FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended: September 30, 1997
OR
|_| 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: 69270-NY
MACE SECURITY INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 030311630
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
160 Benmont Avenue, Bennington, Vermont 05201
- --------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 802-447-1503
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 |_|
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MACE SECURITY INTERNATIONAL, INC.
INDEX
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Page No.
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PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Operations and Deficit -
Three Months and Nine Months Ended September 30, 1997 and 1996 1
Consolidated Balance Sheets - September 30, 1997 and
December 31, 1996 2
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1997 and September 30, 1996 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1 - Legal Proceedings 8
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
- -------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<C> <C> <S> <C> <C>
$ 2,141,215 $ 1,702,058 Net Sales $ 7,406,389 $ 7,414,285
1,294,050 907,436 Cost of sales 4,616,972 4,201,190
- ----------- ----------- ----------- -----------
847,165 794,622 Gross profit 2,789,417 3,213,095
Operating expenses:
692,886 658,882 General and Administrative 2,053,026 1,895,033
456,340 425,905 Selling 1,298,265 1,480,485
- ----------- ----------- ----------- -----------
(302,061) (290,165) Operating loss (561,874) (162,423)
Other (income) expense:
(7,143) (4,413) Interest income (14,551) (18,030)
26,702 21,455 Interest expense 73,982 67,972
(26,081) (29,109) Other income (72,881) (57,339)
- ----------- ----------- ----------- -----------
(6,522) (12,067) (13,450) (7,397)
(295,539) (278,098) Loss before income (548,424) (155,026)
tax expense
1,680 (25,551) Income tax expense (benefit) 7,117 12,013
- ----------- ----------- ----------- -----------
(297,219) (252,547) Net loss (555,541) (143,013)
Deficit,
(1,801,223) $(1,181,019) beginning of period (1,542,901) (1,290,553)
- ----------- ----------- ----------- -----------
Deficit,
$(2,098,442) (1,433,566) end of period $(2,098,442) $(1,433,566)
=========== =========== =========== ===========
Loss per share
$ (0.04) $ (0.04) of common stock $ (0.08) $ (0.02)
=========== =========== =========== ===========
Weighted average number
of common shares
6,945,326 6,825,000 outstanding 6,865,550 6,818,212
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
1
<PAGE>
MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1997 1996
---- ----
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 406,033 $ 345,554
Temporary Investments ........................... 800,595 --
Accounts receivable, less allowance for
doubtful accounts
($79,925, 1997; $101,603, 1996) ............... 1,813,994 2,567,920
Inventories:
Finished goods ................................ 1,803,134 1,729,882
Work in process ............................... 963,979 1,184,590
Raw material and supplies ..................... 2,285,184 2,311,407
Prepaid expenses ................................ 224,331 171,271
------------ ------------
Total current assets .......................... 8,297,250 8,310,624
Property and equipment, net ....................... 2,699,754 2,919,230
Intangibles, net .................................. 2,779,333 2,761,193
Notes Receivable - Related Parties ................ 12,918 --
Other assets ...................................... 124,482 131,543
------------ ------------
Total Assets .................................. $ 13,913,737 $ 14,122,590
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ............ 110,415 949,827
Accounts payable ................................ 423,213 1,012,777
Accrued liabilities ............................. 378,614 411,233
Corporate income taxes payable .................. 6,344 --
------------ ------------
Total current liabilities ....................... 918,586 2,373,837
Long-term debt .................................... 1,689,585 143,271
------------ ------------
Total liabilities ............................. 2,608,171 2,517,108
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 2,000,000 shares; no shares issued
Common stock, par value $.01 per share;
authorized 18,000,000 shares; issued
7,081,666 and 6,825,000 shares
in 1997 and 1996, respectively ................ 70,817 68,250
Additional paid in capital ...................... 13,333,191 13,080,133
Deficit ......................................... (2,098,442) (1,542,901)
------------ ------------
Total stockholders' equity .................... 11,305,566 11,605,482
------------ ------------
Total Liabilities and Stockholders' equity .... $ 13,913,737 $ 14,122,590
============ ============
The accompanying notes are an integral part of the
financial statements.
2
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MACE SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
INCREASE (DECREASE) IN CASH
Nine Months Ended September 30,
-------------------------------
1997 1996
---- ----
Operating activities:
Net loss ................................... $ (555,541) $(143,013)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation ............................. 335,112 333,224
Amortization ............................. 198,995 208,772
Allowance for bad debts .................. (21,678) 8,600
Gain on sale of assets ................... (1,200) (10,249)
Changes in operating assets and liabilities:
Accounts receivable ...................... 775,604 (34,643)
Notes receivable - related parties ....... (12,918) --
Inventories .............................. 256,715 (201,131)
Prepaid expenses ......................... (24,260) 216,018
Accounts payable ......................... (589,564) 160,762
Accrued liabilities ...................... (32,619) (143,937)
Corporate income tax payable ............. 6,344 --
Other assets ............................. 2,781 (8,932)
----------- ---------
Net cash provided by operating
activities ........................... 337,771 385,471
----------- ---------
Investing activities:
Purchase of property and equipment ......... (109,636) (251,664)
Proceeds from sale of property and equipment 1,200 29,850
Cash disbursed for acquisition ............. (46,363) --
Purchase of temporary investments .......... (800,595) --
----------- ---------
Net cash used in investing activities ... (955,394) (221,814)
----------- ---------
Financing activities:
Payment of principal of long-term debt ..... (499,348) (305,296)
Proceeds from issuance of long-term debt ... 1,177,450 --
Payment of notes payable ................... -- (119,920)
----------- ---------
Net cash provided by (used in) financing
activities ............................ 678,102 (425,216)
----------- ---------
Net increase (decrease) in cash .............. 60,479 (261,559)
Cash:
Beginning of period ........................ 345,554 505,638
----------- ---------
End of period .............................. $ 406,033 $ 244,079
=========== =========
The accompanying notes are an integral part
of the financial statements.
3
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MACE SECURITY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------
1. MANAGEMENT OPINION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows for the periods presented. The
results of any interim period are not necessarily indicative of results
for the full year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31,
1996.
2. EARNINGS PER SHARE
Earnings per share on common stock are computed using the weighted average
number of shares of common stock outstanding during each period presented.
Effective December 15, 1997, the Company is required to adopt Financial
Accounting Standard No. 128, "Earnings per Share." This Standard requires
both basic and diluted earnings per share to be reported for all periods
presented. When income/(loss) per common share is calculated in accordance
with this Standard, for the nine months ended September 30, 1997 and 1996,
basic and diluted income/(loss) per common share do not significantly
differ from reported amounts.
3. ACQUISITIONS
On July 1, 1997, the Company purchased all of the issued and outstanding
Common Stock of MSP Inc. ("MSP") an Aurora, Colorado marketer of a
diversified line of consumer safety and security products. MSP is being
treated as a subsidiary and its results of operations are consolidated
with Mace Security International, Inc. as of the acquisition date. All
intercompany transactions have been eliminated. All of the issued and
outstanding common stock of MSP were transferred to the Company in
consideration for 80,000 shares of the Company's common stock. All 80,000
shares of the Company's common stock and all shares of MSP, will be held
in escrow for one year. In the event MSP achieves certain basic financial
goals, the 80,000 shares of the Company's common stock will be released to
the sole former stockholder of MSP immediately prior to the transaction
and currently a director of the Company. In the event these goals are not
met, the Company has the right to "put" the shares of MSP back to the
former stockholder in exchange for the 80,000 shares of the Company's
common stock. Additionally, in the event MSP achieves certain greater
financial goals, the former stockholder will receive an additional 15,000
shares of the Company's common stock. Only 80,000 shares of the Company's
common stock are being treated as issued and outstanding as of the
acquisition date and were valued at $1.125 per share. The
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<PAGE>
purchase price of $90,000 was allocated as follows: $12,112 for inventory,
$1,500 for machinery and equipment and $76,388 for goodwill.
On September 10, 1997, the Company purchased all of the issued and
outstanding Common Stock of MSP Retail, Inc. ("MSPR"), formerly Todays
Security Inc., an operator of two retail stores in the Denver, Colorado
area, specializing in the sale of security products for personal and home
protection. MSPR is being treated as a subsidiary and its results of
operations are consolidated with Mace Security International Inc. for the
three and nine months ended September 30, 1997. All significant
intercompany transactions have been eliminated. All of the issued and
outstanding Common Stock of MSPR were transferred to MSI in consideration
for 176,666 shares of MSI common stock valued at $.9375 per share and
$46,363 in cash. MSI's and MSPR's stock were placed in escrow and will
remain in escrow over a one-year period. 176,666 shares of MSI's Common
Stock will be delivered to the former stockholders of MSPR if certain
financial performance criteria is met. In the event these goals are not
met, the Company has a right to "put" the shares of MSPR back to the
former stockholders in exchange for 176,666 shares of the Company's common
stock. The purchase price of $211,988 was allocated as follows: $71,021
for inventory, $5,800 for other assets, $4,500 for machinery and equipment
and $130,667 for goodwill.
Pro forma results of the MSP and MSPR acquisitions, assuming they had been
made at the beginning of the periods presented, would not be materially
different from the results reported.
On September 11, 1997, the Company established a subsidiary called Mace
Security Centers, Inc. ("MSC"), a corporation formed for the purpose of
offering franchises for the operation of retail stores which will sell
personal protection and security products. There has been no financial
activity with this corporation as of September 30, 1997.
4. SUPPLEMENTARY CASH FLOW INFORMATION
On September 25, 1997, the Company obtained long-term debt from the First
National Bank of New England (see Note 6). As part of this refinancing,
Key Bank National Association long-term debt of $593,750 was paid. This
non-cash transaction has been excluded from proceeds from the issuance of
long-term debt as well as payment of principal of long-term debt.
5. TEMPORARY INVESTMENTS
Temporary investments consist primarily of the highly liquid Merrill Lynch
Institutional Fund. The fund is a no-load money fund consisting of
short-term "money market" instruments.
6. LONG TERM DEBT
On September 25, 1997, the Company refinanced its long-term debt with the
First National Bank of New England. Two term loans totaling $1,800,000
bearing interest at the prime rate quoted by the Wall Street Journal
("Prime") plus 1.50% (10.0% at September 30, 1997) payable in monthly
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installments of $23,787, including interest, due November 1, 2006, were
obtained. Of the proceeds $593,750 was used to pay off the KeyBank
National Association long-term debt. Additionally, a $250,000 line of
credit bearing interest at Prime plus 1% (9.5% at September 30, 1997) due
May 31, 1998 was obtained. No amounts have been drawn on this line of
credit.
These facilities are collateralized by the following: (a) Assignment of
life insurance owned by the Company on the life of Jon E. Goodrich; and
(b) First priority security interest in all inventory and all other assets
of the Company. All three facilities are personally guaranteed by the
President and Chief Executive Officer of the Company, Jon E. Goodrich.
Prior to this refinancing event, the obligation to TransTechnology, Inc.,
relating to the acquisition of the assets of Federal Laboratories, was
paid in full with cash from operations.
7. INCOME TAXES
The Company's income tax expense for the three and nine months ended
September 30, 1997 represents corporate franchise taxes.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following can be interpreted as including forward-looking statements under
the Private Securities Litigation Reform Act of 1995. Such statements are
typically identified by the words "intends," "plans," "effort," "anticipates,"
"believes," "expects," or words of similar import. Various important factors
that could cause actual results to differ materially from those expressed in the
forward looking statements are identified below and may vary significantly based
on a number of factors including, but not limited to, marketing success, product
development, production, manufacturing costs, competitive conditions and the
change in economic conditions of the various markets the Company serves. Actual
future results may differ materially from those suggested in the following
statements.
For the three and six months ended September 30, 1997.
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS:
Net sales for the three-month period ended September 30, 1997 increased $439,157
or 25.8% compared to the same period in 1996. Net sales for the nine-month
period ended September 30, 1997 decreased $7,896 in comparison to the same
period in 1996. The increase in third quarter sales is principally due to an
increase in Law Enforcement division revenues partially offset by a decrease in
Consumer division sales. Consumer division sales decreased by $119,835, or
14.8%, for the three months ended September 30, 1997 as compared to the same
period in 1996. Law Enforcement division sales increased by $558,992, or 62.7%,
for the three months ended September 30, 1997 as compared to the same period in
1996. Consumer sales decreased 41.4% or $1,464,868 for the nine months ended
September 30, 1997
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in comparison to the same period in the prior year while the Law Enforcement
division sales increased 37.6% or $1,456,972 for the same comparable periods.
The primary reasons for the Law Enforcement division sales increases are
shipments of several large international orders during 1997 as well as the
continued increase of Law Enforcement division product line sales both
internationally and domestically. The primary reason for the Consumer Division
sales decrease is the continued decline of the consumer self- defense spray
market.
Gross profit was 39.6% and 37.7% of net sales for the three and nine month
periods ended September 30, 1997 as compared to 46.7% and 43.3% for the similar
periods in 1996.
The principal reason for the decrease in gross profit margin for both the third
quarter and the nine months ended September 30, 1997 as compared to the like
periods in 1996 is due to the Company's sales mix; a higher proportion of total
sales consists of lower margin products. For the third quarter of 1997 the
higher margin Consumer division product line represented 32.3% of total Company
net sales compared to 47.7% for the third quarter of 1996. Consumer division
gross margin for the three months ended September 30, 1997 was 48.8% compared to
49.5% for the comparable 1996 period. Law Enforcement gross margin for the three
months ended September 30, 1997 was 35.2% compared to 44.2%. For the nine months
ended September 30, 1997 the Consumer division product line represented 27.9% of
total Company net sales compared with 47.7% for the same 1996 period. Consumer
Division gross margin was 49.2% for the nine months ended September 30, 1997
compared to 49.6% for the same period in 1996. Law Enforcement division gross
margin was 33.2% for the nine months ended September 30, 1997 compared to 37.7%
for the same period in 1996. The primary reason for the decline in gross margins
for the Law Enforcement division in 1997 is sales of large orders to several
international law enforcement agencies which yielded lower margins due to the
competitive nature of the international business as well as manufacturing rework
incurred during the fourth quarter of 1996 and early 1997.
Operating expenses for the three and nine month periods ended September 30, 1997
were 53.7% and 45.2% of net sales as compared to 63.7% and 45.5% for the
corresponding periods in 1996.
General and administrative expenses for the three-month period ended September
30, 1997 were $692,886 representing 32.4% of net sales as compared to $658,882
representing 38.7% of net sales in the same quarter in 1996. General and
administrative expenses for the nine-month period ended September 30, 1997 were
$2,053,026 representing 27.7% of net sales compared to $1,895,033 representing
25.6% of net sales for the corresponding period in 1996. The increase from the
three months ended September 30, 1996 to 1997 is a result of certain increased
costs and salaries in connection with acquisitions of MSP and MSPR and the
Company's development of its franchise program. The increase from the nine
months ended September 30, 1996 to 1997 is due to severance and bonus payments
and related costs made in the first quarter to the Company's former
President/CEO and former Executive Vice President and General Counsel as well as
certain costs relating to the acquisition of MSP, MSPR, costs associated with
the establishment of a franchise program and professional fees relating to a
potential transaction that did not materialize.
Selling expenses for the three and nine month periods ended September 30, 1997
were 21.3% and 17.5% of net sales as compared to 25.0% and 20.0% of net sales
for the same periods in 1996. The decreases
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in selling expenses, as a percentage of sales, for both the three and nine
months ended September 30, 1997 from 1996 is due to Management's continued
effort to match selling expenses with sales.
Other (income) expense, net for the three and nine month periods ended September
30, 1997, was ($6,522) and ($13,450) as compared to ($12,067) and ($7,397) for
the identical periods in 1996.
LIQUIDITY AND CAPITAL RESOURCES:
Cash increased $60,479 during the nine months ended September 30, 1997 as a
result of the refinancing, accounts receivable collections and reduction of
inventories partially offset by payments on accounts payable, purchase of
property and equipment and payment of principal of long-term debt.
On September 25, 1997, the Company refinanced its long-term debt with the First
National Bank of New England. Two term loans totaling $1,800,000 bearing
interest at Prime plus 1.50% (10.0% at September 30, 1997) payable in monthly
installments of $23,787, including interest, due November 1, 2006, were
obtained. Of the proceeds, $593,750 was used to pay off the KeyBank National
Association long-term debt. Additionally, a $250,000 line of credit bearing
interest at Prime plus 1% (9.5% at September 30, 1997) due May 31, 1998 was
obtained. No amounts have been drawn on this line of credit.
These facilities are collateralized by the following: (a) Assignment of life
insurance owned by the Company on the life of Jon E. Goodrich; and (b) First
priority security interest in all inventory and all other assets of the Company.
All three facilities are personally guaranteed by the President and Chief
Executive Officer of the Company, Jon E. Goodrich.
Prior to this refinancing event, the obligation to TransTechnology, Inc.,
relating to the acquisition of the assets of Federal Laboratories, was paid in
full with cash from operations.
Inventories decreased by $256,715 during the nine months ended September 30,
1997. This reduction reflects the sale of Federal Laboratories(R) inventories
produced in 1996 and during the first quarter of 1997 to fill orders placed in
late 1996 and shipped in 1997.
Accounts payable decreased by $589,564 principally due to the application of
accounts receivable collections to these liabilities.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is not aware of any legal proceedings other than those disclosed in
the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996. There have been no material changes or activity in any of the
proceedings disclosed in such Annual Report.
Although the Company is not aware of any substantiated claim of permanent
personal injury from its products, the Company is aware of recent reports of
incidents in which, for example, defense spray
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products have been mischievously or improperly used, in some case by minors,
have not been instantly effective or have been ineffective against enraged or
intoxicated individuals. Incidents of this type, or others, could give rise to
product liability or other claims; or to claims that past or future advertising,
packaging or other practices should be, or should have been, modified, or that
regulation of products of this nature should be extended or changed.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits (10.58) First National Bank of New England
Loan closing documents dated September
25, 1997 - the $800,000 note
(10.59) First National Bank of New England Loan
closing documents dated September 25,
1997 - the $1,000,000 note
(10.60) First National Bank of New England Loan
closing documents dated September 25,
1997 - the $250,000 line of credit
(10.61) Asset purchase Agreement between the
Company and MSP Retail, Inc. Dated
September 10, 1997
(11) Schedule of Computation of Per Share
Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K (i) Report on Form 8-K filed with the
Securities and Exchange Commission
September 5, 1997 reporting the
termination of Coopers & Lybrand as the
Company's independent public accountants
(ii) Report on Form 8-K filed with the
Securities & Exchange Commission
September 30, 1997 reporting the new
relationship between the Company and
Urbach Kahn & Werlin, PC as the
Company's independent public accountants
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MACE SECURITY INTERNATIONAL, INC.
Date: November 11, 1997
/s/ Jon E. Goodrich
---------------------------------------
Jon E. Goodrich, President
Date: November 11, 1997 /s/ Mark A. Capone
---------------------------------------
Mark A. Capone, Treasurer
Chief Financial Officer, Vice President
10
FIRST NATIONAL BANK OF NEW ENGLAND
COMMERCIAL TERM PROMISSORY NOTE
$800,000.00 September 25, 1997
Springfield, Massachusetts
FOR VALUE RECEIVED, the undersigned, MACE SECURITY INTERNATIONAL, INC.
(individually and, if more than one, collectively, the "Borrower"), promises to
pay Jointly and severally, if more than one) to the order of FIRST NATIONAL BANK
OF NEW ENGLAND ("Lender"), at its office at One Commercial Plaza, Hartford,
Connecticut or at such other place as the holder hereof (including Lender,
hereinafter referred to as "Holder"), may designate, the sum of EIGHT HUNDRED
THOUSAND AND 00/100 DOLLARS ($800,000.00), together with interest on the unpaid
balance of this Note beginning as of the date hereof, before or after maturity
or judgment (but subject to the default rate of interest set forth below), at
the per annum rate set forth in Paragraph I below, which interest rate shall be
computed daily and payable monthly in arrears on the basis of a Three Hundred
Sixty (360) day year and a thirty (30) day month, together with all taxes levied
or assessed on this Note or the debt evidenced hereby against the Holder, and
together with all reasonable costs, expenses and reasonable attorneys' and other
reasonable professionals' fees incurred in any action to collect and/or enforce
this Note or to enforce, protect, preserve, defend, realize upon or foreclose
any security agreement, mortgage or other agreement securing or relating to this
Note, including without limitation, all reasonable costs and expenses incurred
in inspecting or surveying mortgaged real estate, if any, or conducting
environmental studies or tests, or to enforce, protect, preserve, defend or
sustain the lien of said security agreement, mortgage or other agreement or in
any litigation or controversy arising from or connected in any manner with said
security agreement, mortgage or other agreement, or this Note. Borrower further
agrees to pay all reasonable costs, expenses and reasonable attorneys' and other
reasonable professionals' fees incurred by Holder in connection with any
"workout" or default resolution negotiations involving legal counsel or other
professionals and further in connection with any re-negotiation or
restructuring, of the indebtedness evidenced by this Note. Any such costs,
expenses and/or fees remaining unpaid after demand therefore may, at the
discretion of the Holder, be added to the principal amount of the indebtedness
evidenced by this Note.
This Note has been executed and delivered subject to the following terms
and conditions:
1. Interest. Interest on the unpaid balance of this Note shall accrue at a
variable rate per annum of one and one-half percentage points (1.50%) in excess
of the Prime Rate (the "Floating, Rate"), with the term "Prime Rate" meaning,
the "Prime Rate" as published from time to time in the "Money Rates" section of
The Wall Street Journal, or in the event that such rate is no longer published
in The Wall Street Journal, a comparable index or reference rate selected by
Holder, in its sole discretion. The Prime Rate may not necessarily be the
Lender's lowest or best rate.
<PAGE>
Page 2 of 6
The interest rate may be adjusted on the first day of November, 1997, and
on the first day of each and every month thereafter (or the following business
day in the event that such date falls on a Saturday, Sunday, or holiday) until
all sums due hereunder are paid in full without notice or demand (each such day
being referred to as an "Adjustment Date"), which rate shall remain in effect
until the succeeding adjustment date.
Upon the occurrence of an event of default hereunder, without in any way
affecting the Holder's right to accelerate this Note, this Note shall bear
interest at a rate which is three percentage points (3%) per annum greater than
the rate otherwise in effect hereunder.
2. Lawful Interest. Notwithstanding any provisions of this Note, it is the
understanding and agreement of the Borrower and Holder that the maximum rate of
interest to be paid by Borrower to the Holder shall not exceed the highest or
the maximum rate of interest permissible to be charged by a commercial lender
such as Lender to a commercial borrower such as Borrower under the laws of the
State of Connecticut. Any amounts paid in excess of such rate shall be
considered to have been payments in reduction of principal.
3. Payments of Principal and Interest. The indebtedness evidenced by this Note
shall be due and payable monthly in level principal and interest payments of TEN
THOUSAND FIVE HUNDRED SEVENTY-TWO AND 06/100 ($10,572.06) (the "Monthly Payment)
commencing on November 1, 1997 and continuing and the First day of each and
every month thereafter (but subject to adjustment as described below) until
October 31, 2007 (the "Maturity Date"). The Monthly Payment has been calculated
as the amount necessary to fully amortize the entire principal balance hereunder
in accordance with a ten (10) year amortization schedule deemed to have
commenced as of November 1, 1997 at the initial interest rate hereunder. In the
event the Floating Rate is in effect hereunder and a change in the interest rate
occurs because of a change in the Prime Rate, the Monthly Payment shall be
adjusted effective on the first day of the second month following the month in
which any change in the Prime Rate occurs to reflect the new interest rate then
in effect for the balance of the original ten (10) year amortization period.
Notwithstanding anything to the contrary, the entire indebtedness under the
Note, including but not limited to, all outstanding principal and accrued and
unpaid interest shall be due and payable in full on the Maturity Date.
Holder may, at its option, debit principal, interest, fees, cost and
expenses due and payable hereunder to any of Borrower's accounts maintained with
Holder on each date any such amount is due and payable.
4. Late Charge. In the event Borrower fails to pay any installment of principal
and/or interest when it is due and payable, without in any way affecting the
Holder's right to accelerate this Note, a late charge equal to five (5) percent
of such late payment shall, at the option of Holder, be assessed against
Borrower.
5. Prepayments. Borrower may prepay principal of this Note, in whole or in part,
at any time without penalty or premium. Any and all such prepayments shall be
applied first to accrued and unpaid interest and then to unpaid principal in the
inverse order of maturity, and shall not affect the obligation of Borrower to
pay the regular installments required hereunder until the entire indebtedness
has been paid.
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6. Financial Information. As promptly as practicable, upon Holder's request,
Borrower shall deliver to Holder such documentation and information about the
Borrower's financial condition, business and/or operations as Holder may, at any
time and from time to time, request, including without limitation, business
and/or personal financial statements, copies of federal and state income tax
returns and all schedules thereto, aging reports of Borrower's accounts
receivable and accounts payable and a listing of Borrower's inventory and
equipment, all of which shall be in form, scope and content satisfactory to
Holder, in its sole discretion.
7. Events of Default. Notwithstanding the demand nature of the indebtedness
evidenced by this Note, which shall at all times be payable on demand, the
Borrower agrees that each of the following shall constitute an "Event of
Default" hereunder:
(a) Failure of Borrower to pay any of Borrower's liabilities or
obligations to Holder (whether under this Note or otherwise and whether now
existing or hereafter incurred), including without limitation, any installment
of interest or any other sum due hereunder, when due to be paid; or
(b) Failure of Borrower to pay any advance hereunder on demand; or
(c) Failure of Borrower to observe, perform or comply with any covenant,
agreement or duty contained in this Note, which failure is not cured within ten
(10) days of Holder's notice to Borrower of such failure; or
(d) If Borrower or any guarantor of any obligation of the Borrower to
Holder shall be in default under any security agreement or other agreement
governing, securing or relating to this Note, which default is not cured within
any applicable cure period; or
(e) If any material representation or material warranty made by the
Borrower or any Guarantor of any obligation of the Borrower to Holder, including
without limitation, any such representation or warranty contained herein, or any
statement, certificate or other data furnished by any of them in connection
herewith, proves at any time to be incorrect or untrue in any material respect;
or
(f) Institution of or consent to proceedings, or the taking of any action
in furtherance of, or the entry of any order or decree of a court of competent
Jurisdiction with respect to any of the following:
(i) Bankruptcy, insolvency or reorganization, readjustment,
arrangement, composition or similar relief as to Borrower or any guarantor of
any obligation of the Borrower to Holder under federal or state bankruptcy or
insolvency statutes or related laws,
(ii) Appointment of a receiver, liquidator, trustee or assignee in
bankruptcy or insolvency as to Borrower or any guarantor of any obligation of
the Borrower to Holder or a substantial part of their respective properties, or
(iii) Assignment of the Borrower or any guarantor of any obligation
of the Borrower to Holder for the benefit of creditors, the winding up or
liquidation of the affairs of
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the Borrower or such guarantor, or the admission of Borrower or such guarantor
in writing of its inability to pay its debts; or
(g) The death, dissolution, liquidation, insolvency (the term "insolvency"
shall mean either a negative tangible net worth or an inability to pay its debts
as they mature) or termination of legal existence of Borrower or any guarantor
of any obligation of the Borrower to Holder; provided however, that so long, as
the Lender is the collateral assignee of at least $1,800,000.00 of life
insurance proceeds on the life of Guarantor, the death of Guarantor shall not
result in an Event of Default hereunder; or
(h) The service of any process upon the Holder seeking to attach or
garnish by mesne or trustee process any funds of Borrower or of any guarantor of
any obligation of the Borrower to Holder which are on deposit with the Holder in
excess of $50,000.00; or
(i) The failure by Borrower or any guarantor of any obligation of the
Borrower to Holder to pay or perform any material indebtedness or material
obligation owed to any third party when due, or if any such other indebtedness
or obligation shall be accelerated; or
(j) If there shall be any material adverse change in the assets,
liabilities, condition (financial, operating or otherwise) or business of the
Borrower or any guarantor of any obligation of the Borrower to Holder; or
(k) If, at any time, the Holder believes in good faith that the prospect
of payment of any obligation or the performance of any agreement of the Borrower
or any guarantor of any obligation Of the Borrower to Holder is impaired, or
there is such a change in the assets, liabilities, condition (financial,
operating or otherwise) or business of the Borrower or any such guarantor as the
Holder believes in good faith increases its risk of non-collection, and Borrower
fails to provide Holder with reasonable assurances to the contrary within
fourteen (14) days of Holder's notice to Borrower requesting the same.
Upon the occurrence of any Event of Default, all advances outstanding
hereunder, together with accrued interest thereon and any other sums due under
this Note, shall, at the option of the Holder, become immediately due and
payable, and any obligation of the Holder to make advances hereunder shall
terminate, at the option of the Bank, all of the foregoing without presentment
or demand for payment, notice of non-payment, protest or any other notice or
demand of any kind, all of which are expressly waived by the Borrower. Failure
to exercise such option shall not constitute a waiver of the right to exercise
the same in the event of any subsequent default.
8. Lien and Right of Setoff. The Borrower hereby grants the Holder a lien and
right of setoff for all Borrower's liabilities upon and against all the
deposits, credits, collateral and property of the Borrower, now or hereafter in
the possession or control of the Holder or in transit to it. Holder may, at any
time after an Event of Default, apply or set off the same, or any part thereof,
to any liability of the Borrower whether or not matured or demanded.
9. No Waiver. No delay or omission by Holder in exercising any rights hereunder,
nor failure by the Holder to insist upon the strict performance by Borrower of
any terms and provisions herein shall operate as or be deemed to be a waiver of
such right, any other right hereunder, or any terms and provisions herein, and
the Holder shall retain the right thereafter to insist upon strict
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performance by the Borrower of any and all terms and provisions of this Note or
any document securing the repayment of this Note. No waiver of any right shall
be effective unless in writing and signed by Holder, nor shall a waiver on one
occasion be constituted as a bar to, or waiver of, any such right on any future
occasion.
10. Prejudgment Remedy and Other Waivers. BORROWER ACKNOWLEDGES THAT THE LOAN
EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES DILIGENCE, DEMAND,
PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF PROTEST,
AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, AND ALL RIGHTS UNDER ANY
STATUTE OF LIMITATIONS. THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THESE
WAIVERS KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER
ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR
ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
11. Jury Waiver. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN
ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART
AND/OR THE ENFORCEMENT OF ANY OF YOUR RIGHTS AND REMEDIES, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS. THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THIS
WAIVER KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER
ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR
ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
12. Joint and Several Liability. References in this Note to the Borrower in the
singular shall include the plural, and if Borrower consists of more than one
person, the liability of each Borrower shall be joint and several.
13. Acknowledgment of Copy, Use of Proceeds. The Borrower acknowledges receipt
of a copy of this Note and attests that the proceeds of this Note are to be used
for general commercial purposes and that no part of such proceeds will be used,
in whole or in part, for the purpose of purchasing or carrying any "margin
security" as such term is defined in Regulation U of the Board of Governors of
the Federal Reserve System.
14. Miscellaneous. The provisions of this Note shall be binding upon the heirs,
executors, administrators, successors and assigns of Borrower and shall inure to
the benefit of Holder, its successors and assigns. If any provision of this Note
shall, to any extent, be held invalid or unenforceable, then only such provision
shall be deemed ineffective and the remainder of this Note shall not be
affected. Borrower acknowledges and agrees that Holder shall have the right to
report any delinquencies, defaults and/or losses incurred by Holder hereunder to
any credit
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agency, bureau or service. This Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (but not its
conflicts of law provisions).
BORROWER
Witness: MACE SECURITY INTERNATIONAL, INC.
/s/ James K. Bodurtha By /s/ Mark A. Capone
- ---------------------------- ---------------------------------
Name: Mark A. Capone
Title: Treasurer
<PAGE>
FIRST NATIONAL BANK OF NEW ENGLAND
SECURITY AGREEMENT
SECURITY AGREEMENT made this 25th day of September, 1997 between MACE
SECURITY INTERNATIONAL, INC., whose principal place of business is located at
160 Benmont Avenue, Bennington, Vermont 05201 ("Debtor"), and FIRST NATIONAL
BANK OF NEW ENGLAND, a banking association having an office at One Commercial
Plaza, Hartford, Connecticut ("Secured Party").
In consideration of the mutual covenants and agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Debtor and Secured Party, intending to be bound
legally, agree as follows:
I. Security Interest.
A. To secure payment and performance of the Obligations (as defined
below), Debtor hereby pledges, assigns, transfers and grants to Secured Party a
continuing first priority security interest in all tangible and intangible
personal property, (excluding Motor Vehicles unless so indicated below),
including without limitation, Accounts, Chattel Paper, Contracts, Documents,
Equipment, General Intangibles, Instruments and Inventory, as more particularly
described in Exhibit A annexed, whether now owned or hereafter acquired by
Debtor.
Together, in each instance, with the renewals, substitutions,
replacements, additions, rental payments, products and Proceeds thereof
(hereinafter, collectively called the "Collateral").
The security interest herein granted in the Collateral is a first
priority security interest, except with respect to the prior liens set
forth in Exhibit A.
A. Debtor expressly acknowledges that the security interest granted
hereunder shall remain as security for payment and performance of the
Obligations, whether now existing or which may hereafter be incurred by future
advances, or otherwise. The notice of the continuing grant of this security
interest therefore shall not be required to be stated on the face of any
document representing any such Obligations, nor otherwise identify it as being
secured hereby.
II. Cross-Collateralization. All Collateral which Secured Party may at any
time acquire from Debtor or from any other source in connection with any of the
Obligations shall constitute collateral for each and every Obligation, without
apportionment or designation as to particular Obligations, and all Obligations,
however and whenever incurred, shall be secured by all Collateral, however and
whenever acquired, and Secured Party shall have the right, in its sole
discretion, to determine the order in which Secured Party's rights in, or
remedies against, any Collateral are to be exercised, and which type or which
portions of Collateral are to be proceeded against and the order of application
of Proceeds of Collateral as against particular Obligations.
III. Definitions. The following terms shall have the following meanings:
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A. "Accounts" means all accounts, as that term is defined in Article 9 of
the Uniform Commercial Code as in effect from time-to-time in the Commonwealth
of Massachusetts (the "UCC"), and, in any event, shall include any right to
payment held by Debtor, whether in the form of accounts receivable, notes,
drafts, acceptances or other forms of obligations and receivables, now owned or
hereafter received or acquired by or belonging or owing to the Debtor
(including, without limitation, under any trade name, style or division thereof)
for Inventory sold or leased or services rendered by it whether or not earned by
performance, together with all guarantees and security therefor and all Proceeds
thereof, whether cash Proceeds or otherwise, including, without limitation, all
right, title and interest of Debtor in the Inventory which gave rise to any such
Accounts, including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
rejected or repossessed Inventory or other goods;
B. "Chattel Paper" means all chattel paper, as that term is defined in
Article 9 of the UCC, and, in any event, shall include any writing or writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods, whether now or hereafter held by Debtor;
C. "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments, as those terms are defined above and below) in or under which the
Debtor may now or hereafter have any right, title or interest, including,
without limitation, with respect to an Account, and any agreement relating to
the terms of payment or the terms of performance thereof;
D. "Documents" means all documents, as that term is defined in Article 9
of the UCC;
E. "Equipment" means all equipment, as that term is defined in Article 9
of the UCC and, in any event, shall include, without limitation, all machinery,
tools, dyes, equipment, furnishings, vehicles (other than Motor Vehicles) and
computers and other electronic data processing and other office equipment,
including, but not limited to, the items of Equipment, if any, listed on Exhibit
B attached hereto and made a part hereof, any and all additions, substitutions
and replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto, and all Contracts, contract rights and Chattel Paper arising
out of any lease of any of the foregoing;
F. "Financing Agreements" means this Agreement, and any and all
agreements, notes, guaranties, instruments, security agreements and documents
evidencing, governing, securing or relating in any way to any of the
Obligations, including without limitation, that certain commercial term
promissory note of even date herewith in the original principal amount of EIGHT
HUNDRED THOUSAND AND 00/100 DOLLARS ($800,000.00) of Debtor in favor of Secured
Party;
G. "General Intangibles" means all general intangibles, as that term is
defined in Article 9 of the UCC, and, in any event, shall include all right,
title and interest which the Debtor may now or hereafter have in or under any
Contract, all customer lists, trademarks, patents,
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rights in intellectual property, interests in partnerships, joint ventures and
other business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, recipes, experience, processes,
models, drawings, blueprints, catalogs, materials and records, goodwill
(including, without limitation, the goodwill associated with any trademark,
trademark registration or trademark licensed under any trademark license, claims
in or under insurance policies, including unearned premiums, uncertificated
securities, deposit accounts, rights to receive tax refunds and other payments
and rights of indemnification;
H. "Instruments" means all instruments, as that term is defined in Article
9 of the UCC, and, in any event, shall include any negotiable instrument or
certificated security, as defined in Article 8 of the UCC, or any other writing
which evidences a right to the payment of money and is not itself an instrument
that constitutes, or is a part of a group or writings that constitute, Chattel
Paper, and is of a type which, in the ordinary course of business, is
transferred by delivery with any necessary endorsement or assignment, whether
now or hereafter held by Debtor;
I. "Inventory" means all inventory, as that term is defined in Article 9
of the UCC, wherever located, and, in any event, shall include all inventory,
merchandise, goods and other personal property which are held by or on behalf of
the Debtor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
or the processing, packaging, promotion, delivery or shipping of the same, and
all finished goods, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of the Debtor or is
held by the Debtor or by others for the Debtor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of the Debtor or of any carriers, forwarding agents,
truckers, warehousemen, vendors, selling agents or other persons;
J. "Motor Vehicles" shall have the same meaning as that contained in the
General Laws of Commonwealth of Massachusetts;
K. "Obligations" means any and all obligations, indebtedness, liabilities,
guaranties, covenants and duties owing by Debtor to Secured Party, under any of
the Financing Agreements, whether due or to become due, absolute or contingent,
now existing or hereafter incurred or arising, whether or not otherwise
guaranteed or secured and whether evidenced by any note or draft or documented
on the books and records of Secured Party or otherwise on open account,
including without limitation, all costs, expenses, fees, charges and attorneys'
and other professional fees incurred by Secured Party in connection with,
involving or related to the administration, protection, modification,
collection, enforcement, preservation or defense of any of the Secured Party's
rights with respect to any of the Obligations, the Collateral or any agreement,
instrument or document evidencing, governing, securing or relating to any of the
foregoing, including without limitation, all costs and expenses incurred in
inspecting or surveying mortgaged real estate, if any, or conducting
environmental studies or tests, and in
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connection with any "workout" or default resolution negotiations involving legal
counsel or other professionals and any re-negotiation or restructuring of any of
the Obligations; and
L. "Proceeds" means all proceeds, as that term is defined in Article 9 of
the UCC, and, in any event, shall include (a) any and all Accounts, Chattel
Paper, Instruments, cash and other proceeds payable to the Debtor from
time-to-time in respect of any of the foregoing collateral security, (b) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to the
Debtor from time-to-time with respect to any of the collateral security, (c) any
and all payments (in any form whatsoever) made or due and payable to the Debtor
from time-to-time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the collateral
security by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (d) any and all other amounts
from time-to-time paid or payable under or in connection with any of the
collateral security.
IV. Debtor's Representations and Warranties. Debtor represents and
warrants to Secured Party as follows:
A. Good Standing, and Qualification/Legal Capacity. The Debtor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business in the State of
Vermont, and has all requisite corporate power and authority to own and operate
its properties and to carry on its business as now being conducted.
B. Authority. The Debtor has fall corporate power and authority to enter
into and perform the obligations under this Agreement, to execute and deliver
the Financing Agreements and to incur the obligations provided for herein and
therein, all of which have been duly authorized by all necessary and proper
corporate or partnership action, if and as the case may be. No other consent or
approval or the taking of any other action is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Agreements.
C. Binding Agreements. This Agreement and the other Financing Agreements
constitute the valid and legally binding obligations of the Debtor, enforceable
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
D. Litigation. There are no actions, suits, proceedings or investigations
pending or threatened against the Debtor before any court or administrative
agency, which either in any case or in the aggregate, if adversely determined,
would materially and adversely affect the financial condition, assets or
operations of the Debtor, or which question the validity of this Agreement or
any of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby. This representation is
exclusive of the information disclosed in Borrower's Securities and Exchange
Commission Form 10-KSB for the fiscal year ended December 31, 1996, and Form
10-QSB for the quarter ended June 30, 1997, the Secured Party hereby
acknowledging receipt and review of said Forms.
E. No Conflicting Law or Agreements. The execution, delivery and
performance by the Debtor of this Agreement and the other Financing Agreements:
(i) do not violate any provision of the Certificate of Incorporation and By-laws
or the partnership agreement, if and as
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the case may be, of the Debtor, (ii) do not violate any order, decree or
judgment, or any provision of any statute, rule or regulation, (iii) do not
violate or conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any shareholder agreement, partnership
agreement, stock preference agreement, mortgage, indenture, contract or other
agreement to which the Debtor is a party, or by which any of Debtor's properties
are bound, or (iv) except for the liens and mortgages granted to Secured Party
hereunder, do not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the Debtor.
F. Financial Statements. The financial information of the Debtor,
including, but not limited to, tax returns, balance sheets, statements of
earnings, retained earnings, contributed capital and cash flow statements,
heretofore submitted to Secured Party, is complete and correct and fairly
presents the financial condition of the Debtor as of the dates of said
information and the results of its operations and its cash flows for the periods
referred to therein in accordance with generally accepted accounting principles,
consistently applied. Since the submission of said information to Secured Party,
there has been no material adverse change in the financial condition or business
of the Debtor.
G. Taxes. With respect to all taxable periods of the Debtor, the Debtor
has filed all tax returns which are required to be filed and all federal, state,
municipal, franchise and other taxes shown on such filed returns have been paid
as due or have been reserved against, if not yet due, as required by Generally
accepted accounting principles, consistently applied, and the Debtor knows of no
unpaid assessments against Debtor.
H. Compliance. The Debtor is not in default with respect to or in
violation of any order, writ, injunction or decree of any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency, authority or official, or in violation of any law, statute, rule
or regulation to which Debtor or Debtor's properties is or are subject, where
such default or violation would materially and adversely affect the financial
condition of the Debtor. The Debtor represents that Debtor has not received
notice of any such default or violation from any party. The Debtor is not in
default in the payment or performance of any of Debtor's obligations to any
third parties or in the performance of any mortgage, indenture, lease, contract
or other agreement to which Debtor is a party or by which any of Debtor's assets
or properties are bound, where such default would materially and adversely
affect the financial condition of the Debtor.
I. Office. The chief executive office and principal place of business of
the Debtor, and the office where Debtor's books and records concerning
Collateral are kept, is set forth in the first paragraph of this Agreement.
J. Places of Business. The Debtor has no other places of business and
locates no Collateral, specifically including books and records, at any location
other than at Debtor's place of business set forth in the first paragraph of
this Agreement.
K. Contingent Liabilities. The Debtor is not a party to any suretyship,
guarantyship, similar type agreement; nor has Debtor offered its endorsement to
any individual, corporation or other entity or acted or failed to act in any
manner which would in any
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way create a contingent liability (except for endorsement of negotiable
instruments in the ordinary course of business).
L. Licenses. The Debtor has all material licenses, pen-nits and other
permissions required by any government, agency or subdivision thereof, or from
any licensing entity necessary for the conduct of Debtor's business, all of
which the Debtor represents to be in good standing and in full force and effect.
M. Collateral. The Debtor is and shall continue to be the sole owner of
the Collateral free and clear of all liens, encumbrances, security interests and
claims except the liens granted to Secured Party hereunder; the Debtor is fully
authorized to sell, transfer, pledge and/or grant a security interest in each
and every item of the Collateral to Secured Party; all documents and agreements
related to the Collateral shall be true and correct and in all respects what
they purport to be; all signatures and endorsements that appear thereon shall be
genuine and all signatories and endorsers shall have full capacity to contract;
none of the transactions underlying or giving rise to the Collateral shall
violate any applicable state or federal laws or regulations; all documents
relating to the Collateral shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms; and
the Debtor agrees to defend the Collateral against the claims of all persons
other than Secured Party.
N. Environmental, Health, Safety Laws. Debtor has not received any notice,
order, petition or similar document in connection with or arising out of any
violation of any environmental, health or safety law, regulation, rule or order,
and Debtor knows of no basis for any claim of such violation or of any threat
thereof.
V. Affirmative Covenants of the Debtor. The Debtor covenants and agrees
that from the date hereof until full and final payment and performance of all
Obligations, the Debtor shall:
A. Financial Information. Deliver to Secured Party: (i) as promptly as
practicable upon Secured Party's request, such documentation and information
about the Debtor's financial condition, business and/or operations as Secured
Party may, at any time and from time to time, request, including without
limitation, business and/or personal financial statements, copies of federal and
state income tax returns and all schedules thereto, aging reports of Debtor's
Accounts and accounts payable and a listing of Debtor's Inventory and Equipment,
all of which shall be in form, scope and content satisfactory to Secured Party,
in its sole discretion; and (ii) as promptly as practicable upon becoming aware
of any Event of Default (as defined below), or any occurrence which but for the
giving of notice or the passage of time would constitute an Event of Default,
notice thereof in writing.
B. Insurance and Endorsement. (i) Keep the Collateral and Debtor's other
properties insured against loss or damage by fire and other hazards (so-called
"All Risk" coverage) in amounts and with companies satisfactory to Secured Party
to the same extent and covering such risks as is customary in the same or a
similar business; maintain public liability coverage, including without
limitation, products liability coverage, against claims for personal injuries or
death; and maintain all worker's compensation, employment or similar insurance
as may be required by applicable law; (ii) All insurance shall contain such
terms, be in such form, and be for such periods satisfactory to Secured Party,
and be written by such carriers duly licensed by
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the State of Vermont and satisfactory to Secured Party. Without limiting the
generality of the foregoing, such insurance must provide that it may not be
canceled without thirty (30) days prior written notice to Secured Party. The
Debtor shall cause Secured Party to be endorsed as a loss payee with a long form
Lender's Loss Payable Clause, in form and substance acceptable to Secured Party
on all such insurance. In the event of a failure to provide and maintain
insurance as herein provided, Secured Party may, at its option, provide such
insurance and charge the amount thereof to the Debtor. The Debtor shall furnish
to Secured Party certificates or other satisfactory evidence of compliance with
the foregoing insurance provisions. The Debtor hereby irrevocably appoints
Secured Party as its attorney-in-fact, coupled with an interest, to make proofs
of loss and claims for insurance, and to receive payments of the insurance and
execute all documents, checks and drafts in connection with payment of the
insurance. Any Proceeds received by Secured Party shall be applied to the
Obligations in such order and manner as Secured Party shall determine in its
sole discretion, or shall be remitted to the Debtor, in either event at Secured
Party's sole discretion.
C. Tax and Other Liens. Comply with all statutes and government
regulations and pay all taxes (including withholdings), assessments,
governmental charges or levies, or claims for labor, supplies, rent and other
obligations made against it or its property which, if unpaid, might become a
lien or charge against the Debtor or its properties.
D. Place of Business. Maintain its place of business and chief executive
offices at the address set forth in the first paragraph of this Agreement.
E. Inspections. Upon reasonable notice and during normal business hours,
allow Secured Party by or through any of their officers, attorneys, and/or
accountants designated by Secured Party, for the purpose of ascertaining whether
or not each and every provision hereof and of any related agreement, instrument
and document is being performed, to enter the offices and plants of the Debtor
to examine or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts therefrom, and
to discuss the affairs, Finances and accounts thereof with the Debtor all at
such reasonable times and as often as Secured Party or any such representative
of Secured Party may reasonably request.
F. Litigation. Promptly advise Secured Party of the commencement or threat
of litigation, including arbitration proceedings and any proceedings before any
governmental agency (collectively, "Litigation"), which is instituted against
the Debtor involving a claim in excess of $50,000.
G. Maintenance of Existence. Maintain its corporate or partnership
existence, as the case may be, and comply with all valid and applicable
statutes, rules and regulations, and maintain its properties in good repair,
working order and operating condition. The Debtor shall immediately notify
Secured Party of any event causing material loss in the value of its assets.
<PAGE>
Page 8 of 19
H. Collateral Duties. Do whatever Secured Party may request from time to
time by way of obtaining, executing, delivering and filing financing statements,
assignments, landlord's or mortgagee's waivers, and other notices and amendments
and renewals thereof, and the Debtor will take any and all steps and observe
such formalities as Secured Party may request in order to create and maintain a
valid and enforceable first lien upon, pledge of, and first priority security
interest in, any and all of the Collateral. Secured Party is authorized to file
financing statements without the signature of the Debtor and to execute and file
such financing statements on behalf of the Debtor as specified by the UCC to
perfect or maintain Secured Party's security interest in all of the Collateral.
All charges, expenses and fees Secured Party may incur in filing any of the
foregoing, together with reasonable costs and expenses of any lien search
required by Secured Party, and any taxes relating thereto, shall be charged to
the Debtor and added to the Obligations.
I. Notice of Default. Provide to Secured Party, within one business day
after becoming aware of the occurrence or existence of an Event of Default or a
condition which would constitute an Event of Default but for the giving of
notice or passage of time on both, notice in writing of such Event of Default or
condition.
VI. Negative Covenants of the Debtor. The Debtor covenants and agrees that
from the date hereof until full and final payment and performance of all
Obligations, the Debtor shall not without the prior written consent of Secured
Party:
A. Encumbrances. Incur or permit to exist any lien, mortgage, charge or
other encumbrance against any of the Collateral, whether now owned or hereafter
acquired, except: (i) liens required or expressly permitted by this Agreement;
(ii) pledges or deposits in connection with or to secure worker's compensation,
unemployment or liability insurance; and (iii) tax liens which are being
contested in good faith with the prior written consent of Secured Party and
against which, if requested by Secured Party as a condition to its consent, the
Debtor shall set up a cash reserve or post a surety bond in an amount equal to
the total amount of the lien being contested.
B. Consolidation or Merger. Merge into or consolidate with or into any
corporation.
C. Sale and Lease of Assets. Sell, lease or otherwise dispose of any of
its assets in an aggregate amount in excess of $100,000.00, except for sales of
inventory in the ordinary course of business.
D. Name Changes. Change its corporate name or conduct its business under
any trade name or style other than as set forth in this Agreement.
E. Maintenance of Collateral. Permit to incur or suffer any loss, theft,
substantial damage or destruction of any of the Collateral which is not
immediately replaced with Collateral of equal or greater value, or which is not
fully covered by insurance, the proceeds of which shall have been endorsed over
to Secured Party in accordance with Section V.A.) hereof.
F. Further Covenants. The Debtor hereby makes such further covenants, if
any, as may be set forth on a Schedule 6(f) attached hereto and made a part
hereof.
<PAGE>
Page 9 of 19
VII. Rights of Secured Party. Upon the occurrence of any Event of Default,
Secured Party shall have the right to declare all of the Obligations to be
immediately due and payable and shall then have the rights and remedies of a
secured party under the Uniform Commercial Code or under any other applicable
law, including, without limitation, the right to take possession of the
Collateral, and in addition thereto, the right to enter upon any premises on
which the Collateral or any part thereof may be situated and remove the same
therefrom and the right to occupy the Debtor's premises for up to ninety (90)
days rent free for the purposes of liquidating Collateral, including without
limitation, conducting an auction thereon. Secured Party may require the Debtor
to make the Collateral (to the extent the same is moveable) available to Secured
Party at a place to be designated by Secured Party. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give the Debtor at least ten
(10) days' prior written notice at the address of the Debtor set forth above (or
at such other address or addresses as the Debtor shall specify in writing to
Secured Party) of the time and place of any public sale thereof or of the time
after which any private sale or any other intended disposition thereof is to be
made. Any such notice shall be deemed to meet any requirement hereunder or under
any applicable law (including the Uniform Commercial Code) that reasonable
notification be given of the time and place of such sale or other disposition.
After deducting all costs and expenses of collection, storage, custody, sale or
other disposition and delivery (including reasonable attorneys' fees) and all
other reasonable charges against the Collateral, the residue of the Proceeds of
any such sale or disposition shall be applied to the payment of the Obligations
in such order to priority as Secured Party shall determine and any surplus shall
be returned to the Debtor or to any person or party lawfully entitled thereto.
In the event the Proceeds of any sale, lease or other disposition of the
Collateral hereunder, including without limitation, the Proceeds from the
collection of Accounts, are insufficient to pay all of the Obligations in full,
the Debtor will be liable for the deficiency, together with interest thereon, at
the maximum rate allowable by law, and the costs and expenses of collection of
such deficiency, including (to the extent permitted by law) without limitation,
attorneys' fees, expenses and disbursements.
VIII. Right of Secured Party to Use and Operate Collateral, Etc. Upon the
occurrence of any Event of Default, Secured Party shall have the right and power
to take possession of all or any part of the Collateral, and to exclude the
Debtor and all persons claiming under the Debtor wholly or partly therefrom, and
thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, Secured Party may, from time to time, at the
expense of the Debtor, make all such repairs, replacements, alterations,
additions and improvements to the Collateral as Secured Party may deem proper.
In any such case Secured Party shall have the right to manage and control the
Collateral and to carry on the business and to exercise all rights and powers of
the Debtor in respect thereto as Secured Party shall reasonably deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as Secured Party may see
fit; and Secured Party shall be entitled to collect and receive all issues,
profits, fees, revenues and other income of the same and every part thereof.
Such issues, profits, fees, revenues and other income shall be applied to pay
the expenses of holding and operating the Collateral and of conducting the
business thereof, and of all maintenance, repairs, replacements, alterations,
additions and improvements, and to make all payments which Secured Party may be
required or may elect to make, if any, for taxes, assessments, insurance and
other charges upon the Collateral or any part thereof, and all other payments
which Secured Party may be required or authorized to make
<PAGE>
Page 10 of 19
under any provision of this Agreement (including legal costs and attorneys'
fees). The remainder of such issues, profits, fees, revenues and other income
shall be applied to the payment of the Obligations in such order of priority as
Secured Party shall determine. Without limiting the generality of the foregoing,
Secured Party shall have the right to apply for and have a receiver appointed by
a court of competent jurisdiction in any action taken by Secured Party to
enforce its rights and remedies hereunder in order to manage, protect and
preserve the Collateral and continue the operation of the business of the Debtor
and to collect all revenues and profits thereof and apply the same to the
payment of all expenses and other charges of such receivership including the
compensation of the receiver and to the payment of the Obligations as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
IX. Collection of Accounts Receivable, Etc. At any time after default,
Secured Party shall have the right to require Debtor to and Debtor shall, upon
written notice from Secured Party:
A. Make collections of Proceeds upon its Accounts, hold the Proceeds
received from collections in trust for Secured Party and turn over such Proceeds
to Secured Party daily in the exact form which they are received, together with
a collection report in form satisfactory to Secured Party. Secured Party shall
immediately apply, subject to collection, such Proceeds and any Proceeds of
Accounts received by it pursuant to the following provisions of this Section
IX., to the payment of the Obligations in such order of priority as Secured
Party shall determine;
B. Assign or endorse the Accounts to Secured Party, and notify account
debtors that the Accounts have been assigned and should be paid directly to
Secured Party;
C. Turn over to Secured Party all Inventory returned in connection with
any of the Accounts;
D. Mark or stamp each of its individual ledger sheets or cards pertaining
to its Accounts with the legend "Assigned to First National Bank of New
England," and stamp or otherwise mark and keep its books, records, documents and
instruments relating to the Accounts in such manner as Secured Party may
require; and
E. Mark or stamp all invoices with a legend satisfactory to Secured Party
so as to indicate that the same should be paid directly to Secured Party.
Notwithstanding the foregoing, Secured Party shall have the right,
at any time after the occurrence of an Event of Default, to itself so notify
such account debtors to make such payments of the Accounts directly to Secured
Party and Secured Party shall have the further right to notify the post office
authorities to change the address for delivery of mail of Debtor to an address
designated by Secured Party and to receive, open and dispose of all mail
addressed to Debtor. For the purposes of this Section IX., Debtor hereby
irrevocably constitutes Secured Party as Debtor's attorney-in-fact to issue in
the name and execute or endorse on behalf of Debtor each and every notice,
instrument and document necessary to carry out the purposes of the provisions of
this Section IX., and to take such action in connection with the collection of
the Accounts, including without limitation, suing thereon, compromising or
adjusting the same, as Secured party, in its sole discretion, deems necessary.
The power of attorney granted hereby shall be self-
<PAGE>
Page 11 of 19
executing, but Debtor shall promptly execute and deliver to Secured Party, upon
written request of Secured Party, such additional separate powers of attorney as
Secured Party may from time to time request.
I. Events of Default. The Debtor shall be in default under this Agreement
upon the happening of any of the following events or conditions (herein
individually called an "Event of Default" and collectively called "Events of
Default");
A. Failure to pay any part of the Obligations when due;
B. Nonperformance by the Debtor of any agreement with, or any condition
imposed by Secured Party with respect to the indebtedness, which nonperformance
is not cured within ten (10) days of Secured Party's notice to the Debtor of
such failure;
C. Secured Party's discovery of the Debtor's failure in any application of
the Debtor to Secured Party to disclose any fact deemed by Secured Party to be
material or of the making therein or in any of the said agreements, or in any
affidavit or other documents submitted in connection with said application or
the indebtedness, of any material misrepresentation by, on behalf of, or for the
benefit of the Debtor;
D. The reorganization (other than a reorganization pursuant to any of the
provisions of the Bankruptcy Reform Act of 1978, as amended), or merger or
consolidation of the Debtor (or the making of any agreement therefor) without
the prior written consent of Secured Party;
E. The Debtor's failure duly to account, to Secured Party's satisfaction,
at such time or times as Secured Party may require, for any of the Collateral,
or proceeds thereof, coming into the control of the Debtor, within ten (10) days
of Secured Party's notice to the Debtor to do so; or
F. The entering of a judgment in excess of $50,000.00 against the Debtor
in any suit affecting the Debtor deemed by Secured Party to affect adversely its
interest hereunder in the Collateral or otherwise.
II. Waivers, Etc. The Debtor hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with this Agreement or
the enforcement of Secured Party's rights hereunder or in connection with any
Obligations or any Collateral; consents to and waives notice of. (a) the
granting of renewals, extensions of time for payment or other indulgences to the
Debtor or to any account debtor in respect of any account receivable of the
Debtor; (b) substitution, release or surrender of any Collateral; (c) the
addition or release of persons primarily or secondarily liable on any of the
Obligations or on any account receivable or other Collateral; and (d) the
acceptance of partial payments on any Obligations or on any account receivable
or other Collateral and/or the settlement or compromise thereof. No delay or
omission on the part of Secured Party in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder. Any waiver of
any such right on any one occasion shall not be construed as a bar to or waiver
of any such right on any such future occasion. THE DEBTOR FURTHER WAIVES ANY
RIGHT IT MAY HAVE UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (OR UNDER
THE LAWS OF ANY OTHER STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED), OR
UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA, TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY
<PAGE>
Page 12 of 19
PROVIDED BY THIS AGREEMENT TO SECURED PARTY AND WAIVES ITS RIGHTS, IF ANY, TO
SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE
FOREGOING PROVISIONS HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE
WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. THE DEBTOR'S WAIVERS UNDER
THIS SECTION HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY, KNOWINGLY, WITHOUT
DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS THEREOF.
XII. Termination; Assignment, Etc. This Agreement and the security
interest in the Collateral created hereby shall terminate when all of the
Obligations have been paid and finally discharged in full. No waiver by Secured
Party or by any other holder of the Obligations of any default shall be
effective unless in writing signed by Secured Party nor shall any waiver granted
on any one occasion operate as a waiver of any other default or of the same
default on a future occasion. In the event of a sale or assignment by Secured
Party of all or any of the Obligations held by Secured Party, Secured Party may
assign or transfer its respective rights and interests under this Agreement in
whole or in part to the purchaser or purchasers of such Obligations, whereupon
such purchaser or purchasers shall become vested with all of the powers and
rights hereunder, and Secured Party shall thereafter be forever released and
fully discharged from any liability or responsibility hereunder with respect to
the rights and interests so assigned except that Secured Party shall be liable
for damages suffered by the Debtor as a result of actions taken by Secured Party
in bad faith or with willful misconduct.
XIII. Notices. Except as otherwise provided herein, notice to the Debtor
or to Secured Party shall be deemed to have been sufficiently given or served
for all purposes hereof if mailed by certified or registered mail, return
receipt requested, as follows:
A. if to Debtor:
Mace Security International, Inc.
160 Benmont Avenue
Bennington, VT 05201
Attention: Jon E. Goodrich
B. if to Secured Party:
First National Bank of New England
One Commercial Plaza
Hartford, Connecticut 06103
Attention: Documentation Department
XIV. Jury Waiver. THE DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN
ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART
AND/OR THE ENFORCEMENT OF ANY OF SECURED PARTY'S RIGHTS AND REMEDIES, INCLUDING
WITHOUT LIMITATION, TORT CLAIMS. THE DEBTOR ACKNOWLEDGES THAT DEBTOR MAKES THIS
WAIVER VOLUNTARILY, INTELLIGENTLY,
<PAGE>
Page 13 of 19
KNOWINGLY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS THEREOF.
XV. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon Secured Party and the Debtor and their respective successors and
assigns. In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Agreement
may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
XVI. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts and may not be amended except in writing.
XVII. Incorporation by Reference.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
WITNESSES: MACE SECURITY INTERNATIONAL, INC.
/s/ James K. Bodurtha By /s/ Mark A. Capone
- ----------------------------- ---------------------------------
Name: Mark A. Capone
Title: Treasurer
FIRST NATIONAL BANK
OF NEW ENGLAND
/s/ James K. Bodurtha By /s/ Richard M. Rabideau
- ----------------------------- ---------------------------------
Name: Richard M. Rabideau
Title: Senior Vice President
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 25, 1997
Then personally appeared the above-named Mark A. Capone, Treasurer of MACE
SECURITY INTERNATIONAL, INC., and acknowledged the foregoing to be his free act
and deed and the free act and deed of MACE SECURITY INTERNATIONAL, INC., before
me.
/s/ James K. Bodurtha
--------------------------------------------
, Notary Public
My commission expires:
JAMES K. BODURTHA
NOTARY PUBLIC
Commonwealth of Massachusetts
My commission expires: Nov. 8, 2002
<PAGE>
Page 14 of 19
My commission expires:
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 25, 1997
Then personally appeared the above-named Mark A. Capone, Treasurer of MACE
SECURITY INTERNATIONAL, INC., and acknowledged the foregoing to be his free act
and deed and the free act and deed of MACE SECURITY INTERNATIONAL, INC., before
me.
/s/ James K. Bodurtha
--------------------------------------------
, Notary Public
My commission expires:
JAMES K. BODURTHA
NOTARY PUBLIC
Commonwealth of Massachusetts
My commission expires: Nov. 8, 2002
<PAGE>
Page 15 of 19
Schedule 6(f)
Financial Covenants / Requirements
Non-financed fixed asset capital expenditures of Debtor shall be limited to
$100,000 per annum over and above those fixed asset expenditures in the
aggregate amount of approximately $700,000.00 marked by an asterick on Schedule
6(f)(1) attached hereto.
Tangible consolidated net worth of Debtor shall be at least 10% of tangible
assets as of the date hereof.
Debtor's current ratio, as defined under generally accepted accounting
principles, shall be at least 2.OX, measured annually based on the company's
fiscal year and CPA-reviewed financial statements.
Debtor's debt to net worth ratio, as defined under generally accepted accounting
principles, shall not exceed.35X, measured annually based on the company's
fiscal year end CPA-reviewed financial statements.
Without the prior consent of Lender, total annual salaries or drawings,
including bonuses, commissions or other compensation, of the following
officers/employees of the Debtor shall be limited as follows:
Jon E. Goodrich $225,000.00
Tim Smith $110,000.00
Mark A. Capone $150,000.00
Ken Blakey $225,000.00
Bernard Graney $120,000.00
<PAGE>
Page 15A of 19
Schedule 6(f)(1)
MSI
-----------------------
MACE
SECURITY
INTERNATIONAL
-----------------------
September 24, 1997
Richard Rabideau, Vice President
First National Bank of New England
One Commercial Plaza
Hartford, Connecticut 06103
Dear Richard:
Pursuant to your request, I have outlined our projected use of the
proceeds from your loan to us:
Liquidation of Key Bank debt $ 600,000
Initial Security Stores in Denver $ 100,000
Offsite facility to manufacture
raw materials $ 150,000
Opening of two Security Stores locally
plus working capital $ 170,000
Additional mall stores in the Denver and
front-range area plus working capital $ 330,000
Additional leaseholds to corporate building
to facilitate additional leaseable space
and courtyard improvements $ 450,000
----------
$1,800,000
Should you need any further information , please do not hesitate to call me.
Sincerely,
/s/ Mark A. Capone
----------------------------------
Mark A. Capone
Chief Financial Officer, Treasurer
And Vice President of Finance
MAC:bls
[LETTERHEAD OF MACE SECURITY INTERNATIONAL]
<PAGE>
Page 16 of 19
Exhibit A
(Collateral Description)
Debtor: Secured party:
Mace Security International, Inc. First National Bank of New England
160 Benmont Avenue One Commercial Plaza
Bennington, VT 05201 Hartford, Connecticut 06103
(a) all accounts, as that term is defined in Article 9 of the Uniform
Commercial Code as in effect from time-to-time in the Commonwealth of
Massachusetts (the "UCC"), now owned or hereafter acquired, and, in any event,
shall include any right to payment held by Debtor, whether in the form of
accounts receivable, notes, drafts, acceptances or other forms of obligations
and receivables, now owned or hereafter received or acquired by or belonging or
owing to the Debtor (including, without limitation, under any trade name, style
or division thereof) for inventory sold or leased or services rendered by it
whether or not earned by performance, together with all guarantees and security
therefor and all proceeds thereof, whether cash proceeds or otherwise,
including, without limitation, all right, title and interest of Debtor in the
inventory which gave rise to any such accounts, including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed rejected or repossessed inventory or
other goods;
(b) all chattel paper, as that term is defined in Article 9 of the UCC,
now owned or hereafter acquired, and, in any event, shall include any writing or
writings which evidence both a monetary obligation and a security interest in or
a lease of specific goods, whether now or hereafter held by Debtor;
(c) all contracts, undertakings, franchise agreements or other agreements
(other than rights evidenced by chattel paper, documents or instruments, as
those terms are defined above and below), now owned or hereafter acquired, in or
under which the Debtor may now or hereafter have any right, title or interest,
including, without limitation, with respect to an account, and any agreement
relating to the terms of payment or the terms of performance thereof,
(d) all documents, as that term is defined in Article 9 of the UCC now
owned or hereafter acquired;
(e) all equipment, as that term is defined in Article 9 of the UCC, and,
in any event, shall include, without limitation, all machinery, tools, dyes,
equipment, furnishings, fixtures, leasehold improvements, vehicles (other than
motor vehicles) and computers and other electronic data processing and other
office equipment, now owned or hereafter acquired, including, but not limited
to, the items of equipment, if any, listed on Exhibit B attached hereto and made
a part hereof, any and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto, and all
contracts, contract rights and chattel paper arising out of any lease of any of
the foregoing;
<PAGE>
Page 17 of 19
(f) all general intangibles, as that term is defined in Article 9 of the
UCC, now owned or hereafter acquired, and, in any event, shall include all
right, title and interest which the Debtor may now or hereafter have in or under
any contract, all customer lists, trademarks, patents, rights in intellectual
property, interests in partnerships, joint ventures and other business
associations, licenses, pen-nits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, recipes, experience, processes, models, drawings,
blueprints, catalogs, materials and records, goodwill (including, without
limitation, the goodwill associated with any trademark, trademark registration
or trademark licensed under any trademark license, claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification;
(g) all instruments, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, and, in any event, shall include any negotiable
instrument or certificated security, as defined in Article 8 of the UCC, or any
other writing which evidences a right to the payment of money and is not itself
an instrument that constitutes, or is a part of a group or writings that
constitute, chattel paper, and is of a type which, in the ordinary course of
business, is transferred by delivery with any necessary endorsement or
assignment, whether now or hereafter held by Debtor;
(h) all inventory, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, wherever located, and, in any event, shall include
all inventory, merchandise, goods and other personal property which are held by
or on behalf of the Debtor for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in the Debtor's
business, or the processing, packaging, promotion, delivery or shipping of the
same, and all finished goods, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of the Debtor or is
held by the Debtor or by others for the Debtor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of the Debtor or of any carriers, forwarding agents,
truckers, warehousemen, vendors, selling agents or other persons;
(i) all proceeds, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, and, in any event, shall include (a) any and all
accounts, chattel paper, instruments, cash and other proceeds payable to the
Debtor from time-to-time in respect of any of the foregoing collateral security,
(b) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Debtor from time-to-time with respect to any of the collateral
security, (c) any and all payments (in any form whatsoever) made or due and
payable to the Debtor from time-to-time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
collateral security by any governmental body, authority, bureau or agency (or
any person acting under color of governmental authority), and (d) any and all
other amounts from time-to-time paid or payable under or in connection with any
of the collateral security;
(j) all other collateral in which the Debtor may hereafter grant to the
Secured Party a security interest; and
<PAGE>
Page 18 of 19
(k) all renewals, substitutions, replacements, additions, accessions and
products of any and all of the foregoing.
Other Liens
The security interest herein granted shall constitute:
1. A third priority security interest in all Inventory of the Debtor, said
Inventory being subject only to (i) a first priority security interest
granted to the Secured Party in connection with a $1,000,000.00 Small
Business Administration Loan from Secured Party to Debtor, as evidenced by
a separate Security Agreement by and between said parties of even date
herewith, and (11) a second priority security interest granted to the
Secured Party in connection with a $250,000.00 Commercial Revolving Loan
from Secured Party to Debtor, as evidenced by a separate Security
Agreement by and between said parties of even date herewith.
2. A third priority security interest in all Accounts of the Debtor; said
Accounts are subject only to (i) a first priority security interest
granted to the Secured Party in connection with a $250,000.00 Commercial
Revolving Loan from Secured Party to Debtor, as evidenced by a separate
Security Agreement by and between said parties of even date herewith, and
(ii) a second priority security interest granted to the Secured Party in
connection with a $1,000,000.00 Small Business Administration Loan from
Secured Party to Debtor, as evidenced by a separate Security Agreement by
and between said parties of even date herewith .
3. A first priority security interest in all fixed assets, including
Equipment, of the Debtor, said fixed assets, including Equipment, being
subject only to (i) a second security interest granted to the Secured
Party in connection with a $250,000.00 Commercial Revolving Loan from
Secured Party to Debtor, as evidenced by a separate Security Agreement by
and between said parties of even date herewith, and (ii) a third priority
security interest granted to the Secured Party in connection with a
$1,000,000.00 Small Business Administration Loan from Secured Party to
Debtor, as evidenced by a separate Security Agreement by and between said
parties of even date herewith.
4. A second position security interest on all other Collateral of the Debtor.
<PAGE>
Page 19 of 19
Exhibit B
(Specific Equipment Description)
[NONE LISTED]
<PAGE>
FIRST NATIONAL BANK OF NEW ENGLAND
GUARANTY AGREEMENT
This Guaranty dated as of September 25, 1997 from the undersigned (jointly
and severally, if more than one) (individually and collectively (if more than
one) referred to as the "Guarantor") to FIRST NATIONAL BANK OF NEW ENGLAND (the
"Bank").
In consideration of and as a material inducement for the Bank making, now
or in the future, loans, advances or otherwise giving credit to MACE SECURITY
INTERNATIONAL, INC. (the "Borrower"), including, but not limited to, a loan (the
"Loan") as evidenced by, among other things, a commercial term promissory note
in the principal amount of EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS
($800,000.00) of even date herewith and executed by Borrower (the "Note"), the
Guarantor does hereby represent, warrant, covenant and agree as follows:
ARTICLE I.
COVENANTS AND AGREEMENTS
Section 1.1. The Guaranty. The Guarantor hereby absolutely and
unconditionally (and jointly and severally, if more than one) guarantees to the
Bank the full and prompt payment and performance of all liabilities of Borrower
to the Bank, whenever and however arising. As used herein, "liabilities" means
any and all indebtedness, liabilities and obligations of Borrower to the Bank of
every kind and description, including without limitation, the Loan, whether
direct or indirect, primary or secondary, absolute or contingent, due or to
become due, now existing or hereafter arising, regardless of how they arise or
by what agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument, including without limitation, the Note, and all
extensions, renewals and substitutions therefor, and further including, without
limitation, all costs, expenses and attorneys' and other professionals" fees
incurred in the collection of said liabilities and in any litigation arising
from any of the liabilities or this Guaranty or in the defense, protection,
preservation, realization or enforcement of any rights, liens or remedies
against Borrower or in the defense, protection, preservation, realization and
enforcement of any rights, liens or remedies against Guarantor under this
Guaranty or otherwise, including without limitation, all costs and expenses
incurred in inspecting or surveying mortgaged real estate, if any, or conducting
environmental studies or tests. All payments by Guarantor shall be paid in
lawful money of the United States of America. Each and every payment obligation
or liability guaranteed hereunder shall give rise to a separate cause of action,
and separate suits may but need not be brought hereunder as each cause of action
arises.
Section 1.2. Unconditional Nature of Guaranty.
A. The obligations of Guarantor under this Guaranty shall be absolute and
unconditional and shall remain in full force and effect until every payment,
obligation or liability guaranteed hereunder shall have been fully and finally
paid and performed. Guarantor further
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guarantees that all payments made by Borrower with respect to any liabilities
hereby guaranteed will, when made, be final and agrees that if any such payment
is recovered from or repaid by the Bank in whole or in part in any bankruptcy,
insolvency or similar proceeding instituted by or against Borrower, this
Guaranty shall continue to be fully applicable to such liabilities to the same
extent as though the payment so recovered or repaid had never been originally
made on such liabilities. The obligations of Guarantor shall not be affected,
modified, released, discharged or impaired, in whole or in part, upon the
happening from time to time of any event, including, without limitation, any of
the following, whether or not with notice to, or consent of, Guarantor:
(1) The compromise, settlement, release, change or modification
(whether material or otherwise) or termination of any or all of the liabilities;
(2) The failure to give notice to Guarantor of the occurrence of an
event of default under the terms and provisions of this Guaranty, the Note or
any of the other instruments, agreements or documents evidencing, securing or
otherwise relating to any of the liabilities or securing or otherwise relating
to this Guaranty (collectively, including the Note and this Guaranty, the "Loan
Agreements");
(3) The modification, amendment, recession or waiver by the Bank of
the payment, performance or observance by Borrower or Guarantor of any of their
respective obligations, conditions, covenants or agreements contained in any of
the Loan Agreements;
(4) The extension of time for payment of any principal, interest or
any other amount due and owing under any of the Loan Agreements, or of the time
for performance of any other obligations, covenants or agreements under or
arising out of any of the Loan Agreements, or the extension or the renewal of
any thereof;
(5) The modification or amendment (whether material or otherwise) of
any duty, obligation, covenant or agreement set forth in any of the Loan
Agreements;
(6) The taking or the failure to take any of the actions referred to
in any of the Loan Agreements;
(7) Any failure, omission, delay or lack on the part of the Bank to
enforce, assert or exercise any fight, power or remedy conferred on the Bank in
any of the Loan Agreements;
(8) The full or partial discharge of Borrower or any of the Other
Guarantors (as defined below) in bankruptcy or similar proceeding or otherwise;
(9) The release or discharge, in whole or in part, or the death,
bankruptcy, liquidation or dissolution of any other person or entity other than
the Guarantor which is primarily or secondarily liable with respect to the
liabilities, including the Other Guarantors (as defined below);
(10) The addition, exchange, release or surrender of all or any of
the collateral held by the Bank as security for the liabilities; or
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(11) The default or failure of Guarantor fully to perform any of
Guarantor's obligations set forth in this Guaranty.
B. The Guarantor agrees that no delay, act of commission or omission of
any kind or at any time upon the part of the Bank or its successors and assigns
with respect to any matter whatsoever shall in any way impair the right of the
Bank to enforce any right, power or benefit under this Guaranty or any of the
other Loan Agreements to which Guarantor is a party or be construed to be a
waiver thereof Any such right may be exercised from time to time and as often as
may be deemed expedient. No set-off, counterclaim, reduction, or diminution of
any obligation, or any defense of any kind or nature which Borrower has or may
have against the Bank, or any assignee or successor thereof shall be available
hereunder to Guarantor against the Bank or its successors and assigns.
C. To the extent not otherwise expressly provided herein, the Guarantor
expressly waives all defenses of suretyship or impairment of collateral.
Section 1.3. Right of the Bank to Proceed Against Guarantor.
A. Upon any failure in the payment or performance of any of the
liabilities or of any of the obligations of Guarantor under this Guaranty, the
liability of Guarantor shall be effective immediately without notice or demand
and shall be payable or performable on demand without any suit or action against
Borrower. No delay or omission in exercising any right hereunder shall operate
as a waiver of such right or any other right.
B. The Bank, in its sole discretion, shall have the right to proceed first
and directly against the Guarantor under this Guaranty without proceeding
against or exhausting any other remedies which it may have against Borrower or
any other person primarily or secondarily liable for any of the liabilities,
including without limitation, the Other Guarantors (as defined below) and
without resorting to any security held by the Bank.
C. This Guaranty is entered into by Guarantor for the benefit of the Bank
and its successors and assigns, all of whom shall be entitled to enforce
performance and observance of this Guaranty.
Section 1.4. Waivers, Payment of Costs and Other Agreements.
A. GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS GUARANTY IS A
PART IS A COMMERCIAL TRANSACTION. GUARANTOR HEREBY EXPRESSLY WAIVES DILIGENCE,
DEMAND, PRESENTMENT, PROTEST, NOTICE OF NONPAYMENT OR PROTEST, NOTICE OF THE
ACCEPTANCE OF THIS GUARANTY, NOTICE OF ANY RENEWALS OR EXTENSIONS OF THE NOTE
AND OF ANY LOANS MADE OR EXTENSIONS OR OTHER FINANCIAL ACCOMMODATIONS GRANTED TO
BORROWER OR OTHER ACTION TAKEN IN RELIANCE HEREON AND ALL OTHER DEMANDS AND
NOTICES OF ANY DESCRIPTION IN CONNECTION WITH THIS GUARANTY, ANY OF THE
LIABILITIES OR OTHERWISE.
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B. THE GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS GUARANTY IS A PART AND/OR
THE ENFORCEMENT OF ANY OF THE BANK'S RIGHTS AND REMEDIES, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS.
C. Guarantor hereby waives any night of indemnity, reimbursement,
contribution or subrogation arising as a result of any payment made by or on
account of Guarantor hereunder, and will not prove any claim in competition with
the Bank in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature. Guarantor agrees that Guarantor shall not be deemed a
creditor of Borrower as the term "creditor" is defined in the United States
Bankruptcy Code or as such term is or may be interpreted by the courts.
Guarantor will not claim any set-off or counterclaim against Borrower in respect
of any liability of Guarantor to Borrower. Guarantor waives any benefit of and
any right to participate in any collateral which may be held by the Bank. In
consideration of the Loan, Guarantor expressly releases Borrower of and from any
and all liabilities, debts or claims which, as against the Borrower, the
Guarantor ever had, now has or may have as a consequence of this Guaranty. The
provisions of the paragraph shall remain in effect until such time as the
liabilities shall have been finally and fully paid.
D. THE GUARANTOR ACKNOWLEDGES THAT GUARANTOR MAKES THE WAIVERS SET FORTH
IN SUBSECTIONS (A), (B) AND (C) ABOVE KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS
AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THOSE WAIVERS.
THE GUARANTOR FURTHER ACKNOWLEDGES THAT THE BANK HAS NOT AGREED WITH OR
REPRESENTED TO GUARANTOR OR ANY OTHER PARTY HERETO THAT THE PROVISIONS OF
SUBSECTIONS (A), (B) AND (C) ABOVE WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
E. Guarantor agrees to pay all costs and expenses, including attorneys
fees, arising out of or with respect to the validity, enforcement, realization,
protection or preservation of this Guaranty or any of the liabilities.
F. If, for an reason, Borrower has no legal existence or is under no legal
obligation to discharge any liabilities or if any liabilities have become
irrecoverable from Borrower by operation of law or for any other reason, this
Guaranty shall nevertheless be binding on Guarantor to the same extent as if
Guarantor at all times had been the principal obligor on all such liabilities.
In the event that acceleration of the time for payment of any liabilities is
stayed upon the insolvency, bankruptcy or reorganization of Borrower, or for any
other reason, all such amounts otherwise subject to acceleration under the terms
of the Note or any of the other Loan Agreements shall be immediately due and
payable by Guarantor, without notice or demand.
Section 1.5 Set-off. The Guarantor hereby gives the Bank a lien and right
of setoff for all Guarantor's liabilities to the Bank upon and against all
Guarantor's deposits, credits, collateral and property now or hereafter in the
possession or control of the Bank or in transit to it. The Bank may, at any
time, without notice to Guarantor, apply or set-off the same, or any part
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thereof, to any liability of the Guarantor to the Bank, whether or not the Bank
shall have made demand under this Guaranty and although such obligations may be
contingent or unmatured.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1 Guarantor Representations, Warranties and Covenants. The
Guarantor hereby represents, warrants and covenants that:
A. Guarantor is an individual of full legal age and capacity and has the
right and power to execute this Guaranty and the other Loan Agreements to which
Guarantor is a party and to incur the obligations hereunder and thereunder.
B. Neither the execution and delivery of this Guaranty and the other Loan
Agreements to which Guarantor is a party, the consummation of the transactions
contemplated hereby nor the fulfillment of or compliance with the terms and
conditions of this Guaranty is prevented or limited by or conflicts with or
results in a breach of the terms, conditions or provisions of any contractual or
other restriction on the Guarantor or any agreement or instrument of whatever
nature to which the Guarantor is now a party or by which the Guarantor or
Guarantor's property is bound (or, if Guarantor is a corporation, the
Certificate of Incorporation or By-laws of the Guarantor, or, if Guarantor is a
partnership, the partnership agreement of the Guarantor) or constitutes a
default under any of the foregoing.
C. The Guarantor has received and will receive a direct and material
benefit from the accommodations extended by the Bank to Borrower.
D. All authorizations, consents and approvals of governmental bodies or
agencies required in connection with the execution and delivery of this Guaranty
and the other Loan Agreements to which Guarantor is a party, or in connection
with the performance of the Guarantor's obligations hereunder or thereunder have
been obtained as required hereunder or by law.
E. This Guaranty constitutes a valid and legally binding obligation of the
Guarantor, enforceable in accordance with its terms.
F. There is no action or proceeding pending or threatened against the
Guarantor before any court or administrative agency that might adversely affect
the ability of the Guarantor to perform Guarantor's obligations under this
Guaranty.
G. Guarantor will, at the request of the Bank, provide to the Bank such
financial and other information about the financial condition, operations and
business of Guarantor as the Bank may require from time to time, including
without limitation, business and/or personal financial statements and copies of
federal and state income tax returns and all schedules thereto, aging reports of
Guarantor's accounts receivable and accounts payable and a listing of
Guarantor's inventory and equipment, all of which shall be in form, scope and
content satisfactory to the Bank, in its sole discretion.
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H. After any change in the condition or affairs (financial or otherwise)
of Guarantor deemed by the Bank to be adverse and material and which the Bank
believes, in good faith, impairs its security or increases its risk, Guarantor
will, upon demand by the Bank, secure or additionally secure, as the case may
be, the payment and performance of Guarantor's liabilities under this Guaranty
and any other liability of Guarantor to the Bank by granting, pledging,
assigning, delivering or transferring to the Bank a security interest in
collateral of a value and character satisfactory to the Bank, and Guarantor
authorizes the Bank to file and/or record, at Guarantor's expense, after Bank's
request to Guarantor and Guarantor's failure to do so, any financing statement,
mortgage or other document as the Bank may require to perfect any such security
interest, and Guarantor hereby irrevocably appoints the Bank its
attorney-in-fact to sign the name of Guarantor thereto.
I. Failure of Guarantor to comply with any of the covenants herein or
under any of the other Loan Agreements to which Guarantor is a party shall
constitute a default of the liabilities, entitling the Bank to exercise all
rights and remedies set forth in any of the Loan Agreements.
ARTICLE III.
NOTICE AND SERVICE OF PROCESS,
PLEADINGS AND OTHER PAPERS
Section 3.1 Designation of Agent for Service of Process. Guarantor
represents, warrants and covenants that Guarantor is subject to service of
process in the Commonwealth of Massachusetts and that Guarantor will remain so
subject so long as any of the liabilities is outstanding. If for any reason
Guarantor should not be so subject, Guarantor hereby designates and appoints,
without power of revocation, the Secretary of State of the Commonwealth of
Massachusetts as Guarantor's agent upon whom may be served all process,
pleadings, notices or other papers which may be served upon Guarantor as a
result of any of Guarantor's obligations under this Guaranty.
Section 3.2 Consent to Service of Process. Guarantor irrevocably (a)
agrees that any suit, action or other legal proceeding arising out of this
Guaranty may be brought in the courts of record of the Commonwealth of
Massachusetts or the courts of the United States located in such state; (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding; and (c) waives any objection which such Guarantor may have to the
laying of venue of any such suit, action or proceeding in any of such courts.
For such time as any of the liabilities is outstanding, Guarantor's agent
designated in Section 3. Error! Reference source not found. hereof shall accept
and acknowledge on Guarantor's behalf services of any and all process in any
such suit, action or proceeding brought in any such court. Guarantor agrees and
consents that any such services of process upon such agent and written notice of
such service to Guarantor by registered mail shall be taken and held to be valid
personal service upon Guarantor and that any such service of process shall be of
the same force and validity as if services were made upon Guarantor according to
the laws governing the validity and requirements of such service in such state,
and waives all claim of error by reason of any such service.
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Section 3.3 Notices. All notices or other communications required or
permitted to be given hereunder shall be considered effective and properly given
if sent by a nationally recognized overnight messenger service or mailed first
class United States mail, postage prepaid, registered or certified mail, with
return receipt requested, or by delivery of same to the address beneath the
Guarantor's signature below by prepaid messenger or telegram, whether or not
receipt thereof is acknowledged or is refused by the addressee or any person at
such address, or at such other ' lace as any party hereto may be notified in
writing as a place for service or notice hereunder.
ARTICLE IV.
GENERAL
Section 4.1 No Remedy Exclusive, Effect of Waiver. No remedy herein
conferred upon or reserved to the Bank is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Guaranty or now
or hereafter existing at law or in equity. In order to entitle the Bank to
exercise any remedy reserved to it in this Guaranty, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required.
No waiver, amendment, release or modification of this Guaranty shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the parties thereunto duly authorized. A waiver on
one occasion shall not be a bar to or waiver of any right of any other occasion.
The Guarantor acknowledges that this Guaranty supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and is intended as a final expression and a complete
and exclusive statement of the terms of this Guaranty.
Section 4.2 Counterparts. This Guaranty may be executed simultaneously in
several counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 4.3 Severability. The invalidity or unenforceability of any one or
more phrases, sentences, clauses or Sections contained in this Guaranty shall
not affect the validity or enforceability of the remaining portions of this
Guaranty, or any part thereof.
Section 4.4 Massachusetts Law. This Guaranty shall be governed by the laws
of the Commonwealth of Massachusetts (but not its conflicts of law provisions).
Section 4.5 Other Guarantors. The Guarantor acknowledges that other
individuals or entities, including without limitation, each other Guarantor
hereunder, have or may also guaranty the liabilities of the Borrower (including
each other Guarantor hereunder, the "Other Guarantors") and that Guarantor is
unconditionally delivering this Agreement to the Bank. The Guarantor further
acknowledges that the failure of any of the Other Guarantors to execute and
deliver their respective guarantees or the discharge of any of the Other
Guarantors and their respective guarantied obligations shall not discharge the
liability of the Guarantor.
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IN WITNESS WHEREOF, Guarantor has executed this Agreement on the date
first above written.
WITNESS:
/s/ Bonnie L. Sennett /s/ Jon E. Goodrich
- ------------------------------- -----------------------------------------
Jon E. Goodrich
Address: Monument Avenue Ext.
Bennington, VT 05201
Vermont
-----------------------------
(STATE)
Bennington , ss. September 25, 1997
- ------------
(COUNTY)
Then personally appeared the above-named Jon E. Goodrich and acknowledged
the foregoing to be his free and act deed, before me.
/s/ Bonnie L. Sennett
-----------------------------------------
BONNIE L. SENNETT , Notary Public
My commission expires: 2/10/99
OMB Approval No. 3245-0201
SBA LOAN NUMBER
U.S. Small Business Administration
NOTE
September 25, 1997
$1,000,000.00 Springfield, Massachusetts
For value received, the undersigned promises to pay to the order of First
National Bank of New England at its office in the City of Hartford, State of
Connecticut or at holder's option, at such other place as may be designated from
time to time by the holder ONE MILLION AND 00/100 ($1,000,000.00) DOLLARS, with
interest on unpaid principal computed from the date of each advance to the
undersigned at a per annum rate of one and one-half (1.50%) percentage points
above the Prime Rate on a floating basis. The initial interest rate hereunder is
ten percent (10.0%), payment to be made in installments as follows:
Payments in the initial amount of principal and interest of THIRTEEN
THOUSAND TWO HUNDRED FIFTEEN and 07/100 ($13,215.07) Dollars on the first day of
each month commencing November 1, 1997. The undersigned will make these payments
until they have paid in full all principal and interest and any other sums due
hereunder. Not withstanding the foregoing, the entire indebtedness evidenced by
this Note, including, but not limited to, all outstanding principal and accrued
and unpaid interest, shall be due and payable in full on the tenth (10th)
anniversary date of this Note.
On November 1, 1997 and on the first day of each and every month
thereafter until all sums due hereunder are paid in full (each being referred to
as an "Adjustment Date"), the interest rate on the unpaid principal balance
hereunder shall be adjusted, without notice or demand, to a per annum rate of
one and one-half (1.50%) percentage points above the Prime Rate in effect on the
applicable Adjustment Date (or the following business day in the event that such
Adjustment Date falls on a Saturday, Sunday or holiday), which rate shall remain
in effect until the succeeding Adjustment Date. Interest hereunder shall be
computed on a daily basis and on the basis of a Three Hundred Sixty (360) day
year and a thirty (30) day month. As used herein, "Prime Rate" shall mean the
lowest New York prime rate as set forth in the money rate section of the Wall
Street Journal (or in any successor publication).
The undersigned further agrees to pay all taxes levied or assessed on this
Note or the debt evidenced hereby against the holder of this Note, and further
agrees to pay all costs, expenses and attorneys' fees incurred in any action to
collect this Note or to defend, protect, preserve, or realize upon or foreclose
any mortgage or security agreement securing this Note or to protect, defend,
preserve. foreclose or sustain the lien of said mortgage or security agreement
or in any litigation or controversy arising from or connected with said
mortgage, security agreement, or this Note.
All payments received by the Lender. at the option of the Lender, shall be
applied first to any outstanding charges and expenses incurred by the Lender in
connection with this Note or any documents executed in connection with this
Note, then to any unpaid and accrued interest and finally to the outstanding
principal due under the Note. The undersigned agrees that the interest shall
accrue at the foregoing rate on unpaid balance before and after maturity, by
acceleration or otherwise.
The Borrower hereby grants to the Lender or Holder hereof a lien and right
of set-off for all of the Borrower's liabilities to Lender or Holder upon and
against all of the Borrower's deposits, credits and other property now or
hereafter in the possession or control of Lender or Holder or in transit to it.
The Lender or Holder may at any time apply the same or any part thereof to any
of the Borrower's liabilities to Lender or Holder, whether or not matured at the
time of such application.
Holder should give written notice to the undersigned of each increase or
decrease in the interest (and change in installment amount, if applicable)
within thirty days after the effective date of each rate adjustment; however,
the fluctuation of the interest rate is not contingent on whether the notice is
given.
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If the undersigned shall be in default in payment due on the indebtedness
herein and the SMALL BUSINESS ADMINISTRATION (SBA) purchases its guaranteed
portion of said indebtedness, the rate of interest on both the guaranteed and
unguaranteed portions herein shall become fixed at the rate in effect as of the
date of default. If the undersigned shall not be in default in payment when SBA
purchases its guaranteed portion, the rate of interest on both the guaranteed
and unguaranteed portions herein shall be fixed at the rate in effect as of the
date of purchase by SBA.
Borrower agrees to pay a late charge equal to 5% of the monthly payment
amount due if such payment is not received within ten days of the due date.
Funds received from the Borrower will be applied first to interest to the date
of receipt, then to principal and then to the late fee.
If this Note contains a fluctuating interest rate, the notice provision is
not a pre-condition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this Note
may be made prior to the maturity date thereof without penalty. Borrower shall
provide lender with written notice of intent to prepay part or all of this loan
at least three (3) weeks prior to the anticipated prepayment date. A prepayment
is any payment made ahead of schedule that exceeds twenty (20) percent of the
then outstanding principal balance. If borrower makes a prepayment and fails to
give at least three weeks advance notice of intent to prepay, then,
notwithstanding any other provision to the contrary in this note or other
document, borrower shall be required to pay lender three weeks interest on the
unpaid principal as of the date preceding such prepayment.
The term "Indebtedness" as used herein shall mean the indebtedness
evidenced by this Note, including principal, interest and expenses, whether
contingent, now due or hereafter to become due and whether heretofore or
contemporaneously herewith or hereafter contracted. The term "Collateral" as
used in this Note shall mean any funds, Guaranties, or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are, or hereafter may be, hypothecated, directly or indirectly by the
undersigned or others, in connection with, or as security for, the indebtedness
of any part thereof. The Collateral, and each part thereof, shall secure the
Indebtedness and each part thereof. The covenants and conditions set forth or
referred to in any and all instruments of hypothecation constituting the
Collateral are hereby incorporated in this Note as covenants and conditions of
the undersigned with the same force and effect as though such covenants and
conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without notice
or demand, upon the appointment of a receiver or liquidator, whether voluntary
or involuntary, for the undersigned or for any of its property, or upon the
riling of a petition by or against the undersigned under the provisions of any
State insolvency law or under the provisions of the Bankruptcy Reform Act of
1978, as amended, or upon the making by the undersigned of an assignment for the
benefit of its creditors. Holder is authorized to declare all or any part of the
Indebtedness immediately due and payable upon the happening of any of the
following events: (1) Failure to pay any part of the Indebtedness when due; (2)
nonperformance by the undersigned of any agreement with. or any condition
imposed by, Holder or Small Business Administration (hereinafter called "SBA")
with respect to the Indebtedness, which nonperformance is not cured within ten
(10) days of Holder's notice to the undersigned of such failure; (3) Holder's
discovery of the undersigned's failure in any application of the undersigned to
Holder or SBA to disclose any fact deemed by Holder to be material or of the
making therein or in any of the said agreements, or in any affidavit or other
documents submitted in connection with said application or the indebtedness, of
any material misrepresentation by, on behalf of, or for the benefit of the
undersigned; (4) the reorganization (other than a reorganization pursuant to any
of the provisions of the Bankruptcy Reform Act of 1978, as amended) or merger or
consolidation of the undersigned or the making of any agreement therefor)
without the prior written consent of Holder; (5) the undersigned's failure duty
to account, to Holder's satisfaction, at such time or times as Holder may
require, for any of the Collateral, or proceeds thereof, coming into the control
of the undersigned, within ten (10) days of Holder's notice to the undersigned
to do so; or (6) the entering of a judgment against the undersigned in any suit
affecting the undersigned deemed by Holder to affect adversely its interest
hereunder in the Collateral or otherwise. Holder's failure to exercise its
rights under this paragraph shall not constitute a waiver thereof.
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise. Holder is empowered to sell, assign, and
deliver the whole or any part of the Collateral at public or private sale.
without demand. advertisement or notice of the time or place of sale or of any
adjournment thereof, which are hereby expressly waived. After deducting all
expenses incidental to or arising from such sale or sales. Holder may apply the
residue of the proceeds thereof to the payment of the Indebtedness, as it
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shall deem proper, returning the excess, if any, to the undersigned. The
undersigned hereby waives all right of redemption or appraisement whether before
or after sale.
Holder is further empowered to collect or cause to be collected or
otherwise to be converted into money all or any part of the Collateral, by suit
or otherwise, and to surrender, compromise, release, renew, extend, exchange, or
substitute any item of the Collateral in transactions with the undersigned or
any third party, irrespective of any assignment thereof by the undersigned, and
without prior notice to or consent of the undersigned or any assignee. Whenever
any item of the Collateral shall not be paid when due, or otherwise shall be in
default, whether or not the indebtedness, or any part thereof, has become due,
Holder shall have the same rights and powers with respect to such item of the
Collateral as are granted in this paragraph in case of nonpayment of the
Indebtedness, or any part thereof, when due. None of the rights, remedies,
privileges, or powers of Holder expressly provided for herein shall be
exclusive, but each of them shall be cumulative with and in addition to every
other right, remedy, privilege, and power now or hereafter existing in favor of
Holder, whether at law or equity, by statute or otherwise.
The undersigned agrees to take all necessary steps to administer,
supervise, preserve, and protect the Collateral; and regardless of any action
taken by Holder, there shall be no duty upon Holder in this respect. The
undersigned shall pay all expenses of any nature, whether incurred in or out of
court, and whether incurred before or after this Note shall become due at its
maturity date or otherwise, including but not limited to reasonable attorney's
fees and costs, which Holder may deem necessary or proper in connection with the
satisfaction of the Indebtedness or the administration, supervision,
preservation, protection of (including, but not limited to, the maintenance of
adequate insurance) or the realization upon the Collateral. Holder is authorized
to pay at any time and from time to time any or all of such expenses, add the
amount of such payment to the amount of the Indebtedness, and charge interest
thereon at the rate specified herein with respect to the principal amount of
this Note.
The security rights of Holder and its assigns hereunder shall not be
impaired by Holder's sale, hypothecation or rehypothecation of any note of the
undersigned or any item of the Collateral, or by any indulgence, including but
not limited to (a) any renewal, extension, or modification which Holder may
grant with respect to the Indebtedness or any part thereof, or (b) any
surrender, compromise, release, renewal, extension, exchange, or substitution
which Holder may grant in respect of the Collateral, or (c) any indulgence
granted in respect of any endorser, guarantor, or surety. The purchaser,
assignee, transferee, or pledgee of this Note, the Collateral, and guaranty, and
any other document (or any of them), sold, assigned, transferred, pledged, or
repledged, shall forthwith become vested with and entitled to exercise all the
powers and rights given by this Note and all applications of the undersigned to
Holder or SBA, as if said purchaser, assignee, transferee, or pledgee were
originally named as Payee in this Note and in said application or applications.
This promissory note is given to secure a loan which SBA is making or in
which it is participating and, pursuant to Part 101 of the Rules and Regulations
of SBA (13 C.F.R. 101.1(d)), this instrument is to be construed and (when SBA is
the Holder or a party in interest) enforced in accordance with applicable
Federal law.
MACE SECURITY INTERNATIONAL, INC.
/s/ James K. Bodurtha /s/ Mark A. Capone
- ------------------------------ ---------------------------------
Witness By: Mark A. Capone
Its duly authorized Treasurer
- --------------------------------------------------------------------------------
Note. - Corporate applicants must execute Note, in corporate name, by duly
authorized officer, and seal must be affixed and duly attested, partnership
applicants must execute Note in firm name, together with signature of a general
partner.
SBA Form 147 (5-87) *U.S. Government Printing, Office: 1991 - 312-624/51730
<PAGE>
FIRST NATIONAL BANK OF NEW ENGLAND
SECURITY AGREEMENT
(SBA LOANS)
SECURITY AGREEMENT made this 25th day of September, 1997 between MACE
SECURITY INTERNATIONAL, INC., whose principal place of business is located at
160 Benmont Avenue, Bennington, Vermont 05201 ("Debtor"), and FIRST NATIONAL
BANK OF NEW ENGLAND, a banking association having an office at One Commercial
Plaza, Hartford, Connecticut ("Secured Party").
In consideration of the mutual covenants and agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Debtor and Secured Party, intending to be bound
legally, agree as follows:
1. Security Interest.
(a) To secure payment and performance of the Obligations (as defined
below), Debtor hereby pledges, assigns, transfers and grants to Secured Party a
continuing first priority security interest in all tangible and intangible
personal property, (excluding Motor Vehicles unless so indicated below),
including without limitation, Accounts, Chattel Paper, Contracts, Documents,
Equipment, General Intangibles, Instruments and Inventory, as more particularly
described in Exhibit A annexed, whether now owned or hereafter acquired by
Debtor.
Together, in each instance, with the renewals, substitutions,
replacements, additions, rental payments, products and Proceeds thereof
(hereinafter, collectively called the "Collateral").
The security interest herein granted in the Collateral is a first
priority security interest, except with respect to the prior liens set
forth in Exhibit A.
(a) Debtor expressly acknowledges that the security interest granted
hereunder shall remain as security for payment and performance of the
Obligations, whether now existing or which may hereafter be incurred by future
advances, or otherwise. The notice of the continuing grant of this security
interest therefore shall not be required to be stated on the face of any
document representing any such Obligations, nor otherwise identify it as being
secured hereby.
2. Cross-Collateralization. All Collateral which Secured Party may at any
time acquire from Debtor or from any other source in connection with any of the
Obligations shall constitute collateral for each and every Obligation, without
apportionment or designation as to particular Obligations, and all Obligations,
however and whenever incurred, shall be secured by all Collateral, however and
whenever acquired, and Secured Party shall have the night, in its sole
discretion, to determine the order in which Secured Party's rights in, or
remedies against, any Collateral are to be exercised, and which type or which
portions of Collateral are to be proceeded against and the order of application
of Proceeds of Collateral as against particular Obligations.
3. Definitions. The following terms shall have the following meanings:
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(a) "Accounts" means all accounts, as that ten-n is defined in Article 9
of the Uniform Commercial Code as in effect from time-to-time in the
Commonwealth of Massachusetts (the "UCC"), and, in any event, shall include any
right to payment held by Debtor, whether in the form of accounts receivable,
notes, drafts, acceptances or other forms of obligations and receivables, now
owned or hereafter received or acquired by or belonging or owing to the Debtor
(including, without limitation, under any trade name, style or division thereof)
for Inventory sold or leased or services rendered by it whether or not earned by
performance, together with all guarantees and security therefor and all Proceeds
thereof, whether cash Proceeds or otherwise, including, without limitation, all
night, title and interest of Debtor in the Inventory which gave rise to any such
Accounts, including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
rejected or repossessed Inventory or other goods;
(b) "Authorization and Loan Agreement" means SBA Authorization and Loan
Agreement No. PLP 155-372-4004.
(c) "Chattel Paper" means all chattel paper, as that term is defined in
Article 9 of the UCC, and, in any event, shall include any writing or writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods, whether now or hereafter held by Debtor;
(d) "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments, as those terms are defined above and below) in or under which the
Debtor may now or hereafter have any right, title or interest, including,
without limitation, with respect to an Account, and any agreement relating to
the terms of payment or the terms of performance thereof;
(e) "Documents" means all documents, as that term is defined in Article 9
of the UCC;
(f) "Equipment" means all equipment, as that term is defined in Article 9
of the UCC and, in any event, shall include, without limitation, all machinery,
tools, dyes, equipment, furnishings, vehicles (other than Motor Vehicles) and
computers and other electronic data processing and other office equipment,
including, but not limited to, the items of Equipment, if any, listed on Exhibit
B attached hereto and made a part hereof, any and all additions, substitutions
and replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto, and all Contracts, contract rights and Chattel Paper arising
out of any lease of any of the foregoing;
(g) "Financing Agreements" means this Agreement, the Authorization and
Loan Agreement, and any and all agreements, notes, guaranties, instruments,
security agreements and documents evidencing, governing, securing or relating in
any way to any of the Obligations, including without limitation, that certain
SBA commercial term promissory note of even date herewith in the original
principal amount of ONE MILLION AND 00/100 DOLLARS ($ 1,000,000.00) of Debtor in
favor of Secured Party;
<PAGE>
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(h) "General Intangibles" means all general intangibles, as that term is
defined in Article 9 of the UCC, and, in any event, shall include all right,
title and interest which the Debtor may now or hereafter have in or under any
Contract, all customer lists, trademarks, patents, rights in intellectual
property, interests in partnerships, joint ventures and other business
associations, licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, recipes, experience, processes, models, drawings,
blueprints, catalogs, materials and records, goodwill (including, without
limitation, the goodwill associated with any trademark, trademark registration
or trademark licensed under any trademark license, claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification;
(i) "Instruments" means all instruments, as that term is defined in
Article 9 of the UCC, and, in any event, shall include any negotiable instrument
or certificated security, as defined in Article 8 of the UCC, or any other
writing which evidences a night to the payment of money and is not itself an
instrument that constitutes, or is a part of a group or writings that
constitute, Chattel Paper, and is of a type which, in the ordinary course of
business, is transferred by delivery with any necessary endorsement or
assignment, whether now or hereafter held by Debtor;
(j) "Inventory" means all inventory, as that term is defined in Article 9
of the UCC, wherever located, and, in any event, shall include all inventory,
merchandise, goods and other personal property which are held by or on behalf of
the Debtor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
or the processing, packaging, promotion, delivery or shipping of the same, and
all finished goods, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of the Debtor or is
held by the Debtor or by others for the Debtor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of the Debtor or of any carriers, forwarding agents,
truckers, warehousemen, vendors, selling agents or other persons;
(k) "Motor Vehicles" shall have the same meaning as that contained in the
General Laws of Commonwealth of Massachusetts;
(1) "Obligations" means any and all obligations, indebtedness,
liabilities, guaranties, covenants and duties owing by Debtor to Secured Party,
under any of the Financing Agreements, whether due or to become due, absolute or
contingent, now existing or hereafter incurred or arising, whether or not
otherwise guaranteed or secured and whether evidenced by any note or draft or
documented on the books and records of Secured Party or otherwise on open
account, including without limitation, all costs, expenses, fees, charges and
attorneys' and other professional fees incurred by Secured Party in connection
with, involving or related to the administration, protection, modification,
collection, enforcement, preservation or defense of any of the Secured Party's
rights with respect to any of the Obligations, the Collateral or any agreement,
instrument or document evidencing, governing, securing or relating to any of the
<PAGE>
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foregoing, including without limitation, all costs and expenses incurred in
inspecting or surveying mortgaged real estate, if any, or conducting
environmental studies or tests, and in connection with any "workout" or default
resolution negotiations involving legal counsel or other professionals and any
re-negotiation or restructuring of any of the Obligations; and
(m) "Proceeds" means all proceeds, as that term is defined in Article 9 of
the UCC, and, in any event, shall include (a) any and all Accounts, Chattel
Paper, Instruments, cash and other proceeds payable to the Debtor from
time-to-time with respect of any of the foregoing collateral security, (b) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Debtor from time-to-time with respect to any of the collateral security, (c)
any and all payments (in any form whatsoever) made or due and payable to the
Debtor from time-to-time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the collateral
security by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (d) any and all other amounts
from time-to-time paid or payable under or in connection with any of the
collateral security.
4. Debtor's Representations and Warranties. Debtor represents and warrants
to Secured Party as follows:
(a) Good Standing and Qualification/Legal Capacity . The Debtor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business in the State of
Vermont, and has all requisite corporate power and authority to own and operate
its properties and to carry on its business as now being conducted.
(b) Authority. The Debtor has full corporate power and authority to enter
into and perform the obligations under this Agreement, to execute and deliver
the Financing Agreements and to incur the obligations provided for herein and
therein, all of which have been duly authorized by all necessary and proper
corporate or partnership action, if and as the case may be. No other consent or
approval or the taking of any other action is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Agreements.
(c) Binding Agreements. This Agreement and the other Financing Agreements
constitute the valid and legally binding obligations of the Debtor, enforceable
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
(d) Litigation. There are no actions, suits, proceedings or investigations
pending or threatened against the Debtor before any court or administrative
agency, which either in any case or in the aggregate, if adversely determined,
would materially and adversely affect the financial condition, assets or
operations of the Debtor, or which question the validity of this Agreement or
any of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby. This representation is
exclusive of the information disclosed in Borrower's Securities and Exchange
Commission Form 10-KSB for the fiscal year ended December 31, 1996, and Form
IO-QSB for the quarter ended June 30, 1997, the Secured Party hereby
acknowledging receipt and review of said Forms.
<PAGE>
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(e) No Conflicting Law or Agreements. The execution, delivery and
performance by the Debtor of this Agreement and the other Financing Agreements:
(i) do not violate any provision of the Certificate of Incorporation and By-laws
or the partnership agreement, if and as the case may be, of the Debtor, (ii) do
not violate any order, decree or judgment, or any provision of any statute, rule
or regulation, (iii) do not violate or conflict with, result in a breach of or
constitute (with notice or lapse of time, or both) a default under any
shareholder agreement, partnership agreement, stock preference agreement,
mortgage, indenture, contract or other agreement to which the Debtor is a party,
or by which any of Debtor's properties are bound, or (iv) except for the liens
and mortgages granted to Secured Party hereunder, do not result in the creation
or imposition of any lien, charge or encumbrance of any nature whatsoever upon
any property or assets of the Debtor.
(f) Financial Statements. The financial information of the Debtor,
including, but not limited to, tax returns, balance sheets, statements of
earnings, retained earnings, contributed capital and cash flow statements,
heretofore submitted to Secured Party, is complete and correct and fairly
presents the financial condition of the Debtor as of the dates of said
information and the results of its operations and its cash flows for the periods
referred to therein in accordance with generally accepted accounting principles,
consistently applied. Since the submission of said information to Secured Party,
there has been no material adverse change in the financial condition or business
of the Debtor.
(g) Taxes. With respect to all taxable periods of the Debtor, the Debtor
has filed all tax returns which are required to be filed and all federal, state,
municipal, franchise and other taxes shown on such filed returns have been paid
as due or have been reserved against, if not yet due, as required by Generally
accepted accounting principles, consistently applied, and the Debtor knows of no
unpaid assessments against Debtor.
(h) Compliance. The Debtor is not in default with respect to or in
violation of any order, writ, injunction or decree of any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency, authority or official, or in violation of any law, statute, rule
or regulation to which Debtor or Debtor's properties is or are subject, where
such default or violation would materially and adversely affect the financial
condition of the Debtor. The Debtor represents that Debtor has not received
notice of any such default or violation from any party. The Debtor is not in
default in the payment or performance of any of Debtor's obligations to any
third parties or in the performance of any mortgage, indenture, lease, contract
or other agreement to which Debtor is a party or by which any of Debtor's assets
or properties are bound, where such default would materially and adversely
affect the financial condition of the Debtor.
(i) Office. The chief executive office and principal place of business of
the Debtor, and the office where Debtor's books and records concerning
Collateral are kept, is set forth in the first paragraph of this Agreement.
(j) Places of Business. The Debtor has no other places of business and
locates no Collateral, specifically including books and records, at any location
other than at Debtor's place of business set forth in the first paragraph of
this Agreement.
<PAGE>
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(k) Contingent Liabilities. The Debtor is not a party to any suretyship,
guarantyship, or other similar type agreement; nor has Debtor offered its
endorsement to any individual, concern, corporation or other entity or acted or
failed to act in any manner which would in any way create a contingent liability
(except for endorsement of negotiable instruments in the ordinary course of
business).
(l) Licenses. The Debtor has all material licenses, permits and other
permissions required by any government, agency or subdivision thereof, or from
any licensing entity necessary for the conduct of Debtor's business, all of
which the Debtor represents to be in good standing and in full force and effect.
(m) Collateral. The Debtor is and shall continue to be the sole owner of
the Collateral free and clear of all liens, encumbrances, security interests and
claims except the liens granted to Secured Party hereunder or except as
permitted in the Authorization and Loan Agreement; the Debtor is fully
authorized to sell, transfer, pledge and/or grant a security interest in each
and every item of the Collateral to Secured Party; all documents and agreements
related to the Collateral shall be true and correct and in all respects what
they purport to be; all signatures and endorsements that appear thereon shall be
genuine and all signatories and endorsers shall have full capacity to contract;
none of the transactions underlying or giving rise to the Collateral shall
violate any applicable state or federal laws or regulations; all documents
relating to the Collateral shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms; and
the Debtor agrees to defend the Collateral against the claims of all persons
other than Secured Party.
(n) Environmental, Health, Safety Laws. Debtor has not received any
notice, order, petition or similar document in connection with or arising out of
any violation of any environmental, health or safety law, regulation, rule or
order, and Debtor knows of no basis for any claim of such violation or of any
threat thereof
5. Affirmative Covenants of the Debtor. The Debtor covenants and agrees
that from the date hereof until full and final payment and performance of all
Obligations, the Debtor shall:
(a) Financial Information. Deliver to Secured Party: (i) as promptly as
practicable upon Secured Party's request, such documentation and information
about the Debtor's financial condition, business and/or operations as Secured
Party may, at any time and from time to time, request, including without
limitation, business and/or personal financial statements, copies of federal and
state income tax returns and all schedules thereto, aging reports of Debtor's
Accounts and accounts payable and a listing of Debtor's Inventory and Equipment,
all of which shall be in form, scope and content satisfactory to Secured Party,
in its sole discretion; and (ii) as promptly as practicable upon becoming aware
of any Event of Default (as defined below), or any occurrence which but for the
giving of notice or the passage of time would constitute an Event of Default,
notice thereof in writing.
(b) Insurance and Endorsement. (i) Keep the Collateral and Debtor's other
properties insured against loss or damage by fire and other hazards (so-called
"All Risk" coverage) in amounts and with companies satisfactory to Secured Party
to the same extent and covering such risks as is customary in the same or a
similar business; maintain public liability coverage,
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including without limitation, products liability coverage, against claims for
personal injuries or death; and maintain all worker's compensation, employment
or similar insurance as may be required by applicable law; (ii) All insurance
shall contain such terms, be in such form, and be for such periods satisfactory
to Secured Party, and be written by such carriers duly licensed by the State of
Vermont and satisfactory to Secured Party. Without limiting the generality of
the foregoing, such insurance must provide that it may not be canceled without
thirty (30) days prior written notice to Secured Party. The Debtor shall cause
Secured Party to be endorsed as a loss payee with a long form Lender's Loss
Payable Clause, in form and substance acceptable to Secured Party on all such
insurance. In the event of a failure to provide and maintain insurance as herein
provided, Secured Party may, at its option, provide such insurance and charge
the amount thereof to the Debtor. The Debtor shall furnish to Secured Party
certificates or other satisfactory evidence of compliance with the foregoing
insurance provisions. The Debtor hereby irrevocably appoints Secured Party as
its attorney-in-fact, coupled with an interest, to make proofs of loss and
claims for insurance, and to receive payments of the insurance and execute all
documents, checks and drafts in connection with payment of the insurance. Any
Proceeds received by Secured Party shall be applied to the Obligations in such
order and manner as Secured Party shall determine in its sole discretion, or
shall be remitted to the Debtor, in either event at Secured Party's sole
discretion.
(c) Tax and Other Liens. Comply with all statutes and government
regulations and pay all taxes (including withholdings), assessments,
governmental charges or levies, or claims for labor, supplies, rent and other
obligations made against it or its property which, if unpaid, might become a
lien or charge against the Debtor or its properties.
(d) Place of Business. Maintain its place of business and chief executive
offices at the address set forth in the first paragraph of this Agreement.
(e) Inspections. Upon reasonable notice and during normal business hours,
allow Secured Party by or through any of their officers, attorneys, and/or
accountants designated by Secured Party, for the purpose of ascertaining whether
or not each and every provision hereof and of any related agreement, instrument
and document is being performed, to enter the offices and plants of the Debtor
to examine or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts therefrom, and
to discuss the affairs, finances and accounts thereof with the Debtor all at
such reasonable times and as often as Secured Party or any such representative
of Secured Party may reasonably request.
(f) Litigation. Promptly advise Secured Party of the commencement or
threat of litigation, including arbitration proceedings and any proceedings
before any governmental agency (collectively, "Litigation"), which is instituted
against the Debtor involving a claim in excess of $50,000.
(g) Maintenance of Existence. Maintain its corporate or partnership
existence, as the case may be, and comply with all valid and applicable
statutes, rules and regulations, and maintain its properties in good repair,
working order and operating condition. The Debtor shall immediately notify
Secured Party of any event causing material loss in the value of its assets.
<PAGE>
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(h) Collateral Duties. Do whatever Secured Party may request from time to
time by way of obtaining, executing, delivering and filing financing statements,
assignments, landlord's or mortgagee's waivers, and other notices and amendments
and renewals thereof, and the Debtor will take any and all steps and observe
such formalities as Secured Party may request in order to create and maintain a
valid and enforceable first lien upon, pledge of, and first priority security
interest in, any and all of the Collateral. Secured Party is authorized to file
financing statements without the signature of the Debtor and to execute and file
such financing statements on behalf of the Debtor as specified by the UCC to
perfect or maintain Secured Party's security interest in all of the Collateral.
All charges, expenses and fees Secured Party may incur in filing any of the
foregoing, together with reasonable costs and expenses of any lien search
required by Secured Party, and any taxes relating thereto, shall be charged to
the Debtor and added to the Obligations.
(i) Notice of Default. Provide to Secured Party, within one business day
after becoming aware of the occurrence or existence of an Event of Default or a
condition which would constitute an Event of Default but for the giving of
notice or passage of time on both, notice in writing of such Event of Default or
condition.
6. Negative Covenants of the Debtor. The Debtor covenants and agrees that
from the date hereof until full and final payment and performance of all
Obligations, the Debtor shall not without the prior written consent of Secured
Party:
(a) Encumbrances. Incur or permit to exist any lien, mortgage, charge or
other encumbrance against any of the Collateral, whether now owned or hereafter
acquired, except: (i) liens required or expressly permitted by this Agreement or
the Authorization and Loan Agreement; (ii) pledges or deposits in connection
with or to secure worker's compensation, unemployment or liability insurance;
and (iii) tax liens which are being contested in good faith with the prior
written consent of Secured Party and against which, if requested by Secured
Party as a condition to its consent, the Debtor shall set up a cash reserve or
post a surety bond in an amount equal to the total amount of the lien being
contested.
(b) Consolidation or Merger. Merge into or consolidate with or into any
corporation.
(c) Sale and Lease of Assets.. Sell, lease or otherwise dispose of any of
its assets in an aggregate amount in excess of $100,000.00, except for sales of
inventory in the ordinary course of business.
(d) Name Changes. Change its corporate name or conduct its business under
any trade name or style other than as set forth in this Agreement.
(e) Maintenance of Collateral. Permit to incur or suffer any loss, theft,
substantial damage or destruction of any of the Collateral which is not
immediately replaced with Collateral of equal or greater value, or which is not
fully covered by insurance, the proceeds of which shall have been endorsed over
to Secured Party in accordance with Section 5.(a)) hereof.
(f) Further Covenants. The Debtor hereby makes such further covenants, if
any, as may be set forth on a Schedule 6(f) attached hereto and made a part
hereof.
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7. Rights of Secured Party. Upon the occurrence of any Event of Default,
Secured Party shall have the right to declare all of the Obligations to be
immediately due and payable and shall then have the rights and remedies of a
secured party under the Uniform Commercial Code or under any other applicable
law, including, without limitation, the right to take possession of the
Collateral, and in addition thereto, the right to enter upon any premises on
which the Collateral or any part thereof may be situated and remove the same
therefrom and the night to occupy the Debtor's premises for up to ninety (90)
days rent free for the purposes of liquidating Collateral, including without
limitation, conducting an auction thereon. Secured Party may require the Debtor
to make the Collateral (to the extent the same moveable) available to Secured
Party at a place to be designated by Secured Party. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give the Debtor at least ten
(10) days' prior written notice at the address of the Debtor set forth above (or
at such other address or addresses as the Debtor shall specify in writing to
Secured Party) of the time and place of any public sale thereof or of the time
after which any private sale or any other intended disposition thereof is to be
made. Any such notice shall be deemed to meet any requirement hereunder or under
any applicable law (including the Uniform Commercial Code) that reasonable
notification be given of the time and place of such sale or other disposition.
After deducting all costs and expenses of collection, storage, custody, sale or
other disposition and delivery (including reasonable attorneys' fees) and all
other reasonable charges against the Collateral, the residue of the Proceeds of
any such sale or disposition shall be applied to the payment of the Obligations
in such order to priority as Secured Party shall determine and any surplus shall
be returned to the Debtor or to any person or party lawfully entitled thereto.
In the event the Proceeds of any sale, lease or other disposition of the
Collateral hereunder, including without limitation, the Proceeds from the
collection of Accounts, are insufficient to pay all of the Obligations in full,
the Debtor will be liable for the deficiency, together with interest thereon, at
the maximum rate allowable by law, and the costs and expenses of collection of
such deficiency, including (to the extent permitted by law) without limitation,
attorneys' fees, expenses and disbursements.
8. Right of Secured Party to Use and Operate Collateral, Etc. Upon the
occurrence of any Event of Default, Secured Party shall have the night and power
to take possession of all or any part of the Collateral, and to exclude the
Debtor and all persons claiming under the Debtor wholly or partly therefrom, and
thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, Secured Party may, from time to time, at the
expense of the Debtor, make all such repairs, replacements, alterations,
additions and improvements to the Collateral as Secured Party may deem proper.
In any such case Secured Party shall have the right to manage and control the
Collateral and to carry on the business and to exercise all rights and powers of
the Debtor in respect thereto as Secured Party shall reasonably deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as Secured Party may see
fit; and Secured Party shall be entitled to collect and receive all issues,
profits, fees, revenues and other income of the same and every part thereof.
Such issues, profits, fees, revenues and other income shall be applied to pay
the expenses of holding and operating the Collateral and of conducting the
business thereof, and of all maintenance, repairs, replacements, alterations,
additions and improvements, and to make all payments which Secured Party may be
required or may elect to make, if any, for taxes, assessments, insurance and
other charges upon the Collateral or any part thereof, and all other payments
which Secured Party may be required or authorized to make
<PAGE>
Page 10 of 19
under any provision of this Agreement (including legal costs and attorneys'
fees). The remainder of such issues, profits, fees, revenues and other income
shall be applied to the payment of the Obligations in such order of priority as
Secured Party shall determine. Without limiting the generality of the foregoing,
Secured Party shall have the right to apply for and have a receiver appointed by
a court of competent Jurisdiction in any action taken by Secured Party to
enforce its rights and remedies hereunder in order to manage, protect and
preserve the Collateral and continue the operation of the business of the Debtor
and to collect all revenues and profits thereof and apply the same to the
payment of all expenses and other charges of such receivership including the
compensation of the receiver and to the payment of the Obligations as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
9. Collection of Accounts Receivable, Etc. At any time after default,
Secured Party shall have the night to require Debtor to and Debtor shall, upon
written notice from Secured Party:
(a) Make collections of Proceeds upon its Accounts, hold the Proceeds
received from collections in trust for Secured Party and turn over such Proceeds
to Secured Party daily in the exact form which they are received, together with
a collection report in form satisfactory to Secured Party. Secured Party shall
immediately apply, subject to collection, such Proceeds and any Proceeds of
Accounts received by it pursuant to the following provisions of this Section 9.,
to the payment of the Obligations in such order of priority as Secured Party
shall determine;
(b) Assign or endorse the Accounts to Secured Party, and notify account
debtors that the Accounts have been assigned and should be paid directly to
Secured Party;
(c) Turn over to Secured Party all Inventory returned in connection with
any of the Accounts;
(d) Mark or stamp each of its individual ledger sheets or cards pertaining
to its Accounts with the legend "Assigned to First National Bank of New
England," and stamp or otherwise mark and keep its books, records, documents and
instruments relating to the Accounts in such manner as Secured Party may
require; and
(e) Mark or stamp all invoices with a legend satisfactory to Secured Party
so as to indicate that the same should be paid directly to Secured Party.
Notwithstanding the foregoing, Secured Party shall have the night,
at any time after the occurrence of an Event of Default, to itself so notify
such account debtors to make such payments of the Accounts directly to Secured
Party and Secured Party shall have the further right to notify the post office
authorities to change the address for delivery of mail of Debtor to an address
designated by Secured Party and to receive, open and dispose of all mail
addressed to Debtor. For the purposes of this Section 9., Debtor hereby
irrevocably constitutes Secured Party as Debtor's attorney-in-fact to issue in
the name and execute or endorse on behalf of Debtor each and every notice,
instrument and document necessary to carry out the purposes of the provisions of
this Section 9., and to take such action in connection with the collection of
the Accounts, including without limitation, suing thereon, compromising or
adjusting the same, as Secured party, in its sole discretion, deems necessary.
The power of attorney granted hereby shall be self-
<PAGE>
Page 11 of 19
executing, but the Debtor shall promptly execute and deliver to Secured Party,
upon written request of Secured Party, such additional separate powers of
attorney as Secured Party may from time to time request.
1. Events of Default. The Debtor shall be in default under this Agreement
upon the happening of any of the following events or conditions (herein
individually called an "Event of Default" and collectively called "Events of
Default");
(a) Failure to pay any part of the Obligations when due;
(b) Nonperformance by the Debtor of any agreement with, or any condition
imposed by, Secured Party or Small Business Administration (hereinafter called
"SBA"), with respect to the indebtedness, which nonperformance is not cured
within ten (10) days of Secured Party's notice to the Debtor of such failure;
(c) Secured Party's discovery of the Debtor's failure in any application
of the Debtor to Secured Party or SBA to disclose any fact deemed by Secured
Party to be material or of the making therein or in any of the said agreements,
or in any affidavit or other documents submitted in connection with said
application or the indebtedness, of any material misrepresentation by, on behalf
of, or for the benefit of the Debtor;
(d) The reorganization (other than a reorganization pursuant to any of the
provisions of the Bankruptcy Reform Act of 1978, as amended), or merger or
consolidation of the Debtor (or the making of any agreement therefor) without
the prior written consent of Secured Party;
(e) The Debtor's failure duly to account, to Secured Party's satisfaction,
at such time or times as Secured Party may require, for any of the Collateral,
or proceeds thereof, coming into the control of the Debtor, within ten (10) days
of Secured Party's notice to the Debtor to do so; or
(f) The entering of a judgment in excess of $50,000.00 against the Debtor
in any suit affecting the Debtor deemed by Secured Party to affect adversely its
interest hereunder in the Collateral or otherwise.
2. Waivers, Etc. The Debtor hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with this Agreement or
the enforcement of Secured Party's rights hereunder or in connection with any
Obligations or any Collateral; consents to and waives notice of. (a) the
granting of renewals, extensions of time for payment or other indulgences to the
Debtor or to any account debtor in respect of any account receivable of the
Debtor; (b) substitution, release or surrender of any Collateral; (c) the
addition or release of persons primarily or secondarily liable on any of the
Obligations or on any account receivable or other Collateral; and (d) the
acceptance of partial payments on any Obligations or on any account receivable
or other Collateral and/or the settlement or compromise thereof. No delay or
omission on the part of Secured Party in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder. Any waiver of
any such right on any one occasion shall not be construed as a bar to or waiver
of any such night on any such future occasion. THE DEBTOR FURTHER WAIVES ANY
RIGHT IT MAY HAVE UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (OR UNDER
THE LAWS OF ANY OTHER STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED), OR
UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA, TO NOTICE OR TO A
<PAGE>
Page 12 of 19
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THIS
AGREEMENT TO SECURED PARTY AND WAIVES ITS RIGHTS, IF ANY, TO SET ASIDE OR
INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE FOREGOING PROVISIONS
HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED
WITHOUT A PRIOR JUDICIAL HEARING. THE DEBTOR'S WAIVERS UNDER THIS SECTION HAVE
BEEN MADE VOLUNTARILY, INTELLIGENTLY, KNOWINGLY, WITHOUT DURESS AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS THEREOF.
12. Termination, Assignment, Etc. This Agreement and the security interest
in the Collateral created hereby shall terminate when all of the Obligations
have been paid and finally discharged in full. No waiver by Secured Party or by
any other holder of the Obligations of any default shall be effective unless in
writing signed by Secured Party nor shall any waiver granted on any one occasion
operate as a waiver of any other default or of the same default on a future
occasion. In the event of a sale or assignment by Secured Party of all or any of
the Obligations held by Secured Party, Secured Party may assign or transfer its
respective rights and interests under this Agreement in whole or in part to the
purchaser or purchasers of such Obligations, whereupon such purchaser or
purchasers shall become vested with all of the powers and rights hereunder, and
Secured Party shall thereafter be forever released and fully discharged from any
liability or responsibility hereunder with respect to the rights and interests
so assigned except that Secured Party shall be liable for damages suffered by
the Debtor as a result of actions taken by Secured Party in bad faith or with
willful misconduct.
13. Notices. Except as otherwise provided herein, notice to the Debtor or
to Secured Party shall be deemed to have been sufficiently given or served for
all purposes hereof if mailed by certified or registered mail, return receipt
requested, as follows:
(a) if to Debtor:
Mace Security International, Inc.
160 Benmont Avenue
Bennington, VT 05201
Attention: Jon E. Goodrich
(b) if to Secured Party:
First National Bank of New England
One Commercial Plaza
Hartford, Connecticut 06103
Attention: Documentation Department
14. Jury Waiver. THE DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN
ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART
AND/OR THE ENFORCEMENT OF ANY OF SECURED PARTY'S RIGHTS AND REMEDIES, INCLUDING
WITHOUT LIMITATION, TORT CLAIMS. THE DEBTOR ACKNOWLEDGES
<PAGE>
Page 13 of 19
THAT DEBTOR MAKES THIS WAIVER VOLUNTARILY, INTELLIGENTLY, KNOWINGLY, WITHOUT
DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS THEREOF.
15. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon Secured Party and the Debtor and their respective successors and
assigns. In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Agreement
may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
16. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts and may not be amended except in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
WITNESSES: MACE SECURITY INTERNATIONAL, INC.
/s/ James K. Bodurtha By /s/ Mark A. Capone
- ----------------------------- ---------------------------------
Name: Mark A. Capone
Title: Treasurer
/s/ James K. Bodurtha By /s/ Richard M. Rabideau
- ----------------------------- ---------------------------------
Name: Richard M. Rabideau
Title: Senior Vice President
<PAGE>
Page 14 of 19
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 25, 1997
Then personally appeared the above-named Mark A. Capone, Treasurer of MACE
SECURITY INTERNATIONAL, INC., and acknowledged the foregoing to be his free act
and deed and the free act and deed of MACE SECURITY INTERNATIONAL, INC., before
me.
/s/ James K. Bodurtha
--------------------------------------------
, Notary Public
My commission expires:
JAMES K. BODURTHA
NOTARY PUBLIC
Commonwealth of Massachusetts
My commission expires: 11/8/2002
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 25, 1997
Then personally appeared the above-named Richard M. Rabideau, Senior Vice
President of FIRST NATIONAL BANK OF NEW ENGLAND, and acknowledged the foregoing
to be the free act and deed of FIRST NATIONAL BANK OF NEW ENGLAND, before me.
/s/ James K. Bodurtha
--------------------------------------------
, Notary Public
My commission expires:
JAMES K. BODURTHA
NOTARY PUBLIC
Commonwealth of Massachusetts
My commission expires: 11/8/2002
<PAGE>
Page 15 of 19
Schedule 6(f)
Financial Covenants
Unless the Bank otherwise consents in writing, See Financing Agreements.
<PAGE>
Page 16 of 19
Exhibit A
(Collateral Description)
Debtor: Secured Party:
Mace Security International, Inc. First National Bank of New England
160 Benmont Avenue One Commercial Plaza
Bennington, VT 05201 Hartford, Connecticut 06103
(a) all accounts, as that term is defined in Article 9 of the Uniform
Commercial Code as in effect from time-to-time in the Commonwealth of
Massachusetts (the "UCC"), now owned or hereafter acquired, and, in any event,
shall include any night to payment held by Debtor, whether in the form of
accounts receivable, notes, drafts, acceptances or other forms of obligations
and receivables, now owned or hereafter received or acquired by or belonging or
owing to the Debtor (including, without limitation, under any trade name, style
or division thereof) for inventory sold or leased or services rendered by it
whether or not earned by performance, together with all guarantees and security
therefor and all proceeds thereof, whether cash proceeds or otherwise,
including, without limitation, all right, title and interest of Debtor in the
inventory which gave rise to any such accounts, including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed rejected or repossessed inventory or
other goods;
(b) all chattel paper, as that term is defined in Article 9 of the UCC,
now owned or hereafter acquired, and, in any event, shall include any writing or
writings which evidence both a monetary obligation and a security interest in or
a lease of specific goods, whether now or hereafter held by Debtor;
(c) all contracts, undertakings, franchise agreements or other agreements
(other than rights evidenced by chattel paper, documents or instruments, as
those terms are defined above and below), now owned or hereafter acquired, in or
under which the Debtor may now or hereafter have any right, title or interest,
including, without limitation, with respect to an account, and any agreement
relating to the terms of payment or the terms of performance thereof;
(d) all documents, as that term is defined in Article 9 of the UCC now
owned or hereafter acquired;
(e) all equipment, as that term is defined in Article 9 of the UCC, and,
in any event, shall include, without limitation, all machinery, tools, dyes,
equipment, furnishings, fixtures, leasehold improvements, vehicles (other than
motor vehicles) and computers and other electronic data processing and other
office equipment, now owned or hereafter acquired, including, but not limited
to, the items of equipment, if any, listed on Exhibit B attached hereto and made
a part hereof, any and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto, and all
contracts, contract rights and chattel paper arising out of any lease of any of
the foregoing;
<PAGE>
Page 17 of 19
(f) all general intangibles, as that term is defined in Article 9 of the
UCC, now owned or hereafter acquired, and, in any event, shall include all
night, title and interest which the Debtor may now or hereafter have in or under
any contract, all customer lists, trademarks, patents, rights in intellectual
property, interests in partnerships, joint ventures and other business
associations, licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how,' software, data
bases, data, skill, expertise, recipes, experience, processes, models, drawings,
blueprints, catalogs, materials and records, goodwill (including, without
limitation, the goodwill associated with any trademark, trademark registration
or trademark licensed under any trademark license, claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification;
(g) all instruments, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, and, in any event, shall include any negotiable
instrument or certificated security, as defined in Article 8 of the UCC, or any
other writing which evidences a right to the payment of money and is not itself
an instrument that constitutes, or is a part of a group or writings that
constitute, chattel paper, and is of a type which, in the ordinary course of
business, is transferred by delivery with any necessary endorsement or
assignment, whether now or hereafter held by Debtor;
(h) all inventory, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, wherever located, and, in any event, shall include
all inventory, merchandise, goods and other personal property which are held by
or on behalf of the Debtor for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in the Debtor's
business, or the processing, packaging, promotion, delivery or shipping of the
same, and all finished goods, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of the Debtor or is
held by the Debtor or by others for the Debtor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of the Debtor or of any carriers, forwarding agents,
truckers, warehousemen, vendors, selling agents or other persons;
(i) all proceeds, as that ten-n is defined in Article 9 of the UCC, now
owned or hereafter acquired, and, in any event, shall include (a) any and all
accounts, chattel paper, instruments, cash and other proceeds payable to the
Debtor from time-to-time in respect of any of the foregoing collateral security,
(b) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Debtor from time-to-time with respect to any of the collateral
security, (c) any and all payments (in any form whatsoever) made or due and
payable to the Debtor from time-to-time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
collateral security by any governmental body, authority, bureau or agency (or
any person acting under color of governmental authority), and (d) any and all
other amounts from time-to-time paid or payable under or in connection with any
of the collateral security;
(j) all other collateral in which the Debtor may hereafter grant to the
Secured Party a security interest; and
<PAGE>
Page 18 of 19
(k) all renewals, substitutions, replacements, additions, accessions and
products of any and all of the foregoing.
Other Liens
The security interest herein granted shall constitute:
1. A first priority security interest in all Inventory and all other
Collateral of the Debtor, excepting Accounts and fixed assets (fixed
assets to include Equipment).
2. A second priority security interest in all Accounts of the Debtor, subject
only to a first priority security interest in Accounts granted to the
Secured Party in connection with a $250,000.00 Revolving Line of Credit
Loan from Secured Party to Debtor, as evidenced by a separate Security
Agreement by and between said parties of even date herewith.
3. A third priority security interest in all fixed assets, including
Equipment, of the Debtor, subject only to (1) a first priority security
interest in fixed assets, including Equipment, granted to the Secured
Party in connection with a $800,000.00 Commercial Term Loan from Secured
Party to Debtor, as evidenced by a separate Security Agreement by and
between said parties of even date herewith, and (ii) a second priority
security interest in fixed assets, including Equipment, granted to the
Secured Party in connection with a $250,000.00 Revolving Line of Credit
Loan from Secured Party to Debtor, as evidenced by a separate Security
Agreement by and between said parties of even date.
<PAGE>
Page 19 of 19
Exhibit B
(Speciflc Equipment Description)
[NONE LISTED]
<PAGE>
Original Hand-Delivered to
M. Mancuso at FLNB on 9/29/97
LOAN NUMBER
PLP 155-372-4004
U.S. SMALL BUSINESS ADMINISTRATION
1550 MAIN ST
SPRINGFIELD, MASSACHUSETTS 01103
AUTHORIZATION AND LOAN AGREEMENT
(GUARANTY LOANS)
First National Bank of New England (LENDER)
One Monarch Place Suite 1240
Springfield, Massachusetts 01144
Your request dated September 12, 1997 for SBA to Guarantee 75% of a loan in the
amount of $1,000,000 to be made by Lender to :
Mace Security International, Inc.(BORROWER)
160 Benmont Ave.
Bennington, VT 05201
is hereby approved pursuant to Section 7(a) of the Small Business Act as
amended.
1. The following forms are herewith enclosed:
(a) Three copies of SBA Note, one to be executed by the Borrower, the
other two to be conformed. The original executed copy must be
retained by you and one conformed copy must be sent to SBA
immediately after first disbursement, together with a guaranty fee
of $25,937.50. This fee shall be mailed to SBA, Denver, Colorado
80259 and paid by Lender within 90 days of the date of this
Authorization and Loan Agreement and Lender may charge the Borrower
for such fee only after the Lender has paid the fee and an initial
disbursement has been made on the loan.
(b) Copies of the SBA Settlement Sheet, Form 1050 are to be completed
and executed by Lender and Borrower to reflect each disbursement.
Prompt reporting of disbursements is necessary.
(c) Compensation Agreements, (Form 159) shall be executed by Borrower,
its representative and Lender and returned to SBA if Borrower has
employed an attorney, accountant or other representative, or if
Borrower is charged fees for services by Lender or an associate of
Lender. If no such fees have been charged, please write "None" and
return the form, executed by the Lender and the Borrower, to SBA.
(d) The original copy of the Authorization (and documents itemized
below, if any) shall be executed prior to first disbursement and
retained in loan file by the Lender. (A
<PAGE>
copy of the Authorization, Amendments, and itemized documents should
be given to the Borrower.)
2. This Authorization is subject to:
(a) Provisions of the Guaranty Agreement between Lender and SBA, dated
November 6, 1990, as supplemented, May 25, 1995, or as further
supplemented, if applicable.
(b) First Disbursement of the loan being made not later than three
months, and no disbursement being made later than six months, from
the date of this Authorization, unless such time is extended
pursuant to prior written consent by SBA.
(c) Receipt by Lender of evidence that there has been no unremedied
adverse change since the date of the Application, or since any of
the preceding disbursements, in the financial or any other condition
of Borrower, which would warrant withholding or not making any such
disbursement or any further disbursement.
(d) The representations made by Borrower in its loan application, the
requirements or conditions set forth in Lender's application form,
including the supporting documents thereto, the conditions set forth
herein and any future conditions imposed by Lender (with prior SBA
approval).
(e) Lender agrees to pay an ongoing guaranty fee equal to one-half of
one percent per annum on the guaranteed portion of the outstanding
balance. This fee shall be paid by the lender following the receipt
of Borrower's monthly note payment. The fee may not be charged to
the Borrower and shall be received by the SBA-designated fiscal and
transfer agent by the third day of the month (or the next business
day thereafter, if the third is not a business day), following
receipt of a scheduled monthly note payment from Borrower. There is
a two business day grace period after the due date. Lender agrees to
report the status of all of its SBA guaranteed loans on a monthly
bases using, SBA Form 1502 or an acceptable electronic format.
3. Terms of Loan:
(a) Repayment term, interest fate(s) and maturity.
NOTE PAYABLE: The undersigned will pay principal and interest by
making payments in the amount of $13,215.07 on the first day of each
month beginning on November 1, 1997. The undersigned will make these
payments until they have paid in full all principal and interest and
any other sums due hereunder. Notwithstanding the foregoing, the
entire indebtedness evidenced by this Note, including, but not
limited to, all outstanding principal and accrued and unpaid
interest, shall be due and payable in full ten (10) years from date.
The undersigned's initial monthly payments shall be calculated in
accordance with the full amortization of the loan evidenced by this
Note by level monthly payments of principal and interest over a ten
(10) year period at the interest rate applicable on the date hereof
On each Adjustment Date (as herein defined), the amount of the
monthly payments will be adjusted so as to provide for the full
amortization of the then outstanding principal at the interest rate
established at each Adjustment Date in level monthly payments of
principal and interest over the remaining term of the original ten
(10) year amortization period.
-2-
<PAGE>
Interest Rate
Interest shall accrue on the outstanding, principal amount of this Note at
a per annum rate of one and one half (1.50) percentage points above the
Prime Rate on a floating basis. The initial interest rate hereunder is ten
(10.00) percent. On November 1, 1997 and on the first day of each and
every month thereafter until all sums due hereunder are paid in full (each
being referred to as an "Adjustment Date"), the interest rate on the
unpaid principal balance hereunder shall be adjusted, without notice or
demand, to a per annum rate of one and one half (1.50) percentage points
above the Prime Rate in effect on the applicable Adjustment Date (or the
following Monday in the event that such Adjustment Date falls on a
Saturday or Sunday), which such rate shall remain in effect until the
succeeding Adjustment Date. Interest hereunder shall be computed on a
daily basis and on the basis of a Three Hundred Sixty (360) day year and a
thirty day month. The undersigned further agrees to pay all taxes levied
or assessed on this Note or the debt evidenced hereby against the holder
of this Note, and further agrees to pay all costs, expenses and attorneys'
fees incurred in any action to collect this Note or to defend, protect,
preserve, or realize upon or foreclose any mortgage or security agreement
securing this Note or to protect, defend, preserve, foreclose or sustain
the lien of said mortgage or security agreement or in any litigation or
controversy arising from or connected with said mortgage, security
agreement, or this Note. As used herein, "Prime Rate" shall mean the rate
printed in a national financial newspaper published each business day.
All payments received by the Lender, at the option of the Lender, shall be
applied first to any outstanding charges and expenses incurred by the
Lender in connection with this Note or any documents executed in
connection with this Note, then to any unpaid and accrued interest and
finally to the outstanding principal due under the Note. The undersigned
agrees that the interest shall accrue at the foregoing rate on unpaid
balance before and after maturity, by acceleration or otherwise.
THE FOLLOWING PROVISION WILL BE INCLUDED IN THE NOTE LANGUAGE OF ALL
NOTES:
The Maker hereby grants to the Holder hereof a lien and right of set-off
for all of the maker's liabilities to Holder upon and against all of the
Maker's deposits, credits and other property now or hereafter in the
possession or control of Holder or in transit to it. The Holder may at any
time apply the same or any part thereof to any of the maker's liabilities
to Holder, whether or not matured at the time of such application.
Holder should give written notice to the undersigned of each increase or
decrease in the interest (and change in installment amount, if applicable)
within thirty days after the effective date of each rate adjustment;
however, the fluctuation of the interest rate is not contingent on whether
the notice is given. If the undersigned shall be in default in payment due
on the indebtedness herein and the SMALL BUSINESS ADMINISTRATION (SBA)
purchases its guaranteed portion of said indebtedness, the rate of
interest on both the guaranteed and unguaranteed portions herein shall
become fixed at the rate in effect as of the date of default. If the
undersigned shall not be in default in payment when SBA purchases its
guaranteed portion, the rate of interest on both the Guaranteed and
unguaranteed portions herein shall be fixed at the rate in effect as of
the date of purchase by SBA.
-3-
<PAGE>
Maker agrees to pay a late charge equal to 5% of the monthly payment
amount due if such payment is not received within ten days of the due
date. Funds received from the Borrower will be applied first to interest
to the date of receipt, then to principal and then to the late fee.
(b) Use of Proceeds of Loan as follows (show specific uses for which loan
is authorized):
1. Approximately $650,000 to refinance debt to Key Bank
2. Approximately $350,000 for working capital and closing costs
NOTE: DISBURSEMENT OF LOAN PROCEEDS SHALL BE BY TWO PARTY CHECKS (PAYABLE TO
BORROWER AND VENDOR, OR TO BORROWER AND CREDITOR), OR BY WIRE TRANSFER, TO
ASSURE THAT USE OF PROCEEDS COMPLIES WITH THIS LOAN AUTHORIZATION.
c. Collateral:
1. First priority security interest (SBA Form 1059) in all inventory
and all other collateral of the Borrower, excepting accounts and
fixed assets (fixed assets to include equipment). UCC SEARCH
REQUIRED AFTER RECORDING.
2. Second priority security interest (SBA Form 1059) in all accounts of
the Borrower, subject only to a first priority security interest in
accounts granted to Lender in connection with a S250,000.00
Revolving Line of Credit Loan from Lender to Borrower. UCC SEARCH
REQUIRED AFTER RECORDING.
3. Third priority security interest (SBA Form 1059) in all fixed
assets, including equipment, of the Borrower, subject only to (1) a
first priority security interest in fixed assets, including
equipment, granted to the Secured Party in connection with a
$800,000.00 Commercial Term Loan from Lender to Borrower, and (11) a
second priority security interest in fixed assets, including
equipment, granted to the Lender in connection with a $250,000.00
Revolving Line of Credit Loan from Lender to Borrower. UCC SEARCH
REQUIRED AFTER RECORDING.
4. Guaranty on SBA Form 148 of Jon E. Goodrich.
5. Assignment of life insurance with acknowledgment of home office on
Jon E. Goodrich in the amount of $250,000 which shall be decreasing
term or existing permanent type insurance. Original policy to be
retained by Lender. No additional life insurance is to be purchased
from business income or assets without prior written approval of
SBA.
NOTE: Assignment of life insurance shall be by an absolute
assignment properly acknowledged by home office of insurer.
Lender should not be named as beneficiary of these policies.
6. To further induce Lender to make and SBA to Guarantee this Loan,
Lender and SBA impose the following conditions:
-4-
<PAGE>
(a) Execution of all documents required in Item I above.
(b) Reimbursable Expenses - Borrower will, on demand, reimburse Lender
for any and all expenses incurred, or which may be hereafter
incurred, by Lender from time to time in connection with or by
reason of Borrower's application for and the making and
administration of the Loan.
(c) Books, Records, and Reports - Borrower will at all times keep proper
books of account in a manner satisfactory to Lender and/or SBA.
Borrower hereby authorizes Lender or SBA to make or cause to be
made, at Borrower's expense and in such manner and at such times as
Lender or SBA may require, (a) inspections and audits of any books,
records and papers in the custody or control of Borrower or others,
relating to Borrower's financial or business conditions, including
the making of copies thereof and extracts therefrom, and (b)
inspections and appraisals of any of Borrower's assets. Borrower
will furnish to Lender and SBA for the twelve month period ending
12/31/97 and annually thereafter (no later than 3 months following
the expiration of any such period) and at such other times and in
such form as Lender may prescribe, Borrower's CPA-audited financial
and operating statements; the foregoing reporting requirements shall
be subject to any fifteen (15) day extension period granted by the
Securities and Exchange Commission. Borrower hereby authorizes all
Federal, State, and municipal authorities to furnish reports of
examinations, records, and other information from reports, returns,
files and records of such authorities upon request therefor by
Lender or SBA.
(d) Borrower shall not execute any contracts for management consulting
services which provide for an aggregate annual compensation in
excess of $100,000.00, without prior approval of Lender and SBA.
(e) Financial Statements shall include signed and dated Balance Sheet
and Profit and Loss Statement.
(f) Distributions and Compensation - Borrower or Guarantor will not,
without the prior written consent of Lender or SBA (a) if Borrower
and or Guarantor is a corporation, declare or pay any dividend or
make any distribution upon its capital stock, or purchase or retire
any of its capital stock, or consolidate or merge with any other
company, or give any preferential treatment, make any advance,
directly or indirectly, by way of loan, gift, bonus, or other-,vise,
to any company directly or indirectly, controlling or affiliated
with or controlled by Borrower and or Guarantor, or any other
company, or to any officer, director or employee of Borrower and or
Guarantor, or of any such company, (b) if Borrower and or Guarantor
is a partnership or individual make any distribution of assets of
the business of Borrower and or Guarantor, other than reasonable
compensation for services, or give any preferential treatment, make
any advance, directly or indirectly, by way of loan, gift, bonus, or
otherwise, to any partner or any of its employees, or to any company
directly or indirectly controlling or affiliated with or controlled
by Borrower and or Guarantor, or any other company.
(g) Other Provisions:
-5-
<PAGE>
1. Borrower and or Guarantor shall not in any way alter its form
of business organization without the prior written consent of
Lender.
2. Borrower and or Guarantor to display SBA Form 722, Equal
Opportunity Poster, in its place of business where it is
clearly visible to employees, applicants for employment, and
the general public.
3. Guarantors/Principals to furnish personal financial statements
as of 12/31/97 and annually thereafter.
4. Prior to the first disbursement Lender shall be in receipt of
satisfactory evidence that all applicable taxes have been paid
and all zoning regulations and all licensing regulations have
been complied with.
5. The Borrower agrees, to the extent commercially reasonable, to
purchase only American-made equipment and products with the
proceeds of this loan.
6. Prior to any disbursement of loan proceeds, Lender must obtain
Federal Income tax information on Borrower's business directly
from the Internal Revenue Service by submitting IRS Form 4506.
The tax data received from IRS should be compared with that
submitted with the loan application. Any significant
differences must be resolved to the satisfaction of Lender and
SBA before loan proceeds can be disbursed.
7. Prior to first disbursement, the Borrower must obtain, and
maintain, Federal Flood Insurance or other appropriate special
hazard insurance in amounts and coverages equal to the lesser
of (1) the insurable value of the property or (2) the maximum
limit of coverage available. Evidence that required flood or
special hazard insurance has been acquired may be in the form
of proof of payment to any licensed insurance agent
specifically relative to the required flood or hazard
insurance or a copy of the required flood or hazard insurance
policy which has been issued. Borrower will not be eligible
for either any future disaster assistance or SBA business loan
assistance if this flood or special hazard insurance is not
maintained as stipulated herein throughout the entire term of
this loan.
8. Borrower shall provide and maintain hazard insurance on all
business personal property in such amounts and for such
coverage as shall be satisfactory in all respects to lender.
Said insurance shall be maintained for the life of the loan.
Policy coverage on personal property shall designate Lender as
loss payee under a standard lender's loss payable clause and
shall provide a minimum of 10 days written notice to lender
prior to cancellation.
9. Prior to the first disbursement on this loan, Borrower to
provide Lender with:
(a) SBA form 160, "Resolution of Board of Directors."
(b) Certificate of Legal Existence from the Secretary of
State's Office.
Borrower agrees that it will not, without the prior written
consent of Lender, authorize nor issue additional shares of
its capital stock, nor sell, transfer, or
-6-
<PAGE>
redeem more than ten (10%) percent of its outstanding shares
of corporate stock.
10. Prior to first disbursement on this loan, Lender must make a
field visit to the business site for completion of the SBA
Environmental Questionnaire set forth as Appendix 9 to SOP 50
10 3. If, in the opinion of Lender/SBA, the results of the
questionnaire indicate the possibility of site contamination,
then a Phase I audit will be required. AND if unresolved
concerns remain after completing a Phase I Audit, Lender
and/or SBA may require a professional environmental audit
(Phase II audit). All assessments, audits, site inspections or
other analysis shall be at Borrower's expense and shall be
performed by a qualified environmental consulting firm, and
copies of the results must be provided to the SBA and
participating Lender. If the results of any site assessment,
audit, etc. reveal that environmental problems exist, or if
the results of any environmental audit reveal compliance
problems with relevant environmental laws and regulations,
Lender and/or SBA reserve the right to determine, in its sole
judgment, whether such problems pose sufficient credit risk
that Lender and/or SBA desires to reconsider entering into a
loan relationship.
11. Borrower agrees to comply with all existing and future state
and federal regulations governing the handling, storage and
use of any and all hazardous, toxic, or otherwise regulated,
substances or materials; and further covenants that he will
permit no such materials or substances or by products or
wastes thereof, to be permanently stored at the facility, and
that Borrower will operate the facility in such a manner that
the site will remain free of contaminating materials, wastes,
by products or substances.
12. Borrower agrees to comply with all existing and future state
and federal regulations governing the maintenance and
emplacement of underground storage tanks and further covenants
that Borrower will permit no petroleum base waste or hazardous
waste to be stored at the site, and that he will operate the
business in such a manner that the site will remain free of
such contamination waste.
13. Evidence of satisfactory lease with terms and conditions
acceptable to Lender.
14. Non-financed fixed asset capital expenditures of Borrower
shall be limited to $100,000 per annum over and above those
fixed asset those fixed asset expenditures in the aggregate
amount of approximately $700,000.00 marked by an asterisk on
Schedule "A" attached hereto.
15. Prior to disbursement, Lender shall obtain from Borrower a
Certification Regarding Debarment, Suspension, Ineligibility
and Voluntary Exclusion, Lower Tier Covered Transaction (SBA
Form 1624).
16. Prior disbursement, SBA Form 641, "Request for Counseling,"
(SCORE and ACE) must be executed by Borrower.
-7-
<PAGE>
17. Borrower will not, prior to payment in full of the
indebtedness evidenced by the Note, without prior written
consent of the holder of the Note, pledge, mortgage or
otherwise cause or permit to be encumbered in any manner
whatsoever any of Borrower's property or assets, whether then
owned or thereafter acquired.
18. Borrower certifies that no principal who owns at least 50% of
the voting interest of the company is delinquent more than 60
days under the terms of any (a) administrative order, (b)
court order, or (c) repayment agreement that requires payment
of child support.
7. Parties Affected - This Agreement shall be binding upon Borrower and
Borrower's successors and assigns. No provision stated herein shall be
waived without the prior written consent of SBA. The Loan shall be
administered as provided in the Guaranty Agreement.
AIDA ALVAREZ
Administrator
- --------------------------------------------------------------------------------
By Richard W. Bradshaw, Executive Vice President Date
As a Preferred Lender, as an Agent of and on Behalf of the SBA
Borrower and Lender hereby agree to the conditions imposed herein and further
agree that the terms and conditions herein are for the benefit of, and may be
enforced by, Lender and/or SBA. This Authorization and Loan Agreement and
amendments constitute the Loan Agreement between Lender and Borrower.
/s/ Mark A. Capone Treasurer 9/25/97
- --------------------------------------------------------------------------------
Borrower: Mace Security International, Inc. Title Date
NOTE,: Corporate applicants must execute Authorization in corporate name, by
duly authorized officer, and seal must be affixed and duly attested; partnership
applicants must execute in firm name, together with signature of a General
Partner.
/s/ JON E. GOODRICH 9/25/97
- --------------------------------------------------------------------------------
Guarantor: Jon E. Goodrich Date
/s/ RICHARD M. RABIDEAU_____Senior V.P 9/25/97
- --------------------------------------------------------------------------------
Lender: Richard M. Rabideau Title Date
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<PAGE>
Schedule "A"
MSI
-------------
MACE
SECURITY
INTERNATIONAL
-------------
September 24, 1997
Richard Rabideau, Vice President
First National Bank of New England
One Commercial Plaza
Hartford, Connecticut 06103
Dear Richard:
Pursuant to your request, I have outlined our projected use of the proceeds from
your loan to us:
Liquidation of Key Bank debt $ 600,000
Initial Security Stores in Denver $ 100,000
Offsite facility to manufacture
raw materials $ 150,000
Opening of two Security Stores locally
plus working capital $ 170,000
Additional mall stores in the Denver and
front-range area plus working capital $ 330,000
Additional leaseholds to corporate building
to facilitate additional leaseable space
and courtyard improvements $ 450,000
----------
$1,800,000
Should you need any further information, please do not hesitate to call
me.
Sincerely,
/s/ Mark A. Capone
----------------------------------
Mark A. Capone
Chief Financial Officer, Treasurer
And Vice president of Finance
MAC:bls
[LETTERHEAD OF MACE SECURITY INTERNATIONAL]
<PAGE>
OMB Approval No, 3245-0201
Expiration Date: 12-31-93
SBA LOAN NO.
PLP 155-372-4004
U.S. SMALL BUSINESS ADMINISTRATION (SBA)
GUARANTY
September 25, 1997
In order to induce First National Bank of New England (hereinafter called
"Lender") to make a loan or loans, or renewal or extension thereof, to MACE
SECURITY INTERNATIONAL, INC. (hereinafter called "Debtor"), the Undersigned
hereby unconditionally guarantees to Lender, its successors and assigns, the due
and punctual payment when due, whether by acceleration or otherwise, in
accordance with the terms thereof, of the principal of and interest on and all
other sums payable, or stated to be payable, with respect to the note of the
Debtor, made by the Debtor to Lender, of even date herewith in the principal
amount of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) with interest at the
initial rate of ten per cent (10.0%) per annum. Such note, and the interest
thereon and all other sums payable with respect thereto are hereinafter
collectively called 'Liabilities." As security for the performance of this
guaranty the Undersigned hereby mortgages, pledges, assigns, transfers and
delivers to Lender certain collateral (if any), listed in the schedule on the
reverse side hereof. The term "collateral' as used herein shall mean any funds,
guaranties, agreements or other property or rights or interests of any nature
whatsoever, or the proceeds thereof, which may have been, are, or hereafter may
be, mortgaged, pledged, assigned, transferred or delivered directly or
indirectly by or on behalf of the Debtor or the Undersigned or any other party
to Lender or to the holder of the aforesaid note of the Debtor, or which may
have been, are, or hereafter may be held by any party as trustee or otherwise,
as security, whether immediate or underlying, for the performance of this
guaranty or the payment of the Liabilities or any of them or any security
therefor.
The Undersigned waives any notice of the incurring by the Debtor at any
time of any of the Liabilities, and waives any and all presentment, demand,
protest or notice of dishonor, nonpayment, or other default with respect to any
of the Liabilities and any obligation of any party at any time comprised in the
collateral. The Undersigned hereby grants to Lender full power, in its
uncontrolled discretion and without notice to the Undersigned, but subject to
the provisions of any agreement between the Debtor or any other party and Lender
at the time in force, to deal in any manner with the Liabilities and the
collateral, including, but without limiting the generality of the foregoing, the
following powers:
(a) To modify or otherwise change any terms of all or any part of the
Liabilities or the rate of interest thereon (but not to increase the
principal amount of the note of the Debtor to Lender), to grant any
extension or renewal thereof and any other indulgence with respect
thereto, and to effect any release, compromise or settlement with respect
thereto:
(b) To enter into any agreement of forbearance with respect to all or any
part of the Liabilities, or with respect to all or any part of the
collateral, and to change the terms of any such agreement:
(c) To forbear from calling for additional collateral to secure any of the
Liabilities or to secure any obligation comprised in the collateral;
(d) To consent to the substitution, exchange, or release of all or any
part of the collateral, whether or not the collateral, if any, received by
Lender upon any such substitution, exchange, or release shall be of the
same or of a different character or value than the collateral surrendered
by Lender;
(e) In the event of the nonpayment when due, whether by acceleration or
otherwise, of any of the Liabilities, or in the event of default in the
performance of any obligation comprised in the collateral, to realize on
the collateral or any part thereof, as a whole or in such parcels or
subdivided interests as Lender may elect, at any public or private sale or
sales, for cash or on credit or for future delivery, without demand,
advertisement, or notice of the time or place of sale or any adjournment
thereof (the Undersigned hereby waiving any such demand, advertisement and
notice to the extent permitted by law), or by foreclosure or otherwise, or
to forbear from realizing thereon, all as Lender in its uncontrolled
discretion may deem proper, and to purchase all or any part of the
collateral for its own account at any such sale or foreclosure, such
powers to be exercised only to the extent permitted by law.
The obligations of the Undersigned hereunder shall not be released,
discharged or in any way affected, nor shall the Undersigned have any rights or
recourse against Lender, by reason of any action Lender may take or omit to take
under the foregoing powers.
In case the Debtor shall fail to pay all or any part. of the Liabilities
when due, whether by acceleration or otherwise, according to the terms of said
note, the Undersigned, immediately upon the written demand of Lender, will pay
to Lender the amount due and unpaid by the Debtor as aforesaid, in like manner
as if such amount constituted the direct and primary obligation of the
Undersigned. Lender shall not be required, prior to any such demand on, or
payment by, the Undersigned, to make any demand upon or pursue or exhaust any of
its rights or remedies against the Debtor or others with respect to the payment
of any of the Liabilities, or to pursue or exhaust any of its rights or remedies
with respect to any part of the collateral. The Undersigned shall have no right
of subrogation whatsoever with respect to the Liabilities or the collateral
unless and until Lender shall have received full payment of all the Liabilities.
The obligations of the Undersigned hereunder, and the rights of Lender in
the collateral, shall not be released, discharged or in any way affected, nor
shall the Undersigned have any rights against Lender: by reason of the fact that
any of the collateral may be in default at the time of acceptance thereof by
Lender or later; nor by reason of the fact that a valid lien in any of the
collateral may not be conveyed to, or created in favor of Lender; nor by reason
of the fact that any of the collateral may be subject to equities or defenses or
claims in favor of others or may be invalid or defective in any way; nor by
reason of the fact that any of the Liabilities may be invalid for any reason
whatsoever: nor by reason of the fact that the value of any of the collateral,
or the financial condition of the Debtor or any obligor under or guarantor of
any of the collateral, may not have been correctly estimated or may have changed
or may hereafter change; nor by reason of any deterioration, waste, or loss by
fire, theft, or otherwise of any of the collateral, unless such deterioration,
waste, or loss be caused by the willful act or willful failure to act of Lender.
<PAGE>
The Undersigned agrees to furnish Lender, or the holder of the aforesaid
note of the Debtor, upon demand, but not more often than semiannually, so long
as any part of the indebtedness under such note remains unpaid, a financial
statement setting forth, in reasonable detail, the assets, liabilities, and net
worth of the Undersigned.
The Undersigned acknowledges and understands that if the Small Business
Administration (SBA) enters into, has entered into, or will enter into, a
Guaranty Agreement, with Lender or any other lending institution, guaranteeing a
portion of Debtors Liabilities, the Undersigned agrees that it is not a
coguarantor with SBA and shall have no right of contribution against SBA. The
Undersigned further agrees that all liability hereunder shall continue
notwithstanding payment by SBA under its Guaranty Agreement to the other lending
institution.
The term "Undersigned' as used in this agreement shall mean the signer or
signers of this agreement, and such signers, if more than one, shall be jointly
and severally liable hereunder. The Undersigned further agrees that all
liability hereunder shall continue notwithstanding the incapacity, lack of
authority, death, or disability of any one or more of the Undersigned, and that
any failure by Lender or its assigns to file or enforce a claim against the
estate of any of the Undersigned shall not operate to release any other of the
Undersigned from liability hereunder. The failure of any other person to sign
this guaranty shall not release or affect the liability of any signer hereof.
/s/ JON E. GOODRICH
-------------------------------------
Jon E. Goodrich
.........................
NOTE: - Corporate guarantors must execute guaranty in corporate name, by duly
authorized officer, and seal must be affixed and duly attested; partnership
guarantors must execute guaranty in firm name, together with the signature of a
general partner. Formally executed guaranty is to be delivered at the time of
disbursement of loan.
(LIST COLLATERAL SECURING THE GUARANTY)
FIRST NATIONAL BANK OF NEW ENGLAND
COMMERCIAL REVOLVING PROMISSORY NOTE
$250,000.00 September 25, 1997
Springfield, Massachusetts
ON DEMAND, FOR VALUE RECEIVED, the undersigned, MACE SECURITY
INTERNATIONAL, INC., (individually and, if more than one, collectively, the
"Borrower"), promises to pay (jointly and severally, if more than one) to the
order of FIRST NATIONAL BANK OF NEW ENGLAND ("Lender"), at its office at One
Commercial Plaza, Hartford, Connecticut or at such other place as the holder
hereof (including Lender, hereinafter referred to as "Holder"), may designate,
the principal sum of TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($250,000.00), or the aggregate unpaid principal amount of all advances made by
the Holder to the Borrower under the terms hereinafter set forth, whichever is
less, in lawful money of the United States and to pay interest on the unpaid
balance of this Note beginning as of the date hereof, before or after maturity
or judgment (but subject to the default rate of interest set forth below) at the
per annum rate set forth in Paragraph 2 below, which interest rate shall be
computed daily and payable monthly in arrears on the basis of a Three Hundred
Sixty (360) day year and a thirty (30) day month, together with all taxes levied
or assessed on this Note or the debt evidenced hereby against the Holder, and
together with all reasonable costs, expenses and reasonable attorneys' and other
reasonable professionals' fees incurred in any action to collect and/or enforce
this Note or to enforce, protect, preserve, defend, realize upon or foreclose
any security agreement, mortgage or other agreement securing or relating to this
Note, or to enforce, protect, preserve, defend or sustain the lien of said
security agreement, mortgage or other agreement or in any litigation or
controversy arising from or connected in any manner with said security
agreement, mortgage or other agreement, or this Note. Borrower further agrees to
pay all reasonable costs, expenses and reasonable attorneys' and other
reasonable professionals' fees incurred by Holder in connection with any
"workout" or default resolution negotiations involving legal counsel or other
professionals and further in connection with any re-negotiation or restructuring
of the indebtedness evidenced by this Note. Any such costs, expenses and/or fees
remaining unpaid after demand therefor, may, at the discretion of the Holder, be
added to the principal amount of the indebtedness evidenced by this Note.
This Note has been executed and delivered subject to the following terms
and conditions:
1. Advances.
(a) Definitions. As used in this Paragraph 1and otherwise in this Note,
the Following terms shall have the following, meanings:
(i) "Acceptable Accounts" means an account receivable or accounts
receivable of Borrower due not more than ninety (90) days from the date set
forth on the original invoice evidencing such account receivable, arising from
the absolute sale of goods by Borrower in which Borrower had the sole and
complete ownership or the performance of services by Borrower in the ordinary
course of its business, which conforms to the warranties set forth in
subparagraph I (d) below, and which:
<PAGE>
Page 2 of 8
(A) is not an account receivable of a person or entity
obligated to Borrower upon such account receivable (an "Account Debtor") which
has suspended business, made a general assignment for the benefit of creditors,
committed any act of insolvency, or filed or have had filed against it any
petition under any bankruptcy law or any other law or laws for the relief of
debtors;
(B) is not an account receivable which: (1) is subject to any
setoff, counterclaim, defense, allowance or adjustment other than discounts for
prompt payment shown on the invoice or to any dispute, objection or complaint by
the Account Debtor concerning its liability on the account receivable and the
goods, the sale of which gave rise to the account receivable, have not been
returned, rejected, lost or damaged; (2) arises from a sale or sales to an
affiliate, parent, or subsidiary of the Borrower; (3) is the obligation of an
Account Debtor located in a foreign country; and (4) arises from a contract
containing a prohibition against assigning or granting security interest
therein; and
(C) is not an account receivable which Holder, in its sole
discretion, shall notify the Borrower as being ineligible for an advance.
(ii) "Acceptable Equipment" means all equipment and machinery of the
Borrower which Holder, in its sole discretion, shall notify the Borrower as
being eligible for an advance.
(iii) "Acceptable Inventory" means all inventory of the Borrower
consisting of raw materials, work-in-progress and finished goods which are held
by or on behalf of the Borrower for sale or lease and which is: (A) in first
class condition and salable through normal trade channels; (B) new and unused;
(C) owned by the Borrower and subject to no lien, security interest, charge or
other encumbrance whatsoever, except those of Lender, if any; and (D) not of a
class which Holder, in its sole discretion, shall notify the Borrower as being
ineligible for an advance.
(iv) "Maximum Permitted Amount" means an amount equal to the lesser
of. (A) S250,000.00, or (B) the sum of (1) seventy-five percent (75%) of the net
balance due on Acceptable Accounts. The Borrower shall, beginning with calendar
year 1998, reduce the balance outstanding under this Note to zero for a period
of thirty (30) days at least once per each calendar year in the quarter of
Borrower's choosing.
(v) "Termination Date" means May 31, 1998, as such date may be
extended, in writing from time to time, in the Holder's sole and absolute
discretion.
(b) Procedure for Advances, Payment. Within the limits of the Maximum
Permitted Amount, so long as Borrower is in compliance with all of the terms and
conditions of this Note and no Event of Default (as defined in Paragraph 8
hereof) has occurred and no condition exists which would constitute an Event of
Default but for the giving of notice or passage of time, or both, and so long as
Holder has not demanded payment of any outstanding advances made hereunder,
Borrower may request, and Lender may make, in its sole discretion, advances
hereunder from time to time until the Termination Date in the aggregate
principal amount not exceeding at any one time outstanding the Maximum Permitted
Amount. Whenever Borrower desires an advance, Borrower
<PAGE>
Page 3 of 8
shall notify the Lender (which notice shall be irrevocable) by telex, telecopy
or telephone of the proposed borrowing. Such notice (each, a "Notice of
Borrowing") shall specify the date of the proposed borrowing and the amount to
be borrowed. Each Notice of Borrowing must be received by Lender no later than
11:00 a.m., Hartford, Connecticut time on the day such borrowing is requested.
Each Notice of Borrowing shall be immediately followed by a written confirmation
thereof by the Borrower and, if requested by Holder, a written certificate in
form, scope and substance satisfactory to Holder and signed by the chief
financial officer and president of the Borrower which shall set forth in
sufficient detail Borrower's calculation of the Maximum Permitted Amount as
described in subparagraph l(a)(iv)(B) above, if applicable, provided that if
such written confirmation differs in any respect from the action taken by the
Lender, the records of the Lender shall control absent manifest error. Advances
and payments on this Note may be evidenced by borrowing certificates, a grid (if
any) attached to this Note or similar certificates or documents, or by an
internal ledger account of Holder. The Borrower agrees that the amount shown on
said borrowing certificates, grid or similar certificate or internal ledger
account of Holder as outstanding from time to time shall, in the absence of
manifest error, be conclusive of the amount owing to the Holder pursuant to this
Note. ALL ADVANCES HEREUNDER, TOGETHER WITH ACCRUED AND UNPAID INTEREST AND ANY
OTHER AMOUNTS DUE HEREUNDER, SHALL BE DUE AND PAYABLE ON DEMAND, AND IF DEMAND
IS NOT SOONER MADE, ON THE TERMINATION DATE, at which time Borrower shall have
no ability to request, and Holder shall have no obligation to make, any further
advances hereunder. Holder may, at its option, debit principal, interest, fees,
costs and expenses due and payable hereunder to any of Borrower's accounts
maintained with Holder on each date any such amount is due and payable.
(c) Holder Discretion. Nothing, herein shall be construed to require
Holder to make advances hereunder and nothing herein shall prohibit Holder from
lending in excess of the Maximum Permitted Amount or from raising, or lowering
the percentages of advances against Acceptable Accounts, Acceptable Inventory
and/or Acceptable Equipment, it being agreed and understood by Borrower that all
advances hereunder shall be at Holder's sole discretion and shall not establish
a pattern or custom binding upon Holder.
(d) Accounts Receivable Warranties. Borrower represents and warrants to
Holder that: (i) each Acceptable Account is or, at the time it comes into
existence will be, a true and correct statement of (A) the bona fide
indebtedness of the applicable Account Debtor; and (B) the amount of the account
for merchandise sold and delivered to, or for services performed for and
accepted by, such Account Debtor, net of any charges, adjustments, discounts or
other reductions whatsoever; and (ii) at the time of each borrowing hereunder,
there are and, to the best of the Borrower's knowledge after due investigation,
will be no defenses, counterclaims, discounts or setoffs that may be asserted
against Acceptable Accounts.
2. Interest. Interest on each advance made hereunder shall accrue at a variable
rate per annum of one percentage point (1.0%) in excess of the Prime Rate, with
the term "Prime Rate" meaning the "Prime Rate" as published from time to time in
the "Money Rates" section of The Wall Street Journal in the most recent edition
preceding, the time of any interest rate determination, or in the event that
such rate is no longer published in The Wall Street Journal, a comparable index
or reference rate selected by Holder, in its sole discretion. The Prime Rate may
not necessarily be the
<PAGE>
Page 4 of 8
Lender's lowest or best rate. Any change in the interest rate because of a
change in the Prime Rate shall become effective immediately, without notice or
demand, on the date any change in the Prime Rate occurs.
If not sooner demanded, interest shall be due and payable monthly in
arrears beginning on November 1, 1997, and continuing on the first day of each
and every month thereafter until the entire indebtedness evidenced by this Note
has been fully and finally paid. Upon demand for payment of any advance made
hereunder or the occurrence of an Event of Default, without in any way affecting
the Holder's right to accelerate this Note, this Note shall bear interest at a
rate which is three percentage points (3%) per annum greater than the rate
otherwise in effect hereunder.
3. Lawful Interest. Notwithstanding any provisions of this Note, it is the
understanding and agreement of the Borrower and Holder that the maximum rate of
interest to be paid by Borrower to the Holder shall not exceed the highest or
the maximum rate of interest permissible to be charged by a commercial tender
such as Lender to a commercial borrower such as Borrower under the laws of the
State of Connecticut. Any amounts paid in excess of such rate shall be
considered to have been payments in reduction of principal.
4. Additional Payments. If Holder shall deem applicable to this Note (including,
in each case, any borrowed and any unused portion thereof) or any advance made
hereunder, any requirement of any law of the United States of America, any
regulation, order, interpretation, ruling, official directive or Guideline
(whether or not having the force of law) of the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation or any other board or governmental or administrative
agency of the United States of America which shall impose, increase, modify or
make applicable to this Note or any advance made hereunder, or cause this Note
or any advance made hereunder to be included in any reserve, special deposit,
calculation used in the computation of regulatory capital standards, assessment
or other requirement which imposes on Holder any cost that is attributable to
the maintenance thereof, then, and in each such event, Borrower shall promptly
pay Holder, upon its demand, such amount as will compensate Holder for any such
cost, which determination may be based upon the Holder's reasonable allocation
of the aggregate of such costs resulting from any such events. In the event any
such cost is a continuing cost, a fee payable to Holder may be imposed upon
Borrower periodically for so long as any such cost is deemed applicable by
Holder, in an amount determined by Holder to be necessary to compensate Holder
for any such cost, which determination may be based upon the Holder's reasonable
allocation of the aggregate of such costs resulting from any such events. The
determination by Holder of the existence and amount of any such cost shall, in
the absence of manifest error, be conclusive.
5. Late Charge. In the event Borrower falls to pay any installment of interest
within ten (10) days of when it is due and payable, without in any way
affecting, the Holder's right to make demand for payment of or otherwise
accelerate this Note, a late charge equal to five (5) percent of such late
payment shall, at the option of Holder, be assessed against Borrower.
6. Mandatory and Optional Prepayments.
(a) The Borrower shall immediately, without notice or demand, make a
prepayment on account of the advances made hereunder on any date on which the
aggregate principal amount
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outstanding of all advances made hereunder exceeds the Maximum Permitted Amount
in an amount equal to the amount of such excess, together with accrued interest
to the date of such prepayment on the advance or advances, or any portion
thereof, being prepaid.
(b) The Borrower may prepay the unpaid principal balance of this Note, in
whole or in part, at any time without penalty or premium. Any and all such
prepayments shall be applied first to interest accrued to the date of prepayment
and then to the principal balance.
7. Financial Information. As promptly as practicable, upon Holder's request,
Borrower shall deliver to Holder such documentation and information about the
Borrower's financial condition, business and/or operations as Holder may, at any
time and from time to time, request, including without limitation, business
and/or personal financial statements, copies of federal and state income tax
returns and all schedules thereto, aging reports of Borrower's accounts
receivable and accounts payable and a listing of Borrower's inventory and
equipment, all of which shall be in form, scope and content satisfactory to
Holder, in its sole discretion.
8. Events of Default. Notwithstanding the demand nature of the indebtedness
evidenced by this Note, which shall at all times be payable on demand, the
Borrower agrees that each of the following shall constitute an "Event of
Default" hereunder:
(a) Failure of Borrower to pay any of Borrower's liabilities or
obligations to Holder (whether under this Note or otherwise and whether now
existing or hereafter incurred), including without limitation, any installment
of interest or any other sum due hereunder, when due to be paid; or
(b) Failure of Borrower to pay any advance hereunder on demand; or
(c) Failure of Borrower to observe, perform or comply with any covenant,
agreement or duty contained in this Note, which failure is not cured within ten
(10) days of Holder's notice to Borrower of such failure; or
(d) If Borrower or any guarantor of any obligation of the Borrower to
Holder shall be in default under any security agreement or other agreement
governing, securing or relating to this Note, which default is not cured within
any applicable cure period; or
(e) If any material representation or material warranty made by the
Borrower or any guarantor of any obligation of the Borrower to Holder, including
without limitation, any such representation or warranty contained herein, or any
statement, certificate or other data furnished by any of them in connection
herewith, proves at any time to be incorrect or untrue in any material respect;
or
(f) Institution of or consent to proceedings, or the taking of any action
in furtherance of, or the entry of any order or decree of a court of competent
jurisdiction with respect to any of the following:
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(i) Bankruptcy, insolvency or reorganization, readjustment,
arrangement, composition or similar relief as to Borrower or any guarantor of
any obligation of the Borrower to Holder under federal or state bankruptcy or
insolvency statutes or related laws,
(ii) Appointment of a receiver, liquidator, trustee or assignee in
bankruptcy or insolvency as to Borrower or any guarantor of any obligation of
the Borrower to Holder or a substantial part of their respective properties, or
(iii) Assignment of the Borrower or any guarantor of any obligation
of the Borrower to Holder for the benefit of creditors, the winding up or
liquidation of the affairs of the Borrower or such guarantor, or the admission
of Borrower or such guarantor in writing of its inability to pay its debts; or
(g) The death, dissolution, liquidation, insolvency (the term "insolvency"
shall mean either a negative tangible net worth or an inability to pay its debts
as they mature) or termination of legal existence of Borrower or any guarantor
of any obligation of the Borrower to Holder; provided however, that so long as
the Lender is the collateral assignee of at least $1,800,000.00 of life
insurance proceeds on the life of Guarantor, the death of Guarantor shall not
result in an Event of Default hereunder; or
(h) The service of any process upon the Holder seeking to attach or
garnish by mesne or trustee process any funds of Borrower or of any guarantor of
any obligation of the Borrower to Holder which are on deposit with the Holder in
excess of $50,000.00; or
(i) The failure by Borrower or any Guarantor of any obligation of the
Borrower to Holder to pay or perform any material indebtedness or material
obligation owed to any third party when due, or if any such other indebtedness
or obligation shall be accelerated; or
(j) If there shall be any material adverse change in the assets,
liabilities, condition (financial, operating or otherwise or business of the
Borrower or any guarantor of any obligation of the Borrower to Holder; or
(k) If, at any time, the Holder believes in good faith that the prospect
of payment of any obligation or the performance of any agreement of the Borrower
or any guarantor of any obligation of the Borrower to Holder is impaired, or
there is such a change in the assets, liabilities, condition (financial,
operating or otherwise) or business of the Borrower or any such guarantor as the
Holder believes in good faith increases its risk of non-collection, and Borrower
falls to provide Holder with reasonable assurances to the contrary within
fourteen (14) days of Holder's notice to Borrower requesting the same.
Upon the occurrence of any Event of Default, all advances outstanding
hereunder, together with accrued interest thereon and any other sums due under
this Note, shall, at the option of the Holder, become immediately due and
payable, and any obligation of the Holder to make advances hereunder shall
terminate, at the option of the Bank, all of the foregoing without presentment
or demand for payment, notice of non-payment, protest or any other notice or
demand of any kind, all of which are expressly waived by the Borrower. Failure
to exercise such option shall not constitute a waiver of the right to exercise
the same in the event of any subsequent default.
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9. Lien and Right of Setoff. The Borrower hereby grants the Holder a lien and
right of setoff for all Borrower's liabilities upon and against all the
deposits, credits, collateral and property of the Borrower, now or hereafter in
the possession or control of the Holder or in transit to it. Holder may, at any
time after an Event of Default, apply or set off the same, or any part thereof,
to any liability of the Borrower whether or not matured or demanded.
10. No Waiver. No delay or omission by Holder in exercising any rights
hereunder, nor failure by the Holder to insist upon the strict performance by
Borrower of any terms and provisions herein shall operate as or be deemed to be
a waiver of such right, any other right hereunder, or any terms and provisions
herein, and the Holder shall retain the right thereafter to insist upon strict
performance by the Borrower of any and all terms and provisions of this Note or
any document securing the repayment of this Note. No waiver of any right shall
be effective unless in writing and signed by Holder, nor shall a waiver on one
occasion be constituted as a bar to, or waiver of, any such right on any future
occasion.
11. Prejudgment Remedy and Other Waivers. BORROWER ACKNOWLEDGES THAT THE LOAN
EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES DILIGENCE, DEMAND,
PRESENTMENT FOR PAYMENT. NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF PROTEST,
AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, AND ALL RIGHTS UNDER ANY
STATUTE OF LIMITATIONS. THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THESE
WAIVERS KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF TIES WAIVER. THE BORROWER FURTHER
ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR
ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE -DULY
ENFORCED IN ALL INSTANCES.
12. Jury Waiver. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN
ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART
AND/OR THE ENFORCEMENT OF ANY OF YOUR RIGHTS AND REMEDIES, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS. THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THIS
WAIVER KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER
ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR
ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
13. Joint and Several Liability. References in this Note to the Borrower in the
singular shall include the plural, and if Borrower consists of more than one
person, the liability of each Borrower shall be joint and several.
14. Acknowledgment of Copy, Use of Proceeds. The Borrower acknowledges receipt
of a copy of this Note and attests that the proceeds of this Note are to be used
for general commercial
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purposes and that no part of such proceeds will be used, in whole or in part,
for the purpose of purchasing or carrying any "margin security" as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System.
15. Miscellaneous. The provisions of this Note shall be binding upon the
heirs, executors, administrators, successors and assigns of Borrower and shall
inure to the benefit of Holder, its successors and assigns. If any provision of
this Note shall, to any extent, be held invalid or unenforceable, then only such
provision shall be deemed ineffective and the remainder of this Note shall not
be affected. Borrower acknowledges and agrees that Holder shall have the right
to report any delinquencies, defaults and/or losses incurred by Holder hereunder
to any credit agency, bureau or service. This Note shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts (but
not its conflicts of law provisions).
BORROWER
Witness: MACE SECURITY INTERNATIONAL, INC.
/s/ James K. Bodurtha By /s/ Mark A. Capone
- ----------------------------- ------------------------------
Name: Mark A. Capone
Title: Treasurer
<PAGE>
FIRST NATIONAL BANK OF NEW ENGLAND
SECURITY AGREEMENT
SECURITY AGREEMENT made this 25th day of September, 1997 between MACE
SECURITY INTERNATIONAL, INC., whose principal place of business is located at
160 Benmont Avenue, Bennington, Vermont 05201 ("Debtor"), and FIRST NATIONAL
BANK OF NEW ENGLAND, a banking association having an office at One Commercial
Plaza, Hartford, Connecticut ("Secured Party").
In consideration of the mutual covenants and agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Debtor and Secured Party, intending to be bound
legally, agree as follows:
I. Security Interest.
A. To secure payment and performance of the Obligations (as defined
below), Debtor hereby pledges, assigns, transfers and grants to Secured Party a
continuing first priority security interest in all tangible and intangible
personal property, (excluding Motor Vehicles unless so indicated below),
including without limitation, Accounts, Chattel Paper, Contracts, Documents,
Equipment, General Intangibles, Instruments and Inventory, as more particularly
described in Exhibit A annexed, whether now owned or hereafter acquired by
Debtor.
Together, in each instance, with the renewals, substitutions,
replacements, additions, rental payments, products and Proceeds thereof
(hereinafter, collectively called the "Collateral").
The security interest herein granted in the Collateral is a first
priority security interest, except with respect to the prior liens set forth in
Exhibit A.
A. Debtor expressly acknowledges that the security interest granted
hereunder shall remain as security for payment and performance of the
Obligations, whether now existing or which may hereafter be incurred by future
advances, or otherwise. The notice of the continuing grant of this security
interest therefore shall not be required to be stated on the face of any
document representing any such Obligations, nor otherwise identify it as being
secured hereby.
II. Cross-Collateralization. All Collateral which Secured Party may at any
time acquire from Debtor or from any other source in connection with any of the
Obligations shall constitute collateral for each and every Obligation, without
apportionment or designation as to particular Obligations, and all Obligations,
however and whenever incurred, shall be secured by all Collateral, however and
whenever acquired, and Secured Party shall have the right, in its sole
discretion, to determine the order in which Secured Party's rights in, or
remedies against, any Collateral are to be exercised, and which type or which
portions of Collateral are to be proceeded against and the order of application
of Proceeds of Collateral as against particular Obligations.
III. Definitions. The following terms shall have the following meanings:
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A. "Accounts" means all accounts, as that term is defined in Article 9 of
the Uniform Commercial Code as in effect from time-to-time in the Commonwealth
of Massachusetts (the "UCC"), and, in any event, shall include any right to
payment held by Debtor, whether in the form of accounts receivable, notes,
drafts, acceptances or other forms of obligations and receivables, now owned or
hereafter received or acquired by or belonging or owing to the Debtor
(including, without limitation, under any trade name, style or division thereof)
for Inventory sold or leased or services rendered by it whether or not earned by
performance, together with all guarantees and security therefor and all Proceeds
thereof, whether cash Proceeds or otherwise, including, without limitation, all
right, title and interest of Debtor in the Inventory which gave rise to any such
Accounts, including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
rejected or repossessed Inventory or other goods;
B. "Chattel Paper" means all chattel paper, as that term is defined in
Article 9 of the UCC, and, in any event, shall include any writing or writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods, whether now or hereafter held by Debtor;
C. "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments, as those terms are defined above and below) in or under which the
Debtor may now or hereafter have any right, title or interest, including,
without limitation, with respect to an Account, and any agreement relating to
the terms of payment or the terms of performance thereof;
D. "Documents" means all documents, as that term is defined in Article 9
of the UCC;
E. "Equipment" means all equipment, as that term is defined in Article 9
of the UCC and, in any event, shall include, without limitation, all machinery,
tools, dyes, equipment, furnishings, vehicles (other than Motor Vehicles) and
computers and other electronic data processing and other office equipment,
including, but not limited to, the items of Equipment, if any, listed on Exhibit
B attached hereto and made a part hereof, any and all additions, substitutions
and replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto, and all Contracts, contract rights and Chattel Paper arising
out of any lease of any of the foregoing;
F. "Financing Agreements" means this Agreement, and any and all
agreements, notes, Guaranties, instruments, security agreements and documents
evidencing, governing, securing or relating in any way to any of the
Obligations, including without limitation, that certain commercial revolving
promissory note of even date herewith in the original principal amount of TWO
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($250,000.00) of Debtor in favor of
Secured Party;
G. "General Intangibles" means all general intangibles, as that term is
defined in Article 9 of the UCC, and, in any event, shall include all right,
title and interest which the Debtor may now or hereafter have in or under any
Contract, all customer lists, trademarks, patents,
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rights in intellectual property, interests in partnerships, joint ventures and
other business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, recipes, experience, processes,
models, drawings, blueprints, catalogs, materials and records, goodwill
(including, without limitation, the goodwill associated with any trademark,
trademark registration or trademark licensed under any trademark license, claims
in or under insurance policies, including unearned premiums, uncertificated
securities, deposit accounts, rights to receive tax refunds and other payments
and rights of indemnification;
H. "Instruments" means all instruments, as that term is defined in Article
9 of the UCC, and, in any event, shall include any negotiable instrument or
certificated security, as defined in Article 8 of the UCC, or any other writing
which evidences a right to the payment of money and is not itself an instrument
that constitutes, or is a part of a group or writings that constitute, Chattel
Paper, and is of a type which, in the ordinary course of business, is
transferred by delivery with any necessary endorsement or assignment, whether
now or hereafter held by Debtor;
I. "Inventory" means all inventory, as that term is defined in Article 9
of the UCC, wherever located, and, in any event, shall include all inventory,
merchandise, goods and other personal property which are held by or on behalf of
the Debtor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
or the processing, packaging, promotion, delivery or shipping of the same, and
all finished goods, whether or not the same is in transit or in the
constrictive, actual or exclusive occupancy or possession of the Debtor or is
held by the Debtor or by others for the Debtor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of the Debtor or of any carriers, forwarding agents,
truckers, warehousemen, vendors, selling agents or other persons;
J. "Motor Vehicles" shall have the same meaning as that contained in the
General Laws of Commonwealth of Massachusetts;
K. "Obligations" means any and all obligations, indebtedness, liabilities,
guaranties, covenants and duties owing by Debtor to Secured Party, under any of
the Financing Agreements, whether due or to become due, absolute or contingent,
now existing or hereafter incurred or arising, whether or not otherwise
guaranteed or secured and whether evidenced by any note or draft or documented
on the books and records of Secured Party or otherwise on open account,
including without limitation, all costs, expenses, fees, charges and attorneys'
and other professional fees incurred by Secured Party in connection with,
involving or related to the administration, protection, modification,
collection, enforcement, preservation or defense of any of the Secured Party's
rights with respect to any of the Obligations, the Collateral or any agreement,
instrument or document evidencing, governing, securing or relating to any of the
foregoing, including without limitation, all costs and expenses incurred in
inspecting or surveying mortgaged real estate, if any, or conducting
environmental studies or tests, and in
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connection with any "workout" or default resolution negotiations involving legal
counsel or other professionals and any re-negotiation or restructuring of any of
the Obligations; and
L. "Proceeds" means all proceeds, as that term is defined in Article 9 of
the UCC, and, in any event, shall include (a) any and all Accounts, Chattel
Paper, Instruments, cash and other proceeds payable to the Debtor from
time-to-time in respect of any of the foregoing collateral security, (b) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to the
Debtor from time-to-time with respect to any of the collateral security, (c) any
and all payments (in any form whatsoever) made or due and payable to the Debtor
from time-to-time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the collateral
security by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (d) any and all other amounts
from time-to-time paid or payable under or in connection with any of the
collateral security.
IV. Debtor's Representations and Warranties. Debtor represents and
warrants to Secured Party as follows:
A. Good Standing and Qualification/Legal Capacity. The Debtor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business in the State of
Vermont, and has all requisite corporate power and authority to own and operate
its properties and to carry on its business as now being conducted.
B. Authority. The Debtor has full corporate power and authority to enter
into and perform the obligations under this Agreement, to execute and deliver
the Financing Agreements and to incur the obligations provided for herein and
therein, all of which have been duly authorized by all necessary and proper
corporate or partnership action, if and as the case may be. No other consent or
approval or the taking of any other action is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Agreements.
C. Binding Agreements. This Agreement and the other Financing Agreements
constitute the valid and legally binding obligations of the Debtor, enforceable
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
D. Litigation. There are no actions, suits, proceedings or investigations
pending or threatened against the Debtor before any court or administrative
agency, which either in any case or in the aggregate, if adversely determined,
would materially and adversely affect the financial condition, assets or
operations of the Debtor, or which question the validity of this Agreement or
any of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby. This representation is
exclusive of the information disclosed in Borrower's Securities and Exchange
Commission Form 10-KSB for the fiscal year ended December 31, 1996, and Form
10-QSB for the quarter ended June 30, 1997, the Secured Party hereby
acknowledging receipt and review of said Forms.
E. No Conflicting Law of Agreement. The execution, delivery and
performance by the Debtor of this Agreement and the other Financing Agreements:
(i) do not violate any provision of the Certificate of Incorporation and By-laws
or the partnership agreement, if and as
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the case may be, of the Debtor, (ii) do not violate any order, decree or
judgment, or any provision of any statute, rule or regulation, (ill) do not
violate or conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any shareholder agreement, partnership
agreement, stock preference agreement, mortgage, indenture, contract or other
agreement to which the Debtor is a party, or by which any of Debtor's properties
are bound, or (iv) except for the liens and mortgages granted to Secured Party
hereunder, do not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the Debtor.
F. Financial Statements. The financial information of the Debtor,
including, but not limited to, tax returns, balance sheets, statements of
earnings, retained earnings, contributed capital and cash flow statements,
heretofore submitted to Secured Party, is complete and correct and fairly
presents the financial condition of the Debtor as of the dates of said
information and the results of its operations and its cash flows for the periods
referred to therein in accordance with generally accepted accounting principles,
consistently applied. Since the submission of said information to Secured Party,
there has been no material adverse change in the financial condition or business
of the Debtor.
G. Taxes. With respect to all taxable periods of the Debtor, the Debtor
has filed all tax returns which are required to be filed and all federal, state,
municipal, franchise and other taxes shown on such filed returns have been paid
as due or have been reserved against, if not yet due, as required by generally
accepted accounting principles, consistently applied, and the Debtor knows of no
unpaid assessments against Debtor.
H. Compliance. The Debtor is not in default with respect to or in
violation of any order, writ, injunction or decree of any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency, authority or official, or in violation of any law, statute, rule
or regulation to which Debtor or Debtor's properties is or are subject, where
such default or violation would materially and adversely affect the financial
condition of the Debtor. The Debtor represents that Debtor has not received
notice of any such default or violation from any party. The Debtor is not in
default in the payment or performance of any of Debtor's obligations to any
third parties or in the performance of any mortgage, indenture, lease, contract
or other agreement to which Debtor is a party or by which any of Debtor's assets
or properties are bound. where such default would materially and adversely
affect the financial condition of the Debtor.
I. Office. The chief executive office and principal place of business of
the Debtor, and the office where Debtor's books and records concerning
Collateral are kept, is set forth in the first paragraph of this Agreement.
J. Places of Business. The Debtor has no other places of business and
locates no Collateral, specifically including books and records, at any location
other than at Debtor's place of business set forth in the first paragraph of
this Agreement.
K. Contingent Liabilities. The Debtor is not a party to any suretyship,
guarantyship, similar type agreement; nor has Debtor offered its endorsement to
any individual, corporation or other entity or acted or failed to act in any
manner which would in any
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way create a contingent liability (except for endorsement of negotiable
instruments in the ordinary course of business).
L. Licenses. The Debtor has all material licenses, permits and other
permissions required by any government, agency or subdivision thereof, or from
any licensing entity necessary for the conduct of Debtor's business, all of
which the Debtor represents to be in good standing, and in full force and
effect.
M. Collateral. The Debtor is and shall continue to be the sole owner of
the Collateral free and clear of all liens, encumbrances, security interests and
claims except the liens granted to Secured Party hereunder; the Debtor is fully
authorized to sell, transfer, pledge and/or grant a security interest in each
and every item of the Collateral to Secured Party; all documents and agreements
related to the Collateral shall be true and correct and in all respects what
they purport to be; all signatures and endorsements that appear thereon shall be
genuine and all signatories and endorsers shall have full capacity to contract;
none of the transactions underlying or giving rise to the Collateral shall
violate any applicable state or federal laws or regulations; all documents
relating to the Collateral shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms; and
the Debtor agrees to defend the Collateral against the claims of all persons
other than Secured Party.
N. Environmental, Health, Safety Laws. Debtor has not received any notice,
order, petition or similar document in connection with or arising out of any
violation of any environmental, health or safety law, regulation, rule or order,
and Debtor knows of no basis for any claim of such violation or of any threat
thereof.
V. Affirmative Covenants of the Debtor. The Debtor covenants and agrees
that from the date hereof until full and final payment and performance of all
Obligations, the Debtor shall:
A. Financial Information. Deliver to Secured Party: (i) as promptly as
practicable upon Secured Party's request, such documentation and information
about the Debtor's financial condition, business and/or operations as Secured
Party may, at any time and from time to time, request, including without
limitation, business and/or personal financial statements, copies of federal and
state income tax returns and all schedules thereto, aging reports of Debtor's
Accounts and accounts payable and a listing of Debtor's Inventory and Equipment,
all of which shall be in form, scope and content satisfactory to Secured Party,
in its sole discretion; and (ii) as promptly as practicable upon becoming aware
of any Event of Default (as defined below), or any occurrence which but for the
giving of notice or the passage of time would constitute an Event of Default,
notice thereof in writing.
B. Insurance and Endorsement. (i) Keep the Collateral and Debtor's other
properties insured against loss or damage by fire and other hazards (so-called
"All Risk" coverage) in amounts and with companies satisfactory to Secured Party
to the same extent and covering such risks as is customary in the same or a
similar business; maintain public liability coverage, including without
limitation, products liability coverage, against claims for personal injuries or
death; and maintain all worker's compensation, employment or similar insurance
as may be required by applicable law; (ii) All insurance shall contain such
terms, be in such form, and be for such periods satisfactory to Secured Party,
and be written by such carriers duly licensed by
<PAGE>
Page 7 of 19
the State of Vermont and satisfactory to Secured Party. Without limiting the
generality of the foregoing, such insurance must provide that it may not be
canceled without thirty (30) days prior written notice to Secured Party. The
Debtor shall cause Secured Party to be endorsed as a loss payee with a long form
Lender's Loss Payable Clause, in form and substance acceptable to Secured Party
on all such insurance. In the event of a failure to provide and maintain
insurance as herein provided, Secured Party may, at its option, provide such
insurance and charge the amount thereof to the Debtor. The Debtor shall furnish
to Secured Party certificates or other satisfactory evidence of compliance with
the foregoing insurance provisions. The Debtor hereby irrevocably appoints
Secured Party as its attorney-in-fact, coupled with an interest, to make proofs
of loss and claims for insurance, and to receive payments of the insurance and
execute all documents, checks and drafts in connection with payment of the
insurance. Any Proceeds received by Secured Party shall be applied to the
Obligations in such order and manner as Secured Party shall determine in its
sole discretion, or shall be remitted to the Debtor, in either event at Secured
Party's sole discretion.
C. Tax and Other Liens. Comply with all statutes and government
regulations and pay all taxes (including withholdings), assessments,
governmental charges or levies, or claims for labor, supplies, rent and other
obligations made against it or its property which, if unpaid, might become a
lien or charge against the Debtor or its properties.
D. Place of Business. Maintain its place of business and chief executive
offices at the address set forth in the first paragraph of this Agreement.
E. Inspections. Upon reasonable notice and during normal business hours,
allow Secured Party by or through any of their officers, attorneys, and/or
accountants designated by Secured Party, for the purpose of ascertaining whether
or not each and every provision hereof and of any related agreement, instrument
and document is being performed, to enter the offices and plants of the Debtor
to examine or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts therefrom, and
to discuss the affairs, finances and accounts thereof with the Debtor all at
such reasonable times and as often as Secured Party or any such representative
of Secured Party may reasonably request.
F. Litigation. Promptly advise Secured Party of the commencement or threat
of litigation, including arbitration proceedings and any proceedings before any
governmental agency (collectively, "Litigation"), which is instituted against
the Debtor involving a claim in excess of $50,000.
G. Maintenance of Existence. Maintain its corporate or partnership
existence, as the case may be, and comply with all valid and applicable
statutes, rules and regulations, and maintain its properties in good repair,
working order and operating condition. The Debtor shall immediately notify
Secured Party of any event causing material loss in the value of its assets.
<PAGE>
Page 8 of 19
H. Collateral Duties. Do whatever Secured Party may request from time to
time by way of obtaining, executing, delivering and filing financing statements,
assignments, landlord's or mortgagee's waivers, and other notices and amendments
and renewals thereof, and the Debtor will take any and all steps and observe
such formalities as Secured Party may request in order to create and maintain a
valid and enforceable first lien upon, pledge of, and first priority security
interest in, any and all of the Collateral. Secured Party is authorized to file
financing statements without the signature of the Debtor and to execute and file
such financing statements on behalf of the Debtor as specified by the UCC to
perfect or maintain Secured Party's security interest in all of the Collateral.
All charges, expenses and fees Secured Party may incur in filing any of the
foregoing, together with reasonable costs and expenses of any lien search
required by Secured Party, and any taxes relating thereto, shall be charged to
the Debtor and added to the Obligations.
I. Notice of Default. Provide to Secured Party, within one business day
after becoming aware of the occurrence or existence of an Event of Default or a
condition which would constitute an Event of Default but for the giving of
notice or passage of time on both, notice in writing of such Event of Default or
condition.
VI. Negative Covenants of the Debtor. The Debtor covenants and agrees that
from the date hereof until full and final payment and performance of all
Obligations, the Debtor shall not without the prior written consent of Secured
Party:
A. Encumbrances. Incur or permit to exist any lien, mortgage, charge or
other encumbrance against any of the Collateral, whether now owned or hereafter
acquired, except: (i) liens required or expressly permitted by this Agreement;
(ii) pledges or deposits in connection with or to secure worker's compensation,
unemployment or liability insurance; and (iii) tax liens which are being
contested in good faith with the prior written consent of Secured Party and
against which, if requested by Secured Party as a condition to its consent, the
Debtor shall set up a cash reserve or post a surety bond in an amount equal to
the total amount of the lien being contested.
B. Consolidation or Merger. Merge into or consolidate with or into any
corporation.
C. Sale and Lease of Assets. Sell, lease or otherwise dispose of any of
its assets in an aggregate amount in excess of $100,000.00, except for sales of
inventory in the ordinary course of business.
D. Name Changes. Change its corporate name or conduct its business under
any trade name or style other than as set forth in this Agreement.
E. Maintenance of Collateral. Permit to incur or suffer any loss, theft,
substantial damage or destruction of any of the Collateral which is not
immediately replaced with Collateral of equal or greater value, or which is not
fully covered by insurance, the proceeds of which shall have been endorsed over
to Secured Party in accordance with Section V.A.) hereof.
F. Further Covenants. The Debtor hereby makes such further covenants, if
any, as may be set forth on a Schedule 6(f) attached hereto and made a part
hereof.
<PAGE>
Page 9 of 19
VII. Rights of Secured Party. Upon the occurrence of any Event of Default,
Secured Party shall have the right to declare all of the Obligations to be
immediately due and payable and shall then have the rights and remedies of a
secured party under the Uniform Commercial Code or under any other applicable
law, including, without limitation, the right to take possession of the
Collateral, and in addition thereto, the right to enter upon any premises on
which the Collateral or any part thereof may be situated and remove the same
therefrom and the right to occupy the Debtor's premises for up to ninety (90)
days rent free for the purposes of liquidating Collateral, including without
limitation, conducting an auction thereon. Secured Party may require the Debtor
to make the Collateral (to the extent the same is moveable) available to Secured
Party at a place to be designated by Secured Party. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give the Debtor at least ten
(10) days' prior written notice at the address of the Debtor set forth above (or
at such other address or addresses as the Debtor shall specify in writing to
Secured Party) of the time and place of any public sale thereof or of the time
after which any private sale or any other intended disposition thereof is to be
made. Any such notice shall be deemed to meet any requirement hereunder or under
any applicable law (including the Uniform Commercial Code) that reasonable
notification be given of the time and place of such sale or other disposition.
After deducting all costs and expenses of collection, storage, custody, sale or
other disposition and delivery (including reasonable attorneys' fees) and all
other reasonable charges against the Collateral, the residue of the Proceeds of
any such sale or disposition shall be applied to the payment of the Obligations
in such order to priority as Secured Party shall determine and any surplus shall
be returned to the Debtor or to any person or party lawfully entitled thereto.
In the event the Proceeds of any sale, lease or other disposition of the
Collateral hereunder, including without limitation, the Proceeds from the
collection of Accounts, are insufficient to pay all of the Obligations in full,
the Debtor will be liable for the deficiency, together with interest thereon, at
the maximum rate allowable by law, and the costs and expenses of collection of
such deficiency, including (to the extent permitted by law) without limitation,
attorneys' fees, expenses and disbursements.
VIII. Right of Secured Party to use and Operate Collateral, Etc. Upon the
occurrence of any Event of Default, Secured Party shall have the right and power
to take possession of all or any part of the Collateral, and to exclude the
Debtor and all persons claiming under the Debtor wholly or partly therefrom, and
thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, Secured Party may, from time to time, at the
expense of the Debtor, make all such repairs, replacements, alterations,
additions and improvements to the Collateral as Secured Party may deem proper.
In any such case Secured Party shall have the right to manage and control the
Collateral and to carry on the business and to exercise all rights and powers of
the Debtor in respect thereto as Secured Party shall reasonably deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as Secured Party may see
fit; and Secured Party shall be entitled to collect and receive all issues,
profits, fees, revenues and other income of the same and every part thereof.
Such issues, profits, fees, revenues and other income shall be applied to pay
the expenses of holding and operating the Collateral and of conducting the
business thereof, and of all maintenance, repairs, replacements, alterations,
additions and improvements, and to make all payments which Secured Party may be
required or may elect to make, if any, for taxes, assessments, insurance and
other charges upon the Collateral or any part thereof, and all other payments
which Secured Party may be required or authorized to make
<PAGE>
Page 10 of 19
under any provision of this Agreement (including legal costs and attorneys'
fees). The remainder of such issues, profits, fees, revenues and other income
shall be applied to the payment of the Obligations in such order of priority as
Secured Party shall determine. Without limiting the Generality of the foregoing,
Secured Party shall have the right to apply for and have a receiver appointed by
a court of competent jurisdiction in any action taken by Secured Party to
enforce its rights and remedies hereunder in order to manage, protect and
preserve the Collateral and continue the operation of the business of the Debtor
and to collect all revenues and profits thereof and apply the same to the
payment of all expenses and other charges of such receivership including the
compensation of the receiver and to the payment of the Obligations as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
IX. Collection of Accounts Receivable, Etc. At any time after default,
Secured Party shall have the right to require Debtor to and Debtor shall, upon
written notice from Secured Party:
A. Make collections of Proceeds upon its Accounts, hold the Proceeds
received from collections in trust for Secured Party and turn over such Proceeds
to Secured Party daily in the exact form which they are received, together with
a collection report in form satisfactory to Secured Party. Secured Party shall
immediately apply, subject to collection, such Proceeds and any Proceeds of
Accounts received by it pursuant to the following provisions of this Section
IX., to the payment of the Obligations in such order of priority as Secured
Party shall determine;
B. Assign or endorse the Accounts to Secured Party, and notify account
debtors that the Accounts have been assigned and should be paid directly to
Secured Party;
C. Turn over to Secured Party all Inventory returned in connection with
any of the Accounts;
D. Mark or stamp each of its individual ledger sheets or cards pertaining
to its Accounts with the legend "Assigned to First National Bank of New
England," and stamp or otherwise mark and keep its books, records, documents and
instruments relating to the Accounts in such manner as Secured Party may
require; and
E. Mark or stamp all invoices with a legend satisfactory to Secured Party
so as to indicate that the same should be paid directly to Secured Party.
Notwithstanding the foregoing, Secured Party shall have the right,
at any time after the occurrence of an Event of Default, to itself so notify
such account debtors to make such payments of the Accounts directly to Secured
Party and Secured Party shall have the further right to notify the post office
authorities to change the address for delivery of mail of Debtor to an address
designated by Secured Party and to receive, open and dispose of all mail
addressed to Debtor. For the purposes of this Section IX., Debtor hereby
irrevocably constitutes Secured Party as Debtor's attorney-in-fact to issue in
the name and execute or endorse on behalf of Debtor each and every notice,
instrument and document necessary to carry out the purposes of the provisions of
this Section IX., and to take such action in connection with the collection of
the Accounts, including without limitation, suing thereon, compromising or
adjusting the same, as Secured party, in its sole discretion, deems necessary.
The power of attorney granted hereby shall be self-
<PAGE>
executing, but Debtor shall promptly execute and deliver to Secured
Party, upon written request of Secured Party, such additional separate powers of
attorney as Secured Party may from time to time request.
X. Events of Default. The Debtor shall be in default under this Agreement
upon the happening of any of the following events or conditions (herein
individually called an "Event of Default" and collectively called "Events of
Default");
A. Failure to pay any part of the Obligations when due;
B. Nonperformance by the Debtor of any agreement with, or any condition
imposed by Secured Party with respect to the indebtedness, which nonperformance
is not cured within ten (10) days of Secured Party's notice to the Debtor of
such failure;
C. Secured Party's discovery of the Debtor's failure in any application of
the Debtor to Secured Party to disclose any fact deemed by Secured Party to be
material or of the making therein or in any of the said agreements, or in any
affidavit or other documents submitted in connection with said application or
the indebtedness, of any material misrepresentation by, on behalf of, or for the
benefit of the Debtor;
D. The reorganization (other than a reorganization pursuant to any of the
provisions of the Bankruptcy Reform Act of 1978, as amended), or merger or
consolidation of the Debtor (or the making of any agreement therefor) without
the prior written consent of Secured Party;
E. The Debtor's failure duly to account, to Secured Party's satisfaction,
at such time or times as Secured Party may require, for any of the Collateral,
or proceeds thereof, coming into the control of the Debtor, within ten (10) days
of Secured Party's notice to the Debtor to do so; or
F. The entering of a judgment in excess of $50,000.00 against the Debtor
in any suit affecting the Debtor deemed by Secured Party to affect adversely its
interest hereunder in the Collateral or otherwise.
XI. Waivers, Etc. The Debtor hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with this Agreement or
the enforcement of Secured Party's rights hereunder or in connection with any
Obligations or any Collateral; consents to and waives notice of. (a) the
granting of renewals, extensions of time for payment or other indulgences to the
Debtor or to any account debtor in respect of any account receivable of the
Debtor; (b) substitution, release or surrender of any Collateral; (c) the
addition or release of persons primarily or secondarily liable on any of the
Obligations or on any account receivable or other Collateral; and (d) the
acceptance of partial payments on any Obligations or on any account receivable
or other Collateral and/or the settlement or compromise thereof. No delay or
omission on the part of Secured Party in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder. Any waiver of
any such right on any one occasion shall not be construed as a bar to or waiver
of any such right on any such future occasion. THE DEBTOR FURTHER WAIVES ANY
RIGHT IT MAY HAVE UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (OR UNDER
THE LAWS OF ANY OTHER STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED), OR
UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA, TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY
<PAGE>
executing, but Debtor shall promptly execute and deliver to Secured Party, upon
written request of Secured Party, such additional separate powers of attorney as
Secured Party may from time to time request.
I. Events of Default. The Debtor shall be in default under this Agreement
upon the happening of any of the following events or conditions (herein
individually called an "Event of Default" and collectively called "Events of
Default");
A. Failure to pay any part of the Obligations when due;
B. Nonperformance by the Debtor of any agreement with, or any condition
imposed by Secured Party with respect to the indebtedness, which nonperformance
is not cured within ten (10) days of Secured Party's notice to the Debtor of
such failure;
C. Secured Party's discovery of the Debtor's failure in any application of
the Debtor to Secured Party to disclose any fact deemed by Secured Party to be
material or of the making therein or in any of the said agreements, or in any
affidavit or other documents submitted in connection with said application or
the indebtedness, of any material misrepresentation by, on behalf of, or for the
benefit of the Debtor;
D. The reorganization (other than a reorganization pursuant to any of the
provisions of the Bankruptcy Reform Act of 1978, as amended), or merger or
consolidation of the Debtor (or the making of any agreement therefor) without
the prior written consent of Secured Party;
E. The Debtor's failure duly to account, to Secured Party's satisfaction,
at such time or times as Secured Party may require, for any of the Collateral,
or proceeds thereof, coming into the control of the Debtor, within ten (10) days
of Secured Party's notice to the Debtor to do so; or
F. The entering of a judgment in excess of $50,000.00 against the Debtor
in any suit affecting the Debtor deemed by Secured Party to affect adversely its
interest hereunder in the Collateral or otherwise.
II. Waivers, Etc. The Debtor hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with this Agreement or
the enforcement of Secured Party's rights hereunder or in connection with any
Obligations or any Collateral; consents to and waives notice of: (a) the
granting of renewals, extensions of time for payment or other indulgences to the
Debtor or to any account debtor in respect of any account receivable of the
Debtor; (b) substitution, release or surrender of any Collateral; (c) the
addition or release of persons primarily or secondarily liable on any of the
Obligations or on any account receivable or other Collateral; and (d) the
acceptance of partial payments on any Obligations or on any account receivable
or other Collateral and/or the settlement or compromise thereof. No delay or
omission on the part of Secured Party in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder. Any waiver of
any such right on any one occasion shall not be construed as a bar to or waiver
of any such right on any such future occasion. THE DEBTOR FURTHER WAIVES ANY
RIGHT IT MAY HAVE UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (OR UNDER
THE LAWS OF ANY OTHER STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED), OR
UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA, TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY
<PAGE>
Page 12 of 19
PROVIDED BY THIS AGREEMENT TO SECURED PARTY AND WAIVES ITS RIGHTS, IF ANY, TO
SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE
FOREGOING PROVISIONS HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE
WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. THE DEBTOR'S WAIVERS UNDER
THIS SECTION HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY, KNOWINGLY, WITHOUT
DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS THEREOF.
XII. Termination; Assignment, Etc. This Agreement and the security
interest in the Collateral created hereby shall terminate when all of the
Obligations have been paid and finally discharged in full. No waiver by Secured
Party or by any other holder of the Obligations of any default shall be
effective unless in writing signed by Secured Party nor shall any waiver granted
on any one occasion operate as a waiver of any other default or of the same
default on a future occasion. In the event of a sale or assignment by Secured
Party of all or any of the Obligations held by Secured Party, Secured Party may
assign or transfer its respective rights and interests under this Agreement in
whole or in part to the purchaser or purchasers of such Obligations, whereupon
such purchaser or purchasers shall become vested with all of the powers and
rights hereunder, and Secured Party shall thereafter be forever released and
fully discharged from any liability or responsibility hereunder with respect to
the rights and interests so assigned except that Secured Party shall be liable
for damages suffered by the Debtor as a result of actions taken by Secured Party
in bad faith or with willful misconduct.
XIII. Notices. Except as otherwise provided herein, notice to the Debtor
or to Secured Party shall be deemed to have been sufficiently given or served
for all purposes hereof if mailed by certified or registered mail, return
receipt requested, as follows:
A. if to Debtor:
Mace Security International, Inc.
160 Benmont Avenue
Bennington, VT 05201
Attention: Jon E. Goodrich
B. if to Secured Party:
First National Bank of New England
One Commercial Plaza
Hartford, Connecticut 06103
Attention: Documentation Department
XIV. Jury Waiver. THE DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN
ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART
AND/OR THE ENFORCEMENT OF ANY OF SECURED PARTY'S RIGHTS AND REMEDIES, INCLUDING
WITHOUT LIMITATION, TORT CLAIMS. THE DEBTOR ACKNOWLEDGES THAT DEBTOR MAKES THIS
WAIVER VOLUNTARILY, INTELLIGENTLY,
<PAGE>
Page 13 of 19
KNOWINGLY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS THEREOF.
XV. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon Secured Party and the Debtor and their respective successors and
assigns. In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Agreement
may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
XVI. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts and may not be amended except in writing.
XVII. Incorporation by Reference.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
WITNESSES: MACE SECURITY
INTERNATIONAL, INC.
/s/ James K. Bodurtha By /s/ Mark A. Capone
- --------------------------- ----------------------------
Name: Mark A. Capone
Title: Treasurer
FIRST NATIONAL BANK OF
NEW ENGLAND
/s/ James K. Bodurtha By /s/ Richard M. Rabideau
- --------------------------- ----------------------------
Name: Richard M. Rabideau
Title: Senior Vice President
<PAGE>
Page 14 of 19
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 25, 1997
Then personally appeared the above-named Mark A. Capone, Treasurer of MACE
SECURITY INTERNATIONAL, INC., and acknowledged the foregoing to be his free act
and deed and the free act and deed of MACE SECURITY INTERNATIONAL, INC., before
me.
/s/ James K. Bodurtha
--------------------------------------------
, Notary Public
My commission expires:
JAMES K. BODURTHA
NOTARY PUBLIC
Commonwealth of Massachusetts
My commission expires: Nov. 8, 2002
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 25, 1997
Then personally appeared the above-named Richard M. Rabideau, Senior Vice
President of FIRST NATIONAL BANK OF NEW ENGLAND, and acknowledged the foregoing
to be the free act and deed of FIRST NATIONAL BANK OF NEW ENGLAND, before me.
/s/ James K. Bodurtha
--------------------------------------------
, Notary Public
My commission expires:
JAMES K. BODURTHA
NOTARY PUBLIC
Commonwealth of Massachusetts
My commission expires: Nov. 8, 2002
<PAGE>
Page 15 of 19
Schedule 6(t)
Financial Covenants
Unless the Bank otherwise consents in writing, See Financing Agreements.
<PAGE>
Page 16 of 19
Exhibit A
(Collateral Description)
Debtor: Secured Party:
Mace Security International, Inc. First National Bank of New England
160 Benmont Avenue One Commercial Plaza
Bennington, VT 05201 Hartford, Connecticut 06103
(a) all accounts, as that term is defined in Article 9 of the Uniform
Commercial Code as in effect from time-to-time in the Commonwealth of
Massachusetts (the "UCC"), now owned or hereafter acquired, and, in any event,
shall include any right to payment held by Debtor, whether in the form of
accounts receivable, notes, drafts, acceptances or other forms of obligations
and receivables, now owned or hereafter received or acquired by or belonging or
owing to the Debtor (including, without limitation, under any trade name, style
or division thereof) for inventory sold or leased or services rendered by it
whether or not earned by performance, together with all guarantees and security
therefor and all proceeds thereof, whether cash proceeds or otherwise,
including, without limitation, all right, title and interest of Debtor in the
inventory which gave rise to any such accounts, including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed rejected or repossessed inventory or
other goods;
(b) all chattel paper, as that term is defined in Article 9 of the UCC,
now owned or hereafter acquired, and, in any event, shall include any writing or
writings which evidence both a monetary obligation and a security interest in or
a lease of specific goods, whether now or hereafter held by Debtor;
(c) all contracts, undertakings, franchise agreements or other agreements
(other than rights evidenced by chattel paper, documents or instruments, as
those terms are defined above and below), now owned or hereafter acquired, in or
under which the Debtor may now or hereafter have any right, title or interest,
including, without limitation, with respect to an account, and any agreement
relating to the terms of payment or the terms of performance thereof;
(d) all documents, as that term is defined in Article 9 of the UCC now
owned or hereafter acquired;
(e) all equipment, as that term is defined in Article 9 of the UCC, and,
in any event, shall include, without limitation, all machinery, tools, dyes,
equipment, furnishings, fixtures, leasehold improvements, vehicles (other than
motor vehicles) and computers and other electronic data processing and other
office equipment, now owned or hereafter acquired, including, but not limited
to, the items of equipment, if any, listed on Exhibit B attached hereto and made
a part hereof, any and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto, and all
contracts, contract rights and chattel paper arising out of any lease of any of
the foregoing;
<PAGE>
Page 17 of 19
(f) all general intangibles, as that term is defined in Article 9 of the
UCC, now owned or hereafter acquired, and, in any event, shall include all
right, title and interest which the Debtor may now or hereafter have in or under
any contract, all customer lists, trademarks, patents, rights in intellectual
property, interests in partnerships, joint ventures and other business
associations, licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, recipes, experience, processes, models, drawings,
blueprints, catalogs, materials and records, goodwill (including, without
limitation, the goodwill associated with any trademark, trademark registration
or trademark licensed under any trademark license, claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification;
(g) all instruments, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, and, in any event, shall include any negotiable
instrument or certificated security, as defined in Article 8 of the UCC, or any
other writing which evidences a right to the payment of money and is not itself
an instrument that constitutes, or is a part of a group or writings that
constitute, chattel paper, and is of a type which, in the ordinary course of
business, is transferred by delivery with any necessary endorsement or
assignment, whether now or hereafter held by Debtor;
(h) all inventory, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, wherever located, and, in any event, shall include
all inventory, merchandise, goods and other personal property which are held by
or on behalf of the Debtor for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in the Debtor's
business, or the processing, packaging, promotion, delivery or shipping of the
same, and all finished goods, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of the Debtor or is
held by the Debtor or by others for the Debtor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of the Debtor or of any carriers, forwarding agents,
truckers, warehouseman, vendors, selling agents or other persons;
(i) all proceeds, as that term is defined in Article 9 of the UCC, now
owned or hereafter acquired, and, in any event, shall include (a) any and all
accounts, chattel paper, instruments, cash and other proceeds payable to the
Debtor from time-to-time in respect of any of the foregoing collateral security,
(b) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Debtor from time-to-time with respect to any of the collateral
security, (c) any and all payments (in any form whatsoever) made or due and
payable to the Debtor from time-to-time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
collateral security by any governmental body, authority, bureau or agency (or
any person acting under color of governmental authority), and (d) any and all
other amounts from time-to-time paid or payable under or in connection with any
of the collateral security;
(j) all other collateral in which the Debtor may hereafter grant to the
Secured Party a security interest; and
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(k) all renewals, substitutions, replacements, additions, accessions and
products of any and all of the foregoing.
Other Liens
The security interest herein granted shall constitute:
1. A second priority security interest in all Inventory of the Debtor, said
Inventory being subject only to (i) a first priority security interest
granted to the Secured Party in connection with a 1,000,000.00 Small
Business Administration Loan from Secured Party to Debtor, as evidenced by
a separate Security Agreement by and between said parties of even date
herewith, and (ii) a third priority security interest granted to the
Secured Party in connection with a $800,000.00 Commercial Term Loan from
Secured Party to Debtor, as evidenced by a separate Security Agreement by
and between said parties of even date herewith.
2. A first priority security interest in all Accounts of the Debtor; said
Accounts are subject only to (i) a second priority security interest
granted to the Secured Party in connection with a $1,000,000.00 Small
Business Administration Loan from Secured Party to Debtor, as evidenced by
a separate Security Agreement by and between said parties of even date
herewith, and (ii) a third priority security interest granted to the
Secured Party in connection with a $800,000.00 Commercial Term Loan from
Secured Party to Debtor, as evidenced by a separate Security Agreement by
and between said parties of even date herewith.
3. A second priority security interest in all fixed assets, including
Equipment, of the Debtor, said fixed assets, including Equipment, being
subject only to (i) a first priority security interest granted to the
Secured Party in connection with a $800,000.00 Commercial Term Loan from
Secured Party to Debtor, as evidenced by a separate Security Agreement by
and between said parties of even date herewith, and (ii) a third priority
security interest in fixed assets, including Equipment, granted to the
Secured Party in connection with a $1,000,000.00 Small Business
Administration Loan from Secured Party to Debtor, as evidenced by a
separate Security Agreement by and between said parties of even date.
4. A third position security interest in all other Collateral of the Debtor.
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Exhibit B
(Specific Equipment Description)
[NONE LISTED]
<PAGE>
FIRST NATIONAL BANK OF NEW ENGLAND
GUARANTY AGREEMENT
This Guaranty dated as of September 25th, 1997 from the undersigned
jointly and severally, if more than one) (individually and collectively (if more
than one) referred to as the "Guarantor") to FIRST NATIONAL BANK OF NEW ENGLAND
(the "Bank").
In consideration of and as a material inducement for the Bank making, now
or in the future, loans, advances or otherwise giving credit to MACE SECURITY
INTERNATIONAL, INC. (the "Borrower"), including, but not limited to, a loan (the
"Loan") as evidenced by, among other things, a commercial revolving promissory
note in the principal amount of TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($250,000.00) of even date herewith and executed by Borrower (the "Note"), the
Guarantor does hereby represent, warrant, covenant and agree as follows:
ARTICLE I.
COVENANTS AND AGREEMENTS
Section 1.1. The Guaranty. The Guarantor hereby absolutely and
unconditionally (and Jointly and severally, if more than one) guarantees to the
Bank the full and prompt payment and performance of all liabilities of Borrower
to the Bank, whenever and however arising. As used herein, "liabilities" means
any and all indebtedness, liabilities and obligations of Borrower to the Bank of
every kind and description, including without limitation, the Loan, whether
direct or indirect, primary or secondary, absolute or contingent, due or to
become due, now existing or hereafter arising, regardless of how they arise or
by what agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument, including without limitation, the Note, and all
extensions, renewals and substitutions therefor, and further including, without
limitation, all costs, expenses and attorneys' and other professionals" fees
incurred in the collection of said liabilities and in any litigation arising
from any of the liabilities or this Guaranty or in the defense, protection,
preservation, realization or enforcement of any rights, liens or remedies
against Borrower or in the defense, protection, preservation, realization and
enforcement of any rights, liens or remedies against Guarantor under this
Guaranty or otherwise, including without limitation, all costs and expenses
incurred in inspecting or surveying mortgaged real estate, if any, or conducting
environmental studies or tests. All payments by Guarantor shall be paid in
lawful money of the United States of America. Each and every payment obligation
or liability guaranteed hereunder shall give rise to a separate cause of action,
and separate suits may but need not be brought hereunder as each cause of action
arises.
Section 1.2. Unconditional Nature of Guaranty.
A. The obligations of Guarantor under this Guaranty shall be absolute and
unconditional and shall remain in full force and effect until every payment,
obligation or liability guaranteed hereunder shall have been fully and finally
paid and performed. Guarantor further
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Page 2 of 8
guarantees that all payments made by Borrower with respect to any liabilities
hereby guaranteed wi11, when made, be final and agrees that if any such payment
is recovered from or repaid by the Bank in whole or in part in any bankruptcy,
insolvency or similar proceeding instituted by or against Borrower, this
Guaranty shall continue to be fully applicable to such liabilities to the same
extent as though the payment so recovered or repaid had never been originally
made on such liabilities. The obligations of Guarantor shall not be affected,
modified, released, discharged or impaired', in whole or in part, upon the
happening from time to time of any event, including, without limitation, any of
the following, whether or not with notice to, or consent of, Guarantor:
(1) The compromise, settlement, release, change or modification
(whether material or otherwise) or termination of any or all of the liabilities;
(2) The failure to give notice to Guarantor of the occurrence of an
event of default under the terms and provisions of this Guaranty, the Note or
any of the other instruments, agreements or documents evidencing, securing or
otherwise relating to any of the liabilities or securing or otherwise relating
to this Guaranty (collectively, including the Note and this Guaranty, the "Loan
Agreements");
(3) The modification, amendment, recession or waiver by the Bank of
the payment, performance or observance by Borrower or Guarantor of any of their
respective obligations, conditions, covenants or agreements contained in any of
the Loan Agreements;
(4) The extension of time for payment of any principal, interest or
any other amount due and owing under any of the Loan Agreements, or of the time
for performance of any other obligations, covenants or agreements under or
arising out of any of the Loan Agreements, or the extension or the renewal of
any thereof;
(5) The modification or amendment (whether material or otherwise) of
any duty, obligation, covenant or agreement set forth in any of the Loan
Agreements;
(6) The taking or the failure to take any of the actions referred to
in any of the Loan Agreements;
(7) Any failure, omission, delay or lack on the part of the Bank to
enforce, assert or exercise any right, power or remedy conferred on the Bank in
any of the Loan Agreements;
(8) The full or partial discharge of Borrower or any of the Other
Guarantors (as defined below) in bankruptcy or similar proceeding or otherwise;
(9) The release or discharge, in whole or in part, or the death,
bankruptcy, liquidation or dissolution of any other person or entity other than
the Guarantor which is primarily or secondarily liable with respect to the
liabilities, including the Other Guarantors (as defined below);
(10) The addition, exchange, release or surrender of all or any of
the collateral held by the Bank as security for the liabilities; or
<PAGE>
Page 3 of 8
(11) The default or failure of Guarantor fully to perform any of
Guarantor's obligations set forth in this Guaranty.
B. The Guarantor agrees that no delay, act of commission or omission of
any kind or at any time upon the part of the Bank or its successors and assigns
with respect to any matter whatsoever shall in any way impair the night of the
Bank to enforce any right, power or benefit under this Guaranty or any of the
other Loan Agreements to which Guarantor is a party or be construed to be a
waiver thereof Any such night may be exercised from time to time and as often as
may be deemed expedient. No set-off, counterclaim, reduction, or diminution of
any obligation, or any defense of any kind or nature which Borrower has or may
have against the Bank, or any assignee or successor thereof shall be available
hereunder to Guarantor against the Bank or its successors and assigns.
C. To the extent not otherwise expressly provided herein, the Guarantor
expressly waives all defenses of suretyship or impairment of collateral.
Section 1.3. Right of the Bank to Proceed Against Guarantor.
A. Upon any failure in the payment or performance of any of the
liabilities or of any of the obligations of Guarantor under this Guaranty, the
liability of Guarantor shall be effective immediately without notice or demand
and shall be payable or performable on demand without any suit or action against
Borrower. No delay or omission in exercising any right hereunder shall operate
as a waiver of such night or any other right.
B. The Bank, in its sole discretion, shall have the right to proceed first
and directly against the Guarantor under this Guaranty without proceeding
against or exhausting any other remedies which it may have against Borrower or
any other person primarily or secondarily liable for any of the liabilities,
including without limitation, the Other Guarantors (as defined below) and
without resorting to any security held by the Bank.
C. This Guaranty is entered into by Guarantor for the benefit of the Bank
and its successors and assigns, all of whom shall be entitled to enforce
performance and observance of this Guaranty.
Section 1.4. Waivers, Payment of Costs and Other Agreements.
A. GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS GUARANTY IS A
PART IS A COMMERCIAL TRANSACTION. GUARANTOR HEREBY EXPRESSLY WAIVES DILIGENCE,
DEMAND, PRESENTMENT, PROTEST, NOTICE OF NONPAYMENT OR PROTEST, NOTICE OF THE
ACCEPTANCE OF THIS GUARANTY, NOTICE OF ANY RENEWALS OR EXTENSIONS OF THE NOTE
AND OF ANY LOANS MADE OR EXTENSIONS OR OTHER FINANCIAL ACCOMMODATIONS GRANTED TO
BORROWER OR OTHER ACTION TAKEN IN RELIANCE HEREON AND ALL OTHER DEMANDS AND
NOTICES OF ANY DESCRIPTION IN CONNECTION WITH THIS GUARANTY, ANY OF THE
LIABILITIES OR OTHERWISE.
<PAGE>
Page 4 of 8
B. THE GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS GUARANTY IS A PART AND/OR
THE ENFORCEMENT OF ANY OF THE BANK'S RIGHTS AND REMEDIES, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS.
C. Guarantor hereby waives any right of indemnity, reimbursement,
contribution or subrogation arising as a result of any payment made by or on
account of Guarantor hereunder, and will not prove any claim in competition with
the Bank in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature. Guarantor agrees that Guarantor shall not be deemed a
creditor of Borrower as the term "creditor" is defined in the United States
Bankruptcy Code or as such term is or may be interpreted by the courts.
Guarantor will not claim any set-off or counterclaim against Borrower in respect
of any liability of Guarantor to Borrower. Guarantor waives any benefit of and
any night to participate in any collateral which may be held by the Bank. In
consideration of the Loan, Guarantor expressly releases Borrower of and from any
and all liabilities, debts or claims which, as against the Borrower, the
Guarantor ever had, now has or may have as a consequence of this Guaranty. The
provisions of the paragraph shall remain in effect until such time as the
liabilities shall have been finally and fully paid.
D. THE GUARANTOR ACKNOWLEDGES THAT GUARANTOR MAKES THE WAIVERS SET FORTH
IN SUBSECTIONS (A), (B) AND (C) ABOVE KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS
AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THOSE WAIVERS.
THE GUARANTOR FURTHER ACKNOWLEDGES THAT THE BANK HAS NOT AGREED WITH OR
REPRESENTED TO GUARANTOR OR ANY OTHER PARTY HERETO THAT THE PROVISIONS OF
SUBSECTIONS (A), (B) AND (C) ABOVE WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
E. Guarantor agrees to pay all costs and expenses, including attorneys
fees, arising out of or with respect to the validity, enforcement, realization,
protection or preservation of this Guaranty or any of the liabilities.
F. If, for an reason, Borrower has no legal existence or is under no legal
obligation to discharge any liabilities or if any liabilities have become
irrecoverable from Borrower by operation of law or for any other reason, this
Guaranty shall nevertheless be binding on Guarantor to the same extent as if
Guarantor at all times had been the principal obligor on all such liabilities.
In the event that acceleration of the time for payment of any liabilities is
stayed upon the insolvency, bankruptcy or reorganization of Borrower, or for any
other reason, all such amounts otherwise subject to acceleration under the terms
of the Note or any of the other Loan Agreements shall be immediately due and
payable by Guarantor, without notice or demand.
Section 1.5. Set-off. The Guarantor hereby gives the Bank a lien and right
of setoff for all Guarantor's liabilities to the Bank upon and against all
Guarantor's deposits, credits, collateral and property now or hereafter in the
possession or control of the Bank or in transit to it. The Bank may, at any
time, without notice to Guarantor, apply or set-off the same, or any part
<PAGE>
Page 5 of 8
thereof, to any liability of the Guarantor to the Bank, whether or not the Bank
shall have made demand under this Guaranty and although such obligations may be
contingent or unmatured.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Guarantor Representations, Warranties and Covenants. The
Guarantor hereby represents, warrants and covenants that:
A. Guarantor is an individual of full legal age and capacity and has the
right and power to execute this Guaranty and the other Loan Agreements to which
Guarantor is a party and to incur the obligations hereunder and thereunder.
B. Neither the execution and delivery of this Guaranty and the other Loan
Agreements to which Guarantor is a party, the consummation of the transactions
contemplated hereby nor the fulfillment of or compliance with the terms and
conditions of this Guaranty is prevented or limited by or conflicts with or
results in a breach of the terms, conditions or provisions of any contractual or
other restriction on the Guarantor or any agreement or instrument of whatever
nature to which the Guarantor is now a party or by which the Guarantor or
Guarantor's property is bound (or, if Guarantor is a corporation, the
Certificate of Incorporation or By-laws of the Guarantor, or, if Guarantor is a
partnership, the partnership agreement of the Guarantor) or constitutes a
default under any of the foregoing.
C. The Guarantor has received and will receive a direct and material
benefit from the accommodations extended by the Bank to Borrower.
D. All authorizations, consents and approvals of governmental bodies or
agencies required in connection with the execution and delivery of this Guaranty
and the other Loan Agreements to which Guarantor is a party, or in connection
with the performance of the Guarantor's obligations hereunder or thereunder have
been obtained as required hereunder or by law.
E. This Guaranty constitutes a valid and legally binding obligation of the
Guarantor, enforceable in accordance with its terms.
F. There is no action or proceeding pending or threatened against the
Guarantor before any court or administrative agency that might adversely affect
the ability of the Guarantor to perform Guarantor's obligations under this
Guaranty.
G. Guarantor will, at the request of the Bank, provide to the Bank such
financial and other information about the financial condition, operations and
business of Guarantor as the Bank may require from time to time, including
without limitation, business and/or personal financial statements and copies of
federal and state income tax returns and all schedules thereto, aging reports of
Guarantor's accounts receivable and accounts payable and a listing of
Guarantor's inventory and equipment, all of which shall be in form, scope and
content satisfactory to the Bank, in its sole discretion.
<PAGE>
Page 6 of 8
H. After any change in the condition or affairs (financial or otherwise)
of Guarantor deemed by the Bank to be adverse and material and which the Bank
believes, in good faith, impairs its security or increases its risk, Guarantor
will, upon demand by the Bank, secure or additionally secure, as the case may
be, the payment and performance of Guarantor's liabilities under this Guaranty
and any other liability of Guarantor to the Bank by granting, pledging,
assigning, delivering or transferring to the Bank a security interest in
collateral of a value and character satisfactory to the Bank, and Guarantor
authorizes the Bank to file and/or record, at Guarantor's expense, after Bank's
request to Guarantor and Guarantor's failure to do so, any financing statement,
mortgage or other document as the Bank may require to perfect any such security
interest, and Guarantor hereby irrevocably appoints the Bank its
attorney-in-fact to sign the name of Guarantor thereto.
I. Failure of Guarantor to comply with any of the covenants herein or
under any of the other Loan Agreements to which Guarantor is a party shall
constitute a default of the liabilities, entitling the Bank to exercise all
rights and remedies set forth in any of the Loan Agreements.
ARTICLE III.
NOTICE AND SERVICE OF PROCESS,
PLEADINGS AND OTHER PAPERS
Section 3.1. Designation of Agent for Service of Process. Guarantor
represents, warrants and covenants that Guarantor is subject to service of
process in the Commonwealth of Massachusetts and that Guarantor will remain so
subject so long as any of the liabilities is outstanding. If for any reason
Guarantor should not be so subject, Guarantor hereby designates and appoints,
without power of revocation, the Secretary of State of the Commonwealth of
Massachusetts as Guarantor's agent upon whom may be served all process,
pleadings, notices or other papers which may be served upon Guarantor as a
result of any of Guarantor's obligations under this Guaranty.
Section 3.2. Consent to Service of Process. Guarantor irrevocably (a)
agrees that any suit, action or other legal proceeding arising out of this
Guaranty may be brought in the courts of record of the Commonwealth of
Massachusetts or the courts of the United States located in such state; (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding; and (c) waives any objection which such Guarantor may have to the
laying of venue of any such suit, action or proceeding in any of such courts.
For such time as any of the liabilities is outstanding, Guarantor's agent
designated in Section 3.1 hereof shall accept and acknowledge on Guarantor's
behalf services of any and all process in any such suit, action or proceeding
brought in any such court. Guarantor agrees and consents that any such services
of process upon such agent and written notice of such service to Guarantor by
registered mail shall be taken and held to be valid personal service upon
Guarantor and that any such service of process shall be of the same force and
validity as if services were made upon Guarantor according to the laws governing
the validity and requirements of such service in such state, and waives all
claim of error by reason of any such service.
<PAGE>
Page 7 of 8
Section 3.3 Notices. All notices or other communications required or
permitted to be given hereunder shall be considered effective and properly given
if sent by a nationally recognized overnight messenger service or mailed first
class United States mail, postage prepaid, registered or certified mail, with
return receipt requested, or by delivery of same to the address beneath the
Guarantor's signature below by prepaid messenger or telegram, whether or not
receipt thereof is acknowledged or is refused by the addressee or any person at
such address, or at such other place as any party hereto may be notified in
writing as a place for service or notice hereunder.
ARTICLE IV.
GENERAL
Section 4.1. No Remedy Exclusive, Effect of Waiver. No remedy herein
conferred upon or reserved to the Bank is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Guaranty or now
or hereafter existing at law or in equity. In order to entitle the Bank to
exercise any remedy reserved to it in this Guaranty, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required.
No waiver, amendment, release or modification of this Guaranty shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the parties thereunto duly authorized. A waiver on
one occasion shall not be a bar to or waiver of any right of any other occasion.
The Guarantor acknowledges that this Guaranty supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and is intended as a final expression and a complete
and exclusive statement of the terms of this Guaranty.
Section 4.2. Counterparts. This Guaranty may be executed simultaneously in
several counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 4.3. Severability. The invalidity or unenforceability of any one
or more phrases, sentences, clauses or Sections contained in this Guaranty shall
not affect the validity or enforceability of the remaining portions of this
Guaranty, or any part thereof.
Section 4.4. Massachusetts Law. This Guaranty shall be governed by the
laws of the Commonwealth of Massachusetts (but not its conflicts of law
provisions).
Section 4.5. Other Guarantors. The Guarantor acknowledges that other
individuals or entities, including without limitation, each other Guarantor
hereunder, have or may also guaranty the liabilities of the Borrower (including
each other Guarantor hereunder, the "Other Guarantors") and that Guarantor is
unconditionally delivering this Agreement to the Bank. The Guarantor further
acknowledges that the failure of any of the Other Guarantors to execute and
deliver their respective guarantees or the discharge of any of the Other
Guarantors and their respective guarantied obligations shall not discharge the
liability of the Guarantor.
<PAGE>
Page 8 of 8
IN WITNESS WHEREOF, Guarantor has executed this Agreement on the date
first above written.
WITNESS:
/s/ Bonnie L. Sennett /s/ Jon E. Goodrich
- ------------------------------- -----------------------------------------
Jon E. Goodrich
Address: Monument Avenue Extension
Bennington, VT 05201
VERMONT
-----------------------------
(STATE)
Bennington , ss. September 25, 1997
(COUNTY)
Then personally appeared the above-named Jon E. Goodrich and acknowledged the
foregoing to be his free and act deed, before me.
/s/ Bonnie L. Sennett
-----------------------------------------
BONNIE L. SENNETT , Notary Public
My commission expires: 2/10/99
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 10th day of September, 1997 (the "Effective Date"), by and among MACE
SECURITY INTERNATIONAL, INC., a Delaware corporation with a principal place of
business in Bennington, Vermont ("MSI"), MSP RETAIL, INC., a Colorado
corporation and a wholly-owned subsidiary of MSI with a principal place of
business in Aurora, Colorado ("MSPR"), TODAYS SECURITY, INC., a Colorado
corporation with a principal place of business in Arvada, Colorado ("TSI"), and
FRANK E. BROWN and EUNICE BROWN, natural persons of Arvada, Colorado
(collectively "Brown") (all sometimes referred to individually as a "Party" and
all collectively referred to as the "Parties").
PRELIMINARY STATEMENT
WHEREAS, MSI is engaged in the manufacture, distribution, marketing and
sales of personal security devices and services;
WHEREAS, Brown owns or controls all the outstanding stock of TSI which
owns two personal security stores (the "Stores") located at the Westminster Mall
Shopping Center in Westminster, Colorado under a lease agreement with the
Westminster Mall Company and at the Southwest Plaza Mall in Littleton, Colorado,
under a lease agreement with Jordan Perlmutter & Co. (collectively "Real
Property") (collectively "Leases");
WHEREAS, MSPR desires to acquire all of the assets of TSI (excluding cash
and receivables) and TSI desires to sell such assets to MSPR in order to enable
MSPR to operate the Stores, as defined below, all in accordance with this
Agreement;
WHEREAS, all of such assets will be transferred or assigned to MSPR in
consideration for cash and for shares of MSI common stock ("MSI Shares");
WHEREAS, it is desired that the cash payment, the transfer of the MSI
Shares and MSPR's attendant acquisition of the assets of TSI be contingent upon
the Stores' performance over a one-year period commencing September 10, 1997,
and certain other conditions as set forth herein; and
WHEREAS, MSPR and Frank E. Brown desire to enter into an employment
agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein and in consideration of the representations, warranties and
covenants stated below, the parties, intending to be legally bound, agree as
follows:
<PAGE>
1. Purchased Assets. TSI agrees to sell and, at the Effective Date, will
transfer and deliver to MSPR all of the assets (excluding cash and receivables)
owned by TSI (hereinafter the "Purchased Assets"), including but not limited to
the following:
a. All right, title and interest of TSI in and to the improvements
located on the Real Property, including but not limited to, the Stores
located thereon, subject to all rights of the lessors to such assets in
accordance with the Leases;
b. All furniture, fixtures, appliances, equipment, computerized cash
registers, and supplies owned by TSI and on hand at the Stores as of the
Effective Date, all as set forth on the Schedule of Equipment that is
attached hereto as Exhibit A and made a part hereof by reference
(collectively, the "Equipment");
c. All inventory located in the Stores on the Effective Date, all as
set forth on the Schedule of Inventory that is attached hereto as Exhibit
B and made a part hereof by reference (collectively, the "Inventory");
d. All right, title and interest of TSI in or under the Leases, a
list of which are attached hereto as Exhibit C and made a part hereof by
reference; and
e. All right, title and interest of TSI in or under all contracts,
agreements, instruments, certificates, permits and licenses which relate
to the Equipment, Inventory or Stores, all as set forth on the Schedule of
Contracts that is attached hereto as Exhibit D and made a part hereof by
reference (collectively, the "Contracts").
TSI agrees to pay and be responsible for all sales or use taxes connected with
the sale of the Purchased Assets.
2. Prorations. The following prorations shall be made as of the Effective
Date and shall be paid in cash to MSPR or TSI, whichever is entitled thereto,
unless the amount of any such proration cannot be established, in which event
such proration shall be paid within thirty (30) days after the amount thereof is
established.
a. Real property taxes, if required to be paid by TSI under the
Leases, and personal property taxes related to the Purchased Assets shall
be prorated to the Effective Date based on the most recent official
information as of the Effective Date that is obtainable in the office of
the particular taxing authority. If actual tax figures for 1997 are not
available on the Effective Date, an estimated, tentative proration of
taxes shall be made using tax figures from 1996; however, when actual
taxes for 1997 are available, a correct proration of taxes shall be made.
If such taxes for 1997 increase over those for 1996, TSI shall pay to MSPR
a pro rata portion of such increase, computed to the Effective Date, any
such payment to be made within thirty (30) business days after
notification by either MSPR or TSI that such adjustment is necessary.
2
<PAGE>
b. TSI will cause all utility bills to be closed and billed by the
respective utility companies as of the Effective Date in order that
utility charges may be separately billed and paid by TSI for the period
prior to the Effective Date and separately billed and paid by MSPR for the
period after the Effective Date.
c. Any and all prepaid expenses shall be prorated to the Effective
Date. TSI shall provide MSPR with a list of the categories of such prepaid
expenses on the Effective Date.
3. Inventory Valuation. The value of the inventory and other tangible
assets in the Stores shall be determined by physical inspection by
representatives of MSPR and TSI on the Effective Date, or on any other date as
is mutually agreed to in writing by the Parties. Any increase in the value of
the inventory or tangible assets in the Stores over $71,311 shall be paid to TSI
on the Effective Date. MSPR shall have the right to verify the value of the
inventory and tangible assets on or before September 30, 1997. Any differences
in such value shall be paid by TSI to MSPR or by MSPR to TSI, respectively, on
September 30, 1997.
4. No Liabilities Assumed. MSPR does not and shall not assume, agree to
pay, pay, or have any responsibility for any debts, obligations, duties,
responsibilities or liabilities of any nature of TSI and TSI's business,
including, but not limited to, any debts, obligations, duties, responsibilities
or liabilities relating to TSI's employees or employee benefit plans, regardless
of whether any such debt, obligation, duty, responsibility, or liability arises
under any contract, agreement, practice, arrangement, statute, law, ordinance,
rule, regulation or otherwise. Notwithstanding the aforementioned to the
contrary, MSPR shall be responsible for and shall fulfill all obligations
associated with the Leases and Contracts.
5. Bill of Sale. On or before September 30, 1997, a Bill of Sale for all
of the Purchased Assets, properly acknowledged, and executed assignments for the
Leases and Contracts, executed and acknowledged, and consents signed by the
other parties hereto in such forms as MSPR may reasonably request, and such
other instruments of sale, transfer, conveyance and assignment ("Purchase
Documents") as MSPR may reasonably request shall be delivered to MSPR.
6. Consideration and Escrow Agreement.
a. On September 11, 1997, MSI shall pay TSI $35,000 plus any
amount due pursuant to Paragraph 3 hereof. On or before September
30, 1997, MSI and TSI shall execute an Escrow Agreement in the form
that is attached hereto as Exhibit E and made a part hereof by
reference and there shall be delivered to the Escrow Agent a stock
certificate issued to TSI to which TSI shall have an attached stock
power endorsed by TSI in blank for the MSI Shares. The MSI Shares
shall consist of 176,666 shares of MSI common stock minus such
number of shares of MSI common stock as is determined by subtracting
the value of the Inventory on the Effective Date, if it is less that
$60,000, from $60,000 and dividing the result thereof by $1.50. The
number of shares so determined shall be subtracted from the 176,666
shares, to
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determine the number of shares of MSI common stock that will
comprise the MSI Shares. The Inventory value shall be based on the
lower of cost or market. TSI shall have all the privileges and
restrictions of ownership, including the right to vote such MSI
Shares and to collect any dividends thereon.
b. On or before September 30, 1997, a stock certificate
representing all of the issued and outstanding shares of MSPR common
stock ("MSPR Shares") shall be delivered by MSI to the Escrow Agent
with stock power endorsed in blank attached to the certificate. MSI
shall have all of the privileges and restrictions of ownership,
including the right to vote such MSI Shares and to collect any
dividends thereon.
c. The certificates are to be held in escrow with the Escrow
Agent until the first to occur of (i) the date MSPR's pre-tax net
profit for the period from September 10, 1997, to September 10,
1998, is determined and the Escrow Agent is notified that such
pre-tax net profit exceeds $50,000 or MSI exercises the Put
described in Paragraph 6(f), (ii) such date, if ever, prior to
September 10, 1998, MSPR notifies TSI that neither MSPR nor MSI nor
their affiliates will offer franchises or (iii) such date, if ever,
prior to September 10, 1998, the employment agreement that is
attached hereto as Exhibit F and made a part hereof by reference is
terminated pursuant to Paragraph 4(b)(5) thereof and, in the case of
Paragraphs 6(c)(ii) and (iii), TSI exercises the Call described in
Paragraph 6(e). The determination of MSPR's pre-tax net profit shall
be by audit if MSI so elects. In such event, the determination of
MSPR's pre-tax net profit shall be performed by MSI's then auditor
in accordance with MSI's standard accounting practices. For purposes
of this Agreement, the term "pre-tax net profit" shall mean pre-tax
income determined in accordance with generally accepted accounting
principles ("GAAP"), excluding (i) the salary paid or payable to
Brown, if any, (ii) any and all expenses (such as the cost of
telephone listing changes, store signage changes, mall fees or
charges and equipment purchases by the Stores to consummate
merchandising or system modifications) resulting from MSPR's
acquisition of the Stores, pursuant to this Agreement and (iii)
sales of assets of MSPR other than in the ordinary course of
business.
d. Provided all the terms and conditions of this Agreement are
met and if MSPR's pre-tax net profit as determined pursuant to
Paragraph 6(c) is more than $50,000 or if MSI does not exercise the
Put described in Paragraph 6(f) or if TSI does not exercise the Call
defined below, the Escrow Agent, in accordance with the escrow
agreement, shall deliver the MSPR Shares to MSI and deliver the MSI
Shares to TSI. In addition, to the extent the market value
(determined based on the per share closing sale price of the MSI
Shares as quoted on the principal trading market of the MSI common
stock on September 10, 1998, or the last preceding trading day for
which a closing sale price is reported) per share of the MSI common
stock is less than $1.50 per share, the number of MSI Shares to be
delivered to TSI shall be increased by a number of shares of MSI
common stock that is determined by subtracting the total market
value of 176,666 shares of MSI common stock from $265,000 and
dividing the
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result thereof by the market value of a share of MSI common stock on
September 10, 1998.
e. If MSPR notifies TSI that neither MSPR nor MSI nor their
affiliates will offer franchises as described in Paragraph 6(c)(ii)
or if the employment agreement is terminated as provided in
Paragraph 6(c)(iii), TSI will have the option to acquire all of the
MSPR Shares which shall reflect the Purchased Assets purchased by
MSI under this Agreement (the "Call"). The Call may be exercised by
TSI only within the thirty (30) day period after the giving of
notice by MSPR or after the termination of the employment agreement,
as applicable, and by TSI giving notice of the exercise of the Call
to MSI and the Escrow Agent.
f. MSI shall have the option to acquire all of the MSI Shares
(the "Put"). The Put shall be exercisable if, and only if, the
pre-tax net profit of MSPR as determined pursuant to Paragraph 6(c)
is $50,000 or less. The Put shall be exercised within thirty (30)
days of receipt by MSI of the calculation of pre-tax net profit as
is provided herein, by MSI providing written notice of the exercise
thereof to TSI and the Escrow Agent.
g. Upon exercise of either the Put or Call, funds loaned by
MSI to MSPR shall be repaid upon the terms and conditions set forth
in such loans (which shall bear annual interest at no greater than
the prime rate as in effect from time to time plus one percent) and,
in addition, MSPR shall pay the amount of any pre-tax profit earned
by MSPR during the one-year period to MSI within six months of the
exercise of the Put or Call or, if MSPR sustains a pre-tax net loss,
MSI shall pay the same to MSPR within such six months. In addition,
upon exercise of the Put or Call, MSPR shall pay MSI $35,000 plus
any amount paid pursuant to Paragraph 3 hereof, within six months of
the exercise of the Put or Call. Such payment may be reduced, at the
option of MSPR, by the cost of signage with the "MACE" name thereon
added by MSPR between the Effective Date and the Put or Call date.
Further, upon exercise of either the Put or Call, MSPR shall
immediately discontinue the use of the word "MACE" in its corporate
name and shall immediately discontinue the use of any MSI trade
names or trademarks except in advertising or promoting MSI products.
h. If MSI provides funds to MSPR, other than by loan, during
the period of combined operations and if the Put or Call is
exercised, all tangible assets of MSPR then in existence (for
example, and not by way of limitation, cash, accounts receivable and
equipment, except for the recorded value of the Purchased Assets at
the Effective Date), shall be conveyed, transferred and paid to MSI
within six months of the exercise of said Put or Call. In lieu of
receiving all of such tangible assets, MSI, in its sole discretion,
may elect to accept the cash value of said tangible assets.
i. Notwithstanding any term, condition, representation or
warranty contained herein to the contrary, the MSI Shares and the
MSPR Shares shall be issued,
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transferred and assigned in accordance with all federal and state
laws, regulations, and restrictions.
j. If the Put or the Call is exercised, the Escrow Agent, in
accordance with the escrow agreement, shall deliver the certificate
and stock power for the MSPR Shares to TSI and shall deliver the
certificate and stock power for the MSI Shares to MSI.
7. Option to Franchise. Until September 10, 1999, if MSPR, MSI or their
affiliates decide to offer franchises for any stores owned by MSPR and located
in Adams, Arapahoe, Boulder, Denver, Douglas or Jefferson Counties, Colorado,
Frank E. Brown shall have the option to franchise any or all of such stores. The
following additional terms shall apply to Frank E. Brown's exercise of this
option:
a. MSPR shall, as soon as possible, give Frank E. Brown notice
of MSPR's, MSI's or their affiliates' intention to franchise a store
and the terms and conditions of such franchise (other than the
payment of an initial franchise fee which shall not be required of
Frank E. Brown; provided, however, neither MSI, MSPR nor their
affiliates shall, in turn, be required to incur any out-of-pocket
costs as would customarily be covered by payment of the initial
franchise fee) as set forth in MSI's, MSPR's or their affiliates'
Uniform Franchise Offering Circular.
b. Frank E. Brown's option shall be exercisable by Frank E.
Brown by Frank E. Brown entering into a franchise agreement no later
than 30 days after Frank E. Brown is given such notice.
In the event Frank E. Brown does not enter into the franchise agreement as set
forth above, MSI, MSPR or their affiliates will be free to enter into a
franchise agreement for the store.
8. Employment Agreement and Pay Periods. On the Effective Date, MSPR and
Frank E. Brown will enter into an employment agreement in the form that is
attached hereto as Exhibit F and made a part hereof by reference. Further, MSPR
agrees that all MSPR employees will be paid on a bi-weekly basis.
9. Confidentiality and Non-compete Agreement. On the Effective Date, TSI
and Brown will execute a confidentiality and non-compete agreement in the form
that is attached hereto as Exhibit G and made a part hereof by reference.
10. Representations and Warranties by TSI and Brown. TSI and Brown jointly
and severally represent and warrant to MSI and MSPR, from the date hereof as
follows:
a. TSI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado and is
qualified to conduct business as it is presently conducted. TSI has
the corporate power and is duly authorized to carry on its business
where and as now conducted and to own, lease, use and operate its
properties as it now does.
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b. Each of TSI and Brown has full authority and capacity to
enter into and to perform this Agreement in accordance with its
terms and is not bound by or subject to any contractual or other
obligation that would be violated by the execution or performance of
this Agreement, and this Agreement is valid and binding upon TSI and
Brown in accordance with its terms.
c. TSI and each of the Stores has filed all federal, state and
local income, employment and other tax returns required to be filed
by them on or before the dates on which such returns were due to be
filed. TSI and each of the Stores has paid all taxes of any nature
for which each is responsible, except for taxes which are not yet
due and payable as of the date hereof. There are no claims pending
or threatened against TSI or any of the Stores for unpaid taxes and
there are no outstanding waivers or agreements by TSI or any of the
Stores for the extension of time for the assessment of any tax.
Neither the Internal Revenue Service nor any state agency has
conducted a tax audit or examination of TSI or any of the Stores for
any past year and no deficiencies in taxes or any other governmental
charges have been claimed, proposed or assessed against TSI or any
of the Stores and no facts exist or have existed which would
constitute a basis for assessment of liability for any tax or any
other governmental charges against TSI or any of the Stores.
d. As of the date hereof or such additional time as is
agreeable to MSI, Brown will cause to have TSI transfer to MSPR all
right, title and interest to the Purchased Assets, free and clear of
all claims, liens or other encumbrances.
e. MSPR will acquire all right, title and interest to the
Purchased Assets, free and clear of all claims, liens or other
encumbrances in forms and upon terms and conditions acceptable to
MSI.
f. All of the Purchased Assets set forth in paragraphs (a),
(b) and (c) of Paragraph 1 herein, are in good operating condition
and the operation and use of such Purchased Assets in TSI's business
conform in all material respects to all applicable laws, ordinances,
regulations, permits, licenses and certificates. None of such
Purchased Assets owned by TSI are obsolete and all such Purchased
Assets are suitable for the purpose for which they are presently
used. All of the Inventory consists of items of a quantity and
quality useable or saleable without discount in the ordinary and
regular course of business.
g. The transactions to be effected pursuant to this Agreement
give no customer or supplier of TSI the right to terminate any
agreement with TSI and the attitude and actions of suppliers,
customers and employees and other persons with regard to the
operations of TSI will not be directly or indirectly affected by
this Agreement.
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h. No party with whom TSI has any contractual arrangements or
understandings (including without limitation any licenses or
franchises) in relation to the Purchased Assets, is in material
default (without regard to any requirement of notice or grace
period, or both) in the observance or performance of any term,
condition or provision of any such contractual arrangements or
understandings as at the date of this Agreement nor will they be as
of the Effective Date in any manner which will materially adversely
affect the proper conduct of the operations and business of TSI.
i. MSPR will enter into an employment contract with Frank E.
Brown and a confidentiality and noncompete agreement with Brown, in
the forms that are attached hereto as Exhibits F and G,
respectively, and made a part hereof by reference.
j. Except as is set forth on the Schedule of Litigation that
is attached hereto as Exhibit H and made a part hereof by reference,
there is no litigation, proceeding or governmental investigation
pending or threatened and there is no order, injunction or decree
outstanding against or relating to TSI, any of the Stores or Brown,
or the property, assets or businesses of TSI, any of the Stores or
Brown which could have an adverse affect on the transactions
contemplated by this Agreement or which seeks to enjoin or prohibit
the consummation of all or any of the transactions contemplated by
this Agreement. Neither TSI, any of the Stores nor Brown, knows or
has reasonable grounds to know of any basis for any such litigation,
proceeding or governmental investigation. Neither TSI, any of the
Stores, nor Brown is in violation of any applicable law, regulation,
ordinance, order, injunction or decree, or any other requirement of
any governmental body or court relating to the property, assets or
business of TSI, any of the Stores or Brown. Neither TSI, any of the
Stores, nor Brown knows or has reasonable grounds to know of any
factors or the occurrence of any event which might form the basis
for any claim against TSI, any of the Stores or Brown.
k. All statements contained in any exhibit, schedule,
certificate or other document delivered by or on behalf of TSI, any
and all of the Stores or Brown pursuant to this Agreement or in
connection with the transaction contemplated hereby shall be deemed
representations and warranties hereunder by TSI and Brown. No
representation or warranty by TSI or Brown in this Agreement or in
any schedule, exhibit, certificate or other document, in whatever
form, delivered or to be delivered by TSI, any of the Stores or
Brown pursuant to this Agreement, or in connection with the
transaction contemplated hereby contains or will contain any untrue
statement of material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not
misleading.
l. Neither Brown nor TSI has employed any financial advisor,
broker or finder, and none of them has incurred or will incur any
broker's, finder's, investment
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banking or similar fees, commissions or expenses in connection with
the transactions contemplated by this Agreement.
m. TSI has title to all of the Purchased Assets, subject only
to the Lessor's rights to the improvements at the end of the Leases.
TSI and Brown have no knowledge of any other security interests or
liens on the Purchased Assets except security interests represented
by financing statements filed by CGF Sign, Inc. on June 24, 1996 and
Southwest Properties Venture on April 13, 1994 and refiled on April
15, 1997, which will be released by September 30, 1997. TSI and
Brown have no knowledge of any restriction on transfer that would
limit TSI's right to transfer the Purchased Assets hereunder.
n. TSI and Brown have no knowledge of any latent defects with
respect to the Real Property.
o. There are no controversies pending between TSI or Brown and
any of TSI's or Brown's respective employees who work at the Stores.
There are no employment agreements between TSI or Brown and any of
TSI's or Brown's respective employees who work at the Stores and no
employee of TSI or Brown who is employed at the Stores is
represented by any labor union.
p. None of the entities or individuals comprising TSI or any
real property, previously or currently owned by any of them, has
been or is in violation of, or liable for remediation costs or any
other damages or penalties under any Environmental Law (as defined
below); and to the best knowledge of TSI, there are no actions,
suits, demands, notices, claims, investigations or proceedings under
any Environmental Law pending or threatened against TSI and Brown or
relating to any real property previously or currently owned or
occupied by TSI. For purposes of this Agreement, "Environmental Law"
means any applicable federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction, or agreement
with any governmental entity related to (i) the protection,
preservation or restoration of the environment and/or (ii) the use,
storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances (as defined below). The term Environmental Law
includes, without limitation: the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 USC ss.ss.
9601 et seq.; the Resource Conservation and Recovery Act, as
amended, 42 USC ss.ss. 6901 et seq.; the Clean Air Act, as amended,
42 USC ss.ss. 7401 et seq.; the Federal Water Pollution Control Act,
as amended, 33 USC ss.ss. 2151 et seq.; the Toxic Substances Control
Act, as amended, 15 USC ss.ss. 2601 et seq.; the Emergency Planning
and Community Right to Know Act, 42 USC ss.ss. 11001, et seq.; the
Safe Drinking Water Act, 42 USC ss.ss. 300f, et seq.; all comparable
state and local laws and any common law that may impose liability or
obligations for injuries or damages due to or threatened as a result
of the presence of or exposure to any hazardous substance. As used
in this Agreement,
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"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated under any environmental law,
whether by type or by quantity, including all material containing
any such substance as a component.
q. The financial statements of TSI that are attached hereto as
Exhibit I and made a part hereof by reference fairly reflect the
financial condition of TSI as of December 31, 1996, and June 30,
1997, and the results of its operations, changes in stockholders'
equity and cash flows for the twelve and six months then ended,
respectively.
r. TSI has no liabilities or obligations except for (i) those
reflected or reserved against (which reserves are adequate) in the
financial statements, (ii) those incurred, consistent with past
business practices, in the ordinary course of TSI's business since
June 30, 1997 and (iii) those which are specifically disclosed in
this Agreement. For purposes of this Agreement, the term
"liabilities or obligations" shall include any direct or indirect
indebtedness, claim, loss, damage, deficiency (including deferred
income tax and other net tax deficiencies), cost, expense,
obligation, guarantee, warranty or responsibility, whether approved,
absolute, or contingent, fixed or unfixed, liquidated or
unliquidated, secured or unsecured.
s. TSI has obtained all permits, licenses, zoning variances,
approvals and other authorizations (collectively "Permits")
necessary for the operation of its business as presently operated.
All such Permits are listed in Exhibit J that is attached hereto and
made a part hereof by reference. All such Permits are presently
valid and in full force and effect and no renovation, cancellation,
or withdrawal thereof has been effective or, to the best knowledge
of TSI or Brown threatened. The execution, delivery and performance
of this Agreement and the consummation of the transaction
contemplated hereby, will not result in the termination of, or
change in, any such Permits.
t. TSI does not own a controlling ownership interest in any
other corporation and has no subsidiaries, including, without
limitation, any subsidiaries which would be deemed to be a part of
any affiliated group within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, and is not a partner, owner or joint
venturer in any partnership, limited liability company or joint
venture.
11. Securities Representations and Warranties. Brown on behalf of TSI and
on behalf of Brown, as the sole shareholder of TSI, hereby acknowledges,
represents and warrants to, and agrees with, MSI and MSPR as follows:
a. Brown understands that the sale of the MSI Shares is
intended to be exempt from registration under the Securities Act of
1933, as amended ("Act"), by
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virtue of ss. 4(2) of the Act and, in accordance therewith and in
furtherance thereof, Brown represents and warrants to and agrees
with MSI as follows:
(1) Brown has received MSI's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996 and
Quarterly Reports on Form 10-QSB for the quarters ended March
31, 1997 and June 30, 1997 ("Reports") and has carefully
reviewed them and understands and has relied on the
information contained therein relating to MSI and information
otherwise provided to Brown in writing by MSI relating to this
transaction;
(2) Brown understands that all documents, records and
books pertaining to this transaction (including, without
limitation, the Reports and the exhibits thereto) have been
made available for inspection by Brown, Brown's attorney
and/or accountant;
(3) Brown and/or Brown's advisor(s) have had a
reasonable opportunity to ask questions of and receive answers
from a person or persons acting on behalf of MSI concerning
the acquisition of the MSI Shares and all such questions have
been answered to the full satisfaction of Brown;
(4) No oral or written representations have been made or
oral or written information furnished to Brown or Brown's
advisor(s) in connection with the acquisition of the MSI
Shares which were in any way inconsistent with the information
relating to MSI in the Reports;
(5) Brown is not acquiring the MSI Shares as a result of
or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general
solicitation or general advertising, or any solicitation of a
subscription by a person not previously known to Brown in
connection with investments in securities generally;
(6) Brown has adequate means of providing for Brown's
current needs and personal contingencies, is able to bear the
substantial economic risks of an investment in the MSI Shares
for an indefinite period of time, has no need for liquidity in
such investment and, at the present time, could afford a
complete loss of such investment;
(7) Brown has or together with Brown's advisor(s) has
such knowledge and experience in financial, tax and business
matters so as to enable Brown to utilize the information made
available to Brown in connection with the acquisition by Brown
of the MSI Shares in order to evaluate the merits and
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risks of an investment in the MSI Shares and to make an
informed investment decision with respect thereto;
(8) Brown is acquiring the MSI Shares solely for Brown's
own account as principal, for investment purposes only and not
with a view to the resale or dis tribution thereof, in whole
or in part, and no other person has a direct or indirect
beneficial interest in such MSI Shares;
(9) Brown will not sell or otherwise transfer the MSI
Shares without registration under the Act or an exemption
therefrom and fully understands and agrees that Brown must
bear the economic risk of Brown's acquisition of the MSI
Shares for an indefinite period of time because, among other
reasons, the MSI Shares have not been registered under the Act
or under the securities laws of any state and, therefore,
cannot be resold, pledged, assigned or otherwise disposed of
unless the MSI Shares are subsequently registered under the
Act and under the applicable securities laws of such states or
unless an exemption from such regis tration is available;
(10) Brown understands that MSI is under no obligation
to register the MSI Shares on Brown's behalf or to assist
Brown in complying with any exemption from registration under
the Act; and
(11) Brown understands that sales or transfers of the
MSI Shares are further restricted by certain state securities
laws.
b. Brown recognizes that Brown's acquisition of the MSI Shares
involves some risks.
c. Brown agrees to indemnify and hold harmless MSI and MSPR
and their officers, directors and affiliates and each other person,
if any, who controls any thereof, within the meaning of Section 15
of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all
expenses reasonably incurred in investigating, preparing or
defending against any litigation commenced or threatened or any
claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by Brown to comply
with any covenant or agreement made by Brown in this Agreement or in
any other document furnished by Brown to any of the foregoing in
connection with Brown's acquisition of the MSI Shares.
12. Representations and Warranties by MSI. MSI represents and warrants to
TSI and Brown as follows:
a. MSI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is
qualified to conduct its
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business as it is presently conducted. MSI has the corporate power
and is duly authorized to carry on its business where and as now
conducted and to own, lease, use and operate its properties as it
now does.
b. MSI has full authority and capacity to enter into and to
perform this Agreement in accordance with its terms and is not bound
by or subject to any contractual or other obligation that would be
violated by the execution or performance of this Agree ment, and
this Agreement is valid and binding upon MSI in accordance with its
terms.
c. All statements contained in any exhibit, schedule,
certificate or other document delivered by or on behalf of MSI
pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed to be representations and
warranties hereunder by MSI. No representation or warranty by MSI in
this Agreement or any exhibit, schedule, certificate or other
document to be delivered by MSI pursuant to this Agreement or in
connection with the transactions contemplated hereby contains or
will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make the statements
contained therein not misleading.
d. For so long as the MSI Shares are held by the Escrow Agent,
unless MSI is authorized in writing by Frank E. Brown, MSI will not
permit MSPR to dispose of the assets of the Stores other than in the
ordinary course of business.
13. Conditions to Delivery of the Escrowed Certificates.
a. Unless waived in writing by MSI, the delivery of the
certificate for the MSI Shares held in escrow and all obligations of
MSI and MSPR pursuant to this Agreement shall be conditioned upon
all representations and warranties of TSI, the Stores and Brown in
Paragraphs 10 and 11 as stated above, being true in all material
respects as of September 10, 1998, and MSI shall have received a
confirmation from Frank E. Brown as President of TSI in form
acceptable to MSI and its counsel to that affect.
b. Unless waived in writing by TSI, the delivery of the
certificate for the MSPR Shares held in escrow and all obligations
of TSI and Brown pursuant to this Agreement shall be conditioned
upon all representations and warranties of MSI set forth herein
being true as of September 10, 1998.
14. Deliveries to be Made By the Parties. Unless waived in writing by MSI
or TSI, MSI and TSI and Brown shall deliver documents, certificates and other
instructions set forth in this section:
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a. MSI's Deliveries. MSI shall deliver the following:
(1) On or before September 30, 1997, copies of the
resolutions of the directors of MSI and MSPR certified by
their corporate secretaries or assistant secretaries as having
been duly and validly adopted and as being in full force and
effect as of the date of this Agreement authorizing the
execution and delivery by MSI and MSPR of this Agreement and
other agreements and instruments to be executed and delivered
by MSI and MSPR as provided herein and the performance by MSI
and MSPR of the transactions contemplated hereby.
(2) On or before September 30, 1997, MSPR shall deliver
to the Escrow Agent a stock certificate for the MSI Shares and
MSI shall deliver to the Escrow Agent a stock certificate for
the MSPR Shares.
(3) If the conditions of Paragraph 13(a) are not
satisfied and all deliveries pursuant to Paragraphs 14(a) and
(b) are not completed on or before September 30, 1997, on
September 30, 1997, the MSPR Shares shall be delivered to TSI
upon payment by TSI to MSI of $35,000 plus any cash paid by
MSI to TSI pursuant to Paragraph 3 hereof and the MSI Shares
shall be returned to MSI and this Agreement shall terminate.
(4) On September 11, 1997, a wire transfer to TSI of
$35,000 plus any cash paid by MSI to TSI pursuant to Paragraph
3 hereof which total amount shall be returned by TSI to MSI
immediately if all conditions of Paragraph 13(a) are not
satisfied and all deliveries pursuant to Paragraph 14(b) are
not completed on or before September 30, 1997.
b. TSI and Brown's Deliveries. TSI and Brown shall deliver to
MSI and MSPR the following documents.
(1) On or before September 30, 1997, Exhibits A through
D to be attached hereto.
(2) By September 30, 1997, in forms satisfactory to MSI
and MSPR, the Purchase Documents.
(3) By September 30, 1997, copies of the resolutions of
the shareholders and directors of TSI certified by its
corporate secretary or assistant secretary as having been duly
and validly adopted and as being in full force and effect and
authorizing the execution and delivery by TSI of this
Agreement and such other agreements and instruments to be
executed and delivered by TSI as provided herein and the
performance by TSI of the transactions contemplated hereby as
authorizing the sale, transfer and delivery of the Purchased
Assets.
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(4) The employment agreement and confidentiality and
non-compete agreements identified in Exhibits F and G,
respectively.
(5) In a form satisfactory to MSI and MSPR,
documentation that all laws of the state of Colorado have been
complied with in respect to the sale of the Purchased Assets
to MSPR.
15. Indemnification by TSI and Brown. In addition to the indemnification
provided for in Paragraph 11(c), each of TSI and Brown shall jointly and
severally indemnify, defend and hold MSI and MSPR and their officers, directors,
stockholders, agents, employees, representa tives, successors and assigns
(collectively the "MSI Indemnified Parties") harmless from any and all damages,
losses, costs, obligations, claims, demands, assessments, judgments or
liabilities (whether based on contract, tort product liability, strict liability
or otherwise), including taxes and all expenses, including without limitation,
interest penalties and reasonable attorneys' and accountants' fees and
disbursements (collectively "Damages") incurred by any of the MSI Indemnified
Parties resulting from or in connection with any or more of the following:
a. Any misrepresentation, breach of warranty or failure to perform
any covenant or agreement made or undertaken by TSI, any of the Stores or
Brown in this Agreement or in any other document delivered to MSI pursuant
to this Agreement;
b. Any and all commitments, agreements, debts, liabilities and other
obligations of TSI, the Stores (that arose prior to the Effective Date or
that arise out of an event that occurred prior to the Effective Date) or
Brown, whether accrued, absolute contingent or otherwise, whether known or
unknown, and whether or not disclosed in this Agreement, except for those
expressly assumed by MSPR hereunder.
c. Any transaction, event, act or omission which occurred on or
prior to the execution of this Agreement which relates to the operation
and conduct of the businesses of TSI or either of the Stores;
d. Termination of any one or more of TSI's employees which occurred
on or prior to the Effective Date;
e. Any one or more benefit or retirement plans maintained by TSI or
the Stores and any claims under any such benefit or retirement plans;
f. Any failure of TSI or Brown to pay all of its or their
liabilities or other failure of TSI to take appropriate action which would
make the transfers contemplated herein effective as against creditors of
TSI or Brown and any claim by any creditor of TSI or Brown challenging the
effectiveness of the transfers contemplated herein;
15
<PAGE>
g. Any and all claims, actions, suits or proceedings brought or
commenced by any former employee, contractor, consultant or principal of
TSI, any of the Stores or Brown that arise out of an event that occurred
prior to the Effective Date; and
h. Any action, suit, proceeding or claim incident to any of the
matters referred to in this paragraph.
16. Indemnification by MSI. MSI shall indemnify, defend and hold harmless
TSI and Brown and TSI's officers, directors and shareholders and TSI's and
Brown's agents, employees, representatives, successors and assigns (collectively
the TSI Indemnified Parties") harmless from and against any and all damages
incurred by any of the TSI Indemnified Parties resulting from or in connection
with any misrepresentation, breach of warranty or failure to perform any
covenant or agreement made or taken by MSI in this Agreement or in any other
agreement delivered to TSI pursuant to this Agreement.
17. Survival. All of the representations, warranties and covenants of TSI,
Brown, MSI and MSPR contained in this Agreement shall survive the Closing.
18. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
19. Assignment. The Parties may assign this Agreement and any of their
rights, interest or obligations hereunder without the prior written approval of
the other Parties.
20. Headings. The headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
21. Severability. If any provision of this Agreement shall be deemed by
any court having jurisdiction thereon to be invalid or unenforceable, the
balance of this Agreement shall remain in effect. If any provision of this
Agreement shall be deemed by any such court to be unenforceable because such
provision shall be too broad in scope, such provision shall be construed to be
limited in scope to the extent such court shall deem necessary to make it
enforceable. If any provision shall be deemed inapplicable by any such court to
any person or circumstances, it shall nevertheless be construed to apply to all
other persons and circumstances.
22. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
23. Entire Agreement. This Agreement contains a complete statement of the
undertakings between the Parties with respect to its subject matter, cannot be
changed
16
<PAGE>
or terminated orally and supersedes all prior agreements and undertakings. There
is no representa tion not set forth in this Agreement, including the schedules
and exhibits hereto, which has been relied upon by the Parties.
24. Notice. Any notice, approval, consent or other communications under
this Agreement shall be in writing and shall be considered given when (1)
delivered personally, or (2) mailed by registered or certified mail, return
receipt requested, and (3) transmitted by facsimile to the parties at the
addresses and numbers indicated below, or at such other address as a party may
specify by notice to the others pursuant hereto. Notice given by a Party's
counsel shall be considered notice given by that Party.
If to MSI or MSPR, to them at:
Mace Security International, Incorporated
160 Benmont Avenue
Bennington, Vermont 05201
Fax: (802) 442-3823
With a copy to:
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
Fax: (303) 221-6001
If to TSI or Brown, to it or them at:
8708 Otis Drive
Arvada, Colorado 80002
With a copy to:
Baum & Gustafson, P.C.
1321 Bannock Street
Denver, Colorado 80204
Fax: (303) 825-1160
25. Modifications. This Agreement may not be modified except by a writing
signed by all of the Parties hereto.
26. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
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<PAGE>
27. Governing Law. This Agreement shall be governed and construed in
accordance with the internal laws (and not the law of conflicts) of the state of
Vermont.
28. No Waiver. Each Party may, by written notice to the other Parties
hereto, (a) extend the time for performance of any obligation or other actions
of such other Party under this Agreement, (b) waive any inaccuracies in the
representations and warranties, conditions or covenants of any such Party
contained in this Agreement, or (c) waive or modify a performance of any of the
obligations of such other Party under this Agreement. Except as provided in the
foregoing sentence, no waiver of performance or breach of or default under any
condition or obligation here shall be deemed to be made a waiver of any
performance or breach of or default under the same or any condition or
obligation of this Agreement.
29. Expenses. Each of the Parties hereto will bear their own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
30. Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction will be applied against any Party. The Parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
31. Further Assurances. From time to time after the Closing, TSI and Brown
shall, if reasonably requested by MSI or MSPR, make, execute and deliver to MSPR
such additional assignments, bills of sale, or other instruments of transfer as
may be necessary or proper to transfer to MSPR all of TSI's right, title and
interest in and to any of the Purchased Assets. MSI and MSPR shall likewise
execute and deliver to TSI and Brown any instruments or documents necessary to
carry out the intent and purposes of this Agreement.
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<PAGE>
Executed as of the date set forth above.
MACE SECURITY INTERNATIONAL, INC.
/s/ Howard Edelman By: /s/ Jon E. Goodrich
- ------------------------ -----------------------------------
Witness Jon Goodrich, President
MSP RETAIL, INC.
/s/ Howard Edelman By: /s/ Jon E. Goodrich
- ------------------------ -----------------------------------
Witness Jon Goodrich, Chairman
TODAYS SECURITY, INC.
/s/ Howard Edelman By: /s/ Frank E. Brown
- ------------------------ -----------------------------------
Witness Frank E. Brown, President
/s/ Howard Edelman By: /s/ Frank E. Brown
- ------------------------ -----------------------------------
Witness Frank E. Brown, Individually
/s/ Howard Edelman By: /s/ Eunice Brown
- ------------------------ -----------------------------------
Witness Eunice Brown, Individually
19
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("AGREEMENT") is made effective the 30th day of
September, 1997, by and between MACE SECURITY INTERNATIONAL, a Delaware corpora
tion ("MSI"), MSP RETAIL, INC., a Colorado corporation and a wholly-owned
subsidiary of MSI ("MSPR"), TODAYS SECURITY, INC., a Colorado corporation
("TSI"), and FRANK E. BROWN and EUNICE BROWN, natural persons and residents of
Arvada, Colorado (collectively "Brown") (all collectively referred to as "the
Parties").
PRELIMINARY STATEMENT
WHEREAS, the Parties entered into an Asset Purchase Agreement dated
September 10, 1997, pursuant to which MSPR will acquire all of the assets of TSI
(except cash and receivables) and TSI will receive 176,666 shares of MSI common
stock ("MSI Shares") that will be placed in escrow;
WHEREAS, Mark S. Butterfield, Esq. of Rutland, Vermont, has agreed to
serve as the Es crow Agent; and
WHEREAS, MSI has agreed to deposit with the Escrow Agent the MSI Shares
and all of the issued and outstanding shares of common stock of MSPR ("MSPR
Shares"), upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein and in consideration of the representations, warranties and
covenants stated below, the Parties, intending to be legally bound, agree as
follows:
1. Escrowed Documents.
a. Provided the Asset Purchase Agreement dated September 10, 1997,
is not terminated pursuant to Paragraph 14(a)(3) thereof, MSI and TSI will
deliver to the Escrow Agent:
(1) A certificate for the MSI Shares issued to TSI, with stock
power endorsed in blank attached; and
(2) A certificate for the MSPR Shares issued to MSI, with
stock power endorsed in blank attached;
2. Terms of Escrow. The Escrow Agent shall hold all the documents
mentioned in Par agraph 1 above until such time as it receives from MSI written
notification and directions for delivery. Each such notice shall contain a sworn
statement by MSI that the delivery is in accordance with the terms and
conditions of the aforementioned Asset Purchase Agreement and that
<PAGE>
each and every condition precedent to the delivery specified in said
notification has been met or has been otherwise agreed to by the Parties.
Within 10 days of receipt of any such notice, the Escrow Agent shall
endorse the stock powers and deliver the certificates as directed in the
notification.
In the event that the Escrow Agent does not receive a notification from
MSI as provided her ein within two years of the date hereof, the Escrow Agent
shall deliver the certificate for the MSI Shares to Frank E. Brown and Eunice
Brown, with stock power attached, and shall deliver the certificate for the MSPR
Shares to MSI, with stock power attached, unless at that time there is an order
from a court of competent jurisdiction enjoining such delivery or there are
other written instructions by all of the Parties.
In discharging the Escrow Agent's duties hereunder, the Escrow Agent may
rely upon and shall be protected in acting upon any written notice, certificate,
waiver, consent or other instrument or document which the Escrow Agent believes
to be genuine; the Escrow Agent shall not be required to verify any statement or
information contained therein and all such statements and information shall, as
to the Escrow Agent, be conclusively presumed to be complete and accurate in all
respects. The Escrow Agent shall not be liable for any error of judgment or for
any act done or omitted in good faith, except that the Escrow Agent shall be
liable for the Escrow Agent's own willful misconduct. The Escrow Agent may
consult with and obtain legal advice from legal counsel in the event of any
dispute or question as to the construction of any of the provisions hereof or
the Escrow Agent's duties hereunder, and the Escrow Agent shall incur no
liability and shall be protected in acting in accordance with the opinion of
such counsel. The Escrow Agent shall have the right to seek instructions from a
court of competent jurisdiction if the Escrow Agent deems such course to be
appropriate. The Escrow Agent shall be entitled to reasonable compensation for
the Escrow Agent's services hereunder and reimbursement for any out-of-pocket
expenses incurred in connection with its duties hereunder, such compensation and
reimbursement to be paid equally by MSI and MSPR.
3. Designation of Escrow Agent. The Parties hereto agree that Mark S.
Butterfield shall serve as the Escrow Agent under this Agreement. In the event
of Mark S. Butterfield's inability or unwillingness to serve, MSI shall select
an attorney licensed to practice in the State of Vermont who does not at the
time represent MSI, TSI, Brown or Jon Goodrich to serve as Mark S. Butterfield's
successor.
4. Notices. Any notice, approval, consent or other communication under
this Agreement shall be in writing and shall be considered given when (a)
delivered personally, or (b) mailed by registered or certified mail, return
receipt requested and (c) transmitted by telecopy to the Parties at the
addresses indicated below or at such other address as a Party may specify by
notice to the others pursuant hereto. Notice given by a Party's counsel shall be
considered notice given by that Party.
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<PAGE>
If to MSI, to it at:
Mace Security International Incorporated
160 Benmont Avenue
Bennington, Vermont 05201
Fax: (802) 442-3823
With a copy to:
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
Fax: (303) 221-6001
If to TSI, Frank E. Brown or Eunice Brown, to them at:
8708 Otis Drive
Arvada, Colorado 80002
With a copy to:
Baum & Gustafson, P.C.
1321 Bannock Street
Denver, Colorado 80204
Fax: (303) 825-1160
If to the Escrow Agent, to the Escrow Agent at:
P.O. Box 882
Rutland, Vermont 05702
5. Amendments. This Agreement may not be amended or modified in any
respect whatsoever except by instrument in writing signed by the parties hereto
and without written notice to the Escrow Agent. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations, discussions, writings and
agreements between them.
6. Successors. All the terms of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
7. Captions. Captions and headings of this Agreement are for the
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
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<PAGE>
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Vermont, without giving effect to the
conflicts or choice of law provisions of Vermont or any other jurisdiction.
a. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof and this
Agreement shall be construed in all respects as if the invalid or
unenforceable provisions were omitted.
b. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in
Bennington, Vermont, or such other location as the Parties may agree, in
accordance with the commercial rules then obtaining of the American
Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. Each Party shall pay his
or its own costs in connection with the arbitration. The expenses of the
arbitration itself shall be borne equally by the Parties.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals as
of this date first written above.
MACE SECURITY INTERNATIONAL, INC.
By: /s/ Jon E. Goodrich
----------------------------
Jon Goodrich, President
MSP RETAIL, INC.
By: /s/ Jon E. Goodrich
----------------------------
Jon Goodrich, Chairman
4
<PAGE>
TODAYS SECURITY, INC.
By: /s/ Frank E Brown
----------------------------
Frank E. Brown
/s/ Frank E Brown
--------------------------------
Frank E. Brown, Individually
/s/ Eunice Brown
--------------------------------
Eunice Brown, Individually
/s/ Mark S Butterfield
--------------------------------
Mark S. Butterfield
5
<PAGE>
EXHIBIT F
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made this 10th day of September, 1997, by and
between MSP RETAIL, INC. (hereinafter "MSPR") and FRANK E. BROWN (hereinafter
the "Employee").
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and of other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Term and Job Description. MSPR will employ the Employee for a two year
period beginning on the date hereof to oversee the management for MSPR of two
existing stores, to assist in the development of a franchise program for MSPR,
its parent or its affiliates, and to perform such other tasks as MSPR deems in
the best interest of MSPR. All related materials, whether tangible or
intellectual property, developed by the Employee during the term of the
employment are solely for the benefit of MSPR and shall be the sole exclusive
property of MSPR.
2. Conditions. The Employee agrees to adhere to the policies of MSPR as
established from time to time by the board of directors of MSPR and to devote
his time, attention and energy during normal business hours to the business of
MSPR. He shall not, during the term of this Agreement, be engaged in any other
business activity, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage, without the prior written consent of MSPR;
provided, however, that this paragraph shall not be construed to prevent the
Employee from personally and for his own account from trading in stocks, bonds,
securities, real estate, commodities or other forms of investment for his own
account and for his own benefit.
3. Compensation. For all services rendered by the Employee under this
Agreement, MSPR shall pay and the Employee agrees to accept the following:
a. The Employee shall be paid at a rate (unless otherwise agreed to
in writing by the Employee and MSPR) of $1,500 per week, payable in
bi-weekly installments. All payments shall be subject to withholding,
deductions for all applicable state and federal taxes and deductions
specified by Employee.
b. The Employee shall be entitled to receive any benefits which may
accrue or be paid to or with respect to the Employee under any employment
benefit plan; any group medical, hospitalization or insurance plan or
other plan for all employees of MSPR; including, but not limited to, any
employee retirement plan sponsored by MSPR pursuant to Section 401 of the
Internal Revenue Code of 1986, as currently enacted and as amended in the
future; provided, however, that participation
<PAGE>
and the extent and manner of the Employee's participation in any and all
such benefit plans shall be subject to the sole discretion of the Board of
Directors of MSPR and the Employee's qualification therefor.
c. MSPR shall pay all reasonable out-of-pocket expenses incurred by
the Employee while on business for MSPR provided that same be approved in
writing in advance by MSPR.
d. MSPR may, but need not, offer the Employee shares or options to
purchase shares in Mace Security International, Inc. ("MSI") on such terms
and conditions and at such times as MSI's board of directors shall in its
sole discretion deem appropriate.
e. If five franchises are established pursuant to such franchise
program as the Employee shall develop and MSI shall implement, during the
Employee's employment under this Employment Agreement, then within thirty
(30) days of the establishment of the fifth such franchise, the terms and
conditions of this Employment Agreement shall be revised and amended as
MSPR and Employee may agree in writing. If within said thirty (30) day
period the parties do not agree to amend or revise this Employment
Agreement, the Employment Agreement will continue until its natural
expiration, in force and effect as it existed on the day prior to the
establishment of said fifth franchise.
4. Termination.
a. This agreement and the employment may be terminated upon the
mutual agreement of MSPR and the Employee or by MSPR if Todays Security,
Inc. ("TSI") or Employee breach any of TSI's or Employee's warranties to
MSPR or MSI set forth in that certain Asset Purchase Agreement dated
September 10, 1997, whereby MSPR has acquired all of the assets of TSI.
b. This agreement and the employment shall automatically terminate
without notice:
(1) Upon the death of the Employee;
(2) If Employee fails or refuses to faithfully and diligently
perform the duties of his employment and provisions of this
Agreement for whatever reason;
(3) Upon the exercise of either the Put or the Call as set
forth in Paragraph 6 of the Asset Purchase Agreement entered into
between MSI, TSI, MSPR and Employee dated September 10, 1997.
2
<PAGE>
(4) Upon the commission of gross misconduct by the Employee;
or
(5) On September 10, 1999, except that MSPR may terminate this
agreement and the employment at any time prior to September 10,
1999, for no cause, provided that, in the event of such termination
MSPR shall continue to pay the Employee the compensation set forth
in Paragraph 3(a) hereof until September 10, 1999.
(6) If the Asset Purchase Agreement dated September 10, 1997,
terminates pursuant to Paragraph 14(a)(3) thereof.
5. Notices. Any notice or other communication to be given by any party
hereunder shall be in writing and shall be deemed to have been given when sent
by express, registered or certified mail, return receipt requested, postage
prepaid, addressed and sent by facsimile as follows:
If to MSPR, to it at:
MSP Retail, Inc.
10255 East 25th Avenue, Unit 9
Aurora, Colorado 80010
Fax: (303) 367-5833
With copy to:
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
Fax: (303) 221-6001
If to the Employee, to him at:
Frank E. Brown
8708 Otis Drive
Arvada, Colorado 80002
With a copy to:
Baum & Gustafson, P.C.
1321 Bannock Street
Denver, Colorado 80204
Fax: (303) 825-1160
3
<PAGE>
6. Miscellaneous.
a. This Agreement may not be amended or modified in any respect
whatsoever except by instrument in writing signed by the parties hereto.
This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior
negotiations, discussions, writings and agreements between them.
b. Failure of MSPR to act upon any breach of any of the provisions
of this Agreement shall not constitute a waiver of the rights of MSPR to
act upon any other or future breach. Any and all rights and remedies
created for MSPR shall be cumulative and the resort to one remedy shall
not be taken to exclude the right to use any other.
c. This Agreement may be executed in any number of counterparts,
each of which shall be an original but such counterparts shall together
constitute but one and the same instrument.
d. This Agreement shall be governed and construed in accordance with
the laws of the State of Colorado, without giving effect to the conflicts
or choice of laws provisions of Colorado or any other jurisdiction.
e. All of the terms of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the heirs, successors,
assigns and legal representatives of the parties hereto.
7. Severability. The invalidity or unenforceability of any particular
provisions of this Agreement shall not affect the other provisions hereof and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
8. Scope. If this Agreement or any portion thereof shall be held by any
court having jurisdiction thereof to be unenforceable because it is too broad in
scope or for any other reason, then this Agreement or the respective provision
thereof shall be deemed limited in scope to the extent that such court deems
necessary to make it enforceable.
4
<PAGE>
9. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in Denver,
Colorado or such other location as the parties may agree, in accordance with the
rules then obtaining of the American Arbitration Association and judgment upon
the award rendered may be entered in any court having jurisdiction thereof. Each
party shall pay his or its own costs in connection with the arbitration. The
expenses of the arbitration itself shall be borne equally by the parties.
MSP RETAIL, INC.
/s/ Howard Edelman By: /s/ Jon E. Goodrich
- ------------------------ -----------------------------------
Witness Jon Goodrich, Chairman
/s/ Howard Edelman By: /s/ Frank E Brown
- ------------------------ -----------------------------------
Witness Frank E. Brown, Individually
5
<PAGE>
EXHIBIT G
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETE AGREEMENT ("Agreement") made this
10th day of September, 1997, between MACE SECURITY INTERNATIONAL, INC., a
Delaware corporation with a principal place of business in Bennington, Vermont
(hereinafter "MSI"), MSP RETAIL, INC., a Colorado corporation and a wholly-owned
subsidiary of MSI with a principal place of business in Aurora, Colorado
("MSPR"), TODAYS SECURITY, INC., a Colorado corporation with a principal place
of business in Arvada, Colorado ("TSI"), and FRANK E. BROWN AND EUNICE BROWN
(collectively "Brown").
PRELIMINARY STATEMENT
WHEREAS, MSI is engaged in the business of manufacturing, developing,
marketing and selling products, and MSPR is engaged in the business of marketing
and selling products, in the personal security industry and police security
industry;
WHEREAS, MSPR is a wholly-owned subsidiary of MSI;
WHEREAS, TSI is engaged in the business of marketing and selling products
in the personal security industry and police security industry;
WHEREAS, Frank E. Brown is the President of TSI and all of the outstanding
stock of TSI is owned by Brown;
WHEREAS, TSI has conveyed all of its assets related to its two stores
located at the Westminster Mall Shopping Center in Westminster, Colorado, and at
the Southwest Plaza Mall in Littleton, Colorado, to MSPR as set forth in an
Asset Purchase Agreement dated September 10, 1997;
WHEREAS, Frank E. Brown is to be an employee of MSPR pursuant to an
employment agreement dated September 10, 1997; and
WHEREAS, MSI's and MSPR's transaction of business involves the collection
and usage of confidential data as hereinafter defined, the unauthorized
disclosure of which may result in harm to MSI and MSPR.
NOW, THEREFORE, in consideration of Frank E. Brown's employment, the
purchase of certain assets from TSI by MSPR and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Brown, TSI, MSI and MSPR hereby agree as follows:
<PAGE>
1. "Confidential Data" is any and all trade secrets and information (a)
not generally known by persons who are not employed by MSI or MSPR, or (b) which
give MSI or MSPR an advantage over competitors who do not know or use it, or (c)
disclosed to Brown in confidence by MSI or MSPR, its agents or employees, or by
MSI's or MSPR's customers or suppliers. Confidential Data shall mean all
information relating to MSI's or MSPR's businesses that is provided either in
writing or orally to Brown, or otherwise communicated to or obtained by Brown,
including, without limitation, financial, marketing, technical information, all
information pertaining to MSI's or MSPR's proprietary mailing lists, all
information concerning services provided to customers, information concerning
contracts with customers, vendors and suppliers, all information concerning the
pricing and marketing strategies of MSI or MSPR and any and all information of
whatsoever nature and in whatsoever form which does or may give MSI or MSPR an
advantage over its competitors who do not then have such information. Excluded
from the foregoing definition of Confidential Data is:
a. Information in the public domain at the time of disclosure as
evidenced by printed publication, or which becomes part of the public
domain by a publication or otherwise through no fault of the recipient;
b. Information which the recipient can demonstrate was in his
possession at the time of disclosure; and
c. Information properly disclosed on a non-confidential basis by a
third party after the disclosure covered hereby.
2. During the term of Frank E. Brown's employment with MSI and MSPR,
neither Brown nor TSI shall directly or indirectly disclose to any person, firm,
corporation or any other entity without written authorization from the Boards of
Directors of MSI and MSPR any confidential data unless such disclosure is in
furtherance of MSI's or MSPR's business or is required by law.
3. Upon termination of Frank E. Brown's employment with MSPR for any
reason, Brown will immediately surrender to MSI all books, records, documents
and other writings and all computer disks and other recordings which may contain
confidential data.
4. During the term of Frank E. Brown's employment with MSPR and after
termination of employment for any reason, Brown and TSI shall not directly or
indirectly use, without written authorization from the Boards of Directors of
MSI and MSPR, any confidential data unless such use is in furtherance of MSI's
or MSPR's business or is required by law.
5. a. For a period of one year from the date of Frank E. Brown's
termination of employment with MSPR by MSPR for Frank E. Brown failing or
refusing to
2
<PAGE>
faithfully and diligently perform the duties of his employment or as a
result of the gross misconduct of Frank E. Brown or for a period of one
year from the date of Frank E. Brown's termination of employment with MSPR
as a result of the resignation of Frank E. Brown for any reason other than
as a result of a change in Frank E. Brown's duties of managing MSPR's two
stores existing on the date hereof and of assisting in the development of
a franchise program for MSPR, MSI or their affiliates, as a result of MSPR
requiring Frank E. Brown to relocate his residence out of Adams, Arapahoe,
Boulder, Denver, Douglas or Jefferson County, Colorado, or as a result of
MSPR reducing Frank E. Brown's salary below $78,000 per annum, Brown and
TSI shall not directly or indirectly, individually or in combination with
others as employee, partner, agent, corporate officer, corporate
shareholder or otherwise in any manner be engaged or personally interested
in developing or carrying out a business substantially similar to, or
which competes with the business activities conducted by MSI and MSPR or
any of their subsidiaries, or franchisees, particularly such business
activities which involve:
(1) MSI and MSPR and past customers and suppliers of MSI and
MSPR, or their subsidiaries, which are engaged in activities
identical, similar to or which compete with the business activities
conducted by MSI and MSPR.
(2) Past and present customers and suppliers of MSI and MSPR,
their franchisees or their subsidiaries.
(3) Prospective customers to whom MSI and MSPR, or their
subsidiaries, have directly marketed or are presently marketing
their services or products.
b. If all of the MSPR stock is transferred, issued or assigned to
TSI or Brown in accordance with the aforementioned Asset Purchase
Agreement, Brown may directly or indirectly, individually or in
combination with others as employee, partner, agent, corporate officer,
corporate shareholder or otherwise in any manner be engaged or personally
interested in those operations of MSPR conducted on the day prior to the
date of such stock transfer, without regard to the provisions of
Paragraphs 5(a)(1), 5(a)(2) and 5(a)(3) insofar as they relate solely to
MSPR. Each and every provision of Paragraph 5(a) shall otherwise continue
to apply to Brown.
6. In the event of any breach of this Agreement by Brown or TSI, MSI and
MSPR shall be entitled to injunctive relief in addition to all other legal
remedies to enforce the provisions hereof.
7. This Agreement may not be amended or modified in any respect whatsoever
except by instrument in writing signed by the parties hereto. This Agreement
constitutes the
3
<PAGE>
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations, discussions, writings and
agreements between them.
8. Failure of MSI or MSPR to act upon any breach of any of the provisions
of this Agreement shall not constitute a waiver of the rights of MSI or MSPR to
act upon any other or future breach. Any and all rights and remedies created for
MSI or MSPR shall be cumulative and the resort to one remedy shall not be taken
to exclude the right to use any other.
9. This Agreement may be executed in any number of counterparts, each of
which shall be an original but such counterparts shall together constitute but
one and the same instrument.
10. This Agreement shall be governed and construed in accordance with the
laws of the State of Vermont without giving effect to the conflicts or choice of
laws provisions of Vermont or any other jurisdiction.
11. All of the terms of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the heirs, successors, assigns and legal
representatives of the parties hereto.
12. The invalidity or unenforceability of any particular provisions of
this Agreement shall not affect the other provisions hereof and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
13. If this Agreement or any portion thereof shall be held by any court
having jurisdic tion thereof to be unenforceable because it is too broad in
scope or for any other reason, then this Agreement or the respective provision
thereof shall be deemed to be limited in scope to the extent that such court
deems necessary to make it enforceable.
14. Any controversy or claim arising out of or relating to this Agreement
or the breach thereof shall be settled by arbitration in Bennington, Vermont or
such other location as the parties may agree, in accordance with the rules then
obtaining of the American Arbitration Association and judgment upon the award
rendered may be entered in any court having jurisdiction thereof. Each party
shall pay his, her or its own costs in connection with the arbitration. The
expenses of the arbitration itself shall be borne equally by the parties.
15. Frank E. Brown acknowledges receipt of a copy of this Agreement and
agrees to deliver a copy to each employer for whom Frank E. Brown may work at
any time within one year after the termination of his employment with MSPR and
hereby consents to MSI and MSPR corresponding with such employer concerning the
existence and terms of this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first written above.
MACE SECURITY INTERNATIONAL, INC.
By: /s/ Jon E. Goodrich
----------------------------
Jon Goodrich, President
MSP RETAIL, INC.
By: /s/ Jon E. Goodrich
----------------------------
Jon Goodrich, Chairman
TODAYS SECURITY, INC.
By: /s/ Frank E Brown
----------------------------
Frank E. Brown
/s/ Frank E Brown
----------------------------
Frank E. Brown, Individually
/s/ Eunice Brown
----------------------------
Eunice Brown, Individually
5
MACE SECURITY INTERNATIONAL, INC.
Exhibit 11
Schedule of Computation of Primary Net Income
Per Share
---------
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months ended September 30,
- -------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<C> <C> <S> <C> <C>
7,081,666 6,825,000 Common stock outstanding at 7,081,666 6,825,000
end of period
Adjustment to ending shares to
arrive at weighted average for
the period: Shares issued to
Robert D. Norman in accordance
-- -- with Employment Agreement(1) -- 6,788
-- -- Shares issued in connection with 53,040 --
MSP, Inc. Acquisition(2)
136,340 -- Shares issued in connection with 163,076 --
MSPR, Inc. Acquisition(3)****
- --------- --------- ----------- -----------
6,945,326 6,825,000 Weighted average 6,865,550 6,818,212
========= ========= =========== ===========
$(297,219) $(252,547) Net loss $ (555,541) $ (143,013)
========= ========= =========== ===========
$ (0.04) $ (0.04) Net loss per share $ (0.08) $ (0.02)
========= ========= =========== ===========
</TABLE>
- ----------
(1)Shares offered for the nine months:
September 30, 1996 20,000 x (93/274) 6,788
(2)Shares offered for the nine months:
September 30, 1997 80,000 x (181/273) 53,040
(3)Shares offered for the nine months:
September 30, 1997 176,666 x (252/273) 163,076
Shares offered for the three months:
September 30, 1997 176,666 x (71/92) 136,340
Above calculated as follows:
Number of shares outstanding multiplied by the reciprocal of the number of days
outstanding divided by the number of days in the period.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 406,033
<SECURITIES> 800,595
<RECEIVABLES> 1,893,919
<ALLOWANCES> 79,925
<INVENTORY> 5,052,297
<CURRENT-ASSETS> 8,297,250
<PP&E> 4,333,287
<DEPRECIATION> 1,633,533
<TOTAL-ASSETS> 13,913,737
<CURRENT-LIABILITIES> 918,586
<BONDS> 1,689,585
0
0
<COMMON> 70,817
<OTHER-SE> 11,234,749
<TOTAL-LIABILITY-AND-EQUITY> 13,913,737
<SALES> 7,406,389
<TOTAL-REVENUES> 7,406,389
<CGS> 4,616,972
<TOTAL-COSTS> 7,968,263
<OTHER-EXPENSES> (13,450)
<LOSS-PROVISION> 42,012
<INTEREST-EXPENSE> 73,982
<INCOME-PRETAX> (548,424)
<INCOME-TAX> 7,117
<INCOME-CONTINUING> (555,541)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (555,541)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
