SECURITIES PLEDGE AGREEMENT
This
SECURITIES PLEDGE AGREEMENT (this “Agreement”) is made this 31st day of May,
2007 by and between Natural Nutrition, Inc., a Nevada corporation (the
“Pledgor”), and Cornell Capital Partners, L.P., a limited partnership
with
its
principal place of business at 000 Xxxxxx Xxxxxx, Xxx. 0000, Xxxxxx Xxxx, N.J.
07302
(“Cornell”).
Recitals
Cornell
proposes to purchase from Pledgor a Secured Convertible Note (the “Note”), of
even date herewith, in the original aggregate principal amount of U.S.
$9,292,894 pursuant to that certain Securities Purchase Agreement, of even
date
herewith. To secure the payment and performance when due of all principal,
interest and other amounts under the Note (collectively, the “Obligations”) and
in connection with that certain Amended and Restated Security Agreement, of
even
date herewith, executed by Pledgor in favor of Cornell (the “Amended and
Restated Security Agreement”), Pledgor has agreed to pledge to Cornell all
right, title and interest in that certain Convertible Promissory Note, dated
as
of March 31, 2004, as amended, in the principal amount of U.S. $15,000,000,
originally issued to Nesracorp Inc. (under its former name Interactive
Nutrition, Inc.) jointly by Bio-One Corporation and Interactive Nutrition
International, Inc., a company incorporated under the laws of Canada and a
and
wholly-owned subsidiary of Pledgor (the “Subsidiary Note”). The Subsidiary Note
is being purchased simultaneously with the issuance to Cornell of the Note
and
is hereby being pledged to Cornell together with all securities hereafter
acquired by Pledgor (collectively, with the Subsidiary Note, the
“Securities”).
NOW,
THEREFORE, Pledgor and Cornell agree as follows:
1. Pledge
of Securities.
(a) Pledgor
hereby pledges, assigns and delivers to Cornell and grants to Cornell a security
interest in the Securities, together with all proceeds and substitutions
thereof, all cash, stock and other moneys and property paid thereon, all rights
to subscribe for securities declared or granted in connection therewith, and
all
other cash and noncash proceeds of the foregoing (all hereinafter called the
“Pledged Collateral”), as security for the prompt performance of all of the
Obligations, and all of Pledgor’s obligations under the Note and the Amended and
Restated Security Agreement (the “Secured Indebtedness”), and Pledgor’s
obligations hereunder.
(b) The
term
“Pledged Collateral” shall also include any securities, instruments or
distributions of any kind issuable, issued or received by Pledgor upon
conversion of, in respect of, or in exchange for any other Pledged Collateral,
including but not limited to, those arising from a stock dividend, stock split,
reclassification, reorganization, merger, consolidation, sale of assets or
other
exchange of securities or any dividends or other distributions of any kind
upon
or with respect to the Pledged Collateral.
(c) The
certificate or certificates for the securities included in the Pledged
Collateral, accompanied by instruments of assignment duly executed in blank
by
Pledgor, have been, or will be immediately upon the subsequent receipt thereof
by Pledgor, delivered by Pledgor to Cornell. Pledgor shall cause the books
of
each such entity to reflect the pledge of the Securities. Upon the occurrence
of
an Event of Default hereunder, Cornell may effect the transfer of any securities
included in the Pledged Collateral into the name of Cornell and cause new
certificates representing such securities to be issued in the name of Cornell.
Pledgor will at all times execute and deliver such documents, and take or cause
to be taken such actions, as Cornell may reasonably request to perfect or
continue the perfection of Cornell’s security interest in the Pledged
Collateral, including filing any UCC-1 or other financing
statements.
2. Representations,
Warranties and Covenants.
Pledgor
represents and warrants to and covenants with Cornell that:
(a) The
Pledged Collateral is owned by Pledgor free and clear of any security interests,
liens or encumbrances;
(b) Pledgor
has full power and authority to create a first lien on the Pledged Collateral
in
favor of Cornell and no disability or contractual obligation exists which would
prohibit Pledgor from pledging the Pledged Collateral pursuant to this
Agreement, and Pledgor will not assign, create or permit to exist any other
claim to, lien or encumbrance upon (or vote or take any action in favor of),
or
security interest in any of the Pledged Collateral or any of the assets
underlying the Pledged Collateral;
(c) There
are
no subscriptions, warrants or other options exercisable with respect to the
Securities;
(d) The
Securities have been duly authorized and validly issued, and are fully paid
and
non-assessable; and
(e) The
Pledged Collateral is not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Pledgor knows of no
reasonable grounds for the institution of any such proceedings.
All
the
above representations and warranties shall survive the making of this
Agreement.
3. Voting
Prior to Demand.
Unless
an Event of Default (as defined below) shall have occurred and be continuing,
Pledgor shall be entitled to exercise any voting rights with respect to the
Pledged Collateral and to give consents, waivers and ratifications in respect
thereof, provided
that no
vote shall be cast or consent, waiver or ratification given or action taken
which would be inconsistent with any of the terms of this Agreement or which
would constitute or create any violation of any of such terms. All such rights
of Pledgor to vote and give consents, waiver and ratifications shall upon notice
to Pledgor cease in case such an Event of Default hereunder shall occur and
be
continuing.
4. Events
of Default.
Each of
the following shall constitute an event of default (“Event of Default”)
hereunder:
(a) The
occurrence and continuance of an event of default under the Note or any other
indebtedness of Pledgor to Cornell;
(b) The
breach of any provision of the Amended and Restated Security Agreement by
Pledgor or the failure by Pledgor to observe or perform any provisions of the
Amended and Restated Security Agreement; or
(c) The
breach of any provision of this Agreement by Pledgor or the failure by Pledgor
to observe or perform any of the provisions of this Agreement.
5. Cornell’s
Remedies Upon Default.
(a) Upon
the
occurrence and during the continuance of an Event of Default, Cornell shall
have
the right to exercise all such rights as a secured party under the Uniform
Commercial Code of the State of New Jersey as it, in its sole judgment, shall
deem necessary or appropriate, including the right to sell all or any part
of
the Pledged Collateral at one or more public or private sales upon five (5)
days’ written notice to Pledgor, and any such sale or sales may be made for
cash, upon credit, or for future delivery, and in connection therewith, Cornell
may grant options, provided that any such terms or options shall, in the best
judgment of Cornell, be extended only in order to obtain the best possible
price.
(b) Pledgor
recognizes that Cornell may be unable to effect a public sale of all or a part
of the Pledged Collateral by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (“Act”), so that Cornell may be compelled to
resort to one or more private sales to a restricted group of purchasers who
will
be obliged to agree, among other things, to acquire the Pledged Collateral
for
their own account, for investment and without a view to the distribution or
resale thereof. Pledgor understands that private sales so made may be at prices
and on other terms less favorable to the seller than if the Pledged Collateral
were sold at public sales, and agrees that Cornell has no obligation to delay
the sale of any of the Pledged Collateral for the period of time necessary
(even
if Cornell would agree), to register such securities for sale under the Act.
Pledgor agrees that private sales made under the foregoing circumstances shall
be deemed to have been made in a commercially reasonable manner.
(c) After
the
sale of any of the Pledged Collateral, Cornell may deduct all reasonable legal
and other expenses and attorney’s fees for preserving, collecting, selling and
delivering the Pledged Collateral and for enforcing its rights with respect
to
the Secured Indebtedness, and shall apply the residue of the proceeds to the
Secured Indebtedness in such manner as Cornell in its reasonable discretion
shall determine, and shall pay the balance, if any to Pledgor.
6. Amendment
of Note.
Pledgor
authorizes Cornell, without notice or demand and without affecting its liability
hereunder, from time to time to (a) renew, extend, or otherwise change the
terms
of the Note, or any part thereof; (b) take and hold security for the payment
of
the Note, and exchange, enforce, waive and release any such security; and (c)
apply such security and direct the order or manner of sale thereof as Cornell
in
its sole discretion may determine.
7. Indemnification.
Pledgor
agrees to defend, indemnify and hold harmless Cornell and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Agreement, and (b) all losses or expenses
in
any way suffered, incurred, or paid by Cornell as a result of or in any way
arising out of, following, or consequential to transactions between Cornell
and
Pledgor, under this Agreement (including without limitation attorneys’ fees and
expenses), except for obligations, demands, claims, liabilities, losses and
Cornell expenses caused by Cornell’s gross negligence or willful
misconduct.
8. Withholding.
In the
event any payments are received by Cornell from Pledgor hereunder such payments
will be made subject to applicable withholding for any taxes, levies, fees,
deductions, withholding, restrictions or conditions of any nature whatsoever.
Specifically, if at any time any governmental authority, applicable law,
regulation or international agreement requires Pledgor to make any such
withholding or deduction from any such payment or other sum payment hereunder
to
Cornell, Pledgor hereby covenants and agrees that the amount due from Pledgor
with respect to such payment or other sum payable hereunder will be increased
to
the extent necessary to ensure that, after the making of such required
withholding or deduction, Cornell receives a net sum equal to the sum which
it
would have received had no withholding or deduction been required and Pledgor
shall pay the full amount withheld or deducted to the relevant governmental
authority. Pledgor will, upon request, furnish Cornell with proof satisfactory
to Cornell indicating that Pledgor has made such withholding payment provided,
however, that Pledgor need not make any withholding payment if the amount or
validity of such withholding payment is contested in good faith by appropriate
and timely proceedings and as to which payment in full is bonded or reserved
against by Pledgor. The agreements and obligations of Pledgor contained in
this
Section shall survive the termination of this Agreement.
9. Notices.
Unless
otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by certified mail, postage prepaid, return
receipt requested, or by prepaid telefacsimile to Pledgor or to Cornell, as
the
case may be, at its addresses set forth below. Such notice shall be deemed
effective three (3) business days after deposit if sent by first class mail,
upon actual receipt if personally delivered or sent by certified mail, or upon
confirmed transmission if sent via telefacsimile.
If
to
Pledgor
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Natural
Nutrition, Inc.
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000
Xxxxx Xxxx Xxx Xxxx, Xxxxx 000
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Xxxxxxx,
XX
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Attn:
Xxxxxxx X. Xxxxxxxx, President & CEO
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FAX:
(000) 000-0000
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If
to
Xxxxxxx
|
Xxxxxxx
Capital Partners, L.P.
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000
Xxxxxx Xxxxxx, Xxx. 0000
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Xxxxxx
Xxxx, N.J. 07302
|
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Attn:
Xxxx Xxxxx
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FAX:
(000)
000-0000
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with copies to: | Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP |
000
XXX Xxxxxxx
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Xxxxx
Xxxxx, X.X. 00000
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Attn:
Xxxx X. Xxxxxx, Esq.
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FAX.:
(000) 000-0000
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The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the
other.
10. CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER
The
laws
of the State of New Jersey shall apply to this Agreement. PLEDGOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW JERSEY IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND, AGAINST
IT
WHICH ARISES OUT OF OR BY REASON OF THIS AGREEMENT.
PLEDGOR
AND CORNELL EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR THE
NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES
A
MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS
AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT
IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
11. This
Agreement may not be amended or modified except by a written instrument signed
by Cornell and Pledgor.
12. This
Agreement and the agreements and instruments executed in connection therewith
constitute the entire agreement between Cornell and Pledgor with respect to
the
subject matter hereof and supersede all prior agreements, understandings, offers
and negotiations, oral or written.
13. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which shall together constitute one and the
same
document.
[SIGNATURE
PAGE FOLLOWS]
EXECUTED
as a
sealed instrument this 31st day of May, 2007, under the laws of the State of
New
Jersey.
PLEDGOR:
NATURAL
NUTRITION, INC.
By:/s/
Xxxxxxx X. Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Title:
President & CEO
CORNELL:
CORNELL
CAPITAL PARTNERS, L.P.
By:
Yorkville Advisors, L.P.,
Its
Investment
Manager
By: /s/
Xxxx Xxxxx
Xxxx
Xxxxx,
Senior
Managing
Director
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