Exhibit 10.4
INDEMNIFICATION AGREEMENT
-------------------------
Date: March 15, 2002
LSQ FUNDING GROUP L.C.
Xxx Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx XX 00000
Re: Health & Nutrition Systems International, Inc.
Ladies and Gentlemen:
In order to induce you to extend financial accommodations to the Client
pursuant to the Factoring and Security Agreement (the "Agreement") between you
and the Client of even date herewith, the undersigned hereby warrants and
represents to you as follows:
1. All Client's accounts which have been or will be reported to you by or on
behalf of the Client under the Agreement and in which you hold a security
interest ("Accounts"), whether such reports are in the form of agings, borrowing
base certificates, collateral reports or financial statements, are genuine and
in all respects what they purport to be, represent bona fide obligations of
Client's customers arising out of the sale and completed delivery of merchandise
sold by the Client (the "Sold Goods") in the ordinary course of its business in
accordance with and in full and complete performance of customer's (each, a
"Customer") order thereof.
2. All original checks, drafts, notes, letters of credit, acceptances and other
proceeds of the Accounts, received by the Client, will be held in trust for you
and will immediately be forwarded to you upon receipt, in kind, in accordance
with the terms of the Agreements.
3. None of the Accounts are or will be the subject of any offsets, defenses or
counterclaims of any nature whatsoever other than those offsets, defenses and
counterclaims disclosed in writing by Client or the undersigned prior to the
sale to us of the invoices subject to the offsets, defenses or counterclaims,
and Client will not in any way impede or interfere with the normal collection
and payment of the Accounts. The disclosure of every offset, defense or
counterclaim must state in writing the maximum potential dollar value of the
offset, defense or counterclaim that could be taken by an account debtor against
an invoice or series of invoices prior to submission for sale.
4. Client is presently solvent. Solvent means Client's assets exceed its
liabilities and Client is able to pay its debts as they become due.
5. The Sold Goods are and will be up to the point of sale, the sole and absolute
property of the Client, and the Accounts and Sold Goods will be free and clear
of all liens and security interests, except your security interest and except
for that certain security interest which may be granted to Garden State or an
affiliate thereof in certain collateral (the "Garden Lien").
6. The due dates of the Accounts will be as reported to you by or on behalf of
the Client.
7. Client will promptly report to you all disputes, rejections, returns and
resales of Sold Goods and all credits allowed by the Client upon all Accounts.
8. All reports which you receive from the Client, including but not limited to
those concerning its Accounts and its inventory, will be true and accurate
except for minor inadvertent errors.
9. Client will not sell its inventory except in the ordinary course of business.
10. Client will not suffer any lien, security interest or other encumbrance on
any of its present or future Accounts or inventory without your prior written
consent in each instance other than the Garden Lien.
11. The undersigned hereby indemnifies you and holds you harmless from any
direct, indirect, or consequential damage or loss which you may sustain as a
result of the breach of any representation or warranty contained herein (all of
which are continuing and irrevocable for so long as the Client is indebted to
you), or of your reliance (whether such reliance was reasonable) upon any
misstatement (whether or not intentional), fraud, deceit or criminal act on the
part of any officer, employee, or agent of the Client, or any costs (including
reasonable attorneys' fees and expenses) incurred by you in the enforcement of
any rights granted to you hereunder. All such sums will be paid by the
undersigned to you on demand.
12. Nothing herein contained shall be in any way impaired or affected by any
change in or amendment of any of the Agreements. This agreement shall be binding
upon the undersigned, and the undersigned's personal representative, successors,
and assigns.
13. The responsibilities of the undersigned relative to this indemnification
will extend only to invoices (and any costs and expenses associated therewith)
purchased by you up to the date of the receipt by you of a certified letter
notifying you that Guarantor's employment with Client has been terminated.
Very truly yours,
/s/
Guarantor
HOME ADDRESS:
[ADD NOTARIAL ACKNOWLEDGEMENT]
