SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (this "Agreement"), made and
entered into as of the 14th day of October, 1999, is by and
between Montana Naturals Int'l, Inc., a Montana corporation (the
"Borrower"), HealthRite, Inc., a Delaware corporation (the
"Guarantor"), Xxxxx Pharmaceuticals, Inc., a Maryland
corporation ("Xxxxx") and U.S. Bank National Association MT
(formerly known as First Bank Montana, National Association), a
national banking association (the "Lender").
RECITALS
1. The Lender and the Borrower entered into a Credit
Agreement dated as of October 8, 1997 which was amended as of
July 1, 1999 (as amended, the "Credit Agreement") wherein Lender
agreed to extend certain credit facilities to the Borrower;
2. The credit facilities provided to the Borrower
are evidenced by three Promissory Notes dated July 1, 1999 (the
"Notes") and secured with liens on the Borrower's (i) real
property pursuant to a Combination Trust Indenture, Security
Agreement, Assignment of Leases and Rents and Fixture Financing
Statement dated as of October 8, 1997 (the "Indenture") and
(ii), inter alia, equipment, inventory, accounts and general
intangibles pursuant to a Security Agreement also dated
October 8, 1997 (the "Security Agreement");
3. Borrower has failed to pay installments due under
the terms of the Notes on August 1 and September 1, 1999 and
breached certain covenants of the Credit Agreement and,
therefore, the Borrower is in default of its obligations to
Lender;
4. The accelerated balances of the Notes, including
interest accrued as of September 29, 1999, but not including of
attorneys' fees and costs, total $1,247,450.73 ("Note 1"),
$695,979.74 ("Note 2") and $1,534,722.15 ("Note 3"); and
5. The parties wish to provide for an orderly
liquidation of Lender's collateral securing the Notes, discharge
of the indebtedness due Lender under the Notes and discharge of
the Guarantor's obligation to Lender under the terms of the
Guaranty dated October 8, 1997, in each case subject to the
terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby covenant and agree to be bound as follows:
Section 1. Repossession and Sale of Personal
Property. The Borrower shall and does hereby acknowledge that
Lender has repossessed the following personalty (the "Personal
Property"):
1.1 All Borrower's Accounts, as that term is defined
in the Security Agreement, including without limitation the
Accounts described in the attached Exhibit A;
1.2 All Borrower's Inventory, as that term is defined
in the Security Agreement, including without limitation the
Inventory described in the attached Exhibit B;
1.3 The proceeds of sales of the Borrower's Inventory
and payment of its Accounts (the "Proceeds") totaling
approximately $300,000 as of the date hereof, including without
limitation all amounts on deposit in U.S. Bank National
Association MT, Missoula Branch ("U.S. Bank - Missoula") and
Valley Bank of Ronan, Montana ("Valley Bank"); provided,
Borrower may retain $25,000 of the Proceeds free and clear of
the liens of Lender to be used for, among other things, to pay
the costs of termination of the Borrower's legal existence;
1.4 All Borrower's Equipment, as that term is defined
in the Security Agreement, including without limitation the
Equipment described in the attached Exhibit C; and
1.5 All Borrower's general intangible property,
including without limitation the trademarks and other
intellectual property described in the attached Exhibit D (the
"Trademarks"), as well as any and all of Borrower's Chattel
Paper, Documents or Instruments as those terms are defined in
the Security Agreement.
Section 2. Disposition of Personal Property.
2.1. Strict Foreclosure; Waiver. Lender does hereby
elect to retain and foreclose its interests in the Accounts,
Inventory, Equipment, Trademarks and other Personal Property in
partial satisfaction of the debt due Lender under the terms of
the Notes. The Borrower and Guarantor hereby waive and renounce
(i) their right to notification of public or private sale as
provided in MCA Section 30-9-504(3)(a), (ii) their right of written
notice of retention of any or all personal property securing the
Notes as provided in MCA Section 30-9-505(2)(a), and (iii) the right to
an accounting of any surplus of the proceeds of sale pursuant to
MCA Section 30-9-504(2). Borrower and Guarantor further agree
disposition of Personal Property in accordance with this
Section 2 is commercially reasonable.
2.2 Set Off. Lender may exercise its right of set
off against any Proceeds deposited in U.S. Bank - Missoula and
the Borrower shall and does hereby waive any right to notice of
the set off provided by Montana law.
Section 3. Disposition of Real Property.
3.1 Deeds; Foreclosure. The Borrower shall,
simultaneously with the execution of this Agreement, deliver to
Lender (or its nominee, FSM, Inc.) a non-merger deed in lieu of
foreclosure (the "Deed") to the real property described in the
Indenture (the "Premises"), together with such estoppel
certificates as the Lender may require, which Lender shall
immediately record. Lender may, in its sole discretion and at
such time as it may elect following recordation of the Deed,
foreclose the Indenture, by notice of sale or by judicial
process, to defray the unpaid balance of the Notes and, to the
extent its consent may be required, the Borrower shall and does
hereby consent to judgment in favor of Lender in an amount equal
to the outstanding debt due Lender in any foreclosure action by
judicial process; provided, in the event of foreclosure by
judicial process, Lender waives and shall not be entitled to a
deficiency judgment against the Borrower. The parties
specifically acknowledge and agree that delivery of the Deed
shall not merge with or cause a termination or discharge of the
Indenture or be deemed a satisfaction of the Notes to the extent
a foreclosure of the Indenture is determined to be necessary by
Lender.
3.2 Possession. Lender shall have immediate
possession of the Premises.
Section 4. Effectiveness of this Agreement. This
Agreement shall become effective upon due execution and delivery
by the Borrower of, and compliance by the Borrower with, the
following:
4.1 This Agreement;
4.2 The Deed and an estoppel certificate, both in a
form and satisfactory to Lender;
4.3 Instructions to Valley Bank regarding wire
transfer of proceeds on deposit (net of the $25,000 to be
retained pursuant to Section 1.3 above) there to Borrower's
account at U.S. Bank - Missoula;
4.4 An assignment of the Trademarks to be recorded in
the U.S. Patent and Trademark office; and
4.5 A letter terminating the consultancy of Xxxxxx
Xxxxxx and consenting to his service to Lender as an
independent contractor to assist in liquidation of the Personal
Property and Premises by Lender; provided, Olsson shall
simultaneously deliver to Borrower an agreement, in form and
substance acceptable to Borrower, pursuant to which Olsson
releases the Borrower, Guarantor and Xxxxx and agrees not to
disclose any confidential information about the Borrower,
Guarantor or Xxxxx acquired in the course of the terminated
consultancy (which together with all documents described in
Sections 4.1 through 4.4 shall be referred to hereinafter as the
"Closing Documents").
Section 5. Representations, Warranties, Authority, No
Adverse Claim.
5.1 Cooperation. The Borrower represents and
acknowledges its cooperation is necessary to the peaceful
repossession and orderly liquidation of its assets as described
in Sections 1, 2 and 3 of this Agreement and, therefore,
warrants it shall cooperate with Lender fully and at its own
expense as Lender may reasonably require, including, without
limitation, (i) providing information, documents and assistance
to Lender and persons engaged by Lender to conduct environmental
audits and surveys of the Premises, (ii) providing information,
documents, books, records and assistance to Lender in its
efforts to collect the Accounts or liquidate other assets of the
Borrower, and (iii) executing such additional documents as the
Lender may reasonably require to accomplish the purposes of this
Agreement, including without limitation such assignments of
Accounts as Lender may require to pursue collection thereof.
5.2 Authority, No Conflict, No Consent Required. The
Borrower represents and warrants that the Borrower has the power
and legal right and authority to enter into this Agreement and
other Closing Documents. The Borrower represents and warrants
that no consent, approval or authorization of or registration or
declaration with any person, including but not limited to any
governmental authority, is required in connection with the
execution and delivery by the Borrower of the Closing Documents
or other agreements and documents executed and delivered by the
Borrower in connection therewith or the performance of
obligations of the Borrower herein described.
5.3 No Adverse Claim. The Borrower warrants,
acknowledges and agrees that no events have taken place and no
circumstances exist at the date hereof which would give the
Borrower a basis to assert a defense, offset or counterclaim to
any claim of the Lender with respect to the Borrower's
obligations under the Credit Agreement, the Notes or any other
document executed in connection with the Credit Agreement.
Section 6. Affirmation of Credit Agreement, Further
References, Affirmation of Security Interest. The Lender and
the Borrower each acknowledge and affirm that the Credit
Agreement, Notes, Indenture and Security Agreement (which shall
be referred to hereinafter as the "Loan Documents") are hereby
ratified and confirmed in all respects and all terms, conditions
and provisions of each such document, except as amended by this
Agreement, shall remain unmodified and in full force and effect.
The Borrower confirms to the Lender that the Borrower's
obligations under the Credit Agreement are and continue to be
secured by the security interests granted by the Borrower in
favor of the Lender under the Security Agreement and the
Indenture, and made by the Borrower in favor of the Lender, and
all of the terms, conditions, provisions, agreements,
requirements, promises, obligations, duties, covenants and
representations of the Borrower under the Loan Documents and any
and all other documents and agreements entered into with respect
to the obligations under the Credit Agreement are incorporated
herein by this reference and are hereby ratified and affirmed in
all respects by the Borrower, except as amended by this
Agreement. This Agreement supersedes and has merged into this
Agreement all prior oral or written agreements on the subjects
of this Agreement by and between the parties hereto with the
effect that this Agreement, shall control with respect to the
specific subjects hereof and thereof.
Section 7. Severability. Whenever possible, each
provision of this Agreement and the other Closing Documents and
any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto shall be
interpreted in such manner as to be effective, valid and
enforceable under the applicable law of any jurisdiction, but,
if any provision of this Agreement, the other Closing Documents
or any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto shall be held to
be prohibited, invalid or unenforceable under the applicable
law, such provision shall be ineffective in such jurisdiction
only to the extent of such prohibition, invalidity or
unenforceability, without invalidating or rendering
unenforceable the remainder of such provision or the remaining
provisions of this Agreement, the other Closing Documents or any
other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto in such jurisdiction,
or affecting the effectiveness, validity or enforceability of
such provision in any other jurisdiction.
Section 8. Successors. The Closing Documents shall be
binding upon the Borrower, Xxxxx, the Guarantor and the Lender
and their respective successors and assigns, and shall inure to
the benefit of the Borrower, Xxxxx and the Guarantor, their
successors and assigns, and the Lender and the successors and
assigns of the Lender.
Section 9. Default and Remedies for Default. Any
default by the Borrower in performance of its obligations under
this Agreement shall constitute a default by the Borrower under
the Loan Documents and Lender may avail itself of any remedy
provided therein against the Borrower.
Section 10. Expenses. Each party shall bear their own
attorney's fees and other expenses incurred to date with respect
to the default of the Borrower of the Credit Agreement, Security
Agreement, Indenture and Notes and the negotiations and
preparation of this Agreement. In the event an action to
enforce this Agreement becomes necessary, the prevailing party
shall be entitled to recovery of its reasonable attorneys' fees
and costs.
Section 11. Mutual Release and Covenant Not To Xxx.
11.1 The Borrower, Xxxxx and the Guarantor, on behalf
of themselves, their heirs, successors and assigns, do hereby
release, acquit and forever discharge Lender and its affiliated
companies and all persons who presently are or in the past have
acted in the capacity of directors, officers, accountants,
attorneys, employees, agents or others acting on behalf of
Lender, its affiliated companies and their successors and
assigns, and each of them, from any and all manner of action or
actions, suits, claims, demands, damages, judgments, levies and
executions, whether known or unknown, liquidated and
unliquidated, fixed or contingent, direct or indirect, sounding
in contract or tort, which it ever had, have or ever it can,
shall or may have or claim to have against Lender, its
affiliated companies and all persons who presently are or in the
past have acted in the capacity of directors, officers,
accountants, attorneys, employees, agents or others acting on
behalf of Lender, or its affiliated companies and its successors
and assigns, and each of them, upon or by reason of any matter,
fact, or thing, existing prior to the date of signing this
Agreement, including, by way of example and not by limitation,
those claims which could have been asserted in connection with
negotiation, origination, closing, administration, enforcement,
foreclosure or settlement of the Loans identified in the Credit
Agreement.
11.2 Lender, on behalf of itself, its officers, its
directors, its shareholders, its employees, its successors and
assigns, does hereby release, acquit and forever discharge the
Borrower, Xxxxx and the Guarantor and all persons who presently
are or in the past have acted in the capacity of accountants,
attorneys, employees, agents or others acting on behalf of the
Borrower, Xxxxx and the Guarantor, their successors and assigns,
and each of them, from any and all manner of action or actions,
suits, claims, demands, damages, judgments, levies and
executions, whether known or unknown, liquidated or
unliquidated, fixed or contingent, direct or indirect, sounding
in contract or tort, which it ever had, have, or ever it can,
shall or may have or claim to have against the Borrower, Xxxxx
or the Guarantor, and all persons who presently are or in the
past have acted in the capacity of accountants, attorneys,
employees, agents or others acting on behalf of the Borrower,
Xxxxx or the Guarantor, and their successors and assigns, and
each of them, upon or by reason of any matter, fact, or thing,
existing prior to the date of the signing of this Agreement,
provided, however, that this release shall not affect or cause a
release of (i) the Borrower's rights and obligations under this
Agreement or the Closing Documents or (ii) Borrower's
obligations under the Loan Documents to the extent that the
continued existence of the unpaid Notes is necessary to the
foreclosure of the Indenture or to enforce Section 11.4 against
the Guarantor, if applicable; provided further, Xxxxx shall not
be deemed released from its accounts payable obligations, if any
exist, to the Borrower, repossessed and retained by Lender under
Sections 1.1 and 2.1 of this Agreement, except to the extent
such obligations exceed $100,000.
11.3 It is further specifically agreed that the intent
of this Agreement is not only to effect a settlement and release
of the claims or potential claims by the parties against each
other described above, but it is further intended to
specifically effect a complete bar to any right of action by the
parties, their officers, directors, shareholders, accountants,
attorneys, agents, successors and assigns, against each other,
except as may be necessary to enforce the Loan Documents or the
terms of this Agreement.
11.4 The release granted Guarantor and Xxxxx under
Section 11.2 shall be deemed void and of no further force and
effect in the event it is determined that (a) either (i) the
consolidated financial statements of the Guarantor contained in
Form 10-QSB for the second quarter 1999, and for the six months
ended June 30, 1999, as well as the consolidating statements for
the same periods, taken as a whole, materially fail to comply
with generally accepted accounting principles, to the extent
applicable to interim, management prepared financing statements
or (ii) the Schedule of Unpaid Bills of Guarantor as of July 31,
1999 materially overstates the accounts payable of the Guarantor
as of July 31, 1999 and (b) such failures caused a material
understatement of the ability of the Guarantor to satisfy any
substantial liability under the Guaranty. Both the Form 10-QSB
for the second quarter of 1999, the consolidating statement for
the same periods and the Schedule of Unpaid Bills as of July 31,
1999 are attached hereto as Exhibit 11.4. Any actions seeking
to void the release of the Guarantor or Xxxxx must be commenced
within 18 months of the date hereof or be forever waived and
barred.
Section 12. Voluntary and Knowing Agreement. Each
party represents and warrants that they have read, know and
understand the contents of this Agreement, and have executed
this Agreement freely and voluntarily, and have not been
influenced by any person or any attorney acting on behalf of any
other party. The Borrower has not acted or relied upon any
financial tax or other advice from Lender, in connection with
the negotiation, execution or delivery of this Agreement. Each
party represents and warrants that in executing and delivering
this Agreement they were not acting under any menace, undue
influence, or duress.
Section 13. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MONTANA, WITHOUT
GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS, THEIR
HOLDING COMPANIES AND THEIR AFFILIATES.
Section 14. Headings. The headings of various
sections of this Agreement have been inserted for reference only
and shall not be deemed to be a part of this Agreement.
Section 15. Counterparts. The Closing Documents may
be executed in several counterparts as deemed necessary or
convenient, each of which, when so executed, shall be deemed an
original, provided that all such counterparts shall be regarded
as one and the same document, and either party to the Closing
Documents may execute any such agreement by executing a
counterpart of such agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date and year first
above written.
BORROWER: MONTANA NATURALS INT'L, INC.
By_____________________________
Xxxxxxx X. XxxXxxxxx,
President
GUARANTOR: HEALTHRITE, INC.
By_____________________________
Xxxxxxx X. XxxXxxxxx,
Chairman/CEO
XXXXX: XXXXX PHARMACEUTICALS, INC.
By_____________________________
Xxxxxxx X. XxxXxxxxx,
President
LENDER: U.S. BANK NATIONAL ASSOCIATION MT
By:___________________________
Xxxxx X. Xxxxxx,
Vice President
EXHIBIT D
Xxxx Registration No.
Montana Big Sky Federal Appln. Abandoned
Pure Energy Fed. Regis. 1,822,302
Montana Naturals No Federal Appln./Registration
Nautilus No Federal Appln./Registration
Montana Labs No Federal Appln./Registration
Loving Mood Red. Regis. 1,762,388
Pure Serenity No Federal Appln./Registration
Stay Calm Fed. Regis. 1,762,387
Natural Solutions Montana State Registration - Not
Renewed
Throat Care Montana State Registration
Quality From An Environment
You Can Trust Fed. Regis. 1,852,741
Experience The Power
of Nature Fed. Regis. 1,850,980
Pro-Tech Fed. Regis. 1,794,626
Cholestex & Design Montana State Registration
Loving Mood Montana State Registration
Pure Energy & Design Montana State Registration
Montana Greens No Federal Appln./Registration
Botanica Select No Federal Appln./Registration
