SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made this as of the __ day of
March, 2002, by and between XXXXXX TREE CONSTRUCTION, INC., which may become
known as Nutritionary, Inc. ("NUTRITIONARY"), a Nevada corporation having an
address at 0000 Xxxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx, XX 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 note of even date herewith in the amount of
$1,500,000.00 given by NUTRITIONARY in favor of XXXXXXX (as the same may be
amended from time to time) (the "Note"), and any and all other obligations of
NUTRITIONARY 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 American
Health and Diet Centers, Inc. ("AHDC") and NUTRITIONARY 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"),
NUTRITIONARY hereby grants to XXXXXXX a continuing first priority security
interest (pari passu with that certain security interest granted this date to
Xxxxxx Xxxxx) 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 NUTRITIONARY 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 NUTRITIONARY
(the "UCC") and not otherwise defined in this Agreement, the Note, 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. NUTRITIONARY represents and warrants that the
name and address of NUTRITIONARY appearing at the beginning of this Agreement is
NUTRITIONARY's exact legal name and address of its chief executive office, and
that NUTRITIONARY is a corporation duly organized and existing under the laws of
the State of Nevada. NUTRITIONARY has not changed its name, or the name under
which it does business, within the five years preceding the date hereof except
as set forth on Exhibit "A" hereto. NUTRITIONARY has not moved its chief
executive office within the five years preceding the date hereof except as
previously reported in writing to XXXXXXX. NUTRITIONARY has not changed the
jurisdiction of its organization within the five years preceding the date hereof
except as previously reported in writing to XXXXXXX. NUTRITIONARY 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 NUTRITIONARY 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, NUTRITIONARY will
immediately notify XXXXXXX in writing of the additions or changes.
3. REPRESENTATIONS AND WARRANTIES REGARDING COLLATERAL. NUTRITIONARY
represents, warrants and covenants to XXXXXXX that:
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(a) NUTRITIONARY owns the Collateral free of all liens, security interests
and claims, other than that certain pari passu security interest granted this
date to Xxxxxx Xxxxx (the "Permitted Liens");
(b) NUTRITIONARY 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) NUTRITIONARY 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;
(e) except as herein provided, NUTRITIONARY 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) NUTRITIONARY 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
NUTRITIONARY 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 NUTRITIONARY 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. NUTRITIONARY 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 NUTRITIONARY 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 NUTRITIONARY 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 NUTRITIONARY, or a default under any agreement,
judgment, injunction, order, decree or other instrument binding upon or
affecting NUTRITIONARY, (ii) result in the creation or imposition of any lien
(other than the lien(s) created by the Transaction Documents) on any of
NUTRITIONARY's assets, or (iii) give cause for the acceleration of any
obligations of NUTRITIONARY to any other creditor;
(c) NUTRITIONARY 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 NUTRITIONARY, 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;
(d) to NUTRITIONARY's knowledge, no default has occurred under any
Permitted Liens and no claims or interests adverse to NUTRITIONARY's present
rights in its properties and assets have arisen;
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(e) NUTRITIONARY 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) NUTRITIONARY is not, and after consummation of this Agreement and
after giving effect to all indebtedness incurred and liens created by
NUTRITIONARY in connection with this Agreement, the Note and/or any other
Transaction Document, will not be, insolvent within the meaning of 11 U.S.C. ss.
101(32);
(g) NUTRITIONARY 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) NUTRITIONARY 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) NUTRITIONARY 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 NUTRITIONARY ;
(j) there are no pending or threatened suits, claims or demands against
NUTRITIONARY that have not been disclosed directly to XXXXXXX by NUTRITIONARY 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
NUTRITIONARY 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 NUTRITIONARY's assets exceeds its
liabilities, NUTRITIONARY is meeting its current liabilities as they mature, and
NUTRITIONARY is and shall remain solvent;
(n) all financial statements of NUTRITIONARY furnished to XXXXXXX are
correct and accurately reflect the financial condition of NUTRITIONARY 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 NUTRITIONARY; and
(p) there are not now pending any court or administrative proceedings or
undischarged judgments against NUTRITIONARY, no federal or state tax liens have
been filed or threatened against NUTRITIONARY, and NUTRITIONARY is not in
default or claimed default under any agreement.
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5. COVENANTS REGARDING COLLATERAL. NUTRITIONARY 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 NUTRITIONARY's expense, wherever located. NUTRITIONARY
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 NUTRITIONARY. Upon demand of XXXXXXX, NUTRITIONARY 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 NUTRITIONARY 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 NUTRITIONARY'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, NUTRITIONARY's business or any other transaction between the parties
hereto. NUTRITIONARY 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 NUTRITIONARY'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) NUTRITIONARY 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. NUTRITIONARY 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
NUTRITIONARY to support a shipment of inventory by NUTRITIONARY.
(b) NUTRITIONARY 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. NUTRITIONARY will, on at least a weekly
basis, report all credits given to account debtors on all accounts.
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(c) NUTRITIONARY 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
NUTRITIONARY, XXXXXXX may notify any persons who are indebted to NUTRITIONARY 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, NUTRITIONARY will
direct any persons who are indebted to NUTRITIONARY 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. NUTRITIONARY agrees that from the date hereof
and until final payment in full of the Obligations, unless XXXXXXX shall
otherwise consent in writing, NUTRITIONARY 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
NUTRITIONARY 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 NUTRITIONARY's independent certified public
accountant that NUTRITIONARY 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 Note 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 NUTRITIONARY, by a principal financial officer of
NUTRITIONARY 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 NUTRITIONARY'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 NUTRITIONARY 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 NUTRITIONARY; (iii) any material adverse claim against or
affecting NUTRITIONARY 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 NUTRITIONARY; and
(v) at least 30 days prior thereto, any change in NUTRITIONARY's name or address
as shown above, and/or any change in NUTRITIONARY's structure;
(k) deliver promptly such other information regarding the operation,
business affairs, and financial condition of NUTRITIONARY 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
NUTRITIONARY in good faith disputes;
(m) deliver to XXXXXXX, promptly, a copy of all financial statements,
reports, notices, and proxy statements, sent by NUTRITIONARY to stockholders,
and all regular or periodic reports required to be filed by NUTRITIONARY 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 NUTRITIONARY 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
NUTRITIONARY 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 NUTRITIONARY 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 NUTRITIONARY 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 Nevada 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. NUTRITIONARY agrees that from the date of this
Agreement and until final payment in full of the Obligations, unless XXXXXXX
shall otherwise consent in writing, NUTRITIONARY will not:
(a) affix any collateral to any real estate, unless NUTRITIONARY 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 the outstanding stock or voting power of AHDC (or
issue any additional capital stock or other equity in AHDC) or transfer more
than 50% of its outstanding stock or voting power, or any other Affiliate or
Subsidiary (other than AHDC) 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 Nutritionary'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 Nutritionary'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 Nutritionary'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 NUTRITIONARY
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, NUTRITIONARY 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. NUTRITIONARY 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 Note when due and the lapse
of any notice or cure period provided in such Note 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 NUTRITIONARY to perform any of
its obligations under this Agreement or any other Transaction Document; (f)
falsity, inaccuracy or material breach by NUTRITIONARY of any written warranty,
representation or statement made or furnished to XXXXXXX by or on behalf of
NUTRITIONARY; (g) the filing by or against NUTRITIONARY 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 NUTRITIONARY for the benefit of
creditors, or any levy, garnishment, attachment or similar proceeding is
instituted against any property of NUTRITIONARY; (i) a default with respect to
any other indebtedness of NUTRITIONARY 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 NUTRITIONARY and the failure of
NUTRITIONARY to discharge the judgment within
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ten (10) days of the entry thereof; (l) any material adverse change in the
business, assets, operations, financial conditions or results of operations of
NUTRITIONARY; (m) NUTRITIONARY ceases doing business as a 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 liens in favor of Xxxxxx
Xxxxx as described in the Stock Purchase Agreement; or (p) any indication or
evidence received by XXXXXXX that NUTRITIONARY 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 NUTRITIONARY 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 NUTRITIONARY's premises and take possession of
the Collateral, (b) render the Collateral unusable, (c) dispose of the
Collateral on NUTRITIONARY's premises, (d) require NUTRITIONARY 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 NUTRITIONARY'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
NUTRITIONARY 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 NUTRITIONARY 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 Note or any other Transaction Document either as
against NUTRITIONARY, 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. NUTRITIONARY does hereby make, constitute and appoint
any agent of XXXXXXX as NUTRITIONARY's true and lawful attorney-in-fact, with
full power of substitution to endorse the name of NUTRITIONARY or any of
NUTRITIONARY'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
NUTRITIONARY'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 NUTRITIONARY might or
could do, including the right to sign, for NUTRITIONARY, 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. NUTRITIONARY
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. NUTRITIONARY 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.
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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.
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 NUTRITIONARY 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 NUTRITIONARY in
any case will entitle NUTRITIONARY 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 NUTRITIONARY and XXXXXXX and their respective heirs, executors,
administrators, successors and assigns; PROVIDED, HOWEVER, that NUTRITIONARY 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 NUTRITIONARY 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. NUTRITIONARY 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.
NUTRITIONARY 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
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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. NUTRITIONARY 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
NUTRITIONARY at NUTRITIONARY'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 or judgment or exercising any rights
against NUTRITIONARY individually, against any security or against any property
of NUTRITIONARY within any other county, state or other foreign or domestic
jurisdiction. XXXXXXX and NUTRITIONARY agree that the venue provided above is
the most convenient forum for both XXXXXXX and NUTRITIONARY. NUTRITIONARY 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. NUTRITIONARY 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 NUTRITIONARY BY XXXXXXX UNDER THIS AGREEMENT, AND ANY OTHER TRANSACTION
DOCUMENTS, BEFORE NUTRITIONARY CAN BE DEPRIVED OF ANY PROPERTY IN NUTRITIONARY'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 NUTRITIONARY NOTICE AND THE OPPORTUNITY TO BE HEARD ON THE VALIDITY OF
THE CLAIM UPON WHICH SUCH TAKING IS MADE. NUTRITIONARY WAIVES ALL RELIEF FROM
ALL APPRAISEMENT OR EXEMPTION LAWS NOW IN FORCE OR HEREAFTER ENACTED.
25. WAIVER OF JURY TRIAL. EACH OF NUTRITIONARY 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. NUTRITIONARY AND XXXXXXX ACKNOWLEDGE THAT THE FOREGOING WAIVER IS
KNOWING AND VOLUNTARY.
IN WITNESS WHEREOF, NUTRITIONARY, on the day and year first written
above, has caused this Agreement to be executed under seal.
[CORPORATE SEAL] XXXXXX TREE CONSTRUCTION, 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:
0000 Xxxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxx 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 NUTRITIONARY:
New Jersey location
Other names or tradenames now or formerly used by NUTRITIONARY:
Xxxxxx Tree Finishers, Inc. (former name of Xxxxxx Tree Construction, Inc.)
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