SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made this ___ day of March,
2002, by and between AMERICAN HEALTH AND DIET CENTERS, INC., ("AHDC"), a
Delaware corporation having an address at 000 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx
Xxxxxx 00000 and XXXXX XXXXXXX ("XXXXXXX") an individual having an address at 0
Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx 00000.
1. GRANT OF SECURITY INTEREST. For value received and to secure payment and
performance of that certain unconditional guaranty of even date herewith given
by AHDC in favor of XXXXXXX, guaranteeing all of the obligations of Xxxxxx Tree
Construction, Inc. (which may become known as Nutritionary, Inc.
("Nutritionary")), including without limitation, that certain note in the
principal amount of $1,500,000.00 given by Nutritionary in favor of XXXXXXX, as
such unconditional guaranty may be amended from time to time (the "Guaranty"),
and any and all other obligations of AHDC to XXXXXXX however created, arising or
evidenced (including without limitation, any obligations under that Stock
Purchase Agreement dated as of March __, 2002, among Nutritionary, XXXXXXX and
Xxxxxx Xxxxx, as the same may be amended from time to time (the "Stock Purchase
Agreement"), that certain Reimbursement and Indemnification Agreement of even
date herewith from Nutritionary and AHDC in favor of XXXXXXX, and any and all
other documents executed and/or delivered in connection with the transactions
contemplated thereby), whether direct or indirect, absolute or contingent, now
existing or hereafter arising or acquired, and whether or not evidenced by a
loan or transaction document, future advances, and all costs and expenses
incurred by XXXXXXX to obtain, preserve, perfect and enforce the security
interest granted herein and to maintain, preserve and collect the property
subject to the security interest (collectively, the "Obligations"), AHDC hereby
grants to XXXXXXX a continuing first priority security interest (pari passu with
those certain security interests granted this date to Xxxxxx Xxxxx and otherwise
subject only to the HUBCO Lien, as hereinafter defined) in and lien upon the
following described property, whether now owned or hereafter acquired or
arising, wherever located and any additions, replacements, accessions, or
substitutions thereof and all cash and non-cash proceeds and products thereof
(collectively, the "Collateral"):
All of the personal property of AHDC of every kind and nature including, without
limitation, all accounts, accounts receivable, equipment, accessions, inventory,
chattel paper, instruments, documents, rights to proceeds under letters of
credit, letter-of-credit rights, deposit accounts, and general intangibles,
wherever located.
Any term used in this Agreement and in any financing statement filed in
connection herewith which is defined in the Uniform Commercial Code as in effect
in the State of New Jersey on the date this Agreement is signed by AHDC (the
"UCC") and not otherwise defined in this Agreement, the Guaranty, the Stock
Purchase Agreement, or any other document executed or delivered in connection
therewith or any of the transactions contemplated thereby (collectively, the
"Transaction Documents") has the meaning given to such term in the UCC.
2. CHANGE IN NAME OR LOCATIONS. AHDC represents and warrants that the name and
address of AHDC appearing at the beginning of this Agreement is AHDC's exact
legal name and address of its chief executive office, and that AHDC is a
corporation duly organized and existing under the laws of the State of Delaware.
AHDC has not changed its name, or the name under which it does business, within
the five years preceding the date hereof except as previously reported in
writing to XXXXXXX. AHDC has not moved its chief executive office within the
five years preceding the date hereof except as previously reported in writing to
XXXXXXX. AHDC has not changed the jurisdiction of its organization within the
five years preceding the date hereof except as previously reported in writing to
XXXXXXX. AHDC hereby agrees that if the location of the Collateral changes from
the locations listed on Exhibit "A" hereto and made a part hereof, or if AHDC
changes its name or form of organization, or establishes a name in which it may
do business that is not listed as a tradename on Exhibit "A" hereto, AHDC will
immediately notify XXXXXXX in writing of the additions or changes.
3. REPRESENTATIONS AND WARRANTIES REGARDING COLLATERAL. AHDC represents,
warrants and covenants to XXXXXXX that:
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(a) AHDC owns the Collateral free of all liens, security interests and
claims, other than (1) the security interest in favor of Xxxxxx United Bank in
existence on the date hereof (the "HUBCO Lien") and (2) that certain pari passu
security interest granted this date to Xxxxxx Xxxxx (collectively, the
"Permitted Liens");
(b) AHDC has not made any prior sale, pledge, encumbrance, assignment or
other disposition of any of the Collateral and the same are free from all
encumbrances and rights of setoff of any kind, other than the Permitted Liens;
(c) AHDC has good and marketable title to the Collateral and will warrant
and defend the same against all claims:
(d) the security interest in and lien upon the Collateral granted to
XXXXXXX hereunder is a first priority security interest in and lien upon such
Collateral, subject only to the HUBCO Lien;
(e) except as herein provided, AHDC will not hereafter without the prior
written consent of XXXXXXX sell, pledge, encumber, assign or otherwise dispose
of any of the Collateral or permit any right of setoff, lien or security
interest to exist thereon except to XXXXXXX;
(f) AHDC will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein;
(g) each account and general intangible, if included in the definition of
Collateral, is genuine and enforceable in accordance with its terms and AHDC
will defend the same against all claims, demands, setoffs and counterclaims at
any time asserted; and
(h) at the time any account or general intangible becomes subject to this
Agreement, such account or general intangible will be a good and valid account
representing a bona fide sale of goods or services by AHDC and such goods will
have been shipped to the respective account debtors or the services will have
been performed for the respective account debtors, and no such account or
general intangible will be subject to any claim for credit, allowance or
adjustment by any account debtor or any setoff, defense or counterclaim.
4. OTHER REPRESENTATIONS AND WARRANTIES. AHDC represents, warrants and
covenants to XXXXXXX that:
(a) all information now and hereafter furnished to XXXXXXX is and will be
true, correct and complete in all material respects;
(b) the execution, delivery and performance by AHDC of this Agreement and
any other Transaction Document to which it is a party are within its power, have
been duly authorized as may be required and, if necessary, by making appropriate
filings with any governmental agency or unit and are the legal, binding, valid
and enforceable obligations of AHDC and do not (i) contravene, or constitute
(with or without the giving of notice or lapse of time or both) a violation of
any provision of applicable law, a violation of the organizational documents of
AHDC, or a default under any agreement, judgment, injunction, order, decree or
other instrument binding upon or affecting AHDC, (ii) result in the creation or
imposition of any lien (other than the lien(s) created by the Transaction
Documents) on any of AHDC's assets, or (iii) give cause for the acceleration of
any obligations of AHDC to any other creditor;
(c) AHDC has good and marketable title to all of the properties and assets
reflected on the balance sheets and financial statements, if any, supplied to
XXXXXXX by AHDC, and all such properties and assets are free and clear of
mortgages, security deeds, pledges, liens, charges, and all other encumbrances,
other than the Permitted Liens;
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(d) to AHDC's knowledge, no default has occurred under any Permitted Liens
and no claims or interests adverse to AHDC's present rights in its properties
and assets have arisen;
(e) AHDC has duly filed, paid and/or discharged all taxes or other claims
which may become a lien on any of its property or assets, except to the extent
that such items are being appropriately contested in good faith and an adequate
reserve for the payment thereof is being maintained;
(f) AHDC is not, and after consummation of this Agreement and after giving
effect to all indebtedness incurred and liens created by AHDC in connection with
this Agreement, the Guaranty and/or any other Transaction Document, will not be,
insolvent within the meaning of 11 U.S.C. ss. 101(32);
(g) AHDC is in compliance in all material respects with all federal, state
and local laws, rules and regulations applicable to its properties, operations,
business, and finances, including, without limitation, any federal or state laws
relating to liquor (including 18 U.S.C. ss. 3617, et seq.) or narcotics
(including 21 U.S.C. ss. 801, et seq.) and/or any commercial crimes; all
applicable federal, state and local laws and regulations intended to protect the
environment; and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if applicable;
(h) AHDC is duly created, validly existing and in good standing under the
laws of the state of its organization, and has all powers, governmental
licenses, authorizations, consents and approvals required to operate its
business as now conducted;
(i) AHDC is duly qualified, licensed and in good standing in each
jurisdiction where qualification or licensing is required by the nature of its
business or the character and location of its property, business or customers,
and in which the failure to so qualify or be licensed, as the case may be, in
the aggregate, could have a material adverse effect on the business, financial
position, results of operations, properties or prospects of AHDC ;
(j) there are no pending or threatened suits, claims or demands against
AHDC that have not been disclosed directly to XXXXXXX by AHDC in writing, and
approved by XXXXXXX;
(k) none of the proceeds of the credit extended pursuant to this Agreement
shall be used directly or indirectly for the purpose of purchasing or carrying
any margin stock in violation of any of the provisions of Regulation U of the
Board of Governors of the Federal Reserve System ("Regulation U"), or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry margin stock or for any other purchase which might render
the Obligations a "Purpose Credit" within the meaning of Regulation U;
(l) each employee pension benefit plan, as defined in ERISA, maintained by
AHDC meets, as of the date hereof, the minimum funding standards of ERISA and
all applicable regulations thereto and requirements thereof, and of the Internal
Revenue Code of 1986, as amended. No "Prohibited Transaction" or "Reportable
Event" (as both terms are defined by ERISA) has occurred with respect to any
such plan;
(m) the fair saleable value of AHDC's assets exceeds its liabilities, AHDC
is meeting its current liabilities as they mature, and AHDC is and shall remain
solvent;
(n) all financial statements of AHDC furnished to XXXXXXX are correct and
accurately reflect the financial condition of AHDC as of the respective dates
thereof;
(o) since the date of such financial statements, there has not occurred a
material adverse change in the financial condition of AHDC; and
(p) there are not now pending any court or administrative proceedings or
undischarged judgments against AHDC, no federal or state tax liens have been
filed or threatened against AHDC, and AHDC is not in default or claimed default
under any agreement.
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5. COVENANTS REGARDING COLLATERAL. AHDC covenants that it shall:
(a) from time to time and at all reasonable times allow XXXXXXX by or
through any of his agents, attorneys, or accountants, to examine or inspect the
Collateral, notify account debtors of XXXXXXX'x security interest in accounts
(if included in the definition of Collateral) and obtain valuations and audits
of the Collateral, at AHDC's expense, wherever located. AHDC shall do, obtain,
make, execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as XXXXXXX may require to vest in and assure to
XXXXXXX his rights hereunder and in or to the Collateral, and the proceeds
thereof, including, but not limited to, waivers from landlords, warehousemen and
mortgagees;
(b) keep the Collateral in good order and repair at all times and
immediately notify XXXXXXX of any event causing a material loss or decline in
value of the Collateral whether or not covered by insurance and the amount of
such loss or depreciation;
(c) only use or permit the Collateral to be used in accordance with all
applicable federal, state, county and municipal laws and regulations;
(d) have and maintain insurance at all times with respect to all
Collateral against risks of fire (including so called extended coverage), theft,
sprinkler leakage, and other risks (including risk of flood if any Collateral is
maintained at a location in a flood hazard zone) as XXXXXXX may require, in such
form, in such amount, for such period and written by such companies as may be
satisfactory to XXXXXXX in his sole discretion. The policies of all such
casualty insurance shall contain a standard lender's loss payable clause issued
in favor of XXXXXXX under which all losses thereunder shall be paid to XXXXXXX
as XXXXXXX'x interest may appear. Such policies shall expressly provide that the
requisite insurance cannot be altered or canceled without at least thirty (30)
days prior written notice to XXXXXXX and shall insure XXXXXXX notwithstanding
the act or neglect of AHDC. Upon demand of XXXXXXX, AHDC shall furnish XXXXXXX
with duplicate original policies of insurance or such other evidence of
insurance as XXXXXXX may require. In the event of failure to provide insurance
as herein provided, XXXXXXX may, at his option, obtain such insurance and AHDC
shall pay to XXXXXXX, on demand, the cost thereof. Proceeds of insurance may be
applied by XXXXXXX to reduce the Obligations or to repair or replace Collateral,
all in XXXXXXX'x sole discretion;
(e) at all times keep accurate and complete records covering each item of
Collateral, including the proceeds therefrom. XXXXXXX, or any of his agents,
shall have the right upon reasonable prior notice, at intervals to be determined
by XXXXXXX and without hindrance or delay, at AHDC's expense, to inspect, audit,
and examine the Collateral and to make extracts from the books, records,
journals, orders, receipts, correspondence and other data relating to
Collateral, AHDC's business or any other transaction between the parties hereto.
AHDC will at its expense furnish XXXXXXX copies thereof upon request; and
(f) not sell or offer to sell or otherwise transfer or grant or suffer the
imposition of a lien or security interest upon the Collateral (except for sales
of inventory and collections of accounts in AHDC's ordinary course of business)
or use any portion thereof in any manner inconsistent with this Agreement or
with the terms and conditions of any policy of insurance thereon.
6. COVENANTS FOR ACCOUNTS. If accounts are included in the definition of
Collateral:
(a) AHDC will, on demand of XXXXXXX, make notations on its books and
records showing the security interest of XXXXXXX and make available to XXXXXXX
shipping and delivery receipts evidencing the shipment of the goods that gave
rise to an account, completion certificates or other proof of the satisfactory
performance of services that gave rise to an account, a copy of the invoice for
each account and copies of any written contract or order from which an account
arose. AHDC shall promptly notify XXXXXXX if an account becomes evidenced or
secured by an instrument or chattel paper and upon request of XXXXXXX, will
promptly deliver any such instrument or chattel paper to XXXXXXX, including
without limitation, any letter of credit delivered to AHDC to support a shipment
of inventory by AHDC.
(b) AHDC will promptly advise XXXXXXX whenever an account debtor refuses
to retain or returns any goods from the sale of which an account arose and will
comply with any instructions that XXXXXXX may give regarding the sale or other
disposition of such returns. AHDC will, on at least a weekly basis, report all
credits given to account debtors on all accounts.
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(c) AHDC will immediately notify XXXXXXX if any account arises out of
contracts with the United States or any department, agency or instrumentality
thereof, and will execute any instruments and take any steps required by XXXXXXX
so that all monies due and to become due under such contract shall be assigned
to XXXXXXX and notice thereof given to and acknowledged by the appropriate
government agency or authority under the Federal Assignment of Claims Act.
(d) At any time upon thirty (30) days prior written notice to AHDC,
XXXXXXX may notify any persons who are indebted to AHDC on any Collateral
consisting of accounts or general intangibles of the assignment thereof to
XXXXXXX and may direct such account debtors to make payment directly to XXXXXXX
of the amounts due. At the request of XXXXXXX, AHDC will direct any persons who
are indebted to AHDC on any Collateral consisting of accounts or general
intangibles to make payment directly to XXXXXXX. XXXXXXX is authorized to give
receipts to such account debtors for any such payments and the account debtors
will be protected in making such payments to XXXXXXX.
7. OTHER AFFIRMATIVE COVENANTS. AHDC agrees that from the date hereof and
until final payment in full of the Obligations, unless XXXXXXX shall otherwise
consent in writing, AHDC will:
(a) on reasonable prior notice, allow XXXXXXX, or his agents, during
normal business hours, access to the books, records and such other documents of
AHDC as XXXXXXX shall reasonably require, and allow XXXXXXX to make copies
thereof at XXXXXXX'x expense;
(b) conduct its business in substantially the same manner and locations as
such business is now and has previously been conducted;
(c) deliver to XXXXXXX, with the annual financial statements required
herein, a certification by AHDC's independent certified public accountant that
AHDC is in full compliance with the Transaction Documents;
(d) comply with all terms and conditions contained in this Agreement, and
any other Transaction Documents;
(e) furnish, within 15 days after request by XXXXXXX, a written statement
duly acknowledged of the amount due under the Guaranty and whether offsets or
defenses exist against the Obligations;
(f) maintain adequate insurance coverage with respect to its properties
and business against loss or damage of the kinds and in the amounts customarily
insured against by companies of established reputation engaged in the same or
similar businesses including, without limitation, commercial general liability
insurance, workers compensation insurance, and business interruption insurance;
all acquired in such amounts and from such companies as XXXXXXX may reasonably
require;
(g) maintain, preserve and keep its property in good repair, working order
and condition, making all needed replacements, additions and improvements
thereto, to the extent allowed by this Agreement;
(h) deliver to XXXXXXX, with any financial statements required below, a
certificate signed by AHDC, by a principal financial officer of AHDC warranting
that no "Event of Default" as specified in the Transaction Documents nor any
event which, upon the giving of notice or lapse of time or both, would
constitute such Event of Default, has occurred and demonstrating AHDC's
compliance with any financial covenants contained herein;
(i) furnish to XXXXXXX immediately upon becoming aware of the existence of
any condition or event which constitutes an Event of Default (as defined in the
Transaction Documents) or any event which, upon the giving of notice or lapse of
time or both, may become an Event of Default, written notice specifying the
nature and period of existence thereof and the action which AHDC is taking or
proposes to take with respect thereto;
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(j) promptly notify XXXXXXX in writing of (i) any material adverse change
in its financial condition or its business; (ii) any default under any material
agreement, contract or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any
indebtedness owing by AHDC; (iii) any material adverse claim against or
affecting AHDC or any part of its properties; (iv) the commencement of, and any
material determination in, any litigation with any third party or any proceeding
before any governmental agency or unit affecting AHDC; and (v) at least 30 days
prior thereto, any change in AHDC's name or address as shown above, and/or any
change in AHDC's structure;
(k) deliver promptly such other information regarding the operation,
business affairs, and financial condition of AHDC which XXXXXXX may reasonably
request;
(l) pay and discharge when due, and before subject to penalty or further
charge, and otherwise satisfy before maturity or delinquency, all obligations,
debts, taxes, and liabilities of whatever nature or amount, except those which
AHDC in good faith disputes;
(m) deliver to XXXXXXX, promptly, a copy of all financial statements,
reports, notices, and proxy statements, sent by AHDC to stockholders, and all
regular or periodic reports required to be filed by AHDC with any governmental
agency or authority;
(n) deliver to XXXXXXX, within 90 days after the close of each fiscal
year, audited financial statements reflecting its operations during such fiscal
year, including, without limitation, a balance sheet, profit and loss statement
and statement of cash flows, with supporting schedules; all on a consolidated
and consolidating basis with respect to AHDC and its Subsidiaries, Affiliates
and parent or holding company, as applicable, and in reasonable detail, prepared
in conformity with generally accepted accounting principles, applied on a basis
consistent with that of the preceding year;
(o) deliver to XXXXXXX accountant reviewed quarterly financial statements
including, without limitation, a balance sheet, profit and loss statement and
statement of cash flows, with supporting schedules, and an accounts receivable
aging as soon as available and in any event within 45 days after the close of
each such period; all on a consolidated and consolidating basis with respect to
AHDC and its Subsidiaries, Affiliates and parent or holding company, as
applicable, all in reasonable detail and prepared in conformity with generally
accepted accounting principles, applied on a basis consistent with that of the
preceding year, and certified as to their correctness by a principal financial
officer of AHDC and in each case, if audited statements are required, subject to
audit and year-end adjustments;
(p) deliver to XXXXXXX, within 30 days of filing, complete copies of
federal and state tax returns, as applicable, together with all schedules
thereto, each of which shall be signed and certified by AHDC to be true and
complete copies of such returns;
(q) preserve and maintain in full force and effect (i) its existence as a
corporation under the laws of the State of Delaware and its qualification to do
business in each jurisdiction in which the conduct of its business requires such
qualification, (ii) all governmental approvals required at any time in
connection with the business of the Company, and (iii) all of its rights and
franchises and all licenses and other rights in or to use patents, processes,
licenses, trademarks, trade names, domain names, copyrights or other
intellectual property owned or possessed by it and deemed to be necessary to the
conduct of its business;
(r) keep true records and books of account in which full, true and correct
entries will be made of all dealings or transactions in relation to its business
and affairs in accordance with generally accepted accounting principles,
consistently applied; and
(s) retain independent public accounts of recognized national standing who
shall certify its financial statements at the end of each fiscal year.
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8. OTHER NEGATIVE COVENANTS. AHDC agrees that from the date of this Agreement
and until final payment in full of the Obligations, unless XXXXXXX shall
otherwise consent in writing, AHDC will not:
(a) affix any collateral to any real estate, unless AHDC has (i) obtained
XXXXXXX'x permission to do so; (ii) delivered to XXXXXXX a landlord's waiver
and/or mortgagee's waiver with respect to such collateral duly executed by the
landlord or mortgagee, as the case may be, of the real estate to which the
collateral is to be affixed, in form and substance satisfactory to XXXXXXX,
which waiver disclaims any interest in such assets; and (iii) deliver to XXXXXXX
a UCC-1 financing statement with respect to the collateral in the form necessary
or with all information required to be recorded in the real estate records of
the county in which the collateral is to be located;
(b) change its fiscal year;
(c) amend its certificate of incorporation, by-laws, other organization
document, stock option plan or any other material agreement;
(d) acquire, merge or consolidate with any other entity;
(e) enter into any credit agreements or arrangements;
(f) materially alter the kind or type of its business or that of its
Subsidiaries or Affiliates, if any;
(g) sell substantially all of its business or assets, any of its
Subsidiaries or Affiliates or any guarantor, or a material portion (10% or more)
of such business or assets if such a sale is outside the ordinary course of its
business, or any of its Subsidiaries or Affiliates or any guarantor;
(h) transfer any of its outstanding stock or voting power (or issue any
additional capital stock or other equity), any other Subsidiary or Affiliate or
any guarantor in a single transaction or a series of transactions;
(i) acquire substantially all of the business or assets or more than 50%
of the outstanding stock or voting power of any other entity;
(j) provide loans, guarantees or any other type of financial support to
any of AHDC's shareholders, directors or officers, other than salaries, bonuses,
and reimbursable expenses incurred in the ordinary course of business;
(k) incur any indebtedness other than trade credit incurred in the
ordinary course of AHDC's business;
(l) extend credit by any method or in any form, other than open account
credit extended to customers in the ordinary course of AHDC's business;
(m) incur a capital expenditure in excess of US $50,000 in any calendar
year;
(n) make any loans or advances to or investment in any person or entity
except for (1) obligations of or guaranteed by the United States of America; (2)
obligations issued or guaranteed by any instrumentality or agency of the United
States of America, whether now existing or hereafter organized; (3) obligations
issued or guaranteed by any state of the United States or the District of
Columbia; and (4) interest-bearing accounts, certificates of deposit, bankers
acceptances or commercial paper of a United States national bank;
(o) not permit, allow or suffer any lien, security interest or other
encumbrance to exist on any of its assets;
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(p) become a party to any transaction with any shareholder, director,
officer or other Affiliate or Subsidiary or pay or incur any obligation to pay
any management, service, consulting or similar fees to any shareholder,
director, officer or other Affiliate or Subsidiary;
(q) guarantee or otherwise become responsible for obligations of any other
person or persons, other than the endorsement of checks and drafts for
collection in the ordinary course of business;
(r) default on any material contract with or obligation when due to a
third party or default in the performance of any material obligation to a third
party incurred for money borrowed;
(s) permit the assertion or making of any seizure, vesting or intervention
by or under authority of any government by which the management of AHDC is
displaced of its authority in the conduct of its respective business or such
business is curtailed or materially impaired;
(t) permit the entry of any monetary judgment or the assessment against,
the filing of any tax lien against, or the issuance of any writ of garnishment
or attachment against any property of or debts due;
(u) retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so;
(v) relocate its chief executive office;
(w) materially increase its payroll;
(x) make or commit to make any payments or otherwise incur any liability,
or enter into any material agreement(s) or transaction(s), with a value in
excess of $75,000 per year; and
(y) retire or otherwise acquire any of its capital stock.
9. FURTHER ASSURANCES. At the request of XXXXXXX, AHDC will join with XXXXXXX
in executing one or more financing, continuation or amendment statements
pursuant to the UCC in form satisfactory to XXXXXXX and will pay the cost of
preparing and filing the same in all jurisdictions in which such filing is
deemed by XXXXXXX to be necessary or desirable. A carbon, photographic or other
copy of this Agreement or of a UCC-1 financing statement may be filed as and in
lieu of a UCC-1 financing statement.
10. EVENTS OF DEFAULT. AHDC shall, at the option of XXXXXXX, be in default
under this Agreement upon the happening of any of the following events or
conditions (each, an "Event of Default"): (a) the non-payment of any principal,
interest or other indebtedness under the Guaranty when due and the lapse of any
notice or cure period provided in such Guaranty with respect to such default;
(b) any Event of Default (as defined in any of the Obligations); (c) any default
under any of the Obligations that does not have a defined set of "Events of
Default" and the lapse of any notice or cure period provided in such Obligations
with respect to such default; (d) demand by XXXXXXX under any of the Obligations
that have a demand feature; (e) the failure by AHDC to perform any of its
obligations under this Agreement or any other Transaction Document; (f) falsity,
inaccuracy or material breach by AHDC of any written warranty, representation or
statement made or furnished to XXXXXXX by or on behalf of AHDC; (g) the filing
by or against AHDC of any proceeding in bankruptcy, receivership, insolvency,
reorganization, liquidation, conservatorship or similar proceeding (and, in the
case of any such proceeding, such proceeding is not dismissed or stayed within
thirty (30) days of the commencement thereof); (h) any assignment by AHDC for
the benefit of creditors, or any levy, garnishment, attachment or similar
proceeding is instituted against any property of AHDC; (i) a default with
respect to any other indebtedness of AHDC if the effect of such default is to
cause or permit the acceleration of such debt; (j) the commencement of any
foreclosure or forfeiture proceeding, execution or attachment against any of the
Collateral; (k) the entry of any judgment against AHDC and the failure of AHDC
to discharge the judgment within ten (10) days of the entry thereof; (l) any
material adverse change in the business, assets, operations, financial
conditions or results of operations of AHDC; (m) AHDC ceases doing business as a
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going concern; (n) an uninsured material loss, theft, damage, or destruction to
any of the Collateral, or any lien against or the making of any levy, seizure or
attachment of or on the Collateral; (o) the failure of XXXXXXX to have a
perfected first priority security interest in the Collateral subject only to the
Permitted Liens; or (p) any indication or evidence received by XXXXXXX that AHDC
may have directly or indirectly been engaged in any type of activity which, in
XXXXXXX'x discretion, might result in the forfeiture of any property of AHDC to
any governmental entity, federal, state or local.
11. REMEDIES. Upon the occurrence of any such Event of Default and at any time
thereafter, XXXXXXX may declare all Obligations immediately due and payable and
shall have, in addition to any remedies provided herein or by any applicable law
or in equity, all the remedies of a secured party under the Uniform Commercial
Code. As permitted by such Code, XXXXXXX may (a) peaceably by his own means or
with judicial assistance enter AHDC's premises and take possession of the
Collateral, (b) render the Collateral unusable, (c) dispose of the Collateral on
AHDC's premises, (d) require AHDC to assemble the Collateral and make it
available to XXXXXXX at a place designated by XXXXXXX, and (e) notify the United
States Postal Service to send AHDC's mail to XXXXXXX. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, XXXXXXX will give AHDC reasonable notice 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. The requirements
of commercially reasonable notice shall be met if such notice is sent to AHDC at
least five (5) days before the time of the intended sale or disposition.
Expenses of retaking, holding, preparing for sale, selling or the like shall
include XXXXXXX'x reasonable attorney's fees and legal expenses, incurred or
expended by XXXXXXX to enforce any payment due it under the Guaranty or any
other Transaction Document either as against AHDC, or in the prosecution or
defense of any action, or concerning any matter growing out of or connection
with the subject matter of this Agreement or any other Transaction Document and
the Collateral pledged hereunder.
12. POWER OF ATTORNEY. AHDC does hereby make, constitute and appoint any agent
of XXXXXXX as AHDC's true and lawful attorney-in-fact, with full power of
substitution to endorse the name of AHDC or any of AHDC's officers or agents
upon any notes, checks, drafts, money orders, or other instruments of payment or
Collateral that may come into the possession of XXXXXXX in full or part payment
of any amounts owing to XXXXXXX; granting to AHDC's said attorney full power to
do any and all things necessary to be done in and about the premises as fully
and effectually as AHDC might or could do, including the right to sign, for
AHDC, UCC-1 financing statements and UCC-3 Statements of Change and to xxx for,
compromise, settle and release all claims and disputes with respect to, the
Collateral. AHDC hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an
interest, and is irrevocable.
13. PAYMENT OF EXPENSES. At his option, XXXXXXX may discharge taxes, liens,
security interests or such other encumbrances as may attach to the Collateral,
may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the Collateral, as
determined by XXXXXXX to be necessary. AHDC will reimburse XXXXXXX on demand for
any payment so made or any expense incurred by XXXXXXX pursuant to the foregoing
authorization, and the Collateral also will secure any advances or payments so
made or expenses so incurred by XXXXXXX.
14. NOTICES. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt if delivered personally to such party, or if sent by
facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the address set forth above or to such
other address as any party may give to the other in writing for such purpose.
15. PRESERVATION OF RIGHTS. No delay or omission on the part of XXXXXXX to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power or any acquiescence
therein, nor will the action or inaction of XXXXXXX impair any right or power
arising hereunder. XXXXXXX'x rights and remedies hereunder are cumulative and
not exclusive of any other rights or remedies which XXXXXXX may have under other
agreements, at law or in equity.
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16. ILLEGALITY. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
17. CHANGES IN WRITING. No modification, amendment or waiver of any provision
of this Agreement nor consent to any departure by AHDC therefrom, will in any
event be effective unless the same is in writing and signed by XXXXXXX, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on AHDC in any case will
entitle AHDC to any other or further notice or demand in the same, similar or
other circumstance.
18. ENTIRE AGREEMENT. This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
19. COUNTERPARTS. This Agreement may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument.
20. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and inure to
the benefit of AHDC and XXXXXXX and their respective heirs, executors,
administrators, successors and assigns; PROVIDED, HOWEVER, that AHDC may not
assign this Agreement in whole or in part without the prior written consent of
XXXXXXX and XXXXXXX at any time may assign this Agreement in whole or in part.
21. INTERPRETATION. In this Agreement, unless XXXXXXX and AHDC otherwise agree
in writing, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; the word "or" shall be deemed to include
"and/or", the words "including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to articles, sections (or
subdivisions of sections) or exhibits are to those of this Agreement unless
otherwise indicated. Section headings in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. If this Agreement is executed by more than one grantor,
the obligations of such persons or entities will be joint and several.
22. INDEMNITY. AHDC agrees to indemnify each of XXXXXXX, his successors and
assigns (the "Indemnified Parties") and to hold each Indemnified Party harmless
from and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, all reasonable fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party as a result of the execution of or performance under this
Agreement or any other Transaction Document; PROVIDED, HOWEVER, that the
foregoing indemnity agreement shall not apply to claims, damages, losses,
liabilities and expenses solely attributable to an Indemnified Party's gross
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Agreement. AHDC may participate at
its expense in the defense of any such claim.
23. GOVERNING LAW AND JURISDICTION. This Agreement has been delivered to and
accepted by XXXXXXX and will be deemed to be made in the State of New Jersey.
THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, EXCEPT
THAT THE LAWS OF THE STATE WHERE ANY COLLATERAL IS LOCATED (IF OTHER THAN THE
STATE OF NEW JERSEY) SHALL GOVERN THE CREATION, PERFECTION AND FORECLOSURE OF
THE LIENS CREATED HEREUNDER ON SUCH PROPERTY OR ANY INTEREST THEREIN. AHDC
hereby irrevocably consents to the exclusive jurisdiction of any state or
federal court for the county or judicial district in the State of New Jersey,
and consents that all service of process be sent by nationally recognized
overnight courier service directed to AHDC at AHDC's address set forth herein
and service so made will be deemed to be completed on the business day after
deposit with such courier; provided that nothing contained in this Agreement
will prevent XXXXXXX from bringing any action, enforcing any award
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or judgment or exercising any rights against AHDC individually, against any
security or against any property of AHDC within any other county, state or other
foreign or domestic jurisdiction. XXXXXXX and AHDC agree that the venue provided
above is the most convenient forum for both XXXXXXX and AHDC. AHDC waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Agreement.
24. SELF HELP REMEDIES. AHDC BEING FULLY AWARE OF THE RIGHT TO NOTICE AND A
HEARING ON THE QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED
AGAINST AHDC BY XXXXXXX UNDER THIS AGREEMENT, AND ANY OTHER TRANSACTION
DOCUMENTS, BEFORE AHDC CAN BE DEPRIVED OF ANY PROPERTY IN AHDC'S POSSESSION,
HEREBY WAIVES THESE RIGHTS AND AGREES THAT XXXXXXX MAY EMPLOY SELF-HELP OR ANY
LEGAL OR EQUITABLE PROCESS PROVIDED BY LAW TO TAKE POSSESSION OF ANY SUCH
PROPERTY WITHOUT FIRST OBTAINING A FINAL JUDGMENT OR WITHOUT FIRST GIVING AHDC
NOTICE AND THE OPPORTUNITY TO BE HEARD ON THE VALIDITY OF THE CLAIM UPON WHICH
SUCH TAKING IS MADE. AHDC WAIVES ALL RELIEF FROM ALL APPRAISEMENT OR EXEMPTION
LAWS NOW IN FORCE OR HEREAFTER ENACTED.
25. WAIVER OF JURY TRIAL. EACH OF AHDC AND XXXXXXX IRREVOCABLY WAIVES ANY AND
ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF
ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. AHDC
AND XXXXXXX ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
IN WITNESS WHEREOF, AHDC, on the day and year first written above, has
caused this Agreement to be executed under seal.
[CORPORATE SEAL] AMERICAN HEALTH AND DIET CENTERS, INC.
Attest: By:
----------------------------- -----------------------------------
Print Name:
-------------------------
Title:
------------------------------
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EXHIBIT "A"
TO SECURITY AGREEMENT
Address of Grantor's chief executive office, including the County:
000 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000
Address for books and records, if different:
N/A
Addresses of other Collateral locations, including Counties and name and address
of landlord or owner if location is not owned by AHDC:
N/A
Other names or tradenames now or formerly used by AHDC:
N/A
