Exhibit 10.2

 

SECURITY AGREEMENT

 

DATED:  September 19, 2005

 

DEBTOR

 

Ballisitc Recovery Systems, Inc.

300 Airport Road

South St. Paul, MN 55075

 

State of Formation: Minnesota

State Organizational No.: 

SECURED PARTY

 

Charles F. Parsons and

Aerospace Marketing, Inc.

10440 Schultz Road

Ft. Meyers, FL 33908

 

1.     Security Interest and Collateral.  To secure the payment and performance
of each and every debt, liability and obligation of every type and description
that Debtor may now or at any time hereafter owe to Secured Party (whether such
debt, liability or obligation now exists or is hereafter created or incurred,
and whether it is or may be direct or indirect, due or to become due, absolute
or contingent, primary or secondary, liquidated or unliquidated, or joint,
several or joint and several; all such debts, liabilities and obligations
collectively referred to as the “Obligations”).  Debtor hereby grants Secured
Party a security interest (the “Security Interest”) in the following property
(the “Collateral”):

 

(a)           INVENTORY:

 

All inventory of Debtor, whether now owned or hereafter acquired and wherever
located;

 

(b)           EQUIPMENT:

 

All equipment of Debtor, whether now owned or hereafter acquired, including but
not limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts and tools, and the goods described in any equipment schedule or list
herewith or hereafter furnished to Secured Party by Debtor (but no such
schedule or list need be furnished in order for the security interest granted
herein to be valid as to all of Debtor’s equipment);

 

(c)           ACCOUNTS AND OTHER RIGHTS TO PAYMENT:

 

Each and every right of Debtor to the payment of money, whether such right to
payment now exists or hereafter arises, whether such right

 

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to payment arises out of a sale, lease or other disposition of goods or other
property by Debtor, out of a rendering of services by Debtor, out of a loan by
Debtor, out of the overpayment of taxes or other liabilities of Debtor, or
otherwise arises under any contract or agreement, whether such right to payment
is or is not already earned by performance, and howsoever such right to payment
may be evidenced, together with all other rights and interests (including all
liens and security interests) that Debtor may at any time have by law or
agreement against any account debtor or other obligor obligated to make any such
payment or against any of the property of such account debtor or other obligor;
all including but not limited to all present and future payment intangibles,
debt instruments, chattel paper, accounts, deposit accounts, loans and
obligations receivable and tax refunds;

 

(d)           INTANGIBLES:

 

All intangibles of Debtor, whether now owned or hereafter acquired, including
but not limited to, general intangibles, investment property, software,
applications for patents, patents, Supplemental Type Certificates, copyrights,
trademarks, trade secrets, goodwill, tradenames, customers lists, permits and
franchises, internet domain names, uniform resource locators (URL’s), website
contracts and registration rights and the right to use Debtor’s name;

 

together with all substitutions and replacements for and products of any of the
foregoing property and together with proceeds of any and all of the foregoing
property and, in the case of all tangible Collateral, together with all
accessions and together with (i) all accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or used in connection with
any such goods, and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.

 

2.     Representations, Warranties and Agreements.  Debtor represents, warrants
and agrees that:

 

(a)           Debtor is a corporation.

 

(b)           The Collateral will be used primarily for business purposes.

 

(c)           If any part or all of the tangible Collateral will become so
related to particular real estate as to become a fixture, the real estate
concerned is: 

 

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                      and the name of the record owner is

 

 

(d)           Debtor’s chief executive office is located at the address of
Debtor shown at the beginning of this Agreement.

 

3.     Additional Representations, Warranties and Agreements.  Debtor
represents, warrants and agrees that:

 

(a)           Debtor has (or will have at the time Debtor acquires rights in
Collateral hereafter arising) absolute title to each item of Collateral free and
clear of all security interests, liens and encumbrances, except the Security
Interest and the encumbrance permitted under paragraph 6(a) (viii) of the
Stipulation and Confession of Judgment of even date, executed contemporaneously
herewith, and will defend the Collateral against all claims or demands of all
persons other than Secured Party.  Any such security interests, liens or
encumbrances not permitted under this Agreement shall be void.  Debtor will not
sell or otherwise dispose of the Collateral or any interest therein without the
prior written consent of Secured Party, except that, until the occurrence of an
Event of Default and the revocation by Secured Party of Debtor’s right to do so,
Debtor may sell any inventory constituting Collateral to buyers in the ordinary
course of business.  This Agreement has been duly and validly authorized by all
necessary corporate action.

 

(b)           Each right to payment and each instrument, document, chattel paper
and other agreement constituting or evidencing Collateral is (or will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, set-off or counterclaim (other than those arising in the
ordinary course of business) of the account debtor or other obligor named
therein or in Debtor’s records pertaining thereto as being obligated to pay such
obligation.  Debtor will neither agree to any material modification or amendment
nor agree to any cancellation of any such obligation without Secured Party’s
prior written consent, and will not subordinate any such right to claims of
other creditors of such account debtor or other obligor.

 

(c)           Debtor will:

 

(i)            keep all tangible Collateral in good repair, working order and
condition, normal depreciation excepted, and

 

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will, from time to time, replace any worn, broken or defective parts thereof;

 

(ii)           promptly pay all taxes and other governmental charges levied or
assessed upon or against any Collateral or upon or against the creation,
perfection or continuance of the Security Interest except as Debtor shall
contest in good faith and by appropriate proceedings providing such reserves as
are required by generally accepted accounting principles;

 

(iii)          keep all Collateral free and clear of all security interests,
liens and encumbrances except the Security Interest and the encumbrance
permitted under paragraph 6(a) (viii) of the Stipulation and Confession of
Judgment of even date, executed contemporaneously herewith;

 

(iv)          at all reasonable times, permit Secured Party or its
representatives to examine or inspect any Collateral, wherever located, and to
examine, inspect and copy Debtor’s books and records pertaining to the
Collateral and its business and financial condition and permit Secured Party,
upon any Event of Default, to send and discuss with account debtors and other
obligors requests for verifications of amounts owed to Debtor;

 

(v)           keep accurate and complete records pertaining to the Collateral
and pertaining to Debtor’s business and financial condition and submit to
Secured Party such periodic reports concerning the Collateral and Debtor’s
business and financial condition as Secured Party may from time to time
reasonably request;

 

(vi)          promptly notify Secured Party of any material loss of or material
damage to any Collateral or of any material adverse change, known to Debtor, in
the prospect of payment of any sums due on or under any instrument, chattel
paper, or account constituting Collateral;

 

(vii)         if Secured Party so requests after the occurrence of an Event of
Default, promptly deliver to Secured Party any instrument, document or chattel
paper constituting Collateral, duly endorsed or assigned by Debtor;

 

(viii)        at all times keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft, collision (in case of
Collateral consisting of motor vehicles) and such other risks and in such
amounts as Secured Party may reasonably request with any loss payable to Secured
Party to the extent of its interest;

 

(ix)           from time to time authorize such financing statements as Secured
Party may reasonably require in order to perfect the Security Interest and, if
any Collateral consists of an asset subject to a certificate of title, execute
such documents as may be required to have the Security Interest properly noted
on a certificate of title;

 

(x)            pay when due or reimburse Secured Party on demand for all costs
of collection of any of the Obligations and all other out-of-pocket expenses
(including in each case all reasonable attorneys’ fees) incurred by Secured
Party in connection with the, , satisfaction,

 

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protection, defense or enforcement of the Security Interest or the, ,
protection, defense or enforcement of this Agreement or any or all of the
Obligations, including expenses incurred in any litigation or bankruptcy or
insolvency proceedings;

 

(xi)           execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings that Secured
Party may at any time reasonably request in order to secure, protect, perfect or
enforce the Security Interest and Secured Party’s rights under this Agreement;

 

(xii)          not use or keep any Collateral, or permit it to be used or kept,
for any unlawful purpose or in violation of any federal, state or local law,
statute or ordinance;

 

(xiii)         not permit any tangible Collateral to become part of or to be
affixed to any real property without first assuring to the reasonable
satisfaction of Secured Party that the Security Interest will be prior and
senior to any interest, or lien then held or thereafter acquired by any
mortgagee of such real property or the owner or purchaser of any interest
therein; and

 

(xiv)        inform Secured Party of any change to Debtor’s name, address or
state of formation prior to the effective date of such change and authorize and
deliver to Secured Party any financing statement that is necessary as a result
of that change to maintain the perfected status of the Security Interest.

 

If Debtor at any time fails to perform or observe any agreement contained in
this Section 3(d), and if such failure shall continue for a period of thirty
calendar days after Secured Party gives Debtor written notice thereof (or, in
the case of the agreements contained in clauses (viii) and (ix) of this
Section 3(d), immediately upon the occurrence of such failure, without notice or
lapse of time), Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of Debtor (or, at Secured
Party’s option, in Secured Party’s own name) and may (but need not) take any and
all other actions that Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other
obligors, the procurement and maintenance of insurance, the filing of financing
statements, the endorsement of instruments, and the procurement of repairs,
transportation or insurance); and, except to the extent that the effect of such
payment would be to render any loan

 

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or forbearance of money usurious or otherwise illegal under any applicable law,
Debtor shall thereupon pay Secured Party on demand the amount of all moneys
reasonably expended and all reasonable costs and expenses (including reasonable
attorneys’ fees) incurred by Secured Party in connection with or as a result of
Secured Party’s performing or observing such agreements or taking such actions,
together with interest thereon from the date thirty (30) calendar days after
demand therefore made by Secured Party at the highest rate then applicable to
any of the Obligations.  To facilitate the performance or observance by Secured
Party of such agreements of Debtor, Debtor hereby irrevocably appoints (which
appointment is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments, documents, financing statements,
termination statements for filings not permitted under this Agreement held by
other secured parties, applications for insurance and other agreements and
writings required to be obtained, executed, delivered or endorsed by Debtor
under this Section 3 and Section 4.

 

4.     Account Verification and Collection Rights of Secured Party.  Secured
Party shall have the right to verify any accounts in the name of Debtor or in
its own name; and Debtor, whenever requested after the occurrence of an Event of
Default, shall furnish Secured Party with duplicate statements of the accounts,
which statements may be mailed or delivered by Secured Party for that purpose. 
Notwithstanding Secured Party’s rights under Section 4 with respect to any and
all debt instruments, chattel papers, accounts, and other rights to payment
constituting Collateral (including proceeds), Secured Party may at any time
(both before and after the occurrence of an Event of Default) notify any account
debtor, or any other person obligated to pay any amount due, that such chattel
paper, account, or other right to payment has been assigned or transferred to
Secured Party for security and shall be paid directly to Secured Party.  If
Secured Party so requests at any time, Debtor will so notify such account
debtors and other obligors in writing and will indicate on all invoices to such
account debtors or other obligors that the amount

 

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due is payable directly to Secured Party.  At any time after Secured Party or
Debtor gives such notice to an account debtor or other obligor, Secured Party
may (but need not), in its own name or in Debtor’s name, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such chattel paper, account, or other right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor.

 

5.     Assignment of Insurance.  Debtor hereby assigns to Secured Party, as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party.  Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in its own name or in Debtor’s name,
execute and deliver proofs of claim, receive all such moneys, endorse checks and
other instruments representing payment of such moneys, and adjust, litigate,
compromise or release any claim against the issuer of such policy.

 

6.     Events of Default.  Each of the following occurrences shall constitute an
event of default under this Agreement (herein called “Event of Default”):
(i) Debtor shall fail to pay any or all of the Obligations when due and ten
(10) calendar days have elapsed after written notice thereof has been sent to
Debtor or (if payable on demand) on demand, shall fail to observe or perform any
covenant or agreement herein binding on it or shall be in default under any loan
or credit agreement between it and Secured Party; (ii) any representations or
warranty by Debtor set forth in this Agreement or made to Secured Party in any
financial statements or reports submitted to Secured Party by or on behalf of
Debtor shall prove materially false or misleading; and thirty (30) calendar days
have elapsed after written notice thereof has been sent to Debtor (iii) a
garnishment, summons or a writ of attachment shall be issued against or served
upon Secured Party for the attachment of any property of Debtor or any

 

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indebtedness owing to Debtor and such garnishment, summons or writ of attachment
shall not be released after ten(10) calendar days; (iv) Debtor or any guarantor
of any Obligation shall (A) be or become insolvent (however defined); or
(B) voluntarily file, or have filed against it involuntarily, a petition under
the United States Bankruptcy Code and such bankruptcy not be dismissed after
ninety (90) calendar days; or (C) if a corporation, partnership, or
organization, be dissolved or liquidated or, if a partnership, suffer the death
of a partner or, if an individual, die; or (D) go out of business; or
(v) Secured Party shall in good faith believe that the prospect of due and
punctual payment of any or all of the Obligations is impaired.  If Secured Party
is found to have declared a default under this paragraph 6(v) in bad faith,
Debtor shall recover its actual damages, court costs and reasonable attorneys
fees from Secured Party

 

7.     Remedies upon Event of Default.  Upon the occurrence of an Event of
Default under Section 7 and at any time thereafter, Secured Party may exercise
any one or more of the following rights and remedies: (i) declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon be
immediately due and payable, without presentment of other notice or demand;
(ii) exercise and enforce any or all rights and remedies available upon default
to a secured party under the Uniform Commercial Code, including but not limited
to the right to take possession of any Collateral, proceeding without judicial
process or by judicial process (without a prior hearing or notice thereof, which
Debtor hereby expressly waives), and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith, Secured
Party may require Debtor to make the Collateral available to Secured Party at a
place to be designated by Secured Party that is reasonably convenient to both
parties, and if notice to Debtor of any intended disposition of Collateral or
any other intended action is required by law in a particular instance, such
notice shall be deemed commercially reasonable if given (in the manner specified
in Section 10) at least 10 calendar days prior to the date of intended
disposition or other action; (iii) exercise or enforce any or all other rights
or remedies available to Secured Party by law or agreement against the
Collateral, against Debtor or against any other person or

 

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property. Upon the occurrence of the Event of Default described in
Section 7(iv)(B), all Obligations shall be immediately due and payable without
demand or notice thereof.  Upon the occurrence of any Event of Default, Secured
Party is hereby granted a nonexclusive, worldwide and royalty-free license to
use or otherwise exploit all trademarks, trade secrets, franchises, copyrights
and patents of Debtor that Secured Party deems necessary or appropriate to the
disposition of any Collateral.

 

8.     Other Personal Property.  Unless at the time Secured Party takes
possession of any tangible Collateral, or within seven days thereafter, Debtor
gives written notice to Secured Party of the existence of any goods, papers or
other property of Debtor, not affixed to or constituting a part of such
Collateral, but that are located or found upon or within such Collateral,
describing such property, Secured Party shall not be responsible or liable to
Debtor for any action taken or omitted by or on behalf of Secured Party with
respect to such property without actual knowledge of the existence of any such
property or without actual knowledge that it was located or to be found upon or
within such Collateral.

 

9.     Miscellaneous.  This Agreement does not contemplate a sale of accounts,
payment intangibles or chattel paper.  This Agreement can be waived, modified,
amended, terminated or discharged and the Security Interest can be released,
only explicitly in a writing signed by Secured Party.  A waiver signed by
Secured Party shall be effective only in a specific instance and for the
specific purpose given.  Mere delay or failure to act shall not preclude the
exercise or enforcement of any of Secured Party’s rights or remedies.  All
rights and remedies of Secured Party shall be cumulative and may be exercised
singularly or concurrently, at Secured Party’s option, and the exercise or
enforcement of any one such right or remedy shall neither be a condition to nor
bar the exercise or enforcement of any other.  All notices to be given to Debtor
shall be deemed sufficiently given if delivered or mailed by registered or
certified mail, postage prepaid, to Debtor at its address set forth above or at
the most recent address shown on Secured Party’s records.  Secured Party’s duty
of care with respect to Collateral in its possession (as imposed by law) shall
be deemed fulfilled if Secured Party exercises reasonable care in physically
safekeeping such Collateral or, in the case of Collateral in the

 

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custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. 
Secured Party shall not be obligated to preserve any rights Debtor may have
against prior parties, to realize on the Collateral at all or in any particular
manner or order, or to apply any cash proceeds of Collateral in any particular
order of application and Secured Party may disclaim any and all implied
warranties (as imposed by law) in connection with the disposition of
Collateral.  This Agreement shall be binding upon and inure to the benefit of
Debtor and Secured Party and their respective heirs, representatives, successors
and assigns and shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party’s acceptance hereof.  Secured
Party may execute this Agreement if appropriate for the purpose of filing, but
the failure of Secured Party to execute this Agreement shall not affect or
impair the validity or effectiveness of this Agreement.  This Agreement shall be
governed by the internal laws of the State of Minnesota.  If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications that can be given effect and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby.  All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations. 
Debtor hereby irrevocably submits to the jurisdiction of the Minnesota District
Court, Fourth District, and the Federal District Court, District of Minnesota,
Fourth Division, over any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court.  [If this Agreement is
signed by more than one person as Debtor, the term “Debtor” shall refer to each
of them separately and to both or all of them jointly; all such persons shall be
bound both severally and jointly with the other(s); and the Obligations shall
include all debts, liabilities and obligations owed to Secured Party by any
Debtor solely or by both or several or all Debtors jointly or

 

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jointly and severally, and all property described in Section 1 shall be included
as part of the Collateral, whether it is owned jointly by both or all Debtors or
is owned in whole or in part by one (or more) of them.]

 

 

Aerospace Marketing, Inc

Ballistic Recovery Systems, Inc.

 

 

By

Charles F. Parsons

 

 

 

Charles F. Parsons

By

Larry Williams

 

 

Its President

 

Its

Chief Executive Officer

 

 

 

Charles F. Parsons

 

 

Charles F. Parsons, individually

 

 

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