary will purchase
any stock, securities or evidence of indebtedness, or make or permit
to exist any loans or advances to, or make any investment or acquire
any interest in, any other corporation, partnership or other entity
or person (except, however, that the Borrower and its Subsidiaries
shall be entitled to make Permitted Acquisitions in accordance with
the terms thereof).
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Neither the Borrower nor any Subsidiary shall, without the Bank's prior
written cosent, enter into partnership or joint venture agreements
with any other person or entity. Notwithstanding the foregoing: (i)
the Borrower and its Subsidiaries shall be entitled to extend credit
and make advances to wholly owned Included Subsidiaries; (ii) the
Borrower and its Subsidiaries shall be entitled to extend credit and
make advances to Subsidiaries, other than wholly owned Included
Subsidiaries, so long as the total outstanding amount of such credit
and advances, on a combined basis, does not exceed $250,000 at any
one time; (iii) the Borrower and its Subsidiaries may extend credit
and make advances in the ordinary course of business, in addition to
credit and advances permitted under the foregoing subparagraphs (i)
and (ii), so long as the total outstanding amount of such credit and
advances, on a combined basis under this subparagraph (iii), does not
exceed $250,000 at any time; (iv) the Borrower and its Subsidiaries
may extend trade credit to purchasers in the ordinary course of
business in connection with the sale of inventory to such purchasers;
(v) the Borrower and its Subsidiaries may invest in direct
obligations of the United States government and time certificates of
deposit of banks maturing within one year from the date of the
acquisition thereof; and (vi) the Borrower and its Subsidiaries may
invest in Eligible Securities. For purposes hereof, "Eligible
Securities" shall mean: (i) government bonds rated BBB or better by
Standard & Poor's Corporation ("S&P") or Baa2 or better by Moody's
Investors Service, Inc. ("Moody's"); (ii) commercial paper rated BBB
or better by S&P or Baa2 or better by Moody's; (iii) corporate bonds
or debt rated BBB or better by S&P or Baa2 or better by Moody's; (iv)
preferred stock rated BBB or better by S&P or Baa2 or better by
Moody's; and (v) common stock of any publicly traded corporation.
Notwithstanding anything to the contrary in this Section 4.04(a), the
limitations of this Section 4.04(a) shall not be applicable in
connection with the Borrower's or any Subsidiary's formation and
funding of a newly created Subsidiary for the purposes of
consummating a Permitted Acquisition in accordance with the terms of
this Agreement.
(b) The Borrower and its Subsidiaries shall be entitled to
acquire businesses through stock acquisitions, asset purchases or
mergers upon satisfaction of the following conditions:
(i) Each such acquisition shall be made on arms
length terms. The Borrower or one of its Subsidiaries shall,
after consummation of the acquisition, own and control more
than 50% of the outstanding equity and voting rights in any
corporation, partnership or other entity acquired by the
Borrower or any such Subsidiary in connection with the
acquisition.
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(ii) The aggregate acquisition consideration payable
by the Borrower and its Subsidiaries for any acquisition
shall not exceed 50% of the Borrower's Tangible Net Worth
(as defined herein) after giving effect to the acquisition
(except, however, that the Borrower and its Subsidiaries
shall be entitled to make acquisitions for acquisition
consideration in excess of such amount with the Bank's
prior written consent). The acquisition consideration
payable in connection with any such acquisition shall mean
the sum of the following items (without duplication): (aa)
all cash paid by the Borrower and its Subsidiaries in
connection with the acquisition; (bb) the fair market value
of all property transferred (including, without limitation,
the fair market value of all securities issued) by the
Borrower and its Subsidiaries in connection with the
acquisition; (cc) the principal amount of all indebtedness
payable by the Borrower and its Subsidiaries to the sellers
in connection with the acquisition; (dd) the principal
amount of all obligations assumed by the Borrower and its
Subsidiaries in connection with any asset acquisition; and
(ee) all amounts paid or payable under or with respect to
covenants not to compete in connection with the acquisition.
(iii) The acquisition will not result in a default under
the financial or other covenants hereunder: (aa) at the time
such acquisition is consummated after giving effect to such
acquisition; and (bb) on a projected basis based upon
reasonable projections after giving effect to such
acquisition. In addition, the acquisition will not result in
a default or event of default under any Guaranty or any
Subsidiary Security Agreement.
(c) For purposes of this Agreement, the term "Permitted
Acquisition" shall mean any acquisition made in accordance with the
foregoing subparagraph (b).
(d) The Borrower shall, as promptly as practicable after
consummation of any Permitted Acquisition, take all such action as
may be required to cause any Subsidiary acquired in connection
therewith, or resulting therefrom, to become an Included Subsidiary
hereunder (except to the extent that any obligations incurred or
assumed in connection with the acquisition prohibit such action).
4.05 Sale or Pledge of Property. Neither the Borrower nor any
Subsidiary will sell, lease or otherwise dispose of or transfer any of its
interests in any of its assets except in the ordinary course of business
(except for transfers permitted in Section 4.03 hereof).
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<PAGE>
4.06 Dividends and Distributions. Neither the Borrower nor
any Subsidiary which is not wholly owned by the Borrower will pay
or declare any dividends on or make any other distribution with
respect to any class of its stock whether in cash or in property. In addition,
neither the Borrower nor any Subsidiary shall redeem, purchase or otherwise
acquire any stock or any outstanding securities of the Borrower or any
Subsidiary (other than redemptions of the Subordinated Notes in accordance
with the terms thereof). Notwithstanding the foregoing: (a) the Borrower may
pay a stock dividend or declare a stock split which does not result in a
reduction in the total value of the Borrower's stockholders' equity
determined immediately prior to the stock dividend or stock split; and (b)
each of the Borrower's Subsidiaries may pay dividends and distributions to
the Borrower or any Included Subsidiary.
4.07 Pension Plan Funding Deficiency. Neither the Borrower nor any
Subsidiary shall incur or suffer to exist any material accumulated funding
deficiency within the meaning of the Employee Retirement Income Security Act
of 1974 or incur any material liability to the Pension Benefit Guaranty
Corporation (or any successor) established thereunder in connection with any
Plan.
4.08 Transactions with Affiliates. The Borrower and its Subsidiaries
shall not directly or indirectly enter into any transaction with any affiliate
other than in the ordinary course and pursuant to the reasonable business
requirements of the Borrower or such Subsidiaries. Any such transaction shall
be upon fair and reasonable terms and provisions no less favorable to the
Borrower or any such Subsidiary than it could have obtained in a comparable
arm's-length transaction with a person who is not an affiliate of the
Borrower or such Subsidiary.
4.09 Financial Covenants. The Borrower and its Subsidiaries shall
comply at all times with the following financial covenants. All accounting
terms not specifically defined herein shall be construed in accordance with
generally accepted accounting principles as in effect at the time in question
on a basis consistently applied.
(a) The Borrower's Debt Service Coverage Ratio shall be
the ratio of: (i) the Borrower's and all Subsidiaries'
earnings before interest, taxes, lease obligations, depreciation and
amortization (including, without limitation, any income tax credits
utilized) on a consolidated basis for the four preceding fiscal
quarters to (ii) the sum of all principal, interest and lease
obligations (excluding principal payable hereunder, principal payable
under the Note Agreement (as defined herein) and principal payable
under Permitted Acquisition Debt (including, without limitation,
Permitted Acquisition Debt incurred in connection with the
Borrower's acquisition of NIK Public Safety, Inc. and Defense
Technology
17
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Corporation of America) during the one year period
following the acquisition to which such debt relates) payable by the
Borrower or any such subsidiary during such fiscal quarters.
The Debt Service Coverage Ratio shall be computed quarterly, so long
as the Indebtedness to the Bank is outstanding, commencing December
31, 1996, and each March 31, June 30, September 30 and December 31
thereafter and shall not be less than 1.3 to 1.
(b) The Borrower's Interest Coverage Ratio shall be the
ratio of: (i) the Borrower's and all Subsidiaries' earnings
before interest, taxes, depreciation and amortization (including,
without limitation, any income tax credits utilized) on a
consolidated basis for the four preceding fiscal quarters to (ii) the
sum of all interest payable by the Borrower or any such subsidiary
during such fiscal quarters. The Interest Coverage Ratio shall be
computed quarterly, so long as the Indebtedness to the Bank is
outstanding, commencing December 31, 1996, and each March 31, June
30, September 30 and December 31 thereafter and shall not be less
than 2.0 to 1.
(c) The ratio of the Borrower's consolidated current
assets to consolidated current liabilities shall at no time be less
than 2.0 to 1. "Current assets" shall mean the aggregate amount of
all assets of an entity that may properly be classified as current
assets in accordance with generally accepted accounting principles,
not including, however, (i) any deferred assets, (ii) common stock of
any publicly traded corporation if the Borrower and its Subsidiaries
own in the aggregate more than 5% of such corporation's issued
and outstanding shares of common stock, (iii) any prepaid items such
as insurance, taxes, interest, commissions, rents, royalties and
similar items, and (iv) any amounts owed to such entity by officers,
directors, employees, stockholders or subsidiaries or other
affiliates of such entity. "Current liabilities" shall mean all
indebtedness of an entity payable on demand or within a period of one
year from the date of the creation thereof (excluding any
indebtedness renewable or extendible at the option of the debtor,
absolutely or conditionally, for a period or periods extending to
more than one year after such date, whether or not actually so
renewed or extended) plus current maturities of long term debt
(excluding debt described on Schedule 4.09 attached hereto).
(d) The Borrower and the Subsidiaries shall not allow the
ratio of Total Liabilities to Tangible Net Worth for the Borrower and
its Subsidiaries to exceed 1.0 to 1. For purposes of this Agreement,
the terms "Tangible Net Worth" and "Total Liabilities" shall have the
following meanings:
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(i) "Tangible Net Worth" shall mean the
aggregate of the following for the Borrower and the
Subsidiaries on a consolidated basis:
(aa) The gross book value as shown
by the books of the Borrower and its Subsidiaries
of all real and personal property excluding: (1)
all intangible personal property including, without
limitation, licenses, patents, patent applications,
copyrights, trademarks, trade names, goodwill,
going concern value, experimental or organizational
expense, treasury stock and unamortized discount;
and (2) all investments in, loans to or amounts due
from any Subsidiary, shareholder, officer,
director, employee or other affiliate;
less the sum, without duplication, of the following
items (bb), (cc) and (dd);
(bb) all reserves for depletion,
depreciation and amortization of properties as
shown by the books of the Borrower and its
Subsidiaries and all other proper reserves which in
accordance with generally accepted accounting
principles should be set aside in connection with
the businesses of the Borrower and its
Subsidiaries;
(cc) all obligations which under
generally accepted accounting principles are shown
or should be shown on the balance sheet as
liabilities (excluding, however, obligations that
have been subordinated to the Indebtedness and, if
required by the Bank, to any applicable guaranty
thereof); and
(dd) all increases in book value
of any real estate or tangible personal property of
the Borrower or its Subsidiaries attributable to a
reappraisal or other write-up of assets (other than
reappraisals or write-ups made in connection with
Permitted Acquisitions or otherwise required by
generally accepted accounting principles).
(ii) "Total Liabilities" shall mean: (aa) any
indebtedness or liability for borrowed money and any other
indebtedness or liability evidenced by notes, debentures,
bonds or similar obligations; and (bb) all other obligations
which under generally accepted accounting principles are
shown or should be shown on the balance sheet as
liabilities. Total Liabilities shall not, however, include
obligations that have been
19
<PAGE>
subordinated to the Indebtedness and, if required by the
Bank, to any applicable guaranty thereof.
4.10 Subordinated Debt. The Borrower represents that it has delivered
to the Bank a true and correct copy of that certain Convertible Subordinated
Note Purchase Agreement (as amended or restated from time to time, the "Note
Agreement") dated April 30, 1996, together with any and all amendments thereto.
The Borrower agrees that it shall not: (a) make any payment under the Note
Purchase Agreement in violation of the subordination provisions of Section 5
thereof; or (b) modify the Note Agreement without the Bank's prior written
consent. The Borrower agrees that the Indebtedness shall constitute Senior
Indebtedness within the meaning of the Note Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and so long as this Agreement
is in effect or any part of the Indebtedness remains unpaid, shall continue to
represent and warrant at all times, that:
5.01 The Borrower and Subsidiaries. The Borrower and the Subsidiaries
are corporations duly incorporated and validly existing under and by virtue of
their respective states of incorporation. Each is duly licensed and qualified
in all other states and jurisdictions wherein the nature of the business
transacted by it or the ownership of its properties makes such licensing or
qualification as a foreign corporation necessary, if any except where the
failure to be so qualified would not have a material adverse effect on the
Borrower and its Subsidiaries taken as a whole. Each of the Borrower and its
Subsidiaries holds in full force and effect all material permits, licenses and
franchises necessary for it to carry out its operations in conformity with all
applicable laws and regulations.
5.02 Authorization, Conflicts and Validity. The execution and
delivery of this Agreement and each of the other Loan Documents to which the
Borrower is or will be a party and the performance by the Borrower of all of
its obligations thereunder: (a) have been duly authorized by all requisite
corporate action; (b) will not violate or be in conflict with (i) any material
provision of applicable law (including, without limitation, any applicable
usury or similar law); (ii) any material order, rule or regulation of any
court or other governmental authority; (iii) any material provision of its
certificate of incorporation or bylaws, including any amendments thereto, or
any resolution with continuing effect adopted by its Board of Directors or
shareholders; or (iv) any material provision of any shareholders'
agreement or trust respecting securities of its issue or related rights; (c)
will not violate, be in conflict with, result in a breach of or constitute a
default (with or without the giving of notice or the passage of
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<PAGE>
time or both) under any material instrument, indenture, agreement or other
obligation to which it is a party or by which it or any of its assets and
properties is or may be bound or subject; and (d) except as specifically
contemplated by this Agreement or any other Loan Documents, will not result in
the creation or imposition ofany lien, charge or encumbrance of any nature upon
any of its assets and properties. The Loan Documents to which the Borrower is
or will be a party when executed and delivered will be legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms and provisions.
5.03 Consents. Except as otherwise disclosed on Schedule 5.03
attached hereto, no consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority or other person
(including, without limitation, the shareholders of the Borrower) is required
as a condition precedent, concurrent or subsequent to or in connection with
the due and valid execution, delivery and performance by the Borrower of this
Agreement or any other Loan Document to which it is or will be a party, or the
legality, validity, binding effect or enforceability of any of the respective
representations, warranties, covenants and other terms and provisions thereof.
Each franchise, license, certificate, authorization, approval or consent from
any governmental authority material to the present conduct of the business and
operations of the Borrower or its Subsidiaries, or required for the
acquisition, ownership, improvement, operation or maintenance by it of any
material portion of the assets and properties it now owns, operates or
maintains, has been obtained and validly granted, is in full force and effect
and constitutes valid and sufficient authorization therefor.
5.04 Financial Statements. The Borrower has heretofore made available
to the Bank financial statements as of and for the fiscal year ending December
31, 1995, and for the period ending September 28, 1996. Those financial
statements fairly present the financial condition of the Borrower and the
Subsidiaries taken as a whole and the results of their operations as of the
dates thereof. Those financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except for changes, if any, stated in the related
accountants' reports.
5.05 Changes in Financial Condition. Since September 28, 1996, there
has been no material adverse change in the assets or the financial condition
of the Borrower or its Subsidiaries taken as a whole from that set forth or
reflected in the financial statements as of that date. The Borrower and its
Subsidiaries are current in the payment of all of their debts and performance
of all of their material obligations.
5.06 Legal or Administrative Proceedings. Except as otherwise
disclosed on Schedule 5.06 attached hereto, there are no
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<PAGE>
material actions, suits, investigations or proceedings by any person or entity
pending or to the best knowledge of the Borrower threatened against the
Borrower or any Subsidiary or to which they are a party involving the
possibility of any judgment or liability not fully covered by insurance or by
adequate reserves set up onthe books of the Borrower or the Subsidiaries.
5.07 Assets. Except as otherwise disclosed on Schedule 5.07 attached
hereto, the Borrower and the Subsidiaries have good, marketable title to all
of their assets reflected in the financial statements dated September 28,
1996, and such assets are free and clear of all liens, charges and
encumbrances except as shown on those financial statements.
5.08 Losses. Since September 28, 1996, no material loss, damage,
destruction or taking of any of the physical properties of the Borrower or any
of its Subsidiaries has occurred which has not been fully restored or
replaced, or which is not fully covered by insurance, and neither the property
nor business of the Borrower and its Subsidiaries, taken as a whole, has been
adversely affected in any substantial way as the result of any accident,
strike, lockout, combination of workmen, embargo, riot, war, act of God or
public enemy. Neither the Borrower, any Subsidiary nor any of their officers
are aware of any material adverse fact concerning the conditions or future
prospects of the Borrower or any Subsidiary which has not been fully disclosed
in writing to the Bank.
5.09 Corporate Restrictions. Except as otherwise disclosed on
Schedule 5.09 attached hereto, neither the Borrower nor any Subsidiary is a
party to any contract or subject to any charter or other corporate restriction
which would materially and adversely affect its property or business, or its
ability to perform its obligations under the Loan Documents.
5.10 Taxes. The Borrower and the Subsidiaries have filed all federal
and state tax returns which are required to be filed, and have paid all taxes
as shown on the returns and on all assessments received by them to the extent
that the taxes have become due. Proper and accurate amounts have been withheld
by the Borrower and its Subsidiaries from their respective employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies.
5.11 Default. There exists as of the date hereof no Default or Event
of Default.
5.12 Other Representations. All warranties and representations of
the Borrower or any of the Subsidiaries contained in any
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of the Loan Documents are true and accurate in all material respects.
5.13 Subsidiaries. As of the date hereof, the Borrower owns no
Subsidiaries other than NIK Public Safety, Inc., Defense Technology Corporation
of America and Armor Holdings Properties, Inc. The Borrower owns 100% of the
outstanding common stock of its Subsidiaries. The only persons or entities in
which the Borrower owns an equity interest are the Subsidiaries. No person or
entity holds or is entitled to obtain any other equity interest in the
Subsidiaries.
5.14 ERISA. No Plan has incurred any material accumulated funding
deficiency within the meaning of the Employee Retirement Income Security Act
of 1974, and neither the Borrower nor any Subsidiary has incurred any material
liability to the Pension Benefit Guaranty Corporation (or any successor) in
connection with any Plan.
5.15 Purpose of the Borrower. The Borrower does not own any "margin
security" within the meaning of Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System. None of the proceeds of the loan by
the Bank to the Borrower will be used for the purpose of purchasing or
carrying any margin security or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin
security or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of Regulation U, as now in effect or as it
may hereafter be amended. Neither the Borrower nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or
any Loan Document to violate Regulation U or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be amended.
5.16 Payment of Loan Proceeds. The Bank is authorized to disburse all
proceeds of any loan to the Borrower hereunder directly to or upon the order
of the president, vice president--finance, vice president--corporate
development or controller of the Borrower without looking into the use of
those proceeds. The president of the Borrower as of the date hereof is
Jonathan Spiller, the vice president--finance of the Borrower as of the date
hereof is Carol Burke, the vice president--corporate development of the
Borrower as of the date hereof is Robert Schiller and the controller of the
Borrower as of the date hereof is _____________________. The Bank may rely on
the fact that each continues to serve in that capacity until the Bank receives
written notice to the contrary.
5.17 Solvency. After giving effect to the full funding of the loans
contemplated herein, the Borrower and each Subsidiary
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<PAGE>
will be solvent. "Solvent" shall mean, when used with respect to any person or
entity, that: (a) such person or entity does not intend to incur, and does not
believe and has no reason to believe that it will incur, debts beyond its
ability to pay as they become due; (b) the sum of such person's or entity's
assets is greater than all of such person's or entity's liabilities at a fair
valuation; (c) such person or entity has sufficient cash flow to enable it to
pay its debts as they become due; and (d) such person or entity does not have
unreasonably small capital to carry on such person or entity's business as
theretofore operated and all businesses in which such person or entity is about
to engage. "Fair valuation" is intended to mean that value which can be
obtained if the assets are sold within a reasonable time in arm's-length
transactions in an existing and not theoretical market.
5.18 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
ARTICLE VI
EVENTS OF DEFAULT
6.01 Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder:
(a) if the Borrower defaults in the payment of any
principal, interest or other amount under the Note or the Acceptance
Agreement when the same shall become due, either by the terms thereof
or otherwise as provided herein and such default continues for a
period of ten days thereafter; or
(b) if the Borrower or any Subsidiary defaults: (i) in any
payment of principal of or interest on any other obligation beyond
any period of grace provided with respect thereto and such default
results in the acceleration of the obligation in question or (ii) in
the performance or observance of any other agreement, term, or
condition contained in any agreement under which any such obligation
is created if the effect of such default is to cause, or permit the
holder or holders of such obligation (or trustee on behalf of such
holder or holders) to cause, such obligation to become due prior to
its stated maturity, except for obligations disputed in good faith if
the Bank is promptly notified thereof and, if required by generally
accepted accounting principles, funded reserves are established or
(c) if any statement, representation or warranty made by the
Borrower or any Subsidiary herein or in any writing now or hereafter
furnished in connection with or pursuant to the Loan Documents or in
connection with any audit shall be false in any material respect; or
if the Borrower or any Subsidiary
24
<PAGE>
omits or fails to disclose within 10 days any substantial contingent
or liquidated liabilities, or any material adverse change in facts
previously disclosed by any statement, representation, certificate
or warranty to the Bank; or
(d) if the Borrower or any Subsidiary defaults in the
performance or observance of any covenants contained in Section 4.09
hereof; or
(e) (i) if any Event of Default occurs under any Loan
Document; or (ii) if the Borrower or any Subsidiary defaults in the
performance or observance of any other agreement, covenant, term or
condition contained herein or in any other Loan Document and such
default shall not have been remedied within 30 days after written
notice thereof is sent by the Bank to the Borrower except, however,
that an Event of Default shall not be deemed to have occurred if the
Borrower or the Subsidiary, as the case may be, commences to cure
such default within such 30-day period and the Borrower or such
Subsidiary, as the case may be, completes such cure within 60 days
after such notice; or
(f) if any Included Subsidiary disputes, attempts to
avoid or indicates its intent to seek to avoid its obligations
under any Guaranty; or
(g) if the Borrower or any Subsidiary makes an
assignment for the benefit of creditors or is generally not
paying its debts as they become due; or
(h) if any order, judgment or decree is entered under the
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction adjudicating the Borrower or any Subsidiary,
bankrupt or insolvent; or
(i) if the Borrower or any Subsidiary petitions or applies
to any tribunal for, or consents to, the appointment of a trustee,
receiver, custodian, liquidator, or similar official, of the Borrower
or any Subsidiary or of any substantial part of the assets of the
Borrower or any Subsidiary, or commences a voluntary case under the
Bankruptcy Code of the United States or any proceedings relating to
the Borrower or any Subsidiary, under the bankruptcy, insolvency, or
moratorium law of any other jurisdiction, whether now or hereafter in
effect; or
(j) if any such petition or application is filed, or any
such proceedings are commenced, against the Borrower or any
Subsidiary and if the Borrower or the Subsidiary by any act indicates
its or his approval thereof, consent thereto, or acquiescence
therein, or an order is entered in an involuntary
25
<PAGE>
case under the Bankruptcy Code of the United States, or an order,
judgment or decree is entered appointing any such trustee, receiver,
custodian, liquidator, or similar official, or approving the petition
in any proceedings, and such order remains unstayed and in effect for
more than 60 days; or
(k) if any order is entered in any proceedings against
the Borrower or any Subsidiary decreeing the dissolution or
split-up of the Borrower or any Subsidiary; or
(l) if any Event of Default occurs under the Note
Agreement.
6.02 Default. A "Default" shall be deemed to have occurred hereunder
if any event or condition occurs which would constitute an Event of Default
hereunder upon the satisfaction of any requirement for notice or passage of
time in connection with such event or condition.
6.03 Remedies. If any Default shall occur, any obligation of the Bank
to make advances hereunder or under any Loan Document, or to create
Acceptances, shall be terminated without notice to the Borrower. In addition,
if any Event of Default shall occur, the Bank may by notice to the Borrower,
effective upon dispatch, declare the entire unpaid principal amount then
outstanding under the Loan Documents, all interest accrued and unpaid under
the Loan Documents and all other Indebtedness of the Borrower to the Bank
under this Agreement or any of the other Loan Documents to be forthwith due
and payable. Thereupon, the then outstanding principal amount under the Loan
Documents, all such accrued interest and all such other Indebtedness shall
become and be forthwith due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by the
Borrower, and the Bank may immediately enforce payment of all such amounts and
exercise any or all of the rights and remedies of the Bank under this
Agreement and other Loan Documents, including without limitation the right to
resort to any or all collateral securing any obligations under the Loan
Documents and exercise any or all of the rights of a secured party pursuant to
the Uniform Commercial Code of Florida and other applicable similar statutes
in other jurisdictions.
6.04 Termination of Rights to Advances; Automatic Acceleration.
Notwithstanding anything herein to the contrary, (a) the Borrower's right,
if any, to obtain any additional advances under the Loan Documents shall
automatically terminate upon the initiation against the Borrower or any
Subsidiary of any proceeding under the Federal Bankruptcy Code, or upon the
occurrence of any Event of Default described in subparagraphs (g), (h), (i),
(j), or (k) of Section 6.01, and (b) all Indebtedness shall automatically be
and become immediately due and payable upon the occurrence of
26
<PAGE>
any Event of Default described in subparagraphs (h), (i), or (j) of Section
6.01.
ARTICLE VII
MISCELLANEOUS
7.01 Expenses. The Borrower agrees to pay, and save the Bank
harmless against liability for the payment of, all reasonable out-of-pocket
expenses arising in connection with this transaction (including any renewals or
modifications relating hereto), including any state documentary stamp taxes or
other taxes (including interest and penalties, if any) which may be determined
to be payable in respect to the execution and delivery of any Loan Documents
executed in connection with this Agreement or any such renewal or modification,
and the reasonable fees and expenses of the Bank's counsel. The Borrower
acknowledges that it has participated with the Bank in establishing the
structure of this transaction and that it has independently determined the
amount of documentary stamp and other taxes due in connection herewith. The
Borrower has not relied upon representations of the Bank or its counsel in
calculating the amount of such taxes, and the Borrower shall be liable for any
additional taxes (including interest and penalties) which may be due in
connection with this transaction or any renewals hereof. If an Event of Default
shall occur, the Borrower shall also pay all of the Bank's costs of collection
including reasonable Bank employee travel expenses, court costs and reasonable
fees of attorneys and legal assistants (whether incurred in connection with
trial or appellate proceedings). The Borrower authorizes the Bank to make
advances under the Note and to debit its deposit accounts to pay all expenses.
7.02 Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by the Borrower in
connection herewith shall survive the execution and delivery of the Loan
Documents.
7.03 Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. The Borrower shall not be entitled to
assign its rights hereunder. The Bank may, with the Borrower's consent, which
shall not be unreasonably withheld or delayed, assign all or part of its rights
hereunder or grant participations herein. The Bank may disclose to any such
assignee or participant (or any prospective assignee or participant) such
information concerning the Borrower and its affiliates as the Bank deems
appropriate.
7.04 No Third Party Beneficiaries. The Included Subsidiaries are not
third party beneficiaries to this Loan Agreement and, in addition to the
rights of the Bank set forth in the Guaranties, the Bank, with the concurrence
of the Borrower, shall have the right
27
<PAGE>
without impairing the liability of the Included Subsidiaries to alter and amend
this Loan Agreement without notice to or consent by the Included Subsidiaries.
7.05 Notices. All communications, notices or demands provided for
hereunder or under any other Loan Document to which the Borrower is a party
shall be sent by first class mail, by courier, by hand or by certified mail as
follows or to such other address with respect to any party as such party shall
notify the others in writing:
To the Bank: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, Florida 32202
Attn: Corporate Banking Group
To the Borrower: Armor Holdings, Inc.
191 Nassau Place Road
Yulee, Florida 32097
Attn: Robert Schiller
With a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn: Robert L. Lawrence, Esq.
Each such communication, notice or demand shall be deemed given: (i) when
deposited in the mail with proper postage affixed if sent by mail; or (ii)
when actually delivered to the appropriate address if sent by courier or by
hand.
7.06 Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Florida.
7.07 Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.
7.08 Counterparts. This Agreement may be executed simul-
taneously in several counterparts. Each counterpart shall be
deemed an original.
7.09 Remedies Cumulative. All rights and remedies of the Bank
hereunder are cumulative and in addition to any rights and remedies which the
Bank may have under the laws of Florida. The Bank's exercise of any one
right or remedy against one party hereto will not deprive the Bank of any
right or remedy against that party or any other parties hereto. No right,
power or remedy conferred upon or reserved to the Bank under this Agreement or
any other of the Loan Documents is exclusive of any other right, power or
remedy
28
<PAGE>
in any of the Loan Documents, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any
other right, power and remedy given hereunder or under any other Loan
Documents, or now or hereafter existing at law, in equity or by statute.
7.10 Delay or Omission. No delay or omission of the Bank to
exercise any right, power or remedy under any of the Loan Documents or
accruing upon any Event of Default shall exhaust or impair any such right,
power or remedy or shall be construed to waive any such Event of Default or to
constitute acquiescence therein. Every right, power and remedy given to the
Bank under any of the Loan Documents may be exercised from time to time and as
often as may be deemed expedient by the Bank.
7.11 No Waiver of One Default to Affect Another. No waiver of any
Default or Event of Default hereunder shall extend to or affect any subsequent
Default or Event of Default or any other Default or Event of Default then
existing, or impair any rights, powers or remedies consequent thereon.
7.12 Changes. No term of any Loan Document may be changed, waived,
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
7.13 Severability. If any portion of any Loan Document is declared
void by any court as illegal or against public policy, the remainder of the
Loan Documents in question shall continue in full effect.
7.14 Lost or Damaged Note. Upon receipt by the Borrower of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
the Note (the "Lost Note") and of an indemnity agreement reasonably
satisfactory to the Borrower, the Borrower will make and deliver to the Bank a
new Note of like tenor, date and principal amount in lieu of the Lost Note.
7.15 Merger. This Agreement supersedes and replaces any
commitment letter relating to the Indebtedness.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
ARMOR HOLDINGS, INC.
By___________________________________
Its________________________________
29
<PAGE>
BARNETT BANK, N.A.
By___________________________________
Its________________________________
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _______ day of _______________, 1996, by _______________________,
the _________________________ of Armor Holdings, Inc., on behalf of the
corporation, in Camden County, Georgia.
------------------------------------
Notary Public, State and County
Aforesaid
My Commission Expires:
(Notary Seal)
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _______ day of _______________, 1996, by _____________________,
the _________________________ of Barnett Bank, N.A., on behalf of the bank, in
Camden County, Georgia.
------------------------------------
Notary Public, State and County
Aforesaid
My Commission Expires:
(Notary Seal)
30
<PAGE>
PROMISSORY NOTE
$10,000,000.00 November 14, 1996
Camden County, Georgia
FOR VALUE RECEIVED, the undersigned, ARMOR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of BARNETT
BANK, N.A. (the "Lender"), whose address is 50 North Laura Street,
Jacksonville, Florida 32202, the outstanding principal balance of this Note,
together with accrued interest hereunder, in accordance with the terms set
forth herein. This Note shall be governed by the following provisions:
I. Advances. The Borrower and the Lender are parties to a Loan
Agreement (as amended or restated from time to time, the "Loan Agreement") of
even date herewith governing borrowings under this Note. The Borrower may
borrow, repay and reborrow principal amounts hereunder on a revolving basis
from the date hereof through November 13, 1997, subject to the terms contained
herein and in the Loan Agreement. Notwithstanding the foregoing, the
outstanding principal balance hereof shall not exceed $10,000,000.00 (or such
lesser amount as is set forth in the Loan Agreement) at any one time.
II. Payments.
A. The Borrower shall pay all accrued interest hereunder on
the first day of each calendar month during the term hereof commencing on
December 1, 1996, and continuing on the first day of each calendar month
thereafter.
B. The Borrower shall pay all outstanding principal
hereunder, together with all then accrued and unpaid interest, on
November 14, 1997.
III. Interest.
A. Except as otherwise provided herein, interest shall
accrue on the outstanding principal balance of this Note at a rate equal to
the Prime Rate less one-quarter of one percent (0.25%) per annum. The Prime
Rate shall be the interest rate announced from time to time by Barnett Banks,
Inc. as its prime rate. The Prime Rate is a reference rate and is not
necessarily the lowest or best rate the Lender may from time to time charge
its customers. For purposes of this Note, any change in the Prime Rate shall
be effective as of the Lender's opening of business on the effective date
of the change.
B. Notwithstanding the foregoing, the Borrower may elect to
pay interest on all or a portion of the outstanding principal hereunder for
periods of 30, 60 or 90 days (each, an "Interest Period") at an Adjusted Libor
Rate (as defined herein). The Borrower may make such election by delivering
written notice
<PAGE>
thereof to the Lender at least two business days before the commencement of
the Interest Period. The notice shall state: (i) the date upon which the
Interest Period shall commence (which shall not be a Saturday, Sunday or legal
holiday); (ii) whether such Interest Period shall be for 30, 60 or 90 days;
and (iii) the aggregate principal amount which shall bear interest at the
Adjusted Libor Rate (which amount is referred to herein as the "Libor
Amount"). If the Borrower duly elects for interest to accrue hereunder at the
Adjusted Libor Rate, then interest shall accrue at the Adjusted Libor Rate on
the applicable Libor Amount during the applicable Interest Period. Any
election hereunder shall be irrevocable during the term of the Interest
Period, and no Interest Period elected hereunder shall extend beyond November
14, 1997. The Borrower shall not be entitled to have more than ten interest
rates in effect at any one time during the term of this Note. Each Libor
Amount shall be in an increment of $50,000, and no Libor Amount shall be less
than $250,000. The Adjusted Libor Rate shall be a daily rate that is two and
one-quarter percent (2.25%) per annum over the Libor Rate (as defined herein).
The Libor Rate for each Interest Period shall mean the offered rate for
deposits in United States dollars in the London Interbank market for period
equal to the applicable Interest Period which appears on the Reuters Screen
LIBO Page as of 11:00 a.m. (London time) on the day that is two London Banking
Days (as defined herein) preceding the first Banking Business Day (as defined
herein) of the Interest Period. If at least two such offered rates appear on
the Reuters Screen LIBO Page, the rate will be the arithmetic mean of such
offered rates. The Lender may, in its discretion, use any other publicly
available index or reference rate showing rates offered for United States
dollar deposits in the London Interbank market as of the applicable date. In
addition, the Lender may, in its discretion, use rate quotations for monthly
periods in lieu of quotations for substantially equivalent daily periods. For
purposes hereof, the following terms shall have the following meanings:
(i) "Banking Business Day" shall mean each day
other than a Saturday, a Sunday or any holiday on which commercial
banks in Jacksonville, Florida are closed for business.
(ii) "London Banking Day" shall mean each day other
than a Saturday, a Sunday or any holiday on which commercial banks in
London, England are closed for business.
C. All interest hereunder shall be calculated on the basis
of a 360-day year (based upon the actual number of days elapsed).
D. The total liability of the Borrower and any endorsers or
guarantors hereof for payment of interest shall not exceed any limitations
imposed on the payment of interest by
2
<PAGE>
applicable usury laws. If any interest is received or charged by any holder
hereof in excess of that amount, the Borrower shall be entitled to an
immediate refund of the excess.
E. Upon the occurrence of an Event of Default hereunder,
interest shall accrue at the Default Rate hereinafter set forth notwithstanding
the provisions of this Section.
IV. Prepayment. The Borrower shall be entitled to prepay
this Note in whole or in part at any time without penalty. Notwithstanding the
foregoing and any other contrary provision set forth herein or in the Loan
Agreement: (a) the Borrower shall not be permitted to prepay any Libor Amount
prior to the expiration of any applicable Interest Period; and (b) any such
Libor Amounts shall not be repaid or reborrowed on a revolving basis during any
applicable Interest Period.
V. Application of Payments. All payments hereunder shall be
applied first to the Lender's costs and expenses, then to fees authorized
hereunder or under the Loan Agreement, then to interest and then to principal.
VI. Default. Any Event of Default under the Loan Agreement shall be
considered an "Event of Default" hereunder. If any Default (as defined in the
Loan Agreement) or any Event of Default shall occur, the Lender may, without
notice to the Borrower, refuse to advance any more funds hereunder or under
the Loan Agreement. In addition, if any Event of Default shall occur, the
Lender may, in the manner set forth in the Loan Agreement, declare the
outstanding principal of this Note, all interest thereon and all other amounts
payable under this Note or otherwise to be forthwith due and payable.
Thereupon, this Note, all such interest and all such amounts shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower.
From and after the occurrence of an Event of Default, all outstanding
principal hereunder, and accrued and unpaid interest and other charges
hereunder, shall bear interest at the rate of either two percent (2%) per
annum above the Prime Rate until paid or, if such rate is usurious under the
laws of Florida, then at the highest legal rate permissible thereunder (the
"Default Rate").
VII. Expenses. All parties liable for the payment of this Note agree
to pay the Lender all reasonable costs incurred by it in connection with the
collection of this Note. Such costs include, without limitation, reasonable
fees for the services of counsel and legal assistants employed to collect this
Note, whether or not suit be brought, and whether incurred in connection with
collection, trial, appeal or otherwise. All such parties further agree to
indemnify and hold the Lender harmless against liability for the payment of
state documentary stamp taxes, intangible taxes or other taxes (including
interest and penalties, if any), excluding income
3
<PAGE>
or service taxes of the Lender, which may be determined to be payable with
respect to this transaction.
VIII. Substitute Rate. Anything herein to the contrary
notwithstanding, if within two business days prior to the first day of any
Interest Period during which interest will accrue at the Adjusted Libor Rate
the Lender is not, for any reason whatsoever, able to obtain rates to enable
it to determine the Adjusted Libor Rate, the Lender shall give the Borrower
prompt notice thereof. The Note shall thereafter accrue interest at the rate
set forth in Subsection 3(a) hereof.
IX. Change of Law. Notwithstanding any other provision herein, if any
applicable law, rule or regulation or the interpretation or administration
thereof makes it unlawful for the Lender to (i) honor any commitment it may
have hereunder to accrue interest at the Adjusted Libor Rate, then such
commitment shall terminate, or (ii) maintain any accrual of interest at the
Adjusted Libor Rate, then interest shall immediately upon notice from the
Lender accrue at the rate set forth in Subsection 3(a) hereof.
X. Miscellaneous. The Borrower shall make all payments hereunder in
lawful money of the United States at the Lender's address set forth herein
or at such other place as the Lender may designate in writing. The remedies of
the Lender as provided herein shall be cumulative and concurrent, and may be
pursued singly, successively or together, at the sole discretion of the Lender
and may be exercised as often as occasion therefor shall arise. No act of
omission or commission of the Lender, including specifically any failure to
exercise any right, remedy or recourse, shall be effective, unless set forth
in a written document executed by the Lender, and then only to the extent
specifically recited therein. A waiver or release with reference to one event
shall not be construed as continuing, as a bar to, or as a waiver or release
of any subsequent right, remedy or recourse as to any subsequent event. This
Note shall be construed and enforced in accordance with Florida law and shall
be binding on the successors and assigns of the parties hereto. The term
"Lender" as used herein shall mean any holder of this Note. The Lender may, at
its option, round any or all fractional amounts under Section 3 upwards to the
next higher 1/100 of 1%.
The Borrower hereby: (i) waives demand, notice of demand,
presentment for payment, notice of nonpayment or dishonor, protest, notice of
protest and all other notice, filing of suit and diligence in collecting this
Note; (ii) agrees to any substitution, addition or release of any party or
person primarily or secondarily liable hereon; and (iii) agrees that the
Lender shall not be required first to institute any suit, or to exhaust his,
their or its remedies against the Borrower or any other person or party to
4
<PAGE>
become liable hereunder, or against any collateral in order to enforce payment
of this Note.
ARMOR HOLDINGS, INC.
By___________________________________
Its__________________________________
(CORPORATE SEAL)
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _____ day of November, 1996, by ________________________ the
_____________________ of Armor Holdings, Inc., on behalf of the corporation,
in Camden County, Georgia.
------------------------------
Notary Public, State and County
aforesaid
Print Name: __________________
My Commission Expires:
[Notary Seal]
5
<PAGE>
ACCEPTANCE CREDIT AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, between ARMOR
HOLDINGS, INC., a Delaware corporation (the "Borrower"), and BARNETT BANK,
N.A. (the "Bank").
RECITALS
The Borrower and the Bank have entered into a Loan Agreement (as
amended or restated from time to time, the "Loan Agreement") of even date
herewith. The Loan Agreement contemplates that the Bank will establish a
bankers acceptance facility for the Borrower. This Agreement sets forth the
terms of the facility. All capitalized terms used herein shall have the
meanings set forth in the Loan Agreement unless otherwise defined herein.
NOW, THEREFORE, for good and valuable consideration, the parties
agree as follows:
I. The Borrower hereby requests that the Bank from time to time
accept, for the Borrower's account, drafts in United States Dollars drawn
on the Bank by the Borrower (each a "Draft"). However, not more than
$5,000,000 in aggregate Acceptances (as defined herein) (or such lesser amount
as is set forth in the Loan Agreement) shall be outstanding at any one time.
The parties specifically agree as follows:
(a) The Borrower may from time to time prior to 12:00 noon
on any business day request a quote from the Bank of the All-In Rate
(as defined herein) for an acceptance of Drafts with a certain
maturity and certain aggregate amount (each an "Acceptance"). The
Bank will quote the All-In Rate in effect at the time. The Borrower
immediately thereafter will confirm to the Bank by telephone whether
the Borrower wishes for the Bank to create the Acceptance at the
quoted rate, and, if so, the Bank will, subject to the terms hereof,
issue the Acceptance at the quoted rate. The "All-In Rate" means the
total cost to the Borrower of obtaining the Acceptance and, if
applicable, discounting the Acceptance to the Bank. The All-In Rate
shall include all transaction costs, the applicable discount (which
shall be calculated on the basis of a 360 day year), any commissions
and any and all other charges relating thereto.
(b) Upon the creation of an Acceptance hereunder, the
Borrower will sell the Acceptance at a discount to the Bank. The Bank
shall thereafter deduct the amount of the All-In Rate from the face
amount of the Acceptance and remit the balance to the Borrower. The
Borrower shall pay the full face amount of each Acceptance to the
Bank without deduction in immediately available funds at the
Bank's acceptance office, in United States currency, not later
than the maturity date of the Acceptance. If the Acceptance is not
payable at the
<PAGE>
Bank's acceptance office, the Borrower shall make such payment in
time to reach the place of payment not later than the maturity date.
The Borrower agrees that, as more fully set forth in the Loan
Agreement, its obligations to pay the face amount as described above
may be satisfied by the Bank's obtaining an advance under the
Note to reimburse the Bank for payment of any Acceptances upon
maturity thereof.
(c) If amounts due the Bank under the prior paragraph are
not paid by the Borrower as an advance under the Note, the Borrower
shall pay the Bank interest at the Stated Rate (as hereafter defined)
on all amounts remaining unpaid by the Borrower from the due date for
payment thereof until paid. Amounts due hereunder shall not be deemed
unpaid if the Bank has debited the Borrower's deposit accounts
therefor or if an advance has been made under the Note therefor and
such payment has not been set aside as a preference or otherwise. The
Borrower hereby authorizes the Bank to debit its accounts or make
advances for purposes of paying amounts due hereunder. For purposes
hereof, the "Stated Rate" shall equal the Default Rate set forth in
the Note.
(d) The Borrower shall indemnify the Bank from and against
any of the following: (i) all claims, losses or damages to the Bank
arising from any intentional or unintentional misrepresentation by
the Borrower herein or in any certificate made in connection with the
creation of any Acceptance; (ii) all claims, losses or damages to the
Bank in connection with any Draft which is improperly executed,
delivered or authorized by the Borrower or its agents, other than
loss or damage resulting from the Bank's negligence or willful
misconduct; and (iii) all costs and expenses (including reasonable
attorneys' fees and legal expenses) of all claims or legal
proceedings arising from any matter included in the foregoing
clauses, including, without limitation, legal proceedings relating to
any court order, injunction, or other process or decree restraining
or seeking to restrain the Bank from paying any amount under the
Acceptance. The Borrower acknowledges that the Bank's losses or
damages may include additional costs or losses incurred by the Bank
as a result of increased reserve requirements with respect to the
Acceptances.
(e) Without limiting any other provision hereof, if any
Acceptance created hereunder does not, for any reason beyond the
control of the Bank, comply at any time with applicable statutes,
regulations, interpretations or other applicable judicial or
administrative interpretations concerning banker's acceptances
and for such reason is not an acceptance of the type described in
paragraph 7 of Section 13 of the Federal Reserve Act or eligible for
purchase by the Federal Reserve Banks, then, promptly upon obtaining
knowledge of such fact,
2
<PAGE>
the Bank shall notify the Borrower thereof. Thereafter, upon demand
by the Bank, the Borrower shall pay to the Bank or any participant
hereunder additional amounts sufficient to indemnify the Bank or any
such participant against any additional costs, as determined in good
faith by the Bank, incurred by the Bank or any such participant
(including, but not limited to, costs resulting from a higher
discount rate, reserve requirements, or additional premium liability
to the Federal Deposit Insurance Corporation) in connection with such
Acceptance resulting from such non-compliance or ineligibility.
II. The Borrower certifies that each Draft which may be designated by
it for acceptance by the Bank hereunder will have not more than 90 days'
sight to run and will arise out of a transaction involving (a) the importation
or exportation of goods, (b) the domestic shipment of goods, or (c) the
domestic storage of readily marketable staples, and will not arise from a
transaction in violation of the U.S. Treasury Foreign Assets Control Act. The
parties acknowledge that each Draft created hereunder will ordinarily have a
term of approximately sixty to ninety days.
III. The Borrower agrees that in the event of any extension of the
maturity or time for presentation of Drafts, Acceptances or documents, or any
other modification of the terms of any transaction hereunder, at the
Borrower's request, this Agreement shall be binding upon any action taken
by the Borrower or any of the Bank's correspondents in accordance with
such extension or other modification.
IV. The Borrower shall request the Bank's acceptance of Drafts by
telephone, in writing, or by facsimile. The Borrower shall deliver completed
Drafts or instruct the Bank to complete one or more Drafts drawn on it (a)
signed in blank by the Borrower or its duly authorized agent and held in
custody of the Bank or its agent for the Borrower's account or (b) to be
signed by persons designated in writing by the Borrower. All requests for
Acceptances will be confirmed in writing and include the certification that
(a) no other financing is concurrent, (b) the transaction has not been
refinanced, and (c) the transaction is in compliance with the requirements of
paragraph 2 above. All confirmation of requests for Acceptances shall be made
on an application which is substantially in the form of Exhibit "A" attached
hereto.
V. All Drafts signed in blank and delivered to the Bank by the
Borrower are to be held for safekeeping by the Bank or its agent, and the Bank
or its agent shall exercise reasonable care in the custody and control of the
Drafts with the same degree of care as the Bank or its agent exercise with
respect to bearer instruments or property of a similar nature.
3
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VI. Each of the following events shall constitute an Event of Default
hereunder: (a) the nonpayment when due of any of the Borrower's obligations
arising hereunder to the Bank; (b) the failure of the Borrower to perform or
observe any of its other terms, covenants, warranties, or representations
contained herein; or (c) any other event constituting an Event of Default
under the Loan Agreement. Upon the occurrence of any Event of Default, the
amount of all outstanding Acceptances, as well as any and all other
liabilities or obligations of the Borrower to the Bank, shall, at the
Bank's option, become due and payable immediately without demand upon or
notice to the Borrower.
VII. The Bank's obligation to accept Drafts hereunder shall
terminate on November 14, 1997. The Bank shall not in any event be required to
accept Drafts hereunder during the continuance of a Default or an Event of
Default hereunder or under the Loan Agreement.
VIII. If there is a determination made by any regulatory body
(including, without limitation, any Federal Reserve Bank) or if there is a
change in, or change in interpretation of, any applicable rule or regulation
(such determination or such change being defined herein as a "Regulatory
Determination"), in any case to the effect, in the judgment of the Bank, that
any Acceptance does not comply with applicable regulations or interpretations
of the Board of Governors of the Federal Reserve System governing banker's
acceptances and for such reason is not an acceptance of the type described in
paragraph 7 of Section 13 of the Federal Reserve Act or eligible for purchase
by Federal Reserve Banks, then, in any such event, the Bank shall have the
right to terminate this Agreement effective on the date on which the Bank
gives notice to the Borrower by telephone of such termination (confirmed in
writing), which notice shall also describe in reasonable detail the nature of
such Regulatory Determination. From and after any such termination, the Bank
shall have no further obligation to accept Drafts hereunder. Such termination
shall not affect the Borrower's then existing obligations or liabilities
to the Bank hereunder.
IX. Upon the occurrence and during the continuance of any Event of
Default, the Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to set-off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held, including any certificate
of deposit, and other indebtedness at any time owing by the Bank to or for the
credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement, irrespective
of whether or not the Bank shall have made any demand under this Agreement.
The Bank agrees promptly to notify the Borrower after any such set-off and
application made by the Bank, on the same business day by telephone and in
writing within three (3) business days thereafter provided that the failure
4
<PAGE>
to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Paragraph are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
X. The Borrower shall make all payments hereunder in lawful money of
the United States. The remedies of the Bank as provided herein shall be
cumulative and concurrent, and may be pursued singly, successively or together,
at the sole discretion of the Bank and may be exercised as often as occasion
therefor shall arise. No act of omission or commission of the Bank, including
specifically any failure to exercise any right, remedy or recourse, shall be
effective, unless set forth in a written document executed by the Bank, and
then only to the extent specifically recited therein. A waiver or release with
reference to one event shall not be construed as continuing, as a bar to, or
as a waiver or release of any subsequent right, remedy or recourse as to any
subsequent event. This Agreement shall be construed and enforced in accordance
with Florida law. This agreement may not be assigned by the Borrower, shall be
binding upon the Borrower, its successors and assigns, and shall inure to the
benefit of, and be enforced by, the Bank, its successors, transferees and
assigns.
The Borrower hereby: (i) waives demand, notice of demand,
presentment for payment, notice of nonpayment or dishonor, protest, notice of
protest and all other notice, filing of suit and diligence to hold it or any
other obligor liable with respect to its obligations hereunder; (ii) agrees to
any substitution, addition or release of any party or person primarily or
secondarily liable hereon; and (iii) agrees that the Bank shall not be
required first to institute any suit, or to exhaust his, their or its remedies
against the Borrower or any other person or party to become liable hereunder,
or against any collateral in order to enforce payment of Borrower's
obligations hereunder.
ARMOR HOLDINGS, INC.
By______________________________________
Its_____________________________________
BARNETT BANK, N.A.
By______________________________________
Its_____________________________________
5
<PAGE>
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this ______ day of _____________, 1996, by __________________________
the ___________________________ of Armor Holdings, Inc., on behalf of the
corporation, in Camden County, Georgia.
------------------------------------
Notary Public, State and County
aforesaid
Print Name: ________________________
My Commission Expires:
[Notary Seal]
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _______ day of _____________, 1996, by__________________________
the ___________________________ of Barnett Bank, N.A., on behalf of the bank,
in Camden County, Georgia.
-----------------------------------
Notary Public, State and County
aforesaid
Print Name: ______________________
My Commission Expires:
[Notary Seal]
6
<PAGE>
EXHIBIT 10.4
SECURITY AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, by ARMOR
HOLDINGS, INC., a Delaware corporation (the "Debtor"), whose address is 191
Nassau Place Road, Yulee, Florida 32097, in favor of BARNETT BANK, N.A. (the
"Secured Party"), whose address is 50 N. Laura Street, Jacksonville,
Florida 32202.
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 the Debtor, 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. The borrowing relationship between
the Debtor and the Secured Party may be a continuing one and may
include numerous types of extensions of credit, loans, overdraft
<PAGE>
payments or advances made directly or indirectly to or for the benefit of the
Debtor. Accordingly, this Agreement and the Security Interest created by it
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 Debtor 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, 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 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.
2
<PAGE>
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 mark 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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<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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 omissionto 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
7
<PAGE>
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 sue 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.
VIII. 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:
8
<PAGE>
(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
9
<PAGE>
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.
IX. 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.
ARMOR HOLDINGS, INC.
By:__________________________________
Its:______________________________
(CORPORATE SEAL)
10
<PAGE>
EXHIBIT 10.5
ENVIRONMENTAL AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, by and
between ARMOR HOLDINGS, INC. (the "Borrower"), and BARNETT BANK, N.A. (the
"Bank").
RECITALS
The parties wish to confirm certain understandings concerning
premises (the "Premises") now or hereafter owned, operated, occupied or
otherwise used by the Borrower or any of its Subsidiaries. For purposes
hereof: (i) the term "Premises" includes all land, improvements and other real
property interests now or hereafter owned, operated, occupied or otherwise
used by the Borrower or any of its Subsidiaries; and (ii) the term
"Subsidiaries" shall mean and include any partnership, corporation or other
entity if the Borrower directly or indirectly owns or controls a majority of
the equity or voting interests in such partnership, corporation or entity.
NOW, THEREFORE, for good and valuable consideration, the parties
agree as follows:
I. The Borrower warrants and represents to the Bank:
A. That, except as set forth on Schedule 1 attached hereto,
to its best knowledge neither it nor any of its Subsidiaries has used
any Premises as a facility for the storage, treatment or disposal of
any "Hazardous Substances," as that term is hereinafter defined,
except such materials as are used or stored in accordance with all
applicable laws in the ordinary course of business of the Borrower or
any such Subsidiary;
B. That the Premises are now and at all times hereafter will
continue to be in material compliance with all federal, state and
local "Environmental Laws" (as that term is defined hereinafter),
including but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 USC
ss. 9601, et seq., the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the Resource
Conservation and Recovery Act ("RCRA"), 42 USC ss. 6901, et seq., the
Florida Resource Recovery and Management Act, Section 403.702, et
seq., Florida Statutes, the Pollutant Spill Prevention and Control
Act, Section 376.011-376.17 and 376.19-376.21 Florida Statutes, as
the same may be amended from time to time, and all ordinances,
regulations, codes, plans, orders, and decrees now existing or in the
future enacted, promulgated, adopted, entered or issued, both within
and outside present contemplation of the Borrower and the Bank;
<PAGE>
C. That: (i) as of the date hereof, there are no
hazardous or toxic materials, substances, wastes or other
environmentally regulated substances (including solids or gaseous
products and any materials containing asbestos), the presence of
which is limited, regulated or prohibited by any state, federal or
local governmental authority or agency having jurisdiction over the
Premises, or which are otherwise known to pose a hazard to health or
safety of occupants of the Premises, located on, in or under the
Premises or used in connection therewith; or (ii) the Borrower has
fully disclosed to the Bank in writing the existence, extent and
nature of any such hazardous or toxic material waste or other
environmentally regulated substance, which the Borrower or any
Subsidiary is legally authorized and empowered to maintain on, in or
under the Premises or use in connection therewith, and the Borrower
and its Subsidiaries have obtained and will maintain all material
licenses, permits and approvals required with respect thereto, and
are in material compliance with all of the terms, conditions and
requirements of such licenses, permits and approvals;
D. That the Borrower shall notify the Bank of any change of
which it is aware in the nature or extent of any hazardous or toxic
materials, substances or wastes maintained on, in or under the
Premises or used in connection therewith, and will transmit to the
Bank copies of any citations, orders, notices or other material
governmental or other communication received with respect to any
other hazardous materials, substances, wastes or other
environmentally regulated substances affecting the Premises;
E. That the Borrower is not aware of any past, present or
future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent
compliance or continued compliance with Environmental Laws or any
ordinance, regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder, or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation, based on
or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any
Hazardous Substance; and
F. That there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice
of violation, investigation, or proceeding pending or, to the best
knowledge of the Borrower, threatened against it, any Subsidiary or
the Premises, relating in any way to any material Environmental Laws
or any material regulation, code,
2
<PAGE>
plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder.
II. The Borrower agrees to indemnify, reimburse, defend and hold
harmless the Bank, its officers, directors, employees, successors and assigns,
from and against all demands, claims, civil or criminal actions or causes of
action, liens, assessments, civil or criminal penalties or fines, losses,
damages, liabilities, obligations, costs, disbursements, expenses or fees of
any kind or of any nature (including, without limitation, reasonable cleanup
costs, attorneys', consultants' or experts' fees and disbursements and costs
of litigation at trial and appellate levels) which may at any time be imposed
upon, incurred by or asserted or awarded against, the Bank directly or
indirectly: (a) resulting from any acts or activities of the Borrower or any
Subsidiary, any of their respective agents, employees or contractors, at, on
or about the Premises which contaminate air, soils, surface waters or
groundwaters over, on or under the property; (b) arising from or out of any
Hazardous Substance on, in or under the Premises; (c) arising pursuant to or
in connection with the application of any Environmental Law to the acts or
omissions of the Borrower or any of its Subsidiaries, or any other person, and
any environmental damage alleged to have been caused, in whole or in part, by
the transportation, treatment, storage, or disposal of any Hazardous
Substance; or (d) arising from or in relation to the presence, whether past,
present or future, of any Hazardous Substances on the Premises. Without
limiting the foregoing, this indemnification provision specifically protects
the Bank against any claim or action from activities described in (a), (b),
(c) or (d) above, based in whole or in part upon any environmental statute,
rule, regulation or policy, including but not limited to Chapters 403 and 376,
Florida Statutes, the Florida Administrative Code, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, ("CERCLA") 42
USC ss. 9601, et seq., as amended, the Resource Conservation and Recovery Act,
42 USC ss. 6901, et seq., and other laws, whether now in existence or enacted
in the future. The indemnification obligation hereunder shall be one of strict
liability and shall be enforceable without regard to any knowledge of the Bank
with respect to any act or omission or condition or event which is the basis
of the claim under such indemnification obligation. The obligations under this
section shall not be limited to any extent by the term of any Note or other
obligations of the Borrower, and such obligations hereunder shall continue,
survive and remain in full force and effect notwithstanding payment in full or
other satisfaction or release of such Note (and such other obligations).
III. The Bank shall have the right, in its reasonable discretion, to
require the Borrower to periodically (but not more frequently than annually
unless an environmental complaint is then outstanding) perform (at the
Borrower's expense) an environmental audit and, if deemed necessary by the
Bank, an environmental risk assessment, each of which must be satisfactory to
the Bank in its
3
<PAGE>
reasonable discretion, of the Premises, hazardous waste management practices or
hazardous waste disposal sites used by the Borrower or any of its Subsidiaries.
Such audit or risk assessment must be performed by an environmental consultant
reasonably satisfactory to the Bank. If the Borrower fails to perform such
environmental audit or risk assessment within 30 days of the Bank's written
request, the Bank shall have the right but not the obligation to retain an
environmental consultant to perform such environmental audit or risk assessment
at the Borrower's expense.
IV. As used herein, "Environmental Law" means any federal, state, or
local statutory or common law relating to pollution or protection of the
environment, including without limitation, any common law of nuisance or
trespass, and any law or regulation relating to emissions, discharges,
releases or threatened releases of Hazardous Substances into the environment
(including without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances. As used herein, "Hazardous Substance" means
any substance or material: (a) identified in Section 101(14) of CERCLA, 42 USC
ss. 9601(14), as the same may be amended from time to time; or (b) determined
to be toxic, a pollutant or contaminant, under federal, state or local
statute, law, ordinance, rule or regulation or judicial or administrative
order or decision, as same may be amended from time to time, including but not
limited to petroleum and petroleum products as defined in Section 376.301(13)
and (14), Florida Statutes, as same may be amended from time to time.
V. This Agreement shall continue in effect until expressly released
by the Bank in writing. This Agreement shall not be modified except by written
instrument signed by each of the parties hereto. This Agreement shall be
governed by Florida law, and it shall be binding upon the parties' respective
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this instrument as of
the day and year first above written.
ARMOR HOLDINGS, INC.
By:_______________________________
Its: __________________________
BARNETT BANK, N.A.
By:_______________________________
Its:___________________________
4
<PAGE>
EXHIBIT 10.6
WAIVER OF JURY TRIAL
This Waiver is made this 14th day of November, 1996, by BARNETT BANK,
N.A. (the "Bank") and the undersigned customers (the "Customers").
RECITALS
The Bank is this day entering into a credit facility with Armor
Holdings, Inc. (the "Borrower"). The parties recognize that the credit
facility is a relatively complex business transaction and that the documents
relating thereto are relatively lengthy and technical in nature and may be
susceptible to misinterpretation if isolated provisions are the subject of
review. The parties believe that a judge, rather than a jury, will be the most
efficient and best qualified trier of fact in the event of any dispute as to
the rights and obligations of the parties. The Bank and the Customers are
executing this Agreement to set forth their agreement with respect to the
resolution of such disputes.
NOW, THEREFORE, for ten dollars and other good and valuable
consideration, the parties agree as follows:
I. Each of the parties hereto knowingly, voluntarily and
intentionally waives any right that it may have to a trial by jury in any
litigation arising out of, under or in connection with: (a) the Credit
Facility (as defined herein) or any documents, communications or transactions
related thereto; or (b) any course of conduct, course of dealing, statements
(whether oral or written), actions or omissions of any party hereto or any of
their respective Affiliates (as defined herein) in connection with or related
to the Credit Facility or otherwise. In addition, each party hereto shall
cause each of its Affiliates to waive any right that it may have to a trial by
jury in any such litigation, and no such party shall assert, maintain or
pursue any claim, defense or position in any such litigation unless each of
its Affiliates which is a party thereto shall have waived all rights to trial
by jury in such litigation. The waiver set forth herein shall extend to all
litigation by, against or involving any party hereto or its Affiliates
including, without limitation, actions, claims and suits based upon tort,
breach of contract, violation of law, fraud, inequitable conduct, bad faith,
misrepresentation or breach of fiduciary duty.
II. Each of the parties irrevocably and unconditionally: (a) agrees
that any suit, action, or other legal proceeding arising out of or relating to
the Credit Facility may be brought in a court of record of the State of
Florida in Nassau County or Duval County; (b) consents to the jurisdiction of
each such court in any such suit, action, or proceeding; (c) waives any
objection which he, she or it may have to the laying of venue of any such
suit, action or proceeding in any of such courts; and (d) waives any right
that he,
<PAGE>
she or it may have to assert the defense of forum non-conveniens in
any such suit, action or proceeding.
III. For purposes hereof, the terms "Credit Facility" and
"Affiliate" shall have the following meanings:
A. "Credit Facility" shall mean and include: (i) any loan or
loans heretofore, now or hereafter made by the Bank or any of its
Affiliates to the Borrower or any of its Affiliates (as the same may
be renewed, amended, restated or extended from time to time); (ii)
any other extensions of credit heretofore, now or hereafter made by
the Bank or any of its Affiliates to or for the benefit of the
Borrower or any of its Affiliates (as the same may be renewed,
amended, restated or extended from time to time); (iii) any guaranty
of any of the foregoing loans or extensions of credit, whether now or
hereafter in effect (as any such guaranty may from time to time be
renewed, amended, restated or extended); and (iv) any loan agreement,
note, security agreement, mortgage, environmental agreement, pledge,
financing statement, guaranty agreement, consent, certificate or
other document or agreement, whether now or hereafter in effect,
relating in any way to any of the foregoing loans, extensions of
credit or guaranties (as any such documents or agreements may be
renewed, amended, restated or extended from time to time).
B. A party's "Affiliates" shall mean: (i) each person,
corporation and other entity (each, a "Control Affiliate") that
controls, is controlled by or is under common control with the party;
and (ii) each executive officer or director of the party or any
Control Affiliate of the party.
IV. The parties hereto have specifically discussed this
Agreement, and they have agreed that it is an essential part of
their agreement about the Credit Facility.
V. If any one or more of the provisions contained in this Agreement
is declared or found by a court of competent jurisdiction to be invalid,
illegal or unenforceable, such provision or portion thereof shall be deemed
stricken and severed and the remaining provisions hereof shall continue in
full force and effect.
VI. This Agreement shall be governed by and construed in accordance
with Florida law. This Agreement may not be modified, nor shall any provision
be waived, except by written instrument executed by all of the parties hereto.
This Agreement shall inure to the benefit of, and shall be binding upon, all
of the parties' respective successors, assigns and Affiliates. This
Agreement may be executed in one or more counterparts. Such counterparts shall
constitute one agreement. This Agreement shall be binding upon each person or
entity which signs the same or a counterpart hereof
2
<PAGE>
whether or not all persons or entities listed below sign this Agreement or a
counterpart hereof.
Executed the day and year first above written.
BANK:
BARNETT BANK, N.A.
By:__________________________________
Its:______________________________
CUSTOMERS:
ARMOR HOLDINGS, INC.
By:__________________________________
Its:______________________________
NIK PUBLIC SAFETY, INC.
By:_________________________________
Its:_____________________________
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA
By:_________________________________
Its:_____________________________
ARMOR HOLDINGS PROPERTIES, INC.
By:_________________________________
Its:_____________________________
3
<PAGE>
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 191 Nassau Place Road, Yulee, Florida 32097, in favor of
BARNETT BANK, N.A. (the "Secured Party"), whose address is 50 N. Laura Street,
Jacksonville, Florida 32202.
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
<PAGE>
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.
- 2 -
<PAGE>
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 mark 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
- 3 -
<PAGE>
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
- 4 -
<PAGE>
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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<PAGE>
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.
- 6 -
<PAGE>
(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 sue 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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<PAGE>
(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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EXHIBIT 10.8
SECURITY AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, by NIK PUBLIC
SAFETY, INC., a Delaware corporation (the "Debtor"), whose address is 191
Nassau Place Road, Yulee, Florida 32097, in favor of BARNETT BANK, N.A. (the
"Secured Party"), whose address is 50 N.
Laura Street, Jacksonville, Florida 32202.
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
<PAGE>
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.
G. The amount represented by the Debtor to the Secured
Party as owing by each Account Debtor or by all Account
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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 mark 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 location in Jacksonville, Florida without the
Secured Party's prior consent; (i) will notify the Secured Party promptly in
writing of
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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 of the Indebtedness, pursuant to or in connection with this
Agreement or otherwise to the Secured Party, including
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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 disposition of the Collateral do not satisfy
the Indebtedness in full. Nothing contained herein shall be deemed to
require
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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 sue 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.
VIII. 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.
IX. 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.
NIK PUBLIC SAFETY, INC.
By:__________________________________
Its:______________________________
(CORPORATE SEAL)
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EXHIBIT 10.9
SECURITY AGREEMENT
THIS AGREEMENT is made this 14th day of November, 1996, by ARMOR
HOLDINGS PROPERTIES, INC., a Delaware corporation (the "Debtor"), whose
address is 191 Nassau Place Road, Yulee, Florida 32097, in favor of BARNETT
BANK, N.A. (the "Secured Party"), whose address is 50 N. Laura Street,
Jacksonville, Florida 32202.
For good and valuable consideration, the Debtor agrees as follows:
1. 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.
2. 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
<PAGE>
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.
3. 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.
(g) The amount represented by the Debtor to the Secured
Party as owing by each Account Debtor or by all Account
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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.
4. 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 "B" 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 mark 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 location in Jacksonville, Florida without the
Secured Party's prior consent; (i) will notify the Secured Party promptly in
writing of
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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.
5. 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.
6. 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 of the Indebtedness, pursuant to or in connection with this
Agreement or otherwise to the Secured Party, including
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<PAGE>
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 disposition of the Collateral do not satisfy
the Indebtedness in full. Nothing contained herein shall be deemed to
require
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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.
7. 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 sue 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.
ARMOR HOLDINGS PROPERTIES, INC.
By:__________________________________
Its:______________________________
(CORPORATE SEAL)
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GUARANTY OF PAYMENT
THIS GUARANTY is made this 14th day of November, 1996, by DEFENSE
TECHNOLOGY CORPORATION OF AMERICA (the "Guarantor") in favor of BARNETT BANK,
N.A. (the "Bank").
W I T N E S S E T H :
Armor Holdings, Inc. (the "Borrower") and the Bank are parties to a
Loan Agreement (as amended or restated from time to time, the "Loan
Agreement") of even date herewith. The Borrower, pursuant to the Loan
Agreement, has executed and delivered a promissory note (as amended, extended
or renewed from time to time, the "Note") of even date herewith in the
original principal amount of $10,000,000.00 in favor of the Bank. As an
inducement to the Bank to extend, renew, or continue credit to the Borrower,
the Guarantor has agreed to guarantee certain Obligations (as defined below)
of the Borrower and to execute and deliver this Guaranty.
NOW, THEREFORE, in consideration of loans, advances or other credit
now or hereafter made or extended by the Bank to the Borrower, and to enable
such loans, advances or other credit to be maintained or obtained by the
Borrower, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees
with the Bank as follows:
1. The Guarantor hereby irrevocably guarantees the payment
to the Bank when due, whether by acceleration or otherwise, of all Obligations
of the Borrower to the Bank (subject, however, to the limitations set forth in
paragraph 23 hereof). As used in this Agreement, the term "Obligations" means:
(a) all principal, interest, costs, expenses and other amounts now or
hereafter due under the Note (including, without limitation, all principal
amounts advanced thereunder before, on or after the date hereof); and (b) all
other amounts now or hereafter payable by the Borrower under any of the Loan
Documents (as such term is defined in the Loan Agreement).
2. If any of the Obligations are not paid when due, after
the expiration of any applicable cure period, the Guarantor will forthwith pay
all such Obligations of the Borrower to the Bank (subject, however, to the
limitations set forth in paragraph 23 hereof). The Guarantor further agrees to
pay the Bank, upon demand, all reasonable costs and expenses, including
reasonable attorneys' and legal assistants' fees incurred in
connection with any trial or appellate proceedings or otherwise, that may be
incurred by the Bank in exercising its rights and remedies with respect to
payment of the Obligations or its rights and remedies against the Guarantor
under this Agreement.
3. The Guarantor hereby:
<PAGE>
(a) Assents to all terms and agreements heretofore or
hereafter made by the Borrower with the Bank;
(b) Agrees to make all payments hereunder in lawful
money of the United States of America in immediately available
funds without setoff or counterclaim;
(c) Consents that the Bank may, without further consent from
or notice to the Guarantor, and without in any way diminishing the
obligation of the Guarantor under this Agreement:
(i) Exchange, release or surrender to the
Borrower or to any guarantor, pledgor, or grantor any
collateral, or waive, release or subordinate any security
interest, in whole or in part, now or hereafter held as
security for any of the Obligations;
(ii) Accept any new collateral for the
Obligations;
(iii) Waive or delay the exercise of any
of its rights or remedies against the Borrower or any other
person or entity, including, without limitation, any other
guarantor;
(iv) Release any other guarantor or
endorser from any liability;
(v) Renew, extend, or modify the terms of
any of the Obligations or any instrument or agreement
evidencing the same;
(vi) Apply payments by the Borrower, the
Guarantor, or any other person or entity, to the Obligations
or to other indebtedness of any such person or entity in
such order as the Bank, in its discretion, deems
appropriate;
(vii) Abstain from taking advantage of or
realizing upon any security interest or other guarantee;
(d) Waives all notice of:
(i) The Bank's acceptance hereof or its
intention to act, or its action, in reliance hereon;
(ii) The present existence or future
incurring of any of the Obligations or any terms or amounts
thereof or any change therein;
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(iii) Any default by the Borrower, any
endorser, surety, pledgor, grantor of security, or
guarantor; and
(iv) The obtaining or release of any
guaranty or surety agreement (in addition to this Agreement),
pledge, assignment, or other security for any of the
Obligations; and
(e) Waives notice of presentment, demand, notice of demand,
presentment for payment, protest, notice of nonpayment or dishonor,
notice of protest and any other demands and notices required by law
in connection with this Guaranty or any instrument evidencing any
Obligations, except as such waiver may be expressly prohibited by
law, and waives any requirement that suit against it under this
Agreement be brought within any period of time shorter than the
general statute of limitations applicable to contracts under seal.
4. The Guarantor hereby waives and agrees not to assert or
take advantage of:
(a) any defense arising by virtue of:
(i) the lack of authority, death or
disability of any other party, or revocation hereof by any
other party;
(ii) the failure of the Bank to file or
enforce a claim of any kind; or
(iii) the failure of the Bank to record any
document or perfect any lien;
(b) notice of the existence, creation or incurring of any
new or additional indebtedness, or obligation or any action or
non-action on the part of the Borrower, the Bank, any endorser, any
guarantor under this or any other instrument, any creditor of the
Borrower, or any other person whomsoever, in connection with any
obligation or evidence of indebtedness held by the Bank as collateral
or in connection with any indebtedness or any obligation hereby
guaranteed;
(c) any defense based upon an election of remedies by the
Bank, including without limitation, an election to proceed by
non-judicial rather than judicial foreclosure (if the right to
proceed by non-judicial foreclosure is available to the Bank); and
(d) any duty on the part of the Bank to disclose to the
Guarantor any facts which the Bank may now or hereafter know about
the Borrower or any security for the Obligations, regardless of
whether the Bank has reason to believe that any
3
<PAGE>
such facts materially increase the risk beyond that which the
Guarantor intends to assume or has reason to believe that such facts
are unknown to the Guarantor or has a reasonable opportunity to
communicate such facts to the Guarantor, it being understood and
agreed that the Guarantor is fully responsible for being and keeping
informed of the financial condition of the Borrower and the status of
any security for the Obligations and of all circumstances bearing on
the risk of non-payment of all Obligations hereby guaranteed.
5. The Guarantor hereby waives any right or claim of right to cause
a marshaling of any of the Borrower's assets or the assets of any other
party now or hereinafter held as security for any Obligations.
6. The Bank's rights hereunder shall not be impaired or stayed
as a result of any dissolution of the Borrower or any bankruptcy or insolvency
proceedings involving the Borrower (including, without limitation, any
discharge of the Borrower or its debts in any such proceedings). The
Obligations shall include, without limitation, any amounts advanced to or for
the benefit of the Borrower or any successor thereto from and after the
occurrence or commencement of any such dissolution or proceedings. If any such
bankruptcy or insolvency proceedings are commenced by or against the Borrower,
the full amount of all Obligations then outstanding shall become immediately
due and payable by the Guarantor (whether or not the Borrower then owes the
Obligations on an accelerated basis).
7. The liability of the Guarantor under this Agreement is absolute,
irrevocable, unconditional, unlimited (except as set forth in paragraph 23
hereof) and continuing, without regard to the liability of any other person,
and shall not in any manner be affected by reason of any action taken or not
taken by the Bank, nor by the partial or complete unenforceability or
invalidity of any other guaranty or surety agreement, pledge, assignment or
other security for any of the Obligations. Failure to sign this or any other
guarantee by any other person shall not discharge the liability of any signer.
No delay in making demand on the Guarantor for satisfaction of its liability
hereunder shall prejudice the Bank's right to enforce such satisfaction.
All of the Bank's rights and remedies shall be cumulative and any failure
of the Bank to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time, and from
time to time, thereafter.
8. This Guaranty shall continue in effect until the last to occur
of: (a) the payment of all Obligations, including any renewals, extensions or
modifications thereof, in full if such payments of the Obligations have become
final and are not subject to being refunded as a preference or fraudulent
transfer under the Bankruptcy Code or other applicable law; and (b) the
termination of
4
<PAGE>
all loan agreements, loan documents and loan commitments between
the Borrower and the Bank.
9. This Guaranty is fully enforceable regardless of any defenses
which the Borrower may assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, payment, statute of
frauds, statute of limitations, accord and satisfaction, and usury.
10. The Guarantor agrees that, if at any time all or any part of any
payment previously applied by the Bank to any of the Obligations must be
returned by the Bank for any reason, whether by court order, administrative
order, or settlement, the Guarantor shall be liable for the full amount
returned as if such amount had never been received by the Bank,
notwithstanding any termination of this Agreement or the cancellation of any
note or other agreement evidencing any of the Obligations.
11. The Bank shall have the right to proceed against the Guarantor
without first proceeding against the Borrower or any property securing payment
of the Note, or any of the loan documents, or any other guarantor or endorser
of the Note or the Obligations.
12. The Guarantor waives and agrees not to assert any right to which
it may be or become entitled, whether by subrogation, contribution, indemnity,
reimbursement or otherwise, against the Borrower, any other guarantor or any
of their respective properties, by reason of the performance by the Guarantor
of its obligations under this Agreement, under any pledge or security
agreement or otherwise.
13. To secure the prompt payment and performance of the Obligations,
the Guarantor grants to the Bank a continuing first lien security interest in
all property of the Guarantor now or at any time hereafter in the possession
of the Bank and all proceeds of all such property. The Guarantor agrees that
the Bank shall have the rights and remedies of a secured party under the
Uniform Commercial Code as adopted by the State of Florida with respect to
such property, including, without limitation the right to sell or otherwise
dispose of any or all of such property. The Bank may, without further notice
to anyone, apply or set off any balances, credits, deposits, accounts, monies
or other indebtedness at any time created by or due from the Bank to the
Guarantor against the amounts due hereunder. Any notification of intended
disposition of any property required by law shall be deemed reasonable and
properly given if given at least five (5) calendar days before such
disposition.
14. The Guarantor represents and warrants to the Bank that:
5
<PAGE>
(a) The Guarantor: (i) is duly organized, validly existing
and in good standing under the laws of the state or country
of its incorporation and in all other states where the nature and
extent of the business transacted by it or the ownership of its
assets makes such qualification necessary (except where the failure
to be so qualified would not have a material adverse effect on the
Guarantor); (ii) has the corporate power and authority to own its
properties and to carry on its business as now being conducted; (iii)
to the extent necessary, is qualified to do business in the State of
Florida; (iv) is in compliance in all material respects with all
laws, orders, regulations, authorizations and similar matters
(collectively the "Governmental Requirements") of all governmental
authorities, whether federal, state, county, or municipal
(collectively the "Governmental Authority") applicable to it, except
where the failure to be in compliance will not have a material
adverse effect on the Guarantor; (v) represents that all of its
issued and outstanding stock is fully paid and nonassessable, there
are no outstanding rights or options to acquire any additional stock,
and its stock has not been pledged or encumbered in any manner
whatsoever; and (vi) has not amended or modified its articles of
incorporation or its bylaws except as previously disclosed in writing
to the Bank prior to the execution hereof.
(b) The execution, delivery and performance by the Guarantor
of this Guaranty: (i) is within the corporate powers and purposes of
the Guarantor; (ii) has been duly authorized by all requisite
corporate action of the Guarantor; (iii) does not require the
approval of any Governmental Authority; and (iv) will not violate any
material Governmental Requirement, the articles of incorporation and
bylaws of the Guarantor or any material indenture, agreement or other
instrument to which the Guarantor is a party or by which it or any of
its property is bound, or be in conflict with, result in a breach of
or constitute (with due notice or the lapse of time, or both) a
default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of its
property or assets, except as contemplated by the provisions of this
Guaranty.
(c) This Guaranty when executed and delivered by the
Guarantor will constitute the legal, valid and binding obligation of
the Guarantor enforceable in accordance with the terms hereof.
(d) Except as previously disclosed by the Guarantor to the
Bank in writing, there are no judgments outstanding against the
Guarantor and there is no action, suit, proceeding, or investigation
now pending (or to the best of the Guarantor's knowledge after
diligent inquiry threatened)
6
<PAGE>
against, involving or affecting the Guarantor or any of its properties
or any part thereof, at law, in equity or before any Governmental
Authority that if adversely determined as to the Guarantor, would
result in a material adverse change in the business or financial
condition of the Guarantor, or the Guarantor's operation and ownership
of any of its properties, nor to the Guarantor's best knowledge is
there any basis for such action, suit, proceeding, or investigation.
(e) The Guarantor is not insolvent and will not be
rendered insolvent by the execution, delivery, payment and
performance of this Guaranty.
(f) Until the Obligations have been paid and performed in
full and the Guarantor shall have performed all of its obligations
hereunder, the Guarantor shall not, directly or indirectly, sell,
convey, or transfer or permit to be sold, conveyed, or transferred
any of its assets to any party or entity to which the Guarantor is
related or in which the Guarantor has an interest except on
arm's-length terms for fair value in the ordinary course of
business and except as otherwise permitted in the Loan Agreement.
15. The Guarantor acknowledges that the Bank has relied upon the
Guarantor's representations, has made no independent investigation of the
truth thereof and is not charged with any knowledge contrary thereto that may
have been received by any officer, director, employee, or shareholder of the
Bank. The Guarantor further acknowledges that it has not been induced to
execute and deliver this Guaranty as a result of, and is not relying upon, any
representations, warranties, agreements, or conditions, whether express or
implied, written or oral, by the Bank or by any officer, director, employee,
or shareholder of the Bank.
16. The Guarantor agrees that there shall be no material change (a
material change is agreed to be more than 25%) in the ownership or control of
the Guarantor without the prior express written consent of the Bank.
17. Notwithstanding anything to the contrary contained in this
Guaranty or in the Note or the Loan Documents, the parties intend that any
interest for which the Guarantor is obligated hereunder shall not exceed the
maximum amount of interest permitted to be enforced against the Guarantor
under the applicable laws relating to usury.
18. The Guarantor agrees that this Agreement shall be governed by
the substantive law of the State of Florida, without regard to principles of
conflicts of laws.
7
<PAGE>
19. Without in any way limiting the foregoing, the Guarantor
hereby waives any other act or omission of the Bank which may
change the scope of the Guarantor's risk.
20. All communications, notices or demands provided for hereunder
shall be sent by first class mail, by courier, by hand or by certified mail as
follows or to such other address with respect to any party as such party shall
notify the others in writing:
To the Bank: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, Florida 32202
Attn: Corporate Banking Group
To the Guarantor: Defense Technology Corporation
of America
191 Nassau Place Road
Yulee, Florida 32097
Attn: President
With a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn: Robert L. Lawrence, Esq.
Each such communication, notice or demand shall be deemed given: (i) when
deposited in the mail with proper postage affixed if sent by mail; or (ii)
when actually delivered to the appropriate address if sent by courier or by
hand.
21. This Agreement shall inure to the benefit of the Bank, its
successors and assigns, and to any person to whom the Bank may grant an
interest in any of the Obligations, and shall be binding upon the Guarantor
and its respective successors and assigns. This Agreement shall not be
modified except by instrument in writing signed by Guarantor and the Bank. No
waiver by the Bank of any term hereof shall be valid unless the Bank has
executed a written waiver of such term.
22. This Agreement is intended to take effect as a document
under seal.
23. Notwithstanding any contrary provision set forth herein, the
liability of the Guarantor with respect to the Obligations shall not exceed at
any time the Maximum Amount (as defined herein). The "Maximum Amount" shall
mean the greater of:
(a) the aggregate amount of all advances to the
Guarantor made directly or indirectly with the proceeds of the
Note or other Loan Documents; or
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<PAGE>
(b) 95% of: (i) the fair salable value of the assets of
the Guarantor as of the date hereof; minus (ii) the total
liabilities of the Guarantor (including contingent liabilities,
but excluding liabilities of the Guarantor under this
Guaranty and the other Loan Documents executed by the Guarantor) as
of the date hereof (except, however, that if the calculation of the
Maximum Amount in the manner provided in this subparagraph (b) as of
the date payment is required of the Guarantor pursuant to this
Guaranty would result in a greater positive number, then the Maximum
Amount shall be deemed to be such greater positive number).
IN WITNESS WHEREOF, the Guarantor, intending to be legally bound
hereby, has duly executed this Guaranty of Payment on or as of the date and
year first above written.
DEFENSE TECHNOLOGY CORPORATION OF
AMERICA
By:__________________________________
Its:_________________________________
(Corporate Seal)
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _____ day of November, 1996, by ________________________ the
_____________________ of Defense Technology Corporation of America, on behalf
of the corporation, in Camden County, Georgia.
------------------------------------
Notary Public, State and County
aforesaid
Print Name: ________________________
My Commission Expires:
[Notary Seal]
9
<PAGE>
EXHIBIT 10.11
GUARANTY OF PAYMENT
THIS GUARANTY is made this 14th day of November, 1996, by NIK
PUBLIC SAFETY, INC. (the "Guarantor") in favor of BARNETT BANK,
N.A. (the "Bank").
W I T N E S S E T H :
Armor Holdings, Inc. (the "Borrower") and the Bank are parties to a
Loan Agreement (as amended or restated from time to time, the "Loan
Agreement") of even date herewith. The Borrower, pursuant to the Loan
Agreement, has executed and delivered a promissory note (as amended, extended
or renewed from time to time, the "Note") of even date herewith in the
original principal amount of $10,000,000.00 in favor of the Bank. As an
inducement to the Bank to extend, renew, or continue credit to the Borrower,
the Guarantor has agreed to guarantee certain Obligations (as defined below)
of the Borrower and to execute and deliver this Guaranty.
NOW, THEREFORE, in consideration of loans, advances or other credit
now or hereafter made or extended by the Bank to the Borrower, and to enable
such loans, advances or other credit to be maintained or obtained by the
Borrower, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees
with the Bank as follows:
1. The Guarantor hereby irrevocably guarantees the payment to the
Bank when due, whether by acceleration or otherwise, of all Obligations of the
Borrower to the Bank (subject, however, to the limitations set forth in
paragraph 23 hereof). As used in this Agreement, the term "Obligations" means:
(a) all principal, interest, costs, expenses and other amounts now or
hereafter due under the Note (including, without limitation, all principal
amounts advanced thereunder before, on or after the date hereof); and (b) all
other amounts now or hereafter payable by the Borrower under any of the Loan
Documents (as such term is defined in the Loan Agreement).
2. If any of the Obligations are not paid when due, after the
expiration of any applicable cure period, the Guarantor will forthwith pay all
such Obligations of the Borrower to the Bank (subject, however, to the
limitations set forth in paragraph 23 hereof). The Guarantor further agrees to
pay the Bank, upon demand, all reasonable costs and expenses, including
reasonable attorneys' and legal assistants' fees incurred in
connection with any trial or appellate proceedings or otherwise, that may be
incurred by the Bank in exercising its rights and remedies with respect to
payment of the Obligations or its rights and remedies against the Guarantor
under this Agreement.
3. The Guarantor hereby:
<PAGE>
(a) Assents to all terms and agreements heretofore or
hereafter made by the Borrower with the Bank;
(b) Agrees to make all payments hereunder in lawful
money of the United States of America in immediately available
funds without setoff or counterclaim;
(c) Consents that the Bank may, without further consent from
or notice to the Guarantor, and without in any way diminishing the
obligation of the Guarantor under this Agreement:
(i) Exchange, release or surrender to the
Borrower or to any guarantor, pledgor, or grantor any
collateral, or waive, release or subordinate any security
interest, in whole or in part, now or hereafter held as
security for any of the Obligations;
(ii) Accept any new collateral for the Obliga-
tions;
(iii) Waive or delay the exercise of any of its
rights or remedies against the Borrower or any other
person or entity, including, without limitation, any
other guarantor;
(iv) Release any other guarantor or endorser
from any liability;
(v) Renew, extend, or modify the terms of any
of the Obligations or any instrument or agreement
evidencing the same;
(vi) Apply payments by the Borrower, the
Guarantor, or any other person or entity, to the Obligations
or to other indebtedness of any such person or entity in
such order as the Bank, in its discretion, deems
appropriate;
(vii) Abstain from taking advantage of or real-
izing upon any security interest or other guarantee;
(d) Waives all notice of:
(i) The Bank's acceptance hereof or its inten-
tion to act, or its action, in reliance hereon;
(ii) The present existence or future incurring
of any of the Obligations or any terms or amounts thereof
or any change therein;
2
<PAGE>
(iii) Any default by the Borrower, any endorser,
surety, pledgor, grantor of security, or guarantor; and
(iv) The obtaining or release of any guaranty
or surety agreement (in addition to this Agreement),
pledge, assignment, or other security for any of the
Obligations; and
(e) Waives notice of presentment, demand, notice of demand,
presentment for payment, protest, notice of nonpayment or dishonor,
notice of protest and any other demands and notices required by law
in connection with this Guaranty or any instrument evidencing any
Obligations, except as such waiver may be expressly prohibited by
law, and waives any requirement that suit against it under this
Agreement be brought within any period of time shorter than the
general statute of limitations applicable to contracts under seal.
4. The Guarantor hereby waives and agrees not to assert or
take advantage of:
(a) any defense arising by virtue of:
(i) the lack of authority, death or disability
of any other party, or revocation hereof by any other
party;
(ii) the failure of the Bank to file or enforce
a claim of any kind; or
(iii) the failure of the Bank to record any
document or perfect any lien;
(b) notice of the existence, creation or incurring of any
new or additional indebtedness, or obligation or any action or
non-action on the part of the Borrower, the Bank, any endorser, any
guarantor under this or any other instrument, any creditor of the
Borrower, or any other person whomsoever, in connection with any
obligation or evidence of indebtedness held by the Bank as collateral
or in connection with any indebtedness or any obligation hereby
guaranteed;
(c) any defense based upon an election of remedies by the
Bank, including without limitation, an election to proceed by
non-judicial rather than judicial foreclosure (if the right to
proceed by non-judicial foreclosure is available to the Bank); and
(d) any duty on the part of the Bank to disclose to the
Guarantor any facts which the Bank may now or hereafter know about
the Borrower or any security for the Obligations, regardless of
whether the Bank has reason to believe that any
3
<PAGE>
such facts materially increase the risk beyond that which the
Guarantor intends to assume or has reason to believe that such facts
are unknown to the Guarantor or has a reasonable opportunity to
communicate such facts to the Guarantor, it being understood and
agreed that the Guarantor is fully responsible for being and keeping
informed of the financial condition of the Borrower and the status of
any security for the Obligations and of all circumstances bearing on
the risk of non-payment of all Obligations hereby guaranteed.
5. The Guarantor hereby waives any right or claim of right to cause
a marshaling of any of the Borrower's assets or the assets of any other
party now or hereinafter held as security for any Obligations.
6. The Bank's rights hereunder shall not be impaired or stayed
as a result of any dissolution of the Borrower or any bankruptcy or insolvency
proceedings involving the Borrower (including, without limitation, any
discharge of the Borrower or its debts in any such proceedings). The
Obligations shall include, without limitation, any amounts advanced to or for
the benefit of the Borrower or any successor thereto from and after the
occurrence or commencement of any such dissolution or proceedings. If any such
bankruptcy or insolvency proceedings are commenced by or against the Borrower,
the full amount of all Obligations then outstanding shall become immediately
due and payable by the Guarantor (whether or not the Borrower then owes the
Obligations on an accelerated basis).
7. The liability of the Guarantor under this Agreement is absolute,
irrevocable, unconditional, unlimited (except as set forth in paragraph 23
hereof) and continuing, without regard to the liability of any other person,
and shall not in any manner be affected by reason of any action taken or not
taken by the Bank, nor by the partial or complete unenforceability or
invalidity of any other guaranty or surety agreement, pledge, assignment or
other security for any of the Obligations. Failure to sign this or any other
guarantee by any other person shall not discharge the liability of any signer.
No delay in making demand on the Guarantor for satisfaction of its liability
hereunder shall prejudice the Bank's right to enforce such satisfaction.
All of the Bank's rights and remedies shall be cumulative and any failure
of the Bank to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time, and from
time to time, thereafter.
8. This Guaranty shall continue in effect until the last to occur
of: (a) the payment of all Obligations, including any renewals, extensions or
modifications thereof, in full if such payments of the Obligations have become
final and are not subject to being refunded as a preference or fraudulent
transfer under the Bankruptcy Code or other applicable law; and (b) the
termination of
4
<PAGE>
all loan agreements, loan documents and loan commitments between
the Borrower and the Bank.
9. This Guaranty is fully enforceable regardless of any defenses
which the Borrower may assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, payment, statute of
frauds, statute of limitations, accord and satisfaction, and usury.
10. The Guarantor agrees that, if at any time all or any part of any
payment previously applied by the Bank to any of the Obligations must be
returned by the Bank for any reason, whether by court order, administrative
order, or settlement, the Guarantor shall be liable for the full amount
returned as if such amount had never been received by the Bank,
notwithstanding any termination of this Agreement or the cancellation of any
note or other agreement evidencing any of the Obligations.
11. The Bank shall have the right to proceed against the Guarantor
without first proceeding against the Borrower or any property securing payment
of the Note, or any of the loan documents, or any other guarantor or endorser
of the Note or the Obligations.
12. The Guarantor waives and agrees not to assert any right to which
it may be or become entitled, whether by subrogation, contribution, indemnity,
reimbursement or otherwise, against the Borrower, any other guarantor or any
of their respective properties, by reason of the performance by the Guarantor
of its obligations under this Agreement, under any pledge or security
agreement or otherwise.
13. To secure the prompt payment and performance of the Obligations,
the Guarantor grants to the Bank a continuing first lien security interest in
all property of the Guarantor now or at any time hereafter in the possession
of the Bank and all proceeds of all such property. The Guarantor agrees that
the Bank shall have the rights and remedies of a secured party under the
Uniform Commercial Code as adopted by the State of Florida with respect to
such property, including, without limitation the right to sell or otherwise
dispose of any or all of such property. The Bank may, without further notice
to anyone, apply or set off any balances, credits, deposits, accounts, monies
or other indebtedness at any time created by or due from the Bank to the
Guarantor against the amounts due hereunder. Any notification of intended
disposition of any property required by law shall be deemed reasonable and
properly given if given at least five (5) calendar days before such
disposition.
14. The Guarantor represents and warrants to the Bank that:
5
<PAGE>
(a) The Guarantor: (i) is duly organized, validly existing
and in good standing under the laws of the state or country of its
incorporation and in all other states where the nature and extent of
the business transacted by it or the ownership of its assets makes
such qualification necessary (except where the failure to be so
qualified would not have a material adverse effect on the Guarantor);
(ii) has the corporate power and authority to own its properties and
to carry on its business as now being conducted; (iii) to the extent
necessary, is qualified to do business in the State of Florida; (iv)
is in compliance in all material respects with all laws, orders,
regulations, authorizations and similar matters (collectively the
"Governmental Requirements") of all governmental authorities, whether
federal, state, county, or municipal (collectively the "Governmental
Authority") applicable to it, except where the failure to be in
compliance will not have a material adverse effect on the Guarantor;
(v) represents that all of its issued and outstanding stock is fully
paid and nonassessable, there are no outstanding rights or options to
acquire any additional stock, and its stock has not been pledged or
encumbered in any manner whatsoever; and (vi) has not amended or
modified its articles of incorporation or its bylaws except as
previously disclosed in writing to the Bank prior to the execution
hereof.
(b) The execution, delivery and performance by the Guarantor
of this Guaranty: (i) is within the corporate powers and purposes of
the Guarantor; (ii) has been duly authorized by all requisite
corporate action of the Guarantor; (iii) does not require the
approval of any Governmental Authority; and (iv) will not violate any
material Governmental Requirement, the articles of incorporation and
bylaws of the Guarantor or any material indenture, agreement or other
instrument to which the Guarantor is a party or by which it or any of
its property is bound, or be in conflict with, result in a breach of
or constitute (with due notice or the lapse of time, or both) a
default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of its
property or assets, except as contemplated by the provisions of this
Guaranty.
(c) This Guaranty when executed and delivered by the
Guarantor will constitute the legal, valid and binding obligation of
the Guarantor enforceable in accordance with the terms hereof.
(d) Except as previously disclosed by the Guarantor to the
Bank in writing, there are no judgments outstanding against the
Guarantor and there is no action, suit, proceeding, or investigation
now pending (or to the best of the Guarantor's knowledge after
diligent inquiry threatened)
6
<PAGE>
against, involving or affecting the Guarantor or any of its
properties or any part thereof, at law, in equity or before any
Governmental Authority that if adversely determined as to the
Guarantor, would result in a material adverse change in the business
or financial condition of the Guarantor, or the Guarantor's
operation and ownership of any of its properties, nor to the
Guarantor's best knowledge is there any basis for such action, suit,
proceeding, or investigation.
(e) The Guarantor is not insolvent and will not be
rendered insolvent by the execution, delivery, payment and
performance of this Guaranty.
(f) Until the Obligations have been paid and performed in
full and the Guarantor shall have performed all of its obligations
hereunder, the Guarantor shall not, directly or indirectly, sell,
convey, or transfer or permit to be sold, conveyed, or transferred
any of its assets to any party or entity to which the Guarantor is
related or in which the Guarantor has an interest except on
arm's-length terms for fair value in the ordinary course of
business and except as otherwise permitted in the Loan Agreement.
15. The Guarantor acknowledges that the Bank has relied upon the
Guarantor's representations, has made no independent investigation of the
truth thereof and is not charged with any knowledge contrary thereto that may
have been received by any officer, director, employee, or shareholder of the
Bank. The Guarantor further acknowledges that it has not been induced to
execute and deliver this Guaranty as a result of, and is not relying upon, any
representations, warranties, agreements, or conditions, whether express or
implied, written or oral, by the Bank or by any officer, director, employee,
or shareholder of the Bank.
16. The Guarantor agrees that there shall be no material change (a
material change is agreed to be more than 25%) in the ownership or control of
the Guarantor without the prior express written consent of the Bank.
17. Notwithstanding anything to the contrary contained in this
Guaranty or in the Note or the Loan Documents, the parties intend that any
interest for which the Guarantor is obligated hereunder shall not exceed the
maximum amount of interest permitted to be enforced against the Guarantor
under the applicable laws relating to usury.
18. The Guarantor agrees that this Agreement shall be
governed by the substantive law of the State of Florida, without
regard to principles of conflicts of laws.
7
<PAGE>
19. Without in any way limiting the foregoing, the Guarantor
hereby waives any other act or omission of the Bank which may
change the scope of the Guarantor's risk.
20. All communications, notices or demands provided for hereunder
shall be sent by first class mail, by courier, by hand or by certified mail as
follows or to such other address with respect to any party as such party shall
notify the others in writing:
To the Bank: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, Florida 32202
Attn: Corporate Banking Group
To the Guarantor: Nik Public Safety, Inc.
191 Nassau Place Road
Yulee, Florida 32097
Attn: President
With a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn: Robert L. Lawrence, Esq.
Each such communication, notice or demand shall be deemed given: (i) when
deposited in the mail with proper postage affixed if sent by mail; or (ii)
when actually delivered to the appropriate address if sent by courier or by
hand.
21. This Agreement shall inure to the benefit of the Bank, its
successors and assigns, and to any person to whom the Bank may grant an
interest in any of the Obligations, and shall be binding upon the Guarantor
and its respective successors and assigns. This Agreement shall not be
modified except by instrument in writing signed by Guarantor and the Bank. No
waiver by the Bank of any term hereof shall be valid unless the Bank has
executed a written waiver of such term.
22. This Agreement is intended to take effect as a document
under seal.
23. Notwithstanding any contrary provision set forth herein, the
liability of the Guarantor with respect to the Obligations shall not exceed at
any time the Maximum Amount (as defined herein). The "Maximum Amount" shall
mean the greater of:
(a) the aggregate amount of all advances to the
Guarantor made directly or indirectly with the proceeds of the
Note or other Loan Documents; or
8
<PAGE>
(b) 95% of: (i) the fair salable value of the assets of the
Guarantor as of the date hereof; minus (ii) the total liabilities of
the Guarantor (including contingent liabilities, but excluding
liabilities of the Guarantor under this Guaranty and the other Loan
Documents executed by the Guarantor) as of the date hereof (except,
however, that if the calculation of the Maximum Amount in the manner
provided in this subparagraph (b) as of the date payment is required
of the Guarantor pursuant to this Guaranty would result in a greater
positive number, then the Maximum Amount shall be deemed to be such
greater positive number).
IN WITNESS WHEREOF, the Guarantor, intending to be legally bound
hereby, has duly executed this Guaranty of Payment on or as of the date and
year first above written.
NIK PUBLIC SAFETY, INC.
By:__________________________________
Its:______________________________
(Corporate Seal)
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _____ day of November, 1996, by ________________________ the
_____________________ of Nik Public Safety, Inc., on behalf of the
corporation, in Camden County,
Georgia.
------------------------------
Notary Public, State and County
aforesaid
Print Name: __________________
My Commission Expires:
[Notary Seal]
9
<PAGE>
EXHIBIT 10.12
GUARANTY OF PAYMENT
THIS GUARANTY is made this 14th day of November, 1996 by ARMOR
HOLDINGS PROPERTIES, INC. (the "Guarantor") in favor of BARNETT
BANK, N.A. (the "Bank").
W I T N E S S E T H :
Armor Holdings, Inc. (the "Borrower") and the Bank are parties to a
Loan Agreement (as amended or restated from time to time, the "Loan
Agreement") of even date herewith. The Borrower, pursuant to the Loan
Agreement, has executed and delivered a promissory note (as amended, extended
or renewed from time to time, the "Note") of even date herewith in the
original principal amount of $10,000,000.00 in favor of the Bank. As an
inducement to the Bank to extend, renew, or continue credit to the Borrower,
the Guarantor has agreed to guarantee certain Obligations (as defined below)
of the Borrower and to execute and deliver this Guaranty.
NOW, THEREFORE, in consideration of loans, advances or other credit
now or hereafter made or extended by the Bank to the Borrower, and to enable
such loans, advances or other credit to be maintained or obtained by the
Borrower, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees
with the Bank as follows:
1. The Guarantor hereby irrevocably guarantees the payment to the
Bank when due, whether by acceleration or otherwise, of all Obligations of the
Borrower to the Bank (subject, however, to the limitations set forth in
paragraph 23 hereof). As used in this Agreement, the term "Obligations" means:
(a) all principal, interest, costs, expenses and other amounts now or
hereafter due under the Note (including, without limitation, all principal
amounts advanced thereunder before, on or after the date hereof); and (b) all
other amounts now or hereafter payable by the Borrower under any of the Loan
Documents (as such term is defined in the Loan Agreement).
2. If any of the Obligations are not paid when due, after the
expiration of any applicable cure period, the Guarantor will forthwith pay all
such Obligations of the Borrower to the Bank (subject, however, to the
limitations set forth in paragraph 23 hereof). The Guarantor further agrees to
pay the Bank, upon demand, all reasonable costs and expenses, including
reasonable attorneys' and legal assistants' fees incurred in
connection with any trial or appellate proceedings or otherwise, that may be
incurred by the Bank in exercising its rights and remedies with respect to
payment of the Obligations or its rights and remedies against the Guarantor
under this Agreement.
3. The Guarantor hereby:
<PAGE>
(a) Assents to all terms and agreements heretofore or
hereafter made by the Borrower with the Bank;
(b) Agrees to make all payments hereunder in lawful
money of the United States of America in immediately available
funds without setoff or counterclaim;
(c) Consents that the Bank may, without further consent from
or notice to the Guarantor, and without in any way diminishing the
obligation of the Guarantor under this Agreement:
(i) Exchange, release or surrender to the
Borrower or to any guarantor, pledgor, or grantor any
collateral, or waive, release or subordinate any security
interest, in whole or in part, now or hereafter held as
security for any of the Obligations;
(ii) Accept any new collateral for the Obliga-
tions;
(iii) Waive or delay the exercise of any of its
rights or remedies against the Borrower or any other
person or entity, including, without limitation, any
other guarantor;
(iv) Release any other guarantor or endorser
from any liability;
(v) Renew, extend, or modify the terms of any
of the Obligations or any instrument or agreement
evidencing the same;
(vi) Apply payments by the Borrower, the
Guarantor, or any other person or entity, to the Obligations
or to other indebtedness of any such person or entity in
such order as the Bank, in its discretion, deems
appropriate;
(vii) Abstain from taking advantage of or real-
izing upon any security interest or other guarantee;
(d) Waives all notice of:
(i) The Bank's acceptance hereof or its inten-
tion to act, or its action, in reliance hereon;
(ii) The present existence or future incurring
of any of the Obligations or any terms or amounts thereof
or any change therein;
2
<PAGE>
(iii) Any default by the Borrower, any endorser,
surety, pledgor, grantor of security, or guarantor; and
(iv) The obtaining or release of any guaranty
or surety agreement (in addition to this Agreement),
pledge, assignment, or other security for any of the
Obligations; and
(e) Waives notice of presentment, demand, notice of demand,
presentment for payment, protest, notice of nonpayment or dishonor,
notice of protest and any other demands and notices required by law
in connection with this Guaranty or any instrument evidencing any
Obligations, except as such waiver may be expressly prohibited by
law, and waives any requirement that suit against it under this
Agreement be brought within any period of time shorter than the
general statute of limitations applicable to contracts under seal.
4. The Guarantor hereby waives and agrees not to assert or
take advantage of:
(a) any defense arising by virtue of:
(i) the lack of authority, death or disability
of any other party, or revocation hereof by any other
party;
(ii) the failure of the Bank to file or enforce
a claim of any kind; or
(iii) the failure of the Bank to record any
document or perfect any lien;
(b) notice of the existence, creation or incurring of any
new or additional indebtedness, or obligation or any action or
non-action on the part of the Borrower, the Bank, any endorser, any
guarantor under this or any other instrument, any creditor of the
Borrower, or any other person whomsoever, in connection with any
obligation or evidence of indebtedness held by the Bank as collateral
or in connection with any indebtedness or any obligation hereby
guaranteed;
(c) any defense based upon an election of remedies by the
Bank, including without limitation, an election to proceed by
non-judicial rather than judicial foreclosure (if the right to
proceed by non-judicial foreclosure is available to the Bank); and
(d) any duty on the part of the Bank to disclose to the
Guarantor any facts which the Bank may now or hereafter know about
the Borrower or any security for the Obligations, regardless of
whether the Bank has reason to believe that any
3
<PAGE>
such facts materially increase the risk beyond that which the
Guarantor intends to assume or has reason to believe that such facts
are unknown to the Guarantor or has a reasonable opportunity to
communicate such facts to the Guarantor, it being understood and
agreed that the Guarantor is fully responsible for being and keeping
informed of the financial condition of the Borrower and the status of
any security for the Obligations and of all circumstances bearing on
the risk of non-payment of all Obligations hereby guaranteed.
5. The Guarantor hereby waives any right or claim of right to cause
a marshaling of any of the Borrower's assets or the assets of any other
party now or hereinafter held as security for any Obligations.
6. The Bank's rights hereunder shall not be impaired or stayed
as a result of any dissolution of the Borrower or any bankruptcy or insolvency
proceedings involving the Borrower (including, without limitation, any
discharge of the Borrower or its debts in any such proceedings). The
Obligations shall include, without limitation, any amounts advanced to or for
the benefit of the Borrower or any successor thereto from and after the
occurrence or commencement of any such dissolution or proceedings. If any such
bankruptcy or insolvency proceedings are commenced by or against the Borrower,
the full amount of all Obligations then outstanding shall become immediately
due and payable by the Guarantor (whether or not the Borrower then owes the
Obligations on an accelerated basis).
7. The liability of the Guarantor under this Agreement is absolute,
irrevocable, unconditional, unlimited (except as set forth in paragraph 23
hereof) and continuing, without regard to the liability of any other person,
and shall not in any manner be affected by reason of any action taken or not
taken by the Bank, nor by the partial or complete unenforceability or
invalidity of any other guaranty or surety agreement, pledge, assignment or
other security for any of the Obligations. Failure to sign this or any other
guarantee by any other person shall not discharge the liability of any signer.
No delay in making demand on the Guarantor for satisfaction of its liability
hereunder shall prejudice the Bank's right to enforce such satisfaction.
All of the Bank's rights and remedies shall be cumulative and any failure
of the Bank to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time, and from
time to time, thereafter.
8. This Guaranty shall continue in effect until the last to occur
of: (a) the payment of all Obligations, including any renewals, extensions or
modifications thereof, in full if such payments of the Obligations have become
final and are not subject to being refunded as a preference or fraudulent
transfer under the Bankruptcy Code or other applicable law; and (b) the
termination of
4
<PAGE>
all loan agreements, loan documents and loan commitments between
the Borrower and the Bank.
9. This Guaranty is fully enforceable regardless of any defenses
which the Borrower may assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, payment, statute of
frauds, statute of limitations, accord and satisfaction, and usury.
10. The Guarantor agrees that, if at any time all or any part of any
payment previously applied by the Bank to any of the Obligations must be
returned by the Bank for any reason, whether by court order, administrative
order, or settlement, the Guarantor shall be liable for the full amount
returned as if such amount had never been received by the Bank,
notwithstanding any termination of this Agreement or the cancellation of any
note or other agreement evidencing any of the Obligations.
11. The Bank shall have the right to proceed against the Guarantor
without first proceeding against the Borrower or any property securing payment
of the Note, or any of the loan documents, or any other guarantor or endorser
of the Note or the Obligations.
12. The Guarantor waives and agrees not to assert any right to which
it may be or become entitled, whether by subrogation, contribution, indemnity,
reimbursement or otherwise, against the Borrower, any other guarantor or any
of their respective properties, by reason of the performance by the Guarantor
of its obligations under this Agreement, under any pledge or security
agreement or otherwise.
13. To secure the prompt payment and performance of the Obligations,
the Guarantor grants to the Bank a continuing first lien security interest in
all property of the Guarantor now or at any time hereafter in the possession
of the Bank and all proceeds of all such property. The Guarantor agrees that
the Bank shall have the rights and remedies of a secured party under the
Uniform Commercial Code as adopted by the State of Florida with respect to
such property, including, without limitation the right to sell or otherwise
dispose of any or all of such property. The Bank may, without further notice
to anyone, apply or set off any balances, credits, deposits, accounts, monies
or other indebtedness at any time created by or due from the Bank to the
Guarantor against the amounts due hereunder. Any notification of intended
disposition of any property required by law shall be deemed reasonable and
properly given if given at least five (5) calendar days before such
disposition.
14. The Guarantor represents and warrants to the Bank that:
5
<PAGE>
(a) The Guarantor: (i) is duly organized, validly existing
and in good standing under the laws of the state or country of its
incorporation and in all other states where the nature and extent of
the business transacted by it or the ownership of its assets makes
such qualification necessary (except where the failure to be so
qualified would not have a material adverse effect on the Guarantor);
(ii) has the corporate power and authority to own its properties and
to carry on its business as now being conducted; (iii) to the extent
necessary, is qualified to do business in the State of Florida; (iv)
is in compliance in all material respects with all laws, orders,
regulations, authorizations and similar matters (collectively the
"Governmental Requirements") of all governmental authorities, whether
federal, state, county, or municipal (collectively the "Governmental
Authority") applicable to it, except where the failure to be in
compliance will not have a material adverse effect on the Guarantor;
(v) represents that all of its issued and outstanding stock is fully
paid and nonassessable, there are no outstanding rights or options to
acquire any additional stock, and its stock has not been pledged or
encumbered in any manner whatsoever; and (vi) has not amended or
modified its articles of incorporation or its bylaws except as
previously disclosed in writing to the Bank prior to the execution
hereof.
(b) The execution, delivery and performance by the Guarantor
of this Guaranty: (i) is within the corporate powers and purposes of
the Guarantor; (ii) has been duly authorized by all requisite
corporate action of the Guarantor; (iii) does not require the
approval of any Governmental Authority; and (iv) will not violate any
material Governmental Requirement, the articles of incorporation and
bylaws of the Guarantor or any material indenture, agreement or other
instrument to which the Guarantor is a party or by which it or any of
its property is bound, or be in conflict with, result in a breach of
or constitute (with due notice or the lapse of time, or both) a
default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of its
property or assets, except as contemplated by the provisions of this
Guaranty.
(c) This Guaranty when executed and delivered by the
Guarantor will constitute the legal, valid and binding obligation of
the Guarantor enforceable in accordance with the terms hereof.
(d) Except as previously disclosed by the Guarantor to the
Bank in writing, there are no judgments outstanding against the
Guarantor and there is no action, suit, proceeding, or investigation
now pending (or to the best of the Guarantor's knowledge after
diligent inquiry threatened)
6
<PAGE>
against, involving or affecting the Guarantor or any of its
properties or any part thereof, at law, in equity or before any
Governmental Authority that if adversely determined as to the
Guarantor, would result in a material adverse change in the business
or financial condition of the Guarantor, or the Guarantor's
operation and ownership of any of its properties, nor to the
Guarantor's best knowledge is there any basis for such action, suit,
proceeding, or investigation.
(e) The Guarantor is not insolvent and will not be
rendered insolvent by the execution, delivery, payment and
performance of this Guaranty.
(f) Until the Obligations have been paid and performed in
full and the Guarantor shall have performed all of its obligations
hereunder, the Guarantor shall not, directly or indirectly, sell,
convey, or transfer or permit to be sold, conveyed, or transferred
any of its assets to any party or entity to which the Guarantor is
related or in which the Guarantor has an interest except on
arm's-length terms for fair value in the ordinary course of
business and except as otherwise permitted in the Loan Agreement.
15. The Guarantor acknowledges that the Bank has relied upon the
Guarantor's representations, has made no independent investigation of the
truth thereof and is not charged with any knowledge contrary thereto that may
have been received by any officer, director, employee, or shareholder of the
Bank. The Guarantor further acknowledges that it has not been induced to
execute and deliver this Guaranty as a result of, and is not relying upon, any
representations, warranties, agreements, or conditions, whether express or
implied, written or oral, by the Bank or by any officer, director, employee,
or shareholder of the Bank.
16. The Guarantor agrees that there shall be no material change (a
material change is agreed to be more than 25%) in the ownership or control of
the Guarantor without the prior express written consent of the Bank.
17. Notwithstanding anything to the contrary contained in this
Guaranty or in the Note or the Loan Documents, the parties intend that any
interest for which the Guarantor is obligated hereunder shall not exceed the
maximum amount of interest permitted to be enforced against the Guarantor
under the applicable laws relating to usury.
18. The Guarantor agrees that this Agreement shall be
governed by the substantive law of the State of Florida, without
regard to principles of conflicts of laws.
7
<PAGE>
19. Without in any way limiting the foregoing, the Guarantor
hereby waives any other act or omission of the Bank which may
change the scope of the Guarantor's risk.
20. All communications, notices or demands provided for hereunder
shall be sent by first class mail, by courier, by hand or by certified mail as
follows or to such other address with respect to any party as such party shall
notify the others in writing:
To the Bank: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, Florida 32202
Attn: Corporate Banking Group
To the Guarantor: Armor Holdings Properties, Inc.
191 Nassau Place Road
Yulee, Florida 32097
Attn: President
With a copy to:
Kane Kessler, P.C.
13150 Avenue of the Americas
New York, New York 10019
Attn: Robert L. Lawrence, Esq.
Each such communication, notice or demand shall be deemed given: (i) when
deposited in the mail with proper postage affixed if sent by mail; or (ii)
when actually delivered to the appropriate address if sent by courier or by
hand.
21. This Agreement shall inure to the benefit of the Bank, its
successors and assigns, and to any person to whom the Bank may grant an
interest in any of the Obligations, and shall be binding upon the Guarantor
and its respective successors and assigns. This Agreement shall not be
modified except by instrument in writing signed by Guarantor and the Bank. No
waiver by the Bank of any term hereof shall be valid unless the Bank has
executed a written waiver of such term.
22. This Agreement is intended to take effect as a document
under seal.
23. Notwithstanding any contrary provision set forth herein, the
liability of the Guarantor with respect to the Obligations shall not exceed at
any time the Maximum Amount (as defined herein). The "Maximum Amount" shall
mean the greater of:
(a) the aggregate amount of all advances to the
Guarantor made directly or indirectly with the proceeds of the
Note or other Loan Documents; or
8
<PAGE>
(b) 95% of: (i) the fair salable value of the assets of the
Guarantor as of the date hereof; minus (ii) the total liabilities of
the Guarantor (including contingent liabilities, but excluding
liabilities of the Guarantor under this Guaranty and the other Loan
Documents executed by the Guarantor) as of the date hereof (except,
however, that if the calculation of the Maximum Amount in the manner
provided in this subparagraph (b) as of the date payment is required
of the Guarantor pursuant to this Guaranty would result in a greater
positive number, then the Maximum Amount shall be deemed to be such
greater positive number).
IN WITNESS WHEREOF, the Guarantor, intending to be legally bound
hereby, has duly executed this Guaranty of Payment on or as of the date and
year first above written.
ARMOR HOLDINGS PROPERTIES, INC.
By:__________________________________
Its:______________________________
(Corporate Seal)
STATE OF GEORGIA
COUNTY OF CAMDEN
The foregoing instrument was executed, acknowledged and delivered
before me this _____ day of November, 1996, by ________________________ the
_____________________ of Armor Holdings Properties, Inc., on behalf of the
corporation, in Camden County, Georgia.
------------------------------
Notary Public, State and County
aforesaid
Print Name: __________________
My Commission Expires:
[Notary Seal]
9
<PAGE>
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of July 24,
1996, between ARMOR HOLDINGS, INC., a Delaware corporation (the "Company");
and ROBERT R. SCHILLER (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Employee and
to be assured of his services on the terms and conditions
hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment
on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the Company and the Employee hereby
agree as follows:
1. TERM. The term of this Agreement shall be three (3)
years, commencing on the date hereof and ending on July 23, 1999 (the "Initial
Term"), subject to earlier termination pursuant to the provisions of Section 9
herein. The employment of the Employee shall automatically continue hereunder
following the Initial Term for successive one (1) year periods (the "Renewal
Terms") (on terms to be mutually agreed upon by the parties), unless the
Company or the Employee gives notice to the other at least sixty (60) days
prior to the end of the Initial Term of its or his election to terminate this
Agreement at the end of the Initial Term. Subsequent to the Initial Term, the
employment of the Employee hereunder may be terminated at the end of any
Renewal Term by delivery by either the Employee or the Company of a written
notice to the other party at least sixty (60) days prior to the end of any
Renewal Term.
2. DUTIES. During the term of this Agreement, the Employee
shall serve as the Vice President - Corporate Development of the Company and
shall perform all duties commensurate with his position and as may be assigned
to him by the Chief Executive Officer of the Company. The Employee shall
devote his full business time and energies to the business and affairs of the
Company and shall use his best efforts, skills and abilities to promote the
interests of the Company and to diligently and competently perform the duties
of his position.
3. COMPENSATION AND BENEFITS. (a) During the term of
this Agreement, the Company shall pay to the Employee, and the Employee shall
accept from the Company, as compensation for the
<PAGE>
performance of services under this Agreement and the Employee's observance and
performance of all of the provisions hereof, a salary of $120,000 per year
(the "Base Compensation"). The Employee's salary shall be payable in
accordance with the normal payroll practices of the Company. The Company shall
also pay a one-time relocation bonus of $45,000 to the Employee (the
"Relocation Bonus"). In addition to the Relocation Bonus, the Company will pay
for the cost of two trips (at economy fare rates) from the New York City
metropolitan area to Jacksonville, Florida for the Employee and his wife and
child in contemplation of their relocation. The Employee's salary and the
Relocation Bonus shall be subject to withholding for applicable taxes and
other amounts.
(b) During the term of this Agreement, the Employee
shall be entitled to participate in or benefit from, in accordance with the
eligibility and other provisions thereof, the Company's medical insurance and
other fringe benefit plans or policies as the Company may make available to,
or have in effect for, its personnel with commensurate duties from time to
time. The Company retains the right to terminate or alter any such plans or
policies from time to time. The Employee shall also be entitled to four weeks
paid vacation each year, sick leave and other similar benefits in accordance
with policies of the Company from time to time in effect for personnel with
commensurate duties.
(c) The Employee shall be entitled to receive
incentive stock options under the Company's incentive stock option plan to
purchase 150,000 shares of the Company's common stock, at an exercise price
per share equal to $6.0625, the market price thereof at the time of grant.
Such options shall vest over a period of three years and shall not be
exercisable until July 24, 1999; provided, however, that upon a breach by the
Employee of the provisions of Sections 6 or 7 hereof, the Employee shall have
no right to exercise any such options granted hereunder or otherwise held by
the Employee; and provided, further, that in the event that this Agreement is
terminated by the Company without cause prior to the expiration of the Initial
Term, then the entire amount of such options shall vest and become exercisable
on the date of such termination. In the event of a "change in control" (as
hereinafter defined) of the Company, all of such options shall vest and become
exercisable on the effective date of such change in control. For purposes
hereof, "change in control" of the Company shall mean the sale of all of the
shares of capital stock of the Company, or the sale of all or substantially
all of the assets of the Company (other than a transfer of assets to a
subsidiary of the Company) or the merger or consolidation of the Company
(other than for the purpose of (x) consummating an acquisition by the Company
or (y) effecting a restructuring of the Company), the effect of any of which
is to result in the sale of the Company. The Employee may be entitled, during
the term of this Agreement, to receive such
2
<PAGE>
additional options, at such exercise prices and other terms, and/or to
participate in such other bonus plans, whether during the term of this
Agreement or upon termination pursuant to Section 9 hereof, as the Compensation
Committee of the Board of Directors of the Company may, in its sole and
absolute discretion, determine.
4. REIMBURSEMENT OF BUSINESS EXPENSES. During the term of
this Agreement, upon submission of proper invoices, receipts or other
supporting documentation satisfactory to the Company and in specific
accordance with such guidelines as may be established from time to time by the
Company's Board of Directors, the Employee shall be reimbursed by the Company
for all reasonable business expenses actually and necessarily incurred by the
Employee on behalf of the Company in connection with the performance of
services under this Agreement.
5. REPRESENTATION OF EMPLOYEE. The Employee represents and
warrants that he is not party to, or bound by, any agreement or commitment, or
subject to any restriction, including but not limited to agreements related to
previous employment containing confidentiality or noncompete covenants, which
in the future may have a possibility of adversely affecting the business of
the Company or the performance by the Employee of his duties under this
Agreement.
6. CONFIDENTIALITY. For purposes of this Section 6, all
references to the Company shall be deemed to include the Company's affiliates
and subsidiaries.
(a) CONFIDENTIAL INFORMATION. The Employee
acknowledges that as a result of his employment with the Company, the Employee
has and will continue to have knowledge of, and access to, proprietary and
confidential information of the Company, including, without limitation,
research and development plans and results, software, data bases, technology,
inventions, trade secrets, technical information, know-how, plans,
specifications, methods of operations, product information, product
availability, pricing information, financial, business and marketing
information and plans and the identity of customers and suppliers
(collectively, the "Confidential Information"), and that such information,
even though it may be contributed, developed or acquired by the Employee,
constitutes valuable, special and unique assets of the Company developed at
great expense which are the exclusive property of the Company. Accordingly,
the Employee shall not, at any time, either during or subsequent to the term
of this Agreement, use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity, any of the Confidential
Information without the prior written consent of the Company, except to
responsible officers and employees of the
3
<PAGE>
Company and other responsible persons who are in a contractual or fiduciary
relationship with the Company and who have a need for such information for
purposes in the best interests of the Company, and except for such information
which is or becomes of general public knowledge from authorized sources other
than the Employee. The Employee acknowledges that the Company would not enter
into this Agreement without the assurance that all such confidential and
proprietary information will be used for the exclusive benefit of the Company.
(b) RETURN OF CONFIDENTIAL INFORMATION. Upon
the termination of Employee's employment with the Company, the Employee shall
promptly deliver to the Company all drawings, manuals, letters, notes,
notebooks, reports and copies thereof and all other materials relating to the
Company's business, including without limitation any materials incorporating
Confidential Information, which are in the Employee's possession or control.
7. NONCOMPETITION. For purposes of this Section 7, all
references to the Company shall be deemed to include the Company's affiliates
and subsidiaries. The Employee will not utilize his special knowledge of the
business of the Company and his relationships with customers, suppliers of the
Company and others to compete with the Company. During the term of this
Agreement and for a period of one (1) year after the expiration or termination
of this Agreement, the Employee shall not engage, directly or indirectly or
have an interest, directly or indirectly, anywhere in the United States of
America or any other geographic area where the Company does business or in
which its products are marketed, alone or in association with others, as
principal, officer, agent, employee, director, partner, stockholder or lender
(except with respect to his employment by the Company), or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with or substantially similar to that
engaged in by the Company, including without limitation, the development,
manufacture and distribution of bullet and projectile resistant garments,
including bullet resistant and sharp instrument penetration resistant vests,
bullet resistant blankets, bomb disposal suits and helmets, bomb protection
and disposal equipment and load bearing vests, and other ballistic protection
and security equipment, including explosive ordnance device (EOD) handling and
detection equipment, EOD suppression and disposal equipment, helmets, face
masks, shields, hard armor ballistic plates, customized armor for vehicles and
other custom armored products, and related products, or any other business
engaged in by the Company at the time in question for which the Employee is
directly or indirectly responsible (it being understood hereby, that the
ownership by the Employee of 5% or less of the stock of any company listed on
a national securities exchange shall not be deemed a violation of this
Section 7);
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provided, however, that in the event the Employee is terminated without
cause, then the provisions of this Section 7 will continue to be applicable to
the Employee. During the same period, the Employee shall not, and shall not
permit any of his employees, agents or others under his control to, directly
or indirectly, on behalf of himself or any other person, (i) call upon, accept
business from, or solicit the business of any person who is, or who had been
at any time during the preceding two years, a customer of the Company or any
successor to the business of the Company, or otherwise divert or attempt to
divert any business from the Company or any such successor, or (ii) directly
or indirectly recruit or otherwise solicit or induce any person who is an
employee of, or otherwise engaged by, the Company or any successor to the
business of the Company to terminate his or her employment or other
relationship with the Company or such successor, or hire any person who has
left the employ of the Company or any such successor during the preceding two
years. The Employee shall not at any time, directly or indirectly, use or
purport to authorize any person to use any name, mark, logo, trade dress or
other identifying words or images which are the same as or similar to those
used at any time by the Company in connection with any product or service,
whether or not such use would be in a business competitive with that of the
Company. Any breach or violation by the Employee of the provisions of this
Section 7 shall toll the running of any time periods set forth in this Section
7 for the duration of any such breach or violation.
8. REMEDIES. The restrictions set forth in Sections 6 and 7
are considered by the parties to be fair and reasonable. The Employee
acknowledges that the restrictions contained in Section 6 and 7 will not
prevent him from earning a livelihood. The Employee further acknowledges that
the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of
Sections 6 or 7. Accordingly, the Employee agrees that, in addition to any
other remedies available to the Company, the Company shall be entitled to
injunctive and other equitable relief to secure the enforcement of these
provisions, and shall be entitled to receive reimbursement from the Employee
for all attorneys' fees and expenses incurred by the Company in enforcing
these provisions. If any provisions of Sections 6, 7, or 8 relating to the
time period, scope of activities or geographic area of restrictions is
declared by a court of competent jurisdiction to exceed the maximum
permissible time period, scope of activities or geographic area, the maximum
time period, scope of activities or geographic area, as the case may be, shall
be reduced to the maximum which such court deems enforceable. If any
provisions of Sections 6, 7, or 8 other than those described in the preceding
sentence are adjudicated to be invalid or unenforceable, the invalid or
unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in
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which such adjudication is made) in such manner as to render them enforceable
and to effectuate as nearly as possible the original intentions and agreement
of the parties.
9. TERMINATION. This Agreement may be terminated prior
to the expiration of the term set forth in Section 1 upon the
occurrence of any of the events set forth in, and subject to the
terms of, this Section 9.
(a) DEATH. This Agreement will terminate
immediately and automatically upon the death of the Employee. In the event
that this Agreement is terminated upon the death of the Employee, then the
entire amount of options for the purchase of common stock of the Company
granted to the Employee shall vest and become exercisable by the estate of the
Employee on the date of such death.
(b) DISABILITY. This Agreement may be terminated
at the Company's option, immediately upon notice to the Employee, if the
Employee shall suffer a permanent disability. For the purposes of this
Agreement, the term "permanent disability" shall mean the Employee's inability
to perform his duties under this Agreement for a period of 90 consecutive days
or for an aggregate of 120 days, whether or not consecutive, in any twelve
month period, due to illness, accident or any other physical or mental
incapacity, as solely determined by the Board of Directors of the Company. In
the event that this Agreement is terminated upon the permanent disability of
the Employee, then the entire amount of options for the purchase of common
stock of the Company granted to the Employee shall vest and become exercisable
by the Employee on the date of such termination.
(c) CAUSE. This Agreement may be terminated at the
Company's option, immediately upon notice to the Employee, upon: (i) breach by
the Employee of any material provision of this Agreement; (ii) gross
negligence or willful misconduct of the Employee in connection with the
performance of his duties under this Agreement, or Employee's willful refusal
to perform any of his duties or responsibilities required pursuant to this
Agreement; (iii) fraud, criminal conduct, dishonesty or embezzlement by the
Employee; or (iv) Employee's misappropriation for personal use of assets or
business opportunities of the Company.
(d) WITHOUT CAUSE. This Agreement may be
terminated at any time by the Company without cause upon giving the Employee
three (3) days prior written notice of such termination. In such event, the
Employee shall be entitled to receive his Base Compensation in accordance with
the provisions of Section 3(a) hereof throughout the balance of the term of
this Agreement, reduced, dollar for dollar, with any salary, commissions,
wages or
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other income received by him from any other employer or employment contract
during such period.
10. MISCELLANEOUS.
(a) SURVIVAL. The provisions of Sections 6, 7, and
8 shall survive the termination of this Agreement.
(b) ENTIRE AGREEMENT. This Agreement sets forth
the entire understanding of the parties and merges and supersedes
any prior or contemporaneous agreements between the parties
pertaining to the subject matter hereof.
(c) MODIFICATION. This Agreement may not be
modified or terminated orally, and no modification, termination or attempted
waiver of any of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced; provided,
however, that Employee's compensation may be increased at any time by the
Company without in any way affecting any of the other terms and conditions of
this Agreement, which in all other respects shall remain in full force and
effect.
(d) WAIVER. Failure of a party to enforce one or
more of the provisions of this Agreement or to require at any time performance
of any of the obligations hereof shall not be construed to be a waiver of such
provisions by such party nor to in any way affect the validity of this
Agreement or such party's right thereafter to enforce any provision of this
Agreement, nor to preclude such party from taking any other action at any time
which it would legally be entitled to take.
(e) SUCCESSORS AND ASSIGNS. Neither party shall
have the right to assign this Agreement, or any rights or obligations
hereunder, without the consent of the other party; provided, however, that
upon the sale of all or substantially all of the assets, business and goodwill
of the Company to another company, or upon the merger or consolidation of the
Company with another company, this Agreement shall inure to the benefit of,
and be binding upon, both Employee and the company purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other company
were the Company; and provided, further, that the Company shall have the right
to assign this Agreement to any affiliate or subsidiary of the Company.
Subject to the foregoing, this Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their legal representatives, heirs,
successors and assigns.
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<PAGE>
(f) COMMUNICATIONS. All notices, requests, demands
and other communications under this Agreement shall be in writing and shall be
deemed to have been given at the time personally delivered or when mailed in
any United States post office enclosed in a registered or certified postage
prepaid envelope and addressed to the addresses set forth below, or to such
other address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
TO THE COMPANY: Armor Holdings, Inc.
191 Nassau Place Road
Yulee, Florida 32097
Attn.: Jonathan M. Spiller
WITH A COPY TO: Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn.: Robert L. Lawrence, Esq.
TO THE EMPLOYEE: Robert R. Schiller
293 Waters Edge Drive South
Ponte Vedra Beach, Florida 32082
(g) SEVERABILITY. If any provision of this
Agreement is held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the
validity and enforceability of the other provisions of this Agreement and the
provision held to be invalid or unenforceable shall be enforced as nearly as
possible according to its original terms and intent to eliminate such
invalidity or unenforceability.
(h) JURISDICTION; VENUE. This Agreement shall be
subject to the exclusive jurisdiction of the courts of New York County, New
York. Any breach of any provision of this Agreement shall be deemed to be a
breach occurring in the State of New York by virtue of a failure to perform an
act required to be performed in the State of New York, and the parties
irrevocably and expressly agree to submit to the jurisdiction of the courts of
New York County, New York for the purpose of resolving any disputes among them
relating to this Agreement or the transactions contemplated by this Agreement.
(i) GOVERNING LAW. This Agreement is made and
executed and shall be governed by the laws of the State of New York, without
regard to the conflicts of law principles thereof.
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IN WITNESS WHEREOF, each of the parties hereto have duly
executed this Agreement as of the date set forth above.
ARMOR HOLDINGS, INC.
By:
------------------------------------
Name: Jonathan M. Spiller
Title: President and
Chief Executive Officer
------------------------------------
Robert R. Schiller
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<PAGE>
EXHIBIT 10.32
JACKSONVILLE INTERNATIONAL TRADEPORT
PURCHASE AND SALE AGREEMENT
THIS JACKSONVILLE INTERNATIONAL TRADEPORT PURCHASE AND SALE AGREEMENT
(this "Agreement") is made and entered into this ___ day of October, 1996, by
and between ARMOR HOLDINGS, INC., a Delaware Corporation, the address of which
for notices hereunder is 191 Nassau Place Road, Fernandina Beach, Florida
32034 ("Buyer") and WILMA/SKYLAND JOINT VENTURE, LTD., a Georgia limited
partnership, the address of which for notices hereunder is 1350 Tradeport
Drive, Suite 101, Jacksonville, Florida 32218 ("Seller").
WITNESSETH: That,
In consideration of the sum of Five Thousand and No/100 Dollars
($5,000.00) paid by Buyer (the "Deposit") to MARTIN, ADE, BIRCHFIELD &
MICKLER, P.A. ("Escrow Agent"), the mutual covenants contained herein, and
other good and valuable considerations, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto covenant and agree as follows:
1. Property. Buyer agrees to purchase from Seller and Seller agrees
to sell to Buyer, upon the terms and conditions set forth herein, the property
located in Jacksonville, Duval County, Florida, consisting of approximately
7.07 acres located on International Parkway, as depicted on the sketch which
is more particularly described on Exhibit A attached hereto and made a part
hereof (the "Property"). The actual metes and bounds legal description of the
"Property" shall be determined by the survey to be provided by Seller pursuant
to paragraph 6 hereof. Upon delivery of the survey to Buyer, the metes and
bounds legal description set forth on the survey shall automatically be
substituted as the legal description of the "Property" to be purchased
pursuant to this Agreement without the necessity of any further amendment to
this Agreement. The Property is part of a project known as the Jacksonville
International Tradeport (the "Project"). The Project constitutes a Development
of Regional Impact and is subject to the terms and conditions of a Development
Order, [including a Preliminary Development Agreement] ("DO"), a PUD Zoning
Ordinance ("PUD"), a Declaration of Covenants, Conditions and Restrictions
("Covenants") and the Jacksonville International Tradeport Development
Guidelines ("Guidelines"), all of which are incorporated herein by reference.
The terms defined in this paragraph are more particularly described on the
attached Exhibit "B".
2. Buyer's Improvements. Buyer represents and warrants to Seller that
Buyer shall construct on the Property in accordance with the DO, the PUD, the
Covenants, and the Guidelines, certain improvements to be used primarily for
office and light manufacturing which use shall be consistent with "Light
Industrial Purposes" (as defined in the DO), containing at least 50,000 square
feet of enclosed floor space but no more than 150,000 square feet
of enclosed floor space (the "Improvements"). Buyer will commence construction
of the Improvements on or before November 1, 1996 (the "Commencement Date")
and the Improvements will be substantially complete and ready for occupancy on
or before July 1, 1997 (the "Completion Date").
<PAGE>
3. Purchase Price and Payment.
(a) The purchase price (the "Purchase Price") shall be Four
Hundred Ninety Five Thousand Nine Hundred Thirty Dollars and No/100 Dollars
($495,930.00) payable in United States Dollars less an economic incentive
credit in the amount of Forty Thousand Dollars & No/100 ($40,000.00).
(b) The Purchase Price (less a credit for the Deposit and
subject to adjustment for prorations) shall be payable at Buyer's option,
either: (i) by certified\cashier's check issued by a Jacksonville, Florida,
based banking institution and payable to the order of Seller without
endorsement; or (ii) by wire transfer through the Federal Reserve Bank to an
account designated by Seller.
4. Closing Costs, Contributions and Prorations.
(a) Seller shall pay for Seller's attorney's fee, a fee
title insurance policy in the amount of the Purchase Price, State of Florida
documentary stamps on the deed, any mortgage release payment and recording
fees for any release and a boundary survey of the Property.
(b) Buyer shall pay for Buyer's attorney's fee, all costs
related to any financing of the Purchase Price, the contributions described in
paragraph 4(c) hereof, recording fees, and the cost of any special survey
certifications required by Buyer and its mortgagee.
(c) Buyer shall pay to the Jacksonville International
Tradeport Owners' Association, Inc. (the "Association"), at closing, as a
contribution to the Association's initial working capital, an amount equal to
the current regular annual assessment of $350.00 per each acre of the Property
which will be approximately $2,475.00. This initial working capital
contribution is in addition to, and not in lieu of, assessments payable to the
Association pursuant to the Covenants. Buyer shall also pay at closing Buyer's
prorata share of the regular annual assessment upon the Property (equal to
$350.00 per acre times each acre comprising the Property) prorated from the
date of closing until the end of the Association's then current fiscal year.
(d) Real property taxes relating to the Property shall
be prorated as of the day immediately prior to the date of closing.
5. Title Commitment.
(a) Prior to the effective date of this Agreement, Seller,
at Seller's expense, has delivered to Buyer a commitment for a fee title
insurance policy issued by Commonwealth Land Title Insurance Company or any
other title underwriter reasonably acceptable to Buyer
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which shall commit to insure Buyer's title to the Property in the amount of the
Purchase Price subject to the standard printed exceptions set forth therein and
the Permitted Exceptions, none of which will be considered title defects. Any
exception in the title insurance commitment for mortgages, judgments, liens and
other matters which can be cured by the payment of money shall not be
considered title defects provided Seller pays or agrees to pay the amount
required to obtain a release from the proceeds available at closing.
(b) The term "Permitted Exceptions" shall mean and refer to:
(i) the DO, the PUD, the Covenants, and the Guidelines;
(ii) utility and drainage easements of record, including, if
applicable to the Property, a Conservation Easement in favor of St.
Johns River Water Management District;
(iii) rights of governmental authorities and others to any
portion of the Property lying below the mean high water mark of
Little Cedar Creek or Pickett Branch, as applicable;
(iv) ad valorem taxes for the year of closing;
(v) standard printed exceptions set forth in the title insurance
commitment; and
(vi) any matter indicated on the survey map or in the title
insurance commitment which is, or is deemed to be, approved or waived
by Buyer pursuant to this paragraph 5.
(c) If the title insurance commitment or survey map reveals
any title defect, (other than a Permitted Exception) Buyer, prior to the
Closing Date, shall notify Seller in writing of such defect. If Seller
receives no written notice of any defect prior to the Closing Date, Buyer
shall be deemed to have agreed that the status of title reflected in the title
insurance commitment and survey is acceptable.
(d) Seller shall have the right, but no obligation to cure
defects and shall have a period of thirty (30) days from the date of Buyer's
notice in which to do so. Notwithstanding the foregoing, Seller agrees that
it shall use its best efforts to cure any title defect which can be cured by
the payment of a liquidated sum which does not exceed $1,500.00. The deletion
from the title insurance commitment of the exception complained of shall be
sufficient to cure the defect. If any title defect is not cured within such
period of time, then Buyer, at Buyer's option, shall either: (i) waive the title
defect and accept title to the Property in its existing condition without any
change in the Purchase Price; or (ii) terminate this Agreement and accept a
refund of the Deposit together with all accrued interest thereon. If Buyer does
not give Seller written notice of Buyer's election to terminate this Agreement
within ten (10) days of receipt from Seller
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of written notice that Seller is unable or unwilling to cure the title defect,
if any, then Buyer shall have waived Buyer's election to terminate and shall be
deemed to have waived the title defect and to have agreed to accept title in
its existing condition.
6. Survey. Prior to the effective date of this Agreement,
Seller, at Seller's expense, has obtained and delivered to Buyer at
least three (3) prints of a boundary survey of the Property.
7. Buyer's Investigations.
Buyer may enter the Property prior to closing to make
investigations for all reasonable purposes including, but not limited to, soil
tests and borings, subject to the conditions of this paragraph, but Buyer may
not, without the prior written consent of Seller, apply to any governmental
agency having jurisdiction over the Property or the Project for any permit or
license or any change in, variance of, or release from any permit or license
applicable to the Property as of the date hereof. Seller may refuse such
consent in Seller's sole and absolute discretion. Buyer shall indemnify,
defend, and hold Seller harmless from and against any and all loss, liability,
cost, claim, demand, and expense (including without limitation reasonable
attorneys' fees) arising from any unpaid work or from any personal injury,
loss of life, or property damage occurring on or about the Property or any
adjacent lands as a result of any act or omission of Buyer, or Buyer's
employees, agents, contractors, licensees and representatives. Buyer shall,
upon Seller's request, furnish to Seller a certificate of insurance evidencing
liability insurance coverage by an insurer and in an amount reasonably
acceptable to Seller and naming Seller as an additional insured. The provision
of such insurance shall not relieve Buyer of any liability under the indemnity
contained herein.
8. Closing Date. The closing shall be held in Jacksonville,
Florida, on or before October 22, 1996, at 2:00 p.m., at the offices of Martin,
Ade, Birchfield & Mickler, P.A., 3000 Independent Square, Jacksonville, Florida.
9. Closing Documents. At closing, Seller shall execute and deliver to
Buyer the following documents:
(a) General Warranty Deed conveying good and insurable
fee simple title to the Property, free and clear of liens and
encumbrances except the Permitted Exceptions;
(b) An affidavit stating Seller's principal place of
business, Seller's United States Taxpayer Identification Number, and stating
that Seller is not a foreign person as defined in Section 1445 of the Internal
Revenue Code; and
(c) An affidavit of title covering mechanic's and
materialmen's liens and as to possession of the Property acceptable to the
title company for the purpose of removing the standard printed mechanic's lien
and parties in possession exceptions from the title policy.
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10. Escrow of Deposit. The Escrow Agent shall hold the Deposit in
escrow in accordance with the terms of this Agreement. If any dispute should
arise in connection with this Agreement, the Escrow Agent may place the
Deposit with the Clerk of the Circuit Court of Duval County, Florida, and
interplead Buyer and Seller. Buyer and Seller agree that if any interpleader
action is commenced, all attorneys' fees and costs incurred by the Escrow
Agent shall be paid by the party adjudged not to be entitled to the Deposit.
11. Buyer's Compliance.
(a) Buyer agrees that Buyer's covenants, representations,
and warranties in this Agreement are a material inducement to Seller's
entering into this Agreement. Buyer agrees that Seller has a material economic
interest in conveying property within the Project only to purchasers who will
develop such property in a timely manner consistent with the schedules and
requirements as set forth in this Agreement and in accordance with the DO, the
PUD, the Covenants, and the Guidelines.
(b) Buyer represents and warrants to Seller that the
Improvements and all other improvements constructed upon the Property shall be
constructed in accordance with the DO, PUD, the Covenants, and the Guidelines,
and shall be constructed only by a licensed general contractor approved in
writing by Seller, whose approval shall not be unreasonably withheld.
12. Default Clause.
(a) If Buyer fails to purchase the Property in accordance with the
terms of this Agreement for any reason except for Seller's default or pursuant
to any of Buyer's rights of termination herein provided, Seller's only remedy
against Buyer for such breach shall be to collect the Deposit, including any
accrued interest thereon, as agreed and liquidated damages. The parties agree
that such amount is a fair and reasonable measure of the damages to be suffered
by Seller in the event of any such breach, the exact amount thereof being
incapable of ascertainment. If Buyer terminates this Agreement pursuant to a
right of Buyer to do so contained herein, Buyer shall be entitled to a return
of the Deposit, including any accrued interest thereon. If Seller fails to
consummate this Agreement in accordance with its terms for any reason except
for Buyer's default, Buyer shall be entitled to terminate this Agreement and
receive a refund of the Deposit, including any accrued interest thereon, or
bring an action for specific performance. In no event shall Buyer be entitled
to bring or maintain any action for damages for breach of this Agreement by
Seller.
(b) Notwithstanding the foregoing, Seller shall be entitled
to all remedies available at law or in equity (including without limitation an
action for specific performance without posting bond) for any breach of any
representation, warranty or covenant of Buyer contained in paragraphs 2, 7,
11, 13, 14, 15, 17, 18, 19, 24, 28, 30, 31 and 32 of this Agreement.
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13. DO, PUD, Covenants and Guidelines.
(a) Seller reserves the right to amend the DO, the PUD, the
Covenants, or the Guidelines prior to closing, provided that a copy of any
such amendment is transmitted to Buyer prior to closing. If the proposed
change or amendment does not materially alter or modify the DO, the PUD, the
Covenants, or the Guidelines as they relate to the Property in a manner that
is materially adverse to Buyer or do not materially adversely affect the value
of the Property, Buyer's approval shall not be required. If any such change
does materially alter or modify the permitted use of the Property in a manner
that is materially adverse to Buyer or materially adversely affects the value
of the Property, such change shall be considered approved by Buyer unless
Buyer shall notify Seller in writing prior to closing that Buyer disapproves
of the change or amendment and elects to terminate this Agreement and receive
a refund of the Deposit, including any accrued interest thereon.
(b) After closing, should Seller seek to obtain one or more
modifications of the DO or the PUD, Buyer shall not object, either orally or
in writing, to any governmental agency or official with respect to the DO or
the PUD or otherwise impede or hamper Seller's efforts, provided the
modifications do not materially alter or modify the permitted use of the
Property in a manner that is adverse to Buyer and do not materially adversely
affect the value of the Property.
14. Permits. As hereinabove specified, Buyer acknowledges that the
Property is part of the Project, a development known as the Jacksonville
International Tradeport. Seller has obtained from the St. Johns River Water
Management District (the "District") a permit constituting the conceptual
approval of a surface water management system and storm water system to serve
the Project, said permit being identified as permit number 4-031-0225-CM (the
"Water Permit"). Additionally, Seller has obtained from the United States Army
Corps of Engineers (the "Corps") a permit constituting the approval for
dredging and filling of portions of the Project which may include the
Property, said permit being identified as permit number 88IPI-21128 (the "COE
Permit"). Lastly, Seller has obtained from the Florida Department of
Environmental Regulation (now known as the Florida Department of Environmental
Protection) (the "DEP") a permit constituting the approval for dredging and
filling portions of the Project which may include the Property, said permit
being identified as permit number 12-031-0004 (the "DEP Permit"). The Water
Permit, the COE Permit, and the DEP Permit were issued pursuant to certain
plans and specifications submitted to the District, the Corps and the DEP as
more particularly identified in said permits. It is the intent of Buyer and
Seller that such surface and storm water facilities to be constructed by Buyer
on the Property, as are necessary or required for Buyer's intended use of the
Property, shall be consistent with the Water Permit. Further, it is the intent
of Buyer and Seller that such dredge and fill activities, as are necessary or
required for Buyer's intended use of the Property, shall be consistent with
the COE Permit and the DEP Permit. Therefore, Seller and Buyer covenant
as follows:
(a) Prior to applying for a permit from the District, the
Corps, the DEP, or any other governmental body or agency having jurisdiction
over the Property, Buyer shall submit
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<PAGE>
to Seller for approval a copy of Buyer's proposed application or applications
and two (2) complete sets of plans and specifications for Buyer's proposed
surface and storm water management facilities and/or dredge and fill activities
prepared by a qualified registered architect or engineer. If Seller shall fail
to approve or disapprove said plans and specifications within thirty (30) days
after written request by Buyer for such approval, then such approval shall not
be required; provided, however, that Seller's failure to timely approve or
disapprove said application and plans shall not be deemed a waiver of the
requirement that Buyer's activities be consistent and in compliance with the
Water Permit, the COE Permit, and the DEP Permit, nor shall it be deemed a
waiver of any of the other requirements and obligations imposed upon Buyer
under this paragraph 14.
(b) Buyer's application for a permit from the District for
the construction of Buyer's proposed surface and storm water management
facilities or Buyer's application for permits from the Corps or the DEP for
the commencement of its dredge and fill activities shall not seek an amendment
of or deviation from the Water Permit, the COE Permit, or the DEP Permit
without the express written consent of Seller and Buyer's said application or
applications shall expressly reference the permit sought to be amended or
deviated from.
(c) Buyer agrees to promptly notify Seller of any meetings
or conferences planned between Buyer and the District, the Corps, or the DEP
or any other governmental body or agency having jurisdiction over the
Property. Seller may, at Seller's option, attend and participate in any and
all such meetings and conferences.
(d) In the event that (i) the District, the Corps, or the
DEP refuses to issue a permit for Buyer's proposed surface and storm water
management facilities and/or dredge and fill activities which have been
approved by Seller within the period set forth in paragraph 7 of this
Agreement for Buyer's investigations as to the Property, or (ii) Seller
refuses to approve Buyer's plans and specifications and/or Buyer's proposed
modifications or amendments to the Water Permit, the COE Permit, or the DEP
Permit, if any, then, and in such event, Buyer may terminate this Agreement,
whereupon all rights and liabilities of the parties hereunder shall cease and
terminate, and the Deposit shall be returned to Buyer together with any
accrued interest thereon. Further, Buyer agrees upon termination to provide to
Seller copies of all drawings, reports, plans, and documents of any kind or
nature pertaining to Buyer's investigations of the Property.
(e) In the event that (i) it is determined that the permit
for Buyer's proposed surface and storm water management facilities and/or
dredge and fill activities requires modification, revisions, or alterations of
the Water Permit, the COE Permit, or the DEP Permit, and (ii) Seller approves
such modification, revision, or alterations, then all costs incurred by Seller
in applying to the District, the Corps, or the DEP for such modification,
revision, or alteration to the Water Permit, the COE Permit, or the DEP Permit
shall be paid by Buyer at or prior to closing. Such costs shall include, but
not be limited to, attorney's fees, application fees, and fees to engineers
and consultants.
7
<PAGE>
15. Transfer of the Water Permit, the COE Permit, and the DEP Permit.
(a) Buyer hereby expressly covenants and agrees with Seller
that Buyer will execute any and all documents, and supply any and all
information required or contemplated by Seller, the District, the Corps,
and/or the DEP, necessary to partially assign any or all of such permits and
to transfer the liabilities and responsibilities, if any, imposed by the
District, the Corps or the DEP, from the Seller to Buyer as those liabilities
and responsibilities pertain to the Property or to Buyer's ownership thereof
following closing.
(b) In the event that the Property is subject to a
Conservation Easement in favor of the District, Buyer agrees to strictly
comply with all of the terms and provisions of any such Conservation Easement.
Buyer hereby assumes any and all responsibility to fully comply with all of
the terms and provisions of the Conservation Easement from and after the date
of closing and to indemnify and hold harmless Seller from any and all such
matters from and after the date of closing. Buyer agrees to cooperate with
Seller and the District in transferring to Buyer any and all such
responsibilities under any such Conservation Easement and agrees to submit any
information and paperwork required by the District required to transfer such
obligations under this paragraph.
16. Severable Covenants. The provisions of paragraphs 2, 7, 11, 12,
13, 14, 15, 19, 28 and 33 are independent and severable from the remainder of
this Agreement and neither the closing of the transaction contemplated herein
nor any termination of this Agreement shall operate to relieve Buyer (or as to
paragraph 33 hereof, to relieve Seller) of any liability or obligation
pursuant to such provisions.
17. Survival. All of the respective representations, warran-
ties, covenants and agreements of the parties hereto contained in
this Agreement will survive closing and will not be merged into documents
executed at closing.
18. Assignment. Buyer shall not assign this Agreement without
Seller's prior written consent. This Agreement is personal to Buyer and
Seller's refusal to give Seller's consent shall not give rise to any action
for damages against Seller. Notwithstanding the foregoing, Buyer may assign
this Agreement to any corporation or other legal entity wholly owned and
controlled by Buyer, but such assignment shall not release Buyer from its
obligations hereunder. Buyer shall give written notice of any such assignment
to Seller contemporaneously with the making of such assignment.
19. Sales Commission.
(a) Seller represents and warrants to Buyer that Seller has
not dealt in any manner concerning the Property with any real estate agent,
salesman, or broker and Seller agrees to indemnify and hold harmless Buyer
from and against any and all loss, liability or expense (including reasonable
attorneys' fees) resulting from or arising out of any claim against
8
<PAGE>
Buyer by any real estate agent, salesman, or broker claiming to have dealt with
Seller in connection with this transaction.
(b) Buyer represents and warrants to Seller that Buyer has
not dealt in any manner concerning the Property with any real estate agent,
salesman, or broker and Buyer agrees to indemnify and hold harmless Seller
from and against any and all loss, liability or expense (including reasonable
attorneys' fees) resulting from or arising out of any claim against Seller by
any real estate agent, salesman or broker claiming to have dealt with Buyer in
connection with this transaction.
20. Notices. All notices and other communications under this
Agreement shall be in writing and delivered by messenger or by commercial
courier service or sent by registered or certified mail, return receipt
requested, addressed to the parties at the places stated in the heading of
this Agreement or to such other address and to the attention of such person as
either party shall designate in a written notice to the other. All such
notices and other communications will be deemed to have been effectively given
for all purposes herein at the time such notice has been delivered to the
appropriate address as shown above or as so changed.
21. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Florida.
22. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provi- sions hereof.
23. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all such counterparts
together shall constitute one and the same instrument.
24. Successors and Assigns. Subject to the provisions of paragraph 18,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
25. Expenses. Except as otherwise specifically set forth herein, each
party shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing and carrying out the
transaction contemplated by this Agreement.
26. Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, representations and understandings of the
parties. No supplement, modification or amendment to this Agreement will be
binding unless executed in writing by the party sought to be charged. All
amendments, supplements or riders hereto shall be in writing and executed or
initialed by both parties.
27. Time Computation. If the time period by which any right, option or
election
9
<PAGE>
provided for in this Agreement must be exercised, or by which any act required
hereunder must be performed, or by which the closing must be held, expires on a
Saturday, Sunday or legal or bank holiday, then such time period shall be
automatically extended through the close of business on the next regularly
scheduled business day in Jacksonville, Florida.
28. Seller's Representations. Buyer agrees to accept the Property in
its present, existing, "AS IS" condition. No representations, warranties,
undertakings, promises, claims, advertising or promotional activities made or
conducted by Seller, or by Seller's agents or representatives, whether oral,
implied or otherwise, shall be binding upon Seller unless the same are
expressly set forth in this Agreement or in a subsequent written instrument
executed by Seller. Seller represents and warrants to Buyer as follows:
(a) To Seller's knowledge, Seller is legally able to convey
good, marketable, and insurable title to the Property, free and clear of all
liens and encumbrances and other matters affecting title except the Permitted
Exceptions. In the event that this representation is not correct, Buyer's
remedies shall be as set forth in paragraph 5 of this Agreement.
(b) There is no pending or, to Seller's knowledge, threatened
condemnation or property dedication requirement or similar proceeding affecting
the Property, nor has Seller any knowledge that such action is contemplated by
any governmental agency having jurisdiction.
(c) Seller has no information or knowledge of any change
contemplated in any applicable law, ordinance or regulation, nor of any
pending or threatened judicial or administrative action, which would prevent
or impede Buyer's intended use of the Property.
(d) To Seller's knowledge, Seller has complied with all
applicable laws, ordinances, regulations, statutes, rules, and restrictions
affecting the Property. Performance of this Agreement will not result in any
breach of, or constitute any default under, any agreement or other instrument
to which Seller is a party or by which Seller or the Property is bound.
(e) There are no legal actions, suits, or other legal or
administrative proceedings, including condemnation cases, affecting the
Property, pending or, to Seller's knowledge, threatened, nor has Seller
knowledge that any such action is contemplated.
(f) No commitments have been made to any governmental agency
relating to the Property which would impose an obligation upon Buyer to make
any contribution or dedications of money or land or to construct, install, or
maintain any improvements of a public nature on the Property except for storm
water facilities to serve the Property in accordance with the Conceptual
Permit identified in paragraph 14 of the Agreement. No government authority
has imposed any requirement that any developer of the Property pay directly or
indirectly any special fees or contributions or incur any expenses or
obligations in connection with any development of the Property.
(g) Water, sewer, telephone, and electric utility
facilities are available at the
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<PAGE>
boundary of the Property.
(h) Neither Seller nor any of its agents and employees have
used the Property for hazardous or toxic waste disposal, for disposal of fuel,
oil, or similar materials, nor as a landfill, garbage or trash disposal site
nor, to Seller's knowledge, spilled any hazardous or toxic waste, fuel, oil,
or other similar materials on any part of the Property. To the best of
Seller's knowledge, no part of the Property has ever been used for hazardous
or toxic waste disposal, as a mine field or bombing range, or for disposal of
fuel, oil, or other similar material, nor as a landfill or a garbage or trash
disposal site.
(i) From and after the date of the Agreement, Seller, unless
otherwise agreed to in writing by Buyer, will not: (i) perform any grading or
excavation, construction, or removal of any improvements, or make any other
change or improvement upon or about the Property; or (ii) commit any waste or
nuisance upon the Property. Seller will maintain and keep the Property in its
present condition and will observe all laws, ordinances, regulations, and
restrictions affecting the Property and its use.
29. Subordination. This Agreement is subordinate and subject
to any mortgage Seller may grant to provide any portion of the cost
of the acquisition and development of the Project, but Seller shall
cause the Property to be released from the lien of any such
mortgage prior to or contemporaneously with the closing hereunder.
30. Special Restrictions. As a part of the consideration for
this Agreement, the parties agree that the restrictions set forth
in an addendum to this Agreement, if any, entitled "Special
Restrictions", shall be included in the deed contemplated hereby.
31. Additional Provisions. Additional provisions, if any, are
set forth in an addendum attached hereto entitled "Additional
Provisions".
32. Effective Date. The effective date of this Agreement
shall be the date on which it becomes executed by both parties.
33. Construction Manager. The Purchaser and Seller acknowledge that
certain employees of Seller are also principals in GB Investment & Company,
Inc., a Florida corporation (the "Construction Manager"), who will serve as
Construction Manager in connection with the construction of the improvements
on the Property. Recognizing that the key officer of Seller with whom
Purchaser is negotiating is also a key officer and principal of Construction
Manager, the parties acknowledge that the dates of commencement and completion
of the construction and other significant dates in the Purchase and Sale
Agreement, including the closing date, can be directly affected by and in part
controlled by Seller's representatives in their separate capacity as
principals of Construction Manager. Therefore, if and in the event that a
Construction Management Agreement is executed between Purchaser and
Construction Manager, Purchaser will be relying upon the representatives of
Seller, in their separate capacity as principals and employees of Construction
Manager, in all matters relating to the commencement of construction,
11
<PAGE>
completion of construction, or other dates relating to the acquisition of the
Property and the construction of improvements on the Property and for meeting
certain conditions precedent to the closing of this transaction. Therefore,
Purchaser's failure to meet the deadlines imposed by certain of the dates
included in this Agreement, to the extent such failure arises from the acts or
omissions of Seller or Construction Manager, will not constitute a default by
Purchaser under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the dates specified below.
Signed, sealed and delivered ARMOR HOLDINGS, INC.
in the presence of:
____________________________ By:___________________________________
Print: ______________________ Print: _______________________________
____________________________ Date: October ___, 1996
Print: ______________________ "BUYER"
WILMA/SKYLAND JOINT VENTURE, LTD.
___________________________ By: Wilma South Corporation
general partner
Print: _____________________
___________________________ By: __________________________________
Print: Bobby L. Beavers
Print: _____________________
"SELLER"
Date: October ___, 1996
12
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Martin, Ade, Birchfield & Mickler, P.A., acknowledges receipt of the Deposit
and agrees to hold it in escrow in accordance with the terms of this
Agreement.
MARTIN, ADE, BIRCHFIELD
& MICKLER, P.A.
___________________________ By: _____________________________________
Print: Sharon R. Henderson
Print: _____________________
___________________________ "ESCROW AGENT"
Date: October ____, 1996
Print: _____________________
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<PAGE>
EXHIBIT 10.33
ASSIGNMENT OF PURCHASE AND SALE AGREEMENT
BY THIS AGREEMENT dated the 22nd day of October, 1996, ARMOR
HOLDINGS, INC., a Delaware corporation (the "Assignor"), hereby assigns to
ARMOR HOLDINGS PROPERTIES, INC., a Delaware corporation (the "Assignee"), all
of Assignor's right, title and interest in and to that certain Purchase and
Sale Agreement between Assignor as Buyer and WILMA/SKYLAND JOINT VENTURE, LTD.
as Seller dated October ___, 1996. This assignment is authorized by Paragraph
18 of the said Purchase and Sale Agreement.
All other terms and provisions of the Purchase and Sale
Agreement shall remain in full force and effect and the Agreement shall be
binding upon and inure to the benefit of the parties hereto, their successors
and assigns.
ARMOR HOLDINGS, INC. ARMOR HOLDINGS PROPERTIES, INC.
By:__________________________ By:____________________________
-------------------------- ----------------------------
Its________________ Its__________________
WILMA/SKYLAND JOINT VENTURE, LTD. joins herein to
evidence its consent to and receipt of notice of the foregoing assignment.
Dated this 22nd day of October, 1996.
WILMA/SKYLAND JOINT
VENTURE, LTD.
By:___________________________
---------------------------
Its_________________
<PAGE>
EXHIBIT 10.34
CONSTRUCTION ESCROW AGREEMENT
THIS CONSTRUCTION ESCROW AGREEMENT (this "Escrow Agreement") is made
and entered into as of this ____ day of ______, 1996, by and among ARMOR
HOLDINGS, INC. and ARMOR HOLDINGS PROPERTIES, INC., a Delaware corporation,
whose address is 191 Nassau Place Road, Fernandina Beach, Florida 32034 and GB
INVESTMENT & COMPANY, INC. ("GB"), whose address is 1350 Tradeport Drive,
Suite 101, Jacksonville, Florida 32218, and KENT, RIDGE & CRAWFORD ("Escrow
Agent"), whose address is 225 Water Street, Suite 900, Jacksonville, Florida
32202.
W I T N E S S E T H : That,
WHEREAS, Armor Holdings Properties, Inc., is the owner and holder of
the real property described on Exhibit "A" hereto (the "Property");
WHEREAS, Armor Holdings Properties, Inc., and its parent corporation,
Armor Holdings, Inc. (hereinafter referred to jointly and severally as
"Armor") and GB have entered into that certain Agreement Between Owner and
Construction Manager dated October ___, 1996, (the "Construction Management
Agreement"), wherein GB has agreed to act as Construction Manager for the
construction by Armor of an office and manufacturing facility consisting of
approximately 72,086 sq. ft. of manufacturing, distribution and office space
to be located on the Property at 13386 International Parkway, Jacksonville,
Florida 32218, as more particularly described in the Construction Management
Agreement (the "Project");
WHEREAS, GB, in its capacity as Construction Manager and on owner's
behalf, has entered into that certain Standard Form of Agreement Between
Owner/Construction Manager and Contractor, dated October ___, 1996 (the
"Construction Contract"), with Mastec Design Build, Inc., as contractor (the
"Contractor"), for construction of the Project;
WHEREAS, to provide a source of funds for payment of the cost of
construction of the Project as set forth in the Construction Management
Agreement and the Construction Contract and to induce the issuance on behalf
of Contractor of a payment and performance bond with respect to the Project,
Armor has agreed to escrow the funds required for payment of the guaranteed
maximum price for construction of the Project pursuant to the Construction
Contract and any other costs or fees required by the Construction Management
Agreement;
NOW, THEREFORE, in consideration of the foregoing and $10.00 and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Armor, GB and Escrow Agent do hereby agree as
follows:
I. Armor has this day deposited with Escrow Agent the sum of
$1,000,000.00 (the "Escrow Amount") for construction of the Project pursuant
to the Construction Contract and payment of the fees due under the
Construction Management Agreement. Escrow Agent hereby
<PAGE>
acknowledges receipt of the Escrow Amount and of a true and correct copy of the
Construction Management Agreement and the Construction Contract. Escrow Agent
shall deposit the Escrow Amount into an interest bearing escrow account at
Barnett Bank of Jacksonville, N. A. All interest or income earned on the Escrow
Amount shall be the property of Armor, but shall be retained in escrow for the
term of this Escrow Agreement. All interest earned on such deposit shall be
attributed for tax purposes as income to Armor whose Tax Identification Number
is ___________________. From time to time, as requested by Construction Manager
and upon satisfaction of the Draw Procedures as set forth in paragraphs 4 and 5
hereof, and all other terms and conditions of this Agreement, Escrow Agent
shall pay to Construction Manager for disbursement in accordance with the terms
of Construction Management Agreement and the Construction Contract, the costs
and expenses due to Mastec Design Build, its subcontractor's agents and
materialmen, and all other fees or costs payable under the Construction
Management Agreement or the Construction Contract.
II. Return of Balance of Escrow Amount. After completion of the
Project and payment to GB of all sums due under the Construction Management
Agreement and the Construction Contract, to the extent there remains any
portion of the Escrow Amount or accrued interest thereon which has not
previously been disbursed pursuant to this Agreement, such remaining portion
shall be paid to Armor.
III. Disbursement Procedures. Whenever GB shall request any
disbursement from Escrow Agent for payment of an amount due under the
Construction Management Agreement or the Construction Contract, GB shall send
copies of such request, and of all supporting documentation required by the
Draw Procedures (as hereafter defined) to Armor at the address set forth
below. Unless Armor shall notify Escrow Agent in writing that it objects to
the payment of the draw request within seven (7) business days after receipt
of such request, or unless Armor pays the draw request directly to GB from
Armor's separate funds and provides evidence of such direct payment to Escrow
Agent, Escrow Agent shall make such disbursement to GB for application by GB
in accordance with the terms of the Construction Management Agreement and the
Construction Contract within eight (8) business days after the draw request.
Armor agrees that it shall not unreasonably object to the payment of a draw
request for which GB has complied with all the Draw Procedures as set forth
herein.
IV. Draw Procedures. Upon the satisfaction of the following conditions
and requirements (which, together with the requirements set forth in paragraph
5 shall be referred to herein as the "Draw Procedures"), as of the time of any
draw request from GB, Escrow Agent shall disburse to GB from the Escrow Amount
the sum requested by the draw request, V.for application by GB in the manner
required by the Construction Management Agreement and the Construction
Contract:
(a) Each draw request shall be submitted to GB by Contractor
on AIA forms, together with such supporting evidence as is required
by the Construction Contract. GB
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<PAGE>
shall deliver to Escrow Agent (with a copy to Armor), a copy of
such draw request, together with the supporting documentation
required herein or by the Construction Contract with a letter from GB
stating that GB has reviewed and approved the draw request as
required by the terms of the Construction Management Agreement. The
draw request shall be executed by the Architect to certify: (i) that
the construction of the Project theretofore completed has been
performed in accordance with the applicable plans and specifications;
(ii) the amount of work that has been theretofore completed for each
item for which a draw request has been submitted; and (iii) the
remaining amount estimated to be incurred to complete each item of
the improvements as set forth in the Construction Contract.
(b) GB shall deliver to Escrow Agent (with a copy to Armor)
a waiver of lien rights through the date of the draw request from the
Contractor and from all subcontractors in connection with the portion
of Project which theretofore has been constructed.
(c) GB shall deliver to Escrow Agent (with a copy to Armor)
a title check down from Commonwealth Land Title Insurance Company
showing that no liens have been filed against the Property pursuant
to the Notice of Commencement to be recorded with respect to the
Project.
(d) Escrow Agent shall make disbursements no more frequently
than once a month and each draw request shall be submitted to Escrow
Agent at least eight (8) business days prior to the date of the
requested advance.
V. Draw Procedures for Final Advance. In addition to the matters set
forth in paragraph 4, the final advance of the sum required under the
Construction Contract for payment of completion of construction of the Project
shall be subject to GB submitting to Escrow Agent (with a copy to Armor) all
the documents or information required for the final advance as set forth in
the Construction Contract including the following:
(a) A certificate from the Architect that the improvements
have been substantially completed in accordance with the plans and
specifications;
(b) A certificate from GB setting forth the total construction
costs;
(c) Evidence that the Project has passed its final inspection
by the governmental authority having jurisdiction;
(d) Contractor's Final Affidavit evidencing amount required
for payment of all remaining sums due to Contractor, release by
Contractor of all liens, and releases of lien
3
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by each subcontractor who has given Armor statutory Notice to
Owner under Chapter 713 of Florida Statutes; and
(e) A final check down from Commonwealth Land Title
Insurance Company, evidencing that no liens have been recorded
against the Property as a result of construction of the Project.
VI. Exculpation of Escrow Agent. In performing its duties hereunder,
Escrow Agent, except for its wilful default or breach of trust, shall not incur
any liability to anyone for any loss or damage resulting from any good faith
act or forbearance of Escrow Agent, any default, error, action, or omission of
any party other than Escrow Agent, the lack of authenticity of any writing
delivered to Escrow Agent or of any signature thereto, or the lack of authority
of the signatory to such writing. Escrow Agent's compliance with all
attachments, writs, orders, judgments, or other legal process issued out of any
court, Escrow Agent's assertion or failure to assert any cause of action or
defense in any judicial or administrative proceeding, or any loss or damage
which arises after the Escrow Amount has been disbursed in accordance with the
terms of this Escrow Agreement.
VII. Disputes. In the event of a dispute between GB and Armor,
sufficient in the sole discretion of Escrow Agent to justify it doing so,
Escrow Agent shall be entitled to tender the Escrow Amount into the registry
of any court of competent jurisdiction, together with such legal pleadings as
it may deem appropriate and thereon be discharged from all further duties and
responsibilities under this Escrow Agreement. Any such legal action shall be
brought in a court of competent jurisdiction in Duval County, Florida. GB
acknowledges that Escrow Agent also represents Armor and agrees that Escrow
Agent shall not be disqualified from continuing to represent Armor in any
dispute arising hereunder or in connection with construction of the Project,
by virtue of having acted as Escrow Agent hereunder. Provided, however, that
if Escrow Agent becomes aware of any dispute, Escrow Agent shall notify both
GB and Armor in writing of the dispute. Escrow Agent shall agree not to
interplead funds into the Registry of the Court until the earlier of sixty
(60) days from the date of Escrow Agent's notice to the parties involved in
the dispute or until such time as either of the parties so notified files
suit. It is agreed that the nonprevailing party in any such suit shall pay the
costs and reasonable attorney's fees incurred by the prevailing party and the
Escrow Agent.
VIII. Indemnity of Escrow Agent. GB and Armor hereby indemnify and hold
harmless Escrow Agent against and all losses, claims, damages, liabilities,
and expenses, including, without limitation, reasonable costs of investigation
and legal counsel fees which may be imposed upon Escrow Agent or incurred by
Escrow Agent in connection with the performance of its duties hereunder,
including without limitation, any litigation arising from this Escrow
Agreement or involving the subject matter hereof.
4
<PAGE>
IX. Notices. Whenever any notice is required or permitted
hereunder, such notice shall be in writing and shall be (1) sent via Federal
Express or other overnight courier delivery service which requires signature of
the receiving party upon delivery; or (2) sent by telephone facsimile, with the
originals sent the same day by overnight courier as set forth above. A notice
sent pursuant to this paragraph in the manner set forth above shall be deemed
to be received by the party to whom it is addressed on the next business day
after deposit with an overnight courier for next day delivery, or on the date
sent by telephone facsimile for which the sending party has a confirmation of
completion of the facsimile transmission.
X. Binding Agreement. This Escrow Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs and
their respective successors and assigns.
XI. Governing Law. This Escrow Agreement shall be governed by and
shall be construed in accordance with the laws of the State of Florida.
XII. Attorney's Fees. In the event of any litigation with respect to
this Agreement, the prevailing party shall be entitled to collect its
reasonable attorneys' fees and costs from the non-prevailing party.
XIII. Rights of Third Parties. All conditions of this Agreement are
imposed solely and exclusively for the benefit of the parties and their
successors and assigns, and no other person shall have standing to require
satisfaction of such conditions or be entitled to assume that Escrow Agent will
make disbursements in the absence of strict compliance with any or all thereof,
and no other person shall, under any circumstances, be deemed to be a
beneficiary of this Agreement.
XIV. Minimum Escrow Amount. The guaranteed maximum amount payable by
Armor for construction of the Project is $2,841,510.00, subject to any change
orders hereafter approved by Armor. When draw requests are made by GB, the sum
requested may be paid by Armor directly to GB from Armor's separate funds, but
if payment has not been made directly to GB by Armor from separate funds within
five (5) business days after delivery of the draw request to Escrow Agent (with
a copy to Armor), such draw request shall be paid to GB from the Escrow Amount
by Escrow Agent, provided all other conditions of payment hereunder have been
satisfied. Armor agrees that it shall at all times during the term of this
Escrow Agreement maintain on deposit with Escrow Agent an Escrow Amount which
is not less than the Minimum Escrow Amount. The "Minimum Escrow Amount" shall
be the lesser of (i) $1,000,000.00 or (ii) the remaining cost necessary to
complete the construction of the Project. In the event the amount held by
Escrow Agent under this Agreement is reduced below the Minimum Escrow Amount by
payment of draw requests for any other reason, Armor shall promptly make such
additional escrow deposits with Escrow Agent to be held and disbursed under the
terms of the Agreement as are necessary to restore the amount held by Escrow
Agent at least to the Minimum Escrow Amount. Escrow Agent shall certify to
Armor and to GB on request by either party from time
5
<PAGE>
to time the amount then held in escrow pursuant to this Agreement. In the event
Armor shall fail to maintain the Minimum Escrow Amount in escrow, and such
failure continues for more than three (3) business days after written notice to
Armor, such failure shall constitute a default by Armor hereunder and under the
Construction Management Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Escrow
Agreement on the day and year first above written.
ARMOR HOLDINGS, INC.
By: ______________________________
Print: _______________________
Its: _________________________
ARMOR HOLDINGS PROPERTIES, INC.
By: _______________________________
Print: _______________________
Its: _________________________
"ARMOR"
GB INVESTMENT & COMPANY, INC.
By: ________________________________
Bobby L. Beavers
Vice President
"GB"
KENT, RIDGE & CRAWFORD
6
<PAGE>
By:_________________________________
Print: ________________________
"ESCROW AGENT"
7
<PAGE>
EXHIBIT 10.35
AGREEMENT BETWEEN OWNER AND
CONSTRUCTION MANAGER
AGREEMENT
made as of the 10th day of October, in the year of nineteen hundred ninety-six
BETWEEN the Owner: Armor Holdings, Inc., and Armor Holdings Properties, Inc.
P O Box 1769
Fernandina Beach, Florida 32035-1769
(904) 261-4035
and the Construction
Manager: GB Investment & Company, Inc.
1350 Tradeport Drive, Suite #101
Jacksonville, Florida 32218
(904) 741-4880
for the following
Project: Phase 1 of a 3-Phase Office and Manufacturing facility
located at the Jacksonville International Tradeport
consisting of approximately 72,086 square feet of Phase I
manufacturing, distribution and office space in Phase One.
The office portion of the facility will be 2-Story. The
facility will be situated on approximately a 7.07 acre
site located at 13386 International Parkway,
Jacksonville, Florida 32218
The Design and
Construction Team
shall be: GB Investment & Company, Inc., - Construction Manager
MasTec Design Build, Inc., - General Contractor
Architectural Consultant - Bob Winters
Dawson Enterprises, - Architectural Services, Structural
Design, Mechanical, Electrical and Plumbing Design
Agee, Vorpe & Associates, - Civil Design Services
Margaret Nelson, - Landscape Architect
The Owner and Construction Manager agree as set forth below.
<PAGE>
TERMS AND CONDITIONS OF AGREEMENT BETWEEN
OWNER AND CONSTRUCTION MANAGER
ARTICLE 1
CONSTRUCTION MANAGER'S
RESPONSIBILITIES
1.1 CONSTRUCTION MANAGER'S SERVICES
1.1.1 The Construction Manager's services consist of those services performed
by the Construction Manager, Construction Manager's employees and Construction
Manager's consultants as enumerated in Article 2 of this Agreement and any
other services included in Article 14.
1.1.2 The Construction Manager's services shall be provided in conjunction with
the services of other design professionals and consultants (Design Team)
including but not limited to Architect, Structural Engineer, Civil Engineer,
Interior Design, Geotechnical Engineer, Landscape Architect, Mechanical
Engineer, Electrical Engineer and General Contractor.
1.1.3 The Construction Manager shall provide sufficient organization, personnel
and management to carry out the requirements of this Agreement in an
expeditious and economical manner consistent with the interests of the Owner.
ARTICLE 2
SCOPE OF CONSTRUCTION MANAGER'S
BASIC SERVICES
2.1 DEFINITION
2.1.1 The Construction Manager's Basic Services consist of those described in
Paragraphs 2.2 and 2.3 and any other services identified in Article 14 as part
of Basic Services.
2.2 PRE-CONSTRUCTION PHASE
2.2.1 The Construction Manager shall review the program furnished by the Owner
to ascertain the requirements of the Project and shall arrive at a mutual
understanding of such requirements with the Owner.
2.2.2 The Construction Manager shall provide a preliminary evaluation of the
Owner's program, schedule and construction budget requirements, each in terms
of the other.
2.2.3 Based on early schematic designs and other design criteria prepared by
the Design Professionals and Consultants, the Construction Manager shall
prepare preliminary estimates of Construction Cost for program requirements
using area, volume or similar conceptual estimating techniques. The
Construction Manager shall provide cost evaluations of alternative materials
and systems.
2.2.4 The Construction Manager shall expeditiously review design documents
during their development and advise on proposed site use and improvements,
selection of materials, building systems and equipment, and methods of Project
delivery. The Construction Manager shall provide recommendations on relative
feasibility of construction methods, availability of materials and labor, time
requirements for procurement, installation and construction, and factors
related to construction cost including, but not limited to, costs of
alternative designs and materials, preliminary budgets, and possible economies.
2.2.5 The Construction Manager in conjunction with the Design Team, shall
prepare and periodically update a Project Schedule for the Owner's review and
acceptance. The Project Schedule shall coordinate and integrate all design
services, including permitting, constriction time frame as well as highlighting
critical and long-lead-time items.
2.2.6 As the Design Team progresses with the preparation of the Schematic,
Design Development and Construction Documents, the Construction Manger shall
prepare and update at appropriate intervals agreed to by the Owner, estimate of
Construction Cost of increasing detail and refinement. The estimated cost of
each Contract shall be indicated with supporting detail. The Construction
Manager shall advise the Owner if it appears that the Construction Cost may
exceed the latest approved Project budget and make recommendations for
corrective action.
2.2.7 The Construction Manager shall consult with the Owner and Design Team
regarding the Construction Documents and make recommendations whenever design
details adversely affect constructibility, cost or schedules.
2.2.8 The Construction Manager shall provide recommendations and information to
the Owner regarding the assignment of responsibilities for temporary Project
facilities and equipment, materials and services for common use of the
Contractors. The Construction Manager shall verify that such requirements and
assignment of responsibilities are included in the proposed Contract Documents.
2.2.9 The Construction Manager shall provide information to the Owner regarding
the allocation of responsibilities for safety programs among the Contractors.
2.2.10 The Construction Manager shall advise on the division of the Project
into individual Contracts for various categories of Work, including the method
to be used for selecting subcontractors and awarding Contracts.
2.2.11 The Design Team shall prepare a Project construction schedule providing
for the components of the Work, including phasing of construction, times of
commencement and completion required of each subcontractor, ordering and
delivery of products requiring long lead time, and the occupancy requirements
of the Owner. The Construction Manager shall provide the current Project
construction schedule for each set of bidding documents.
2.2.12 The Construction Manager shall expedite and coordinate the ordering and
delivery of materials requiring long lead time.
2.2.13 The Construction Manager shall assist the Owner in selecting, retaining
and coordinating the professional services of surveyors, special consultants
and testing laboratories required for the Project.
2.2.14 The Construction Manager shall provide an analysis of the types and
quantities of labor required for the Project and review the availability of
appropriate categories of labor required for critical phases. The Construction
Manager shall make recommendations for actions designed to minimize adverse
effects of labor shortages.
2.2.15 The Construction Manager shall assist the Owner in obtaining information
regarding applicable requirements for equal employment opportunity programs for
inclusion in the Contract Documents.
2.2.16 Following the Owner's approval of the Preliminary Construction
Documents, the Construction Manager shall update and submit the latest estimate
of Construction Cost and the Project construction schedule for the Owner's
approval.
2.2.17 The Construction Manager, with the Owner's approval shall prepare
Construction and Design Contracts for consummation.
2.2.18 The Construction Manager shall assist the Owner in obtaining approvals
and special permits for permanent improvements, except for permits required to
be obtained directly by the various Contractors. The Construction Manager shall
verify that the Owner has paid applicable fees and assessments. The
Construction Manager shall act as the Owner's Agent in connection with the
filing of documents required for the approvals of governmental authorities
having jurisdiction over the Project.
2.3 CONSTRUCTION PHASE - ADMINISTRATION
OF THE CONSTRUCTION CONTRACT
2.3.1 The Construction Phase will commence with the award of the initial
Construction Contract or purchase order and, together with the Construction
Manager's obligation to provide Basic Services under this Agreement, will end
30 days after final payment to all Contractors is due.
2.3.2 The Construction Manager shall provide administration of the Contracts
for Construction.
2.3.3 The Construction Manager shall provide administrative, management and
related services to coordinate scheduled activities and responsibilities of the
Contractor with each other and with those of the Construction Manager, the
Owner and the Design Team to endeavor to manage the Project in accordance with
the latest approved estimate of Construction Cost, the Project Schedule and
the Contract Documents.
2.3.4 The Construction Manager shall schedule and conduct meetings to discuss
such matters as procedures, progress and scheduling. The Construction Manager
shall prepare and promptly distribute minutes to the Owner and Design Team.
2.3.5 Utilizing the Construction Schedules provided by the Contractors, the
Construction Manager shall update the Project construction schedule
incorporating the activities of the Contractors on the Project, including
activity sequences and durations, allocation of labor and materials, processing
of Shop Drawings, Product Data and Samples, and delivery of products requiring
long lead time and procurement. The Project construction schedule shall include
the Owner's occupancy requirements showing portions of the Project having
occupancy priority. The Construction Manager shall update and reissue the
Project construction schedule as required to show current conditions. If an
update indicates that the previously approved Project construction schedule may
not be met, the Construction Manager shall recommend corrective action to the
Owner and Architect.
2.3.6 Consistent with the various bidding documents, and utilizing information
from the Contractors, the Construction Manager shall coordinate the sequence of
construction and assignment of space in area where the Contractors are
performing Work.
2.3.7 The Construction Manager shall monitor the approved estimate of
Construction Cost. The Construction Manager shall show actual costs for
activities in progress and estimates for uncompleted tasks by way of comparison
with such approved estimate.
2.3.8 The Construction Manager shall develop cash flow reports and forecasts
for the Project and advise the Owner as to variances between actual and
budgeted or estimated costs.
2.3.9 The Construction Manager shall maintain accounting records on authorized
Work performed under unit costs, additional Work performed on the basis of
actual costs of labor and materials, and other Work requiring accounting
records.
2.3.10 The Construction Manager shall develop and implement procedures for the
review and processing of applications by Contractors for progress and final
payments.
2.3.10.1 Based on the Construction Manager's observations and evaluations of
each Contractor's Application for Payment, the Construction Manager shall
review and certify the amounts due the respective Contractors.
2.3.10.2 The Construction Manager shall prepare a Project Application for
Payment based on the Contractors' Certificates for Payment.
2.3.10.3 The Construction Manager's certification for payment shall constitute
a representation to the Owner, based on the Construction Manager's
determinations at the site as provided in Subparagraph 2.3.13 and on the date
comprising the Contractors' Applications for Payment, that, to the best of the
Construction Manager's knowledge, information and belief, the Work has
progressed to the point indicated and the quality of the Work is in accordance
with the Contract Documents. The foregoing representations are subject to an
evaluation of the Work for conformance with the Contract Documents upon
Substantial Completion, to results of subsequent tests and inspections, to
minor deviations from the Contract Documents correctable prior to completion
and to specific qualifications expressed by the Construction Manager. The
issuance of a Certificate for Payment shall further constitute a representation
that the Contractor is entitled to payment in the amount certified.
2.3.10.4 The issuance of a Certificate for Payment shall not be a
representation that the Construction Manager has (1) made exhaustive or
continuous on-site inspections to check the quality or quantity of the Work,
(2) reviewed construction means, methods, techniques, sequences for the
Contractor's own Work, or procedures, (3) reviewed copies of requisitions
received from Subcontractors and material suppliers and other data requested by
the Owner to substantiate the Contractor's right to payment or (4) ascertained
how or for what purpose the Contractor has used money previously paid on
account of the Contract Sum.
2.3.11 The Construction Manager shall review the safety programs developed by
each of the Contractors for purposes of coordinating the safety programs with
those of the other Contractors. The Construction Manager's responsibilities for
coordination of safety programs shall not extend to direct control over or
charge of the acts or omissions of the Contractors, Subcontractors, agents or
employees of the Contractors or Subcontractors, or any other persons performing
portions of the Work and not directly employed by the Construction Manager.
2.3.12 The Construction Manager shall determine in general that the Work of
each Contractor is being performed in accordance with the requirements of the
Contract Documents, endeavoring to guard the Owner against defect and
deficiencies in the Work. As appropriate, the Construction Manager shall have
authority, upon written authorization from the Owner, to require additional
inspection or testing of the Work in accordance with the provisions of the
Contract Documents, whether or not such Work is fabricated, installed or
completed. The Construction Manager, in consultation with the Design
Consultants, may reject Work which does not conform to the requirements of the
Contract Documents.
2.3.13 The Construction Manager shall schedule and coordinate the sequence of
construction in accordance with the Contract Documents and the latest approved
Project construction schedule.
2.3.14 With respect to each Contractor's own Work, the Construction Manager
shall not have control over or charge of and shall not be responsible for
construction means, methods, techniques, sequences or procedures, or for safety
precautions or programs in connection with the Work of each of the Contractors,
since these are solely the Contractor's responsibility under the Contract for
Construction. The Construction Manager shall not be responsible for a
Contractor's failure to carry out the Work in accordance with the respective
Contract Documents. The Construction Manager shall not have control over or
charge of acts or omissions of the Contractors, Subcontractors, or their agents
or employees, or any other persons performing portions of the Work not directly
employed by the Construction Manager.
2.3.15 The Construction Manager shall transmit to the Architect requests for
interpretations of the meaning and intent of the Drawings and Specifications,
and assist in the resolution of questions that may arise.
2.3.16 The Construction Manager shall review requests for changes, assist in
negotiating Contractors' proposals, submit recommendations to the Owner, and,
if they are accepted, prepare Change Orders and Construction Change Directives
which incorporate the Architect's modifications to the Documents.
2.3.17 The Construction Manager shall receive certificates of insurance from
the Contractors and forward them to the Owner.
2.3.18 In collaboration with the Design Team, the Construction Manager shall
establish and implement procedures for expediting the processing and approval
of Shop Drawings, Product Data, Samples and other submittals. The Construction
Manager shall review all Shop Drawings, Product Data, Samples and other
submittals from the Contractors. The Construction Manager shall coordinate
submittals with information contained in related documents and transmit to the
Design Team those which have been approved by the Construction Manager. The
Construction Manager's actions shall be taken with such reasonable promptness
as to cause no delay in the Work or in the activities of the Owner or
Contractors.
2.3.19 The Construction Manager shall record the progress of the Project. The
Construction Manager shall submit written progress reports to the Owner
including information on each Contractor and each Contractor's Work, as well as
the entire Project, showing percentages of completion. The Construction Manager
shall require
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the Contractor to keep a daily log containing a record of weather, each
Subcontractor's Work on the site, number of workers, identification of
equipment, Work accomplished, problems encountered, and other similar relevant
data as the Owner may require.
2.3.20 The Design Team in conjunction with the Construction Manager shall
maintain at the Project site for the Owner one record copy of all Contracts,
Drawings, Specifications, addenda, Change Orders and other Modifications, in
good order and marked currently to record changes and selections made during
construction, and in addition, approved Shop Drawings, Product Data, Samples
and similar required submittals. The Construction Manager shall maintain
records, in duplicate, of principal building layout lines, elevations of the
bottom of footings, floor levels and key site elevations certified by a
qualified surveyor or professional engineer. The Construction Manager shall
make all such records available to the Owner and upon completion of the Project
shall deliver them to the Owner.
2.3.21 The Construction Manager shall arrange for the delivery, storage,
protection and security of the Owner- purchased materials, systems and
equipment that are a part of the Project until such items are incorporated into
the Project.
2.3.22 With the Design Team and the Owner's maintenance personnel, the
Construction Manager shall observe the Contractors' final testing and start-up
of utilities, operational systems and equipment.
2.3.23 When the Construction Manager considers each Subcontractor's Work or a
designated portion thereof substantially complete, the Construction Manager
shall, jointly with the Contractor, prepare for the Architect a list of
incomplete or unsatisfactory items and a schedule for their completion. The
Construction Manager shall assist the Architect in conducting inspections to
determine whether the Work or designated portion thereof is substantially
complete.
2.3.24 The Construction Manager shall coordinate the correction and completion
of the Work. Following issuance of a Certificate of Substantial Completion of
the Work or a designated portion thereof, the Construction Manager shall
evaluate the completion of the Work of the Contractors and make recommendations
to the Architect when Work is ready for final inspection. The Construction
Manager shall assist the Architect in conducting final inspections.
2.3.25 The Construction Manager shall secure and transmit to the Architect
warranties and similar submittals required by the Contract Documents for
delivery to the Owner and deliver all keys, manuals, record drawings and
maintenance stocks to the Owner. The Construction Manager shall forward to the
Architect a final Project Application for Payment upon compliance with the
requirements of the Contract Documents.
2.3.26 Duties, responsibilities and limitations of authority of the
Construction Manager as set forth in the Contract Documents shall not be
restricted, modified or extended without written consent of the Owner and
Construction Manager.
ARTICLE 4
OWNER'S RESPONSIBILITIES
4.1 The Owner shall provide full information regarding requirements for the
Project, including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems, and site
requirements.
4.2 The Owner shall establish and update an overall budget for the Project
based on consultation with the Design Team, which shall include the
Construction Cost, the Owner's other costs and reasonable contingencies related
to all of these costs.
4.3 If requested by the Construction Manager, the Owner shall furnish evidence
that financial arrangements have been made to fulfill the Owner's obligations
under this Agreement.
4.4 The Owner shall designate a representative authorized to act on the Owner's
behalf with respect to the Project. The Owner, or such authorized
representative, shall render decisions in a timely manner pertaining to
documents submitted by the Construction Manager in order to avoid unreasonable
delay in the orderly and sequential progress of the Construction Manager's
services.
4.5 The Owner shall authorize the Construction Manager to enter into and
consummate agreements for Design and Construction according to Section 2.2.17.
The Design drawings shall be sealed by licensed professionals that are licensed
within the State of Florida and the Construction Contractor shall be licensed
and bonded within the State of Florida. The monetary amounts of the Design and
Construction Agreements will be further defined in Article 14.
4.6 The Owner shall pay for structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.
4.7 The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including auditing
services the Owner may require to verify the Contractors' Applications for
Payment or to ascertain how or for what purposes the Contractors have used the
money by or on behalf of the Owner.
4.8 Prompt written notice shall be given by the Owner to
<PAGE>
the Construction Manager and Design Team if the Owner becomes aware of any
fault or defect in the Project or nonconformance with the Contract Documents.
4.9 The Owner reserves the right to perform construction and operations related
to the Project with the Owner's own forces, and to award contracts in
connection with the Project which are not part of the Design Team's
responsibilities under this Agreement. The Construction Manager shall notify
the Owner if any such independent action will interfere with the Design Team's
responsibilities under this Agreement. When performing construction or
operations related to the Project, the Owner agrees to be subject to the same
obligations and to have the same rights as the Contractors.
4.10 Information or services under the Owner's control shall be furnished by
the Owner with reasonable promptness to avoid delay in the orderly progress of
the Construction Manager's services and the progress of the Work.
ARTICLE 5
CONSTRUCTION COST
5.1 DEFINITION
5.1.1 The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Owner or
Design Team.
5.1.2 The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable
allowance for the Contractors' overhead and profit. In addition, a reasonable
allowance for contingencies shall be included for market conditions at the time
of bidding and for changes in the Work during construction. Except as provided
in Subparagraph 5.1.3, Construction Cost shall also include the compensation of
the Construction Manager and Construction Manager's consultants.
5.1.3 Construction Cost does not include the cost of the land, rights-of-way,
financing or other Costs which are the responsibility of the Owner as provided
in Article 4. If any portion of the Construction Manager's compensation is
based upon a percentage of Construction Cost, then Construction Cost, for the
purpose of determining such portion, shall not include the compensation of the
Construction Manager or Construction Manager's consultants.
5.2 RESPONSIBILITY FOR CONSTRUCTION COST
5.2.1 Evaluations of the Owner's Project budget, preliminary estimates of
Construction Cost and detailed estimates of Construction Cost prepared by the
Construction Manager represent the Construction Manager's best judgment as a
person or entity familiar with the construction industry. It is recognized,
however, that neither the Construction Manager nor the Owner has control over
the cost of labor, materials or equipment, over Contractors' methods of
determining bid prices, or over competitive bidding, market or negotiating
conditions. Accordingly, the Construction Manager cannot and does not warrant
or represent that bids or negotiated prices will not vary from the Project
budget proposed, established or approved by the Owner, or from any cost
estimate or evaluation prepared by the Construction Manager.
5.2.2 No fixed limit of Construction Cost shall be established as a condition
of this Agreement by the furnishing, proposal or establishment of a Project
budget unless such fixed limit has been agreed upon in writing and signed by
the parties hereto. If such a fixed limit has been established, the
Construction Manager shall be permitted to include contingencies for design,
bidding and price escalation, and shall consult with the Architect to determine
what materials, equipment, component systems and types of construction are to
be included in the Contract Documents, to suggest reasonable adjustments in the
scope of the Project, and to suggest inclusion of alternate bids in the
Construction Documents to adjust the Construction Cost to the fixed limit.
Fixed limits, if any, shall be increased in the amount of any increase in the
Contract Sums occurring after execution of the Contracts for Construction.
5.2.3 If the Bidding or Negotiation Phase has not commenced within 90 days
after submittal of the Construction Documents to the Owner, any Project budget
or fixed limit of Construction Cost shall be adjusted to reflect changes in the
general level of prices in the construction industry between the date of
submission of the Construction Documents to the Owner and the date on which
proposals are sought.
5.2.4 If a fixed limit of Construction Cost (adjusted as provided in
Subparagraph 5.2.3) is exceeded by the sum of the lowest bona fide bids or
negotiated proposals plus the Construction Manager's estimate of other elements
of Construction Cost for the Project, the Owner shall:
.1 give written approval of an increase in
such fixed limit;
.2 authorize rebidding or renegotiating of
the Project within a reasonable time;
.3 if the Project is abandoned, terminate in
accordance with Paragraph 9.3; or
.4 cooperate in revising the Project scope
and quality as required to reduce the
Construction Cost.
5.2.5 If the Owner chooses to proceed under Clause 5.2.4.4, the Construction
Manager, without additional charge, shall cooperate with the Owner as necessary
to bring the Construction Cost within the fixed limit, if established as a
condition of this Agreement.
<PAGE>
ARTICLE 6
CONSTRUCTION SUPPORT ACTIVITIES
6.1 Construction support activities, if provided by the Construction Manager,
shall be governed by separate contractual agreements, unless otherwise
provided in Article 14.
6.2 Reimbursable expenses listed in Article 14 for
construction support activities may be subject to trade discounts, rebates,
refunds and amounts received from sales of surplus materials and equipment
which shall accrue to the Owner, and the Construction Manager shall make
provisions so that they can be secured.
ARTICLE 7
OWNERSHIP AND USE OF DRAWINGS,
SPECIFICATIONS AND OTHER DOCUMENTS
7.1 The Drawings, Specifications and other documents prepared by the Design
Team are the property of the Design Team until the Owner has paid all members
of the Design Team in full, and at that time the Drawings, Specifications and
other documents will become the property of the Owner.
ARTICLE 8
ARBITRATION
8.1 Claims, disputes or other matters in question between the parties to this
Agreement arising out of or relating to this Agreement or breach thereof shall
be subject to and decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently
in effect unless the parties mutually agree otherwise.
8.2 Demand for arbitration shall be filed in writing with the other party to
this Agreement and with the American Arbitration Association. A demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.
8.3 No arbitration arising out of or relating to this Agreement shall include,
by consolidation, joinder or in any other manner, an additional person or
entity not a party to this Agreement, except by written consent containing a
specific reference to this Agreement signed by the Owner, Construction Manager,
and any other person or entity sought to be joined. Consent to arbitration
involving an additional person or entity shall not constitute consent to
arbitration of any claim, dispute or other matter in question not described in
the written consent or with a person or entity not named or described therein.
The foregoing agreement to arbitrate and other agreements to arbitrate with an
additional person or entity duly consented to by the parties to this Agreement
shall be specifically enforceable in accordance with applicable law in any
court having jurisdiction thereof.
8.4 The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
ARTICLE 9
TERMINATION, SUSPENSION OR ABANDONMENT
9.1 This Agreement may be terminated by either party upon not less than seven
days' written notice should the other party fail substantially to perform in
accordance with the terms of this Agreement through no fault of the party
initiating the termination.
9.2 If the Project is suspended by the Owner for more than 30 consecutive days,
the Construction Manager shall be compensated for services performed prior to
notice of such suspension. When the Project is resumed, the Construction
Manager's compensation shall be equitably adjusted to provide for expenses
incurred in the interruption and resumption of the Construction Manager's
services.
9.3 This Agreement may be terminated by the Owner upon not less than seven
days' written notice to the Construction Manager in the event that the Project
is permanently abandoned. If the Project is abandoned by the Owner for more
than 90 consecutive days, the Construction Manager may terminate this Agreement
by giving written notice.
9.4 Failure of the Owner to make payments to the Construction Manager in
accordance with this Agreement shall be considered substantial nonperforamnce
and cause for termination.
9.5 If the Owner fails to make payment when due the Construction Manager for
services and expenses, the Construction Manager may, upon seven days' written
notice to the Owner, suspend performance of services under this Agreement.
Unless payment in full is received by the Construction Manager within seven
days of the date of the notice, the suspension shall take effect without
further notice. In the event of a suspension of services, the Construction
Manager shall have no liability to the Owner for delay or damage caused to the
Owner because of such suspension of services.
9.6 In the event of termination not the fault of the Construction Manager, the
Construction Manager shall be compensated for services performed prior to
termination, together with Reimbursable Expenses then due and all
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Termination Expenses as defined in Paragraph 9.7.
9.7 Termination Expenses are those costs directly attributable to termination
for which the Construction manager is not otherwise compensated.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Unless otherwise provided, this Agreement shall be governed by the law of
the place where the Project is located.
10.2 Causes of the action between the parties to this Agreement pertaining to
acts or failures to act shall be deemed to have accrued and the applicable
statutes of limitations shall commence to run not later than either the date of
Substantial Completion for acts or failures to act occurring prior to
Substantial Completion, or the date of issuance of the final Project
Certificate for Payment for acts or failures to act occurring after Substantial
Completion.
10.3 WAIVERS OF SUBROGATION. The Owner and Construction Manager waive all
rights against each other and against the Contractors, Design Team,
consultants, agents and employees of any of them, for damages, but only to the
extent covered by property insurance during construction, except such rights as
they may have to the proceeds to such insurance as set forth in the edition of
AIA Document A201/CMA, General Conditions of the Contract for Construction,
Construction Manager Advisor Edition, current as of the date of this Agreement.
The Owner and Construction Manager each shall require similar waivers from
their Contractors, Architect, consultants, agents, and persons or entities
awarded separate contracts administered under the Owner's own forces.
10.4 The Owner and Construction Manager, respectively, bind themselves, their
partners, successors, assigns and legal representatives to the other party to
this Agreement and to the partners, successors, assigns and legal
representatives of such other party with respect to all covenants of this
Agreement. Neither Owner nor Construction Manager shall assign this Agreement
without the written consent of the other.
10.5 This Agreement represents the entire and integrated agreement between the
Owner and Construction Manager and supersedes all prior negotiations,
representations or agreements, either written or oral. This Agreement may be
amended only by written instrument signed by both Owner and Construction
Manager.
10.6 Nothing contained in this Agreement shall create a contractual
relationship with or a cause of action in favor of a third party against either
the Owner or Construction Manager.
10.7 Unless otherwise provided in this Agreement, the Construction Manager and
the Construction Manager's consultants shall have no responsibility for the
discovery, presence, handling, removal or disposal of or exposure of persons to
hazardous materials in any form at the Project site, including but not limited
to asbestos, asbestos products, polychlorinated biphenyl (PCB) or other toxic
substances.
ARTICLE 11
INSURANCE
11.1 CONSTRUCTION MANAGER'S LIABILITY INSURANCE
11.1.1 The Construction Manager shall purchase and maintain in a company or
companies lawfully authorized to do business in the jurisdiction in which the
Project is located such insurance as will protect the Construction Manager from
claims set forth below which may arise out of or result from the Construction
Manager's operations under this Agreement and for which the Construction
Manager may be legally liable.
.1 claims under workers compensation, disability benefit and other similar
employee benefit acts which are applicable to the operations to be performed;
.2 claims for damages because of bodily injury, occupational sickness or dis
ease, or death of the Construction Manager's employees;
.3 claims for damages because of bodily injury, sickness or disease, or death
of any person other than the Construction Manager's employees;
.4 claims for damages insured by usual personal injury liability coverage which
are sustained (1) by a person as a result of an offense directly or indirectly
related to employment of such person by the Construction Manager, or (2) by
another person;
.5 claims for damages, other than to the Work itself, because of injury to or
destruction of tangible property, including loss of use resulting therefrom;
.6 claims for damages because of bodily injury, death of a person or property
damage arising out of ownership, maintenance or use of a motor vehicle.
11.1.2 The insurance required by Subparagraph 11.1.1 shall be written for not
less than limits of liability required by law. Coverages, whether written on
an occurrence or claims-made basis, shall be maintained without interruption
from date of commencement of operations under this Agreement until date of
final payment and termination of any coverage required to be maintained after
final payment.
ARTICLE 12
PAYMENTS TO THE CONSTRUCTION MANAGER
12.1 REIMBURSABLE EXPENSES
12.1.1 Reimbursable Expenses are in addition to compensation for Basic and
Additional Services and include expenses incurred by the Construction Manager
and Construction Manager's employees and consultants in the interest of the
Project, as identified in the following clauses.
12.1.1.2 Expenses in connection with authorized out-of-town travel, and fees
paid for securing approval of authorities having jurisdiction over the Project.
12.1.1.3 Expense of additional insurance coverage of limits requested by the
Owner in excess of that normally carried by the Construction Manager.
12.2 PAYMENTS ON ACCOUNT OF BASIC SERVICES
12.2.1 An initial payment as set forth in Paragraph 13.1 is the minimum payment
under this Agreement.
12.2.2 Subsequent payments for Basic Services shall be made monthly and, where
applicable, shall be in proportion to services performed within each phase of
service, on the basis set forth in Subparagraph 13.2.1.
ARTICLE 13
BASIS OF COMPENSATION
The Owner shall compensate the Construction Manager as follows:
13.1 AN INITIAL PAYMENT of -0- Dollars ($ -0- )
shall be made upon execution of this Agreement and credited to the Owner's
account at final payment.
13.2 BASIC COMPENSATION
13.2.1 FOR BASIC SERVICES, as described in Article 2, and any other services
included in Article 14 as part of Basic Services, Basic Compensation shall be
computed as follows:
For Pre-Construction Phase Services:
**TWENTY THOUSAND DOLLARS & NO/100** ($20,000.00 STIPULATED SUM) PAYMENT IN
FULL TO BE PAID AT CLOSING OF THE CONSTRUCTION LOAN, BUT IN NO EVENT LATER
THAN NOVEMBER 1, 1996.
For Construction Phase Services:
**FIFTY EIGHT THOUSAND FIVE HUNDRED SIXTY EIGHT DOLLARS & NO/100** ($58,586.00
STIPULATED SUM) PAYABLE IN MONTHLY INSTALLMENTS OF $9,764.33 EACH UNTIL FULLY
PAID, PROVIDED HOWEVER, THE REMAINING UNPAID BALANCE, IF ANY, SHALL BE PAID ON
SUBSTANTIAL COMPLETION OF THE PROJECT.
13.3 COMPENSATION FOR ADDITIONAL SERVICES
13.3.1 In the event the Owner proceeds with other phases of the three phase
facility before Phase I is completed, the Owner shall pay the Construction
Manager three and one-half percent (3 1/2%) of the Design and Construction
Cost of such other phases as are commenced, as compensation for construction
management services.
13.4 REIMBURSABLE EXPENSES
13.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph 12.1, a multiple
of TWENTY PERCENT (20%) times the expenses incurred by the Construction
Manager and the Construction Manager's employees and consultants in the
interest of the Project.
ARTICLE 14
OTHER CONDITIONS OR SERVICES
14.1 Additional pre-construction services included in base compensation are as
listed in Paragraph 14.1.1.
14.1.1 The additional following services shall be provided by the Construction
Manager:
A - Alternate Site Plan
B - Construction Methods
C - Site Plan approvals from City of Jacksonville
D - P.U.D. Compliance with the City of Jacksonville
<PAGE>
E - D.R.I. Compliance with the City of Jacksonville
F - Attend any necessary public hearing on approval of permits
G - Attend meetings with City of Jacksonville and AA & D in behalf of Armor
Holdings, Inc. for the securing of incentives
H - Perform Estimates for AA & D for presentation package to City of
Jacksonville in order to receive incentives
14.1.2 The Construction Manager is authorized by the Owner to proceed to
contract on Owners behalf for the following Design, Pre-construction
Cost and Post Construction inspections, and Owner agrees to pay the
cost thereof as listed below within ten (10) days after completion of
the work and receipt of an invoice for the cost thereof.
1. Foundation investigation for the proposed building the scope of work
would be as follows:
a. Five (5) each 30' SPT borings and one (1) each 45' SPT boring
inside the building perimeter.
b. Three (3) each 6' auger borings in the automobile parking area
and two (2) each 6' auger borings in the truck court area.
c. Engineering report for the site.
d. Complete engineering report and recommendations
TOTAL COST OF SOIL BORINGS $2,493.00
2. The survey work needed for the site is as follows:
a. Topographical survey
b. Tree survey
c. Stake out the soil borings in the proper locations
d. Upon completion of the job, provide as-built drawings of the
site and building.
e. The boundary survey would be supplied by Wilma/Skyland Joint
Venture at no cost to you as the client.
TOTAL COST OF SURVEY WORK $2,650.00
3. The environmental site assessment or the Phase I Environmental Report
will include the following:
a. Inspection of the site and adjoining vicinity, including
inspection of the site for evidence of recognized environmental
conditions, as defined by ASTM Standard practice E1527-94.
b. Review of past occupant/owner activity and history based upon
interviews with present and past owners and/or occupants of the
property, a review of available, if any, historical city
directories and fire insurance maps, and a review of an existing
November 28, 1995 50 Year Title Search that will be provided by
the developer of Tradeport.
c. Review of historical aerial photographs on file with the county.
d. Survey of reasonable ascertainable public records (ASTM
designated federal and state data bases and county regulatory
agencies) for listed facilities, including contaminated sites,
registered storage tanks and hazardous waste generator
facilities.
e. Summary of existing conditions in a written report with site
photographs and other pertinent documentation indicating
presence (or possible presence) of recognized environmental
conditions as defined in ASTM practice E1527-95.
TOTAL COST OF PHASE I ENVIRONMENTAL AUDIT BASED UPON THE ABOVE
STANDARD CRITERIA $ 2,700.00
4. The civil design for the project will include:
a. Twelve (12) set preliminary review drawings with the City of
Jacksonville
b. Nine (9) set final review drawings
c. Drawings for the St. Johns River Water Management District in
order to receive a letter of no objection
d. Inspections during the construction of the civil work being
performed
TOTAL COST FOR THE CIVIL DESIGN $ 6,750.00
<PAGE>
The civil design is of most importance to the project in
that it takes longer for city approval than any other
required approvals. Within the City of Jacksonville, there
are two (2) submittals for the site work or civil
engineering design; (1) a twelve set review which takes
approximately 4 weeks to go through all the city departments
and (2) a nine set review and permit which takes
approximately another two weeks. Once the soil borings are
completed and a conceptual site plan is approved the civil
design will need to begin immediately.
5. In submitting the civil design we must also submit the landscape and
irrigation design for the site.
TOTAL LANDSCAPE AND IRRIGATION DESIGN $ 950.00
6. Listed below is the architectural/structural, mechanical and electrical
design along with cost:
a. Conceptual architectural site plan including preliminary site
drawings $ 1,500.00
b. Architectural and Structural design on the building shell including
structural design of the mezzanine $14,400.00
c. Complete architectural drawings of the interior and tenant build-out
of the building $15,400.00
d. Periodic structural inspections of tilt-wall panels prior to and
during concrete pours. Inspections of structural steel framing, site
inspections and inspections for pay applications. $ 2,285.00
e. Mechanical, plumbing and electrical design $ 9,100.00
f. Architectural consultant for original design and rendering $ 1,200.00
g. Drafting and printing twenty (20) sets of specifications $ 2,500.00
h. Producing twenty (20) sets of drawings for construction along with
five (5) sets of signed and sealed construction documents $ 2,500.00
i. Interior Design Consultant $ 3,500.00
j. Additional cost for design consultant and color renderings for
alternate designs $ 1,620.00
k. Architectural and structural design for tilt-wall masonry facade for
alternate designs $ 1,500.00
l. Additional Printing due to alternate designs $ 332.00
TOTAL COST FOR THE ARCHITECTURAL/STRUCTURAL AND MECHANICAL
DESIGN $55,837.00
7. Consulting engineer to inspect the roof during the construction
and to perform a final inspection upon completion. $ 2,500.00
8. Construction engineer/consultant to perform a final inspection on the
structural integrity of the building along with a structural review
of the drawings $ 2,500.00
TOTAL COST FOR DESIGN, PRE-CONSTRUCTION COST
AND POST CONSTRUCTION INSPECTIONS $76,380.00
<PAGE>
14.1.3 The guaranteed maximum cost for the project including Construction
Managers Fee as provided in Article 13, Design and other costs as
provided in Paragraph 14.1.2 and Construction Contract as provided in
Paragraph 14.1.5, but excluding alternates and land is Two Million
Seven Hundred Seventy Three Thousand Nine Hundred Two Dollars and
No/100 $2,773,902.00 as specified in a revised cost proposal to Armor
Holdings, Inc., dated September 24, 1996 consisting of seven Sections
as outlined below and further defined as Exhibit "A".
I. Revised Cost Proposal
II. Design And Development Cost
III. Allowances Included In Proposal
IV. Alternates
V. Building Shell And Site Specifications
VI. Interior Build-Out And Facade Specifications
VII. Construction Schedule
14.1.4 The Construction Manager is hereby authorized by Armor Holdings,
Inc., to prepare and consummate on behalf of Armor Holdings, Inc. a
design contract with Dawson Enterprises for the architectural and
structural design, attached as Exhibit "B" for the exterior of the
building including inspections, specifications and printing.
14.1.5 The Construction Manager is hereby authorized by Armor Holdings, Inc.
to prepare and consummate on behalf of Armor Holdings, Inc. a
guaranteed maximum price construction contract in the amount of Two
Million Six Hundred Eighteen Thousand Nine Hundred Fifty Four and
No/100 ($2,618,954.00) with MasTec Design Build, Inc., ("MasTec")
using AIA Document A101, 1987 Edition with General Conditions AIA
Document A201, 1987 Edition, attached hereto as Exhibit "C", for
construction of the Project. Owner shall make all payments due to
MasTec under the said construction contract, when the same are due
and payable, with the assistance of Construction Manager as provided
herein, perform the obligations of Owner under the said construction
contract.
14.1.6 Within the guaranteed maximum price construction contract is a budget
of $763,018.00 for the office build-out. The present build- out is
based upon conceptual drawings. Whenever the final drawings are
complete, the budget will be adjusted accordingly.
14.1.7 THE FOLLOWING ITEMS ARE NOT PART OF THE GUARANTEED MAXIMUM COST OF THE
PROJECT AND ARE THEREBY EXCLUDED:
1. Jacksonville Electric Authority's Security Deposit
2. Office furniture and furnishings
3. Office equipment
4. Telephone system, except for underground main telephone
conduits, however have included sixty-four (64) telephone
boxes with conduit in the office area.
5. Security System
6. Racking or warehouse equipment
7. Construction or permanent financing
8. Builders' Risk and Owners' Liability Insurance
14.1.8 CRITICAL MILESTONES
In order for the project schedule to be maintained Armor Holdings, Inc.,
through their architectural consultant, must supply the following information
by the dates provided herein.
a. Use of skylights in the warehouse and office - Date;
November 15, 1996
b. Location of elevator - Date; October 4, 1996
c. Location of restrooms in office - Date; October 21, 1996
d. Preliminary office floor plan - Date; November 1, 1996
e. Warehouse breakroom and ballistics layout - Date;
November 1, 1996
f. Manufacturing Layout - Date; November 1, 1996
14.1.9 It is Owner's intention that the construction of the Project is a
"turnkey" project to be performed and delivered by Construction Manager. Owner
has and will continue to fully rely on Construction Manager for all aspects of
both construction and construction administration for the entire Project.
Notwithstanding the terms and provisions of the Agreement, the parties agree
that
<PAGE>
it will be Construction Manager's full responsibility to hire, coordinate,
manage and control all contractors, consultants, engineers, architects and any
other parties employed on the design and construction team to insure that the
Project is completed timely for the amounts contracted and in accordance with
the plans and specifications approved by Owner. Further, in connection with
each construction disbursement, Owner intends to make its payment to
Construction Manager only and will fully rely on Construction Manager to
disburse such payments to any and all parties on the design and construction
team or those employed by the design and construction team, then entitled to
payment. In this regard (and except as otherwise specifically provided herein),
Owner views Construction Manager as fully responsible for every and all aspects
of the construction including, without limitation, day to day site decisions,
all project direction, labor issues and compliance with all local, State and
Federal regulations, and compliance with all excepted standards, codes,
regulations and specifications, to insure that the Project is constructed
within the maximum cost guaranteed, and is timely completed in a workman like
manner and timely delivered.
To assure financial responsibility for performance of the
construction by the Contractor, MasTec Design Build, Inc. ("MasTec"), Owner
has required and Construction Manager has provided for a 100% payment and
performance bond for this Project. Owner shall look only to the payment and
performance bond and to MasTec to assure payment by MasTec for and performance
by MasTec of the construction of the Project. Owner shall look only to MasTec
and to the Architects and Engineers performing services as part of the design
and construction team for all warranties in connection with such construction,
contracting, design and engineering of the Project. In all other respects,
Owner is relying fully upon Construction Manager to administer the
construction of the Project and to deliver the same on a turn-key basis in a
timely manner, as if said Construction Manager were acting as the general
contractor for this Project.
This section concerning the interpretation and construction of said
Contract shall control to the extent these terms conflict with any other terms
of this Contract.
This Agreement entered into as of the day and year first written
above. For the purpose of calculating any dates herein which are computed from
the effective date of this Agreement, the effective date shall be deemed to be
October 23, 1996.
OWNER CONSTRUCTION MANAGER
ARMOR HOLDINGS, INC. GB INVESTMENT & COMPANY, INC.
By: ________________________________ By: ________________________________
(Signature) (Signature)
Print Name: ______________________ Print Name: ______________________
Its: _____________________________ Its: _____________________________
ARMOR HOLDINGS PROPERTIES, INC.
By: ________________________________
(Signature)
Print Nme: _______________________
Its: _____________________________
<PAGE>
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
The following table details the number of shares used in computing primary and
fully diluted earnings per share:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Primary:
Weighted average common shares
outstanding 7,223,506 4,753,999
Effect of shares issuable under
stock option and stock grant
plans, based on the treasury
stock method 819,223 325,290
Effect of shares issuable under
conversion of preferred stock 90,548 1,290,383
------ ---------
8,133,277 6,369,672
========= =========
Earnings $ 834,921 $ 520,153
Earnings per share $.10 $.08
Fully diluted:
Weighted average common shares
outstanding 7,223,506 4,753,999
Effect of shares issuable under
stock option and stock grant
plans, based on the treasury
stock method 892,326 598,191
Effect of shares issuable under
conversion of preferred stock 90,548 1,290,383
------ ---------
8,206,380 6,642,573
========= =========
Earnings $ 834,921 $ 520,153
Earnings per share $.10 $.08
</TABLE>
Fully diluted earnings per share does not include the effect of shares
issuable under conversion of the convertible notes as such effect is
antidilutive. The weighted average common shares outstanding includes
2,300,000 shares of common stock issued on December 18, 1996 upon the
conversion of the convertible notes.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
---------------------------
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- ------------------ -----------------------------
Armor Holdings Limited United Kingdom
Armor Holdings Properties, Inc. State of Delaware
Defense Technology Corporation of America State of Delaware
NIK Public Safety, Inc. State of Delaware
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 333-8533 of Armor Holdings, Inc. on Form S-3 of our report dated
February 21, 1997, appearing in this Annual Report on Form 10-KSB of Armor
Holdings, Inc. for the year ended December 28, 1996.
We additionally consent to the incorporation by reference in Registration
Statement No. 33-018863 of American Body Armor & Equipment, Inc., now known as
Armor Holdings, Inc., on Form S-8 of our report dated February 21, 1997,
appearing in this Annual Report on Form 10-KSB of Armor Holdings, Inc. for the
year ended December 28, 1996.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
March 24, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> $7,062,369
<SECURITIES> 0
<RECEIVABLES> $5,938,704
<ALLOWANCES> $186,000
<INVENTORY> $4,160,782
<CURRENT-ASSETS> $17,563,894
<PP&E> $3,904,839
<DEPRECIATION> $513,550
<TOTAL-ASSETS> $28,731,155
<CURRENT-LIABILITIES> $4,045,366
<BONDS> $119,216
0
$0
<COMMON> $104,170
<OTHER-SE> $24,462,403
<TOTAL-LIABILITY-AND-EQUITY> $28,731,155
<SALES> $18,011,014
<TOTAL-REVENUES> $18,011,014
<CGS> $10,878,974
<TOTAL-COSTS> $4,939,784
<OTHER-EXPENSES> $513,760
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $253,518
<INCOME-PRETAX> $1,426,921
<INCOME-TAX> $592,000
<INCOME-CONTINUING> $834,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $834,921
<EPS-PRIMARY> $.10
<EPS-DILUTED> $.10
</TABLE>
