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EXHIBIT 10.7
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made on November 11, 1999,
between Natural Alternatives International, Inc., a Delaware corporation
(referred to as "Secured Party") and FitnessAge, Inc., a Nevada corporation
(referred to as "Debtor").
NOW THEREFORE, the parties agree as follows:
1. Definitions of Terms Used Herein.
(i) "Bally Proceeds" shall mean sixty percent (60%) of the gross
receipts of Custom Nutrition, LLC from Bally Total Fitness Holding Corporation
or its affiliates ("Bally"), which amount Debtor has undertaken to cause to be
placed in an escrow account, the contents of which account are to be held as
security for the amounts to become due and owing on the Notes (as defined below)
pursuant to this Agreement and the Loan Agreement between Debtor and Secured
Party dated November 11, 1999 (the "Loan Agreement"), a copy of which is
attached hereto and incorporated herein by this reference.
(ii) "LLC Interest" shall mean all of the right title or interest
of Debtor in and to Custom Nutrition, LLC, a Delaware limited liability company
in whatever form such interest may take, including but not limited to any
interest now held or hereafter acquired by Debtor as a member, manager or
creditor of Custom Nutrition, LLC.
(iii) "Event of Default" shall mean a failure by Debtor to pay
principal or accrued interest when due under any of those certain Convertible
Secured Promissory Notes executed by Debtor in favor of Secured Party in the
form attached to the Loan Agreement and incorporated herein by reference
("Notes") or failure by Debtor to perform any of its obligations contained in
this Agreement, the Notes or the Loan Agreement.
(iv) "Collateral" shall mean (i) the LLC Interest; (ii) Bally
Proceeds; and (iii) Proceeds from either of the foregoing.
(v) "Liability" or "Liabilities" shall mean all indebtedness due
or to become due, of the Debtor to the Secured Party under the Notes.
(vi) "Proceeds" shall mean whatever is received, including cash,
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements or other documents, when any of the Collateral is
sold, exchanged, leased, collected or otherwise disposed of, and any
instruments, securities, contract rights, general intangibles, credits, claims,
dividends and any other property, rights and interest of Debtor.
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(vii) "Security Interest" shall mean a lien or other interest in
the Collateral which secures payment in full of a Liability or performance of
any obligation hereunder continuing in full force and effect until the payment
in full of all of the Liabilities.
2. Security Interest. As security for the payment of the Liabilities,
the Debtor hereby grants to the Secured Party a Security Interest in all the
Collateral and in all ledger sheets, files, records and documents relating to
the Collateral. Until payment in full of the Liabilities, the Security Interest
in all Collateral hereby shall continue in force and effect.
3. Taxes; Financing Statements. At its option, the Secured Party may
discharge taxes, liens or security interest or other encumbrances at any time
levied or placed on the Collateral, and may pay for the maintenance and
preservation thereof, and the Debtor agrees to reimburse the Secured Party on
demand for any payment made or any expense incurred by the Secured Party on
demand for any payment made or any expense incurred by the Secured Party
pursuant to the foregoing authorization. The Debtor hereby authorizes the
Secured Party to file a financing statement or financing statements on Form
UCC-1 and any amendments thereto without the signature of the Debtor. Such
authorization is limited to the Security Interest granted by this Security
Agreement.
4. Collections. Upon the occurrence of an Event of Default hereunder,
the Secured Party shall have the right to receive, endorse, assign and/or
deliver in its own name or the name of the Debtor any and all checks, drafts and
other instruments for the payment of money relating to the Collateral and the
Proceeds and the Debtor hereby waives notices of presentment, protest and
nonpayment of any instrument so endorsed. In furtherance of the foregoing, upon
the occurrence of an Event of Default hereunder, the Debtor hereby irrevocably
appoints the Secured Party its true and lawful agent, with power of substitution
for such Debtor's name or in the name of the Secured Party or otherwise, for the
use and benefit of the Secured Party: (a) To endorse the name of the Debtor upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment that may come into the possession of the Secured Party; (b) To commence
and prosecute any and all suits, actions or proceedings in law or in equity in
any court of competent jurisdiction to collect or otherwise realize on all or
any of the Collateral or the Proceeds or to enforce any rights in respect
thereof; (c) To settle, compromise, compound, adjust or defend any actions,
suits or proceedings relating to or pertaining to all or any of the Collateral;
and (d) Generally to sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and do all other
acts and things necessary to carry out this Security Agreement, as fully and
completely as though the Secured Party were the absolute owner thereof for all
purposes; provided, however, that, unless an Event of Default shall have
occurred, the Debtor may make collections and otherwise may deal with the
Collateral (including the Proceeds) in any lawful manner in the ordinary course
of its business. The Secured Party shall not be responsible nor liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located regardless of the cause thereof unless the same
shall happen through the Secured Party's negligence or wilful misconduct. The
costs of collection, notification and enforcement, including counsel fees and
out-of-pocket expenses, shall be borne solely by the Debtor whether the same are
incurred by the Security Party or the Debtor.
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5. Event of Default. If an Event of Default shall occur, the Secured
Party may take any or all of the following actions, at the same or different
times:
(i) declare any or all of the Liabilities immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Notes to
the contrary notwithstanding;
(ii) with or without legal process and with or without previous
notice or demand for performance, enter any premises where the Collateral is
located and take possession of the same, together with anything therein, and
make disposition of, or proceed to enforce payment of, the Collateral subject to
any and all applicable provisions of law; and/or
(iii) exercise any and all rights and remedies afforded to it
under any and all applicable provisions of law or principles of equity.
If the Collateral is sold at public sale, the Secured Party may purchase
all or part of the Collateral at such sale. The Secured Party shall apply the
proceeds of any such sale as follows: first, to the extent the same have not
been paid within 30 days of the invoice therefor, to the payment of all costs
and expenses of the Secured Party incurred in connection with such sale or
otherwise in connection with this Agreement, the Loan Agreement or any of the
Notes including, but not limited to, the reasonable fees and expenses of its
agents, attorneys and counsel; second, upon three (3) business days' notice to
the Debtor of the Secured Party's intention to make such application, to the
payment or reduction of any principal of or interest on the Notes then due and
payable, whether at the stated maturity thereof, or by acceleration or
otherwise, and any remainder of the proceeds of such sale shall be paid over to
the Debtor.
6. Waiver. The Secured Party shall not be deemed to have waived any
rights hereunder under any other agreement, instrument or paper signed by the
Secured Party. No delay or omission on the part of the Secured Party in
exercising any right hereunder shall operate as a waiver thereof or of any other
right. A waiver upon any one occasion shall not be construed as a bar or a
waiver of any right or remedy on any future occasion. All of the rights and
remedies of the Secured Party, whether evidenced hereby or by any other
agreement, instrument or paper, shall be cumulative and may be exercised singly
or concurrently.
7. Governing Law. This Agreement shall be deemed to be a contract made
under the laws of the State of California and shall be construed in accordance
with and governed by the laws of said State.
8. Successors and Assigns. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of the Secured Party in this Agreement shall bind and inure to the
benefit of the successors and assigns of the Secured Party.
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9. Severability. If any part of this Agreement is contrary to,
prohibited by or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
10. Execution by the Secured Party. This Agreement shall take effect
immediately upon execution by the Debtor, and the execution hereof by the
Secured Party shall not be required as a condition to the effectiveness of the
Security Agreement. The provision for execution of this Agreement by the Secured
Party is only for purposes of filing this Agreement as a Security Agreement
under the Uniform Commercial Code, if execution hereof by the Secured Party is
required for purposes of such filings.
11. Headings. Sections headings have been inserted in this Agreement as
a matter of convenience of reference only, and it is agreed that such Section
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
12. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties only in the courts of the
State of California, County of San Diego, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
California, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the proceeding sentence may be served on any party anywhere in
the world.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SECURED PARTY:
Natural Alternatives, International, Inc.,
a Delaware corporation
By: /s/ Xxxx X. XxXxxx
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Xxxx X. XxXxxx, Chief Executive Officer
DEBTOR:
FitnessAge, Inc.,
a Nevada corporation
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx, Chief Financial Officer
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EXHIBIT "A"
FORM UCC-1
