SECURITY AGREEMENT FOR TRADEMARKS AND TRADENAMES
EXHIBIT
10.3
SECURITY
AGREEMENT FOR TRADEMARKS AND TRADENAMES
SECURITY
AGREEMENT FOR TRADEMARKS AND TRADENAMES dated
as
of August 25, 2006 by and among N21 ACQUISITION I LLC., a New York limited
liability company having an office at ▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇ (“NewCo”),
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇▇”)
and
▇▇▇▇▇▇ ▇▇▇▇▇ (“▇▇▇▇▇”),
each
having an office at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ are sometimes hereinafter referred
to
collectively as the “Stockholders”)
(capitalized terms used herein and not otherwise defined herein, shall have
the
meanings ascribed thereto in the Merger Agreement, as hereinafter
defined).
Background.
Pursuant to the execution of an Amended and Restated Merger Agreement by and
among Iceland Health, Inc., a New York corporation (“Iceland”),
its
sole Stockholders, Nutrition 21, Inc., a New York corporation, and its wholly
owned acquisition subsidiary, NewCo, dated as of August 25, 2006 (the
“Merger
Agreement”),
according to which Iceland shall merge with and into NewCo (the “Merger”),
whereby it shall transfer to NewCo, among other assets, all of its right, title
and interest in and to the trademarks, trademark applications, servicemarks,
and
tradenames owned by Iceland prior to the consummation of the Merger, free and
clear of any and all liens and encumbrances Of Record. As a part of the total
consideration to be delivered to Stockholders under the Merger Agreement, N21
has executed Promissory Notes in the aggregate principal amount of $2,500,000
to
the benefit of the Stockholders dated the date hereof (the “Secured
Promissory Notes”),
and
the payment of such principal amount thereof and interest accruing thereon
when
due in accordance with the terms thereof is to be secured by a security interest
in all of Iceland’s trademarks, trademark applications, servicemarks,
tradenames, and goodwill in respect thereof, owned by Iceland prior to the
effective date of the Merger as set forth in Schedule
A
hereto
and transferred in their entirety to NewCo effective upon the consummation
of
the Merger (collectively, the “Collateral”
or
“Iceland’s
Trademarks”),
such
security interest is being granted by NewCo to the benefit of N21, for purposes
of securing the Notes issued by N21, in exchange for good, valuable and adequate
consideration, the receipt and sufficiency of which are hereby acknowledged
and
is deemed to be in NewCo’s best interest. To confirm and perfect the
Stockholder’s security interest in the Collateral,
NewCo
has
agreed to grant a security interest and lien upon Iceland’s trademarks,
trademark applications, servicemarks, and tradenames to and for the benefit
of
the Stockholders as hereinafter provided.
Additional
Definitions.
The
following terms shall be defined as follows:
“Event
of Default”
shall
have the meaning assigned thereto by the Secured Promissory Note.
“Obligations”
means
all obligations, liabilities and indebtedness due and to become due from N21
to
the Stockholders, and each of them, at any time and from time to time from
the
date hereof, of every kind and description, whether now existing or hereafter
incurred, which are evidenced by or incurred pursuant to that certain Secured
Promissory Note of N21 of even date herewith issued to the Stockholders in
the
principal amount of Two Million and Five Hundred Thousand Dollars
($2,500,000.00) with interest accruing thereon as set forth therein (as may
be
amended, modified, restated or supplemented from time to time, together with
any
instrument, document or agreement which may hereafter be substituted
therefor).
“Of
Record”
means
recorded, registered or pending registration, as of the date hereof or in the
future, in the U.S. Patent and Trademark Office or in any other foreign patent
and trademark office or governmental agency, or the respective foreign
equivalent thereof in such foreign jurisdiction.
NOW,
THEREFORE, in consideration of the premises, NewCo hereby agrees with the
Stockholders as follows:
Security
Interest
1. To
secure
the complete and timely payment and satisfaction of the Obligations, NewCo
hereby grants, assigns and conveys to the Stockholders, a security interest
in
and lien upon (a) the trademark and servicemark applications, trademarks,
servicemarks, and tradenames listed in Schedule
A
hereto
(the “Marks”),
as
held and owned solely and exclusively by Iceland prior to the effective date
of
the Merger, and (b) the goodwill in respect thereof, including without
limitation the right to ▇▇▇ for past, present and future infringements, and
all
rights corresponding thereto throughout the world (the “Rights”).
Representations
and Warranties; Covenants
2. NewCo
covenants and warrants that:
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(a)
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Upon
consummation of the Merger, NewCo shall become the transferee and
sole
owner of the entire and unencumbered right, title and interest, to
the
extent so owned by Iceland prior to, and transferred thereby to NewCo
upon, the consummation of the Merger, in and to each of the Marks
and the
Rights Of Record; and
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(b)
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NewCo
has the unqualified right to enter into this Agreement and perform
its
terms.
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3. NewCo
agrees that, until all of the Obligations shall have been satisfied in full,
it
will not enter into any agreement which is inconsistent with NewCo’s obligations
under this Agreement, without Stockholders’ prior written consent.
4. NewCo
hereby covenants and agrees with the Stockholders that NewCo (a) shall promptly
pay any and all taxes, assessments and governmental fees upon the Marks prior
to
the date penalties are attached thereto; and (b) shall immediately notify the
Stockholders of any event causing a substantial loss or diminution in the value
of all or any material part of the Marks and the amount or an estimate of the
amount of such loss or diminution, provided,
however,
that
NewCo shall permit the Stockholders, at their option and cost and in their
sole
discretion, to take such action as is reasonably necessary to protect the Marks
and the Rights against any and all claims and demands of all persons at any
time
claiming interest therein and shall further reasonably cooperate with the
Stockholders and reasonably authorize them to act on its behalf in respect
of
the foregoing as owner of the Marks and Rights.
2
5. Unless
and until there shall have occurred an Event of Default, NewCo shall have the
right to use the Marks and Rights for NewCo’s own benefit, but it may not make
or grant assignments or sublicenses of the Rights in a manner which may impair
the rights of NewCo or the Stockholders to sell or dispose of the Collateral
in
the United States or elsewhere in accordance with the terms of this Agreement
or
otherwise. NewCo shall permit the Stockholders access to NewCo’s facilities at
all reasonable times for the purpose of verifying NewCo’s compliance with the
foregoing and following covenants.
6. NewCo
shall, until foreclosure on the Marks and Rights by the Stockholders, be
responsible for maintaining any and all registrations of the Marks and shall
bear all costs pertaining thereto, provided,
however,
that
N21 shall permit the Stockholders, at their option and cost and in their sole
discretion, to maintain any and all applications for registration and
re-registration of the Marks and shall further reasonably cooperate with the
Stockholders and reasonably authorize them to act on its behalf in respect
of
the foregoing as the owner of the Marks and Rights.
7. NewCo
agrees
that until the Obligations have been satisfied in full, NewCo
will, if
and to the extent required, execute further security agreements for the benefit
of the Stockholders of like tenor to this Agreement, granting a security
interest in and lien upon any and all trademarks and trademark applications
and
any licenses of any trademarks that NewCo
shall
effect, acquire or make application for which are in any way derivative from
the
Marks and Rights set forth on Schedule A and
which
shall be Of Record, so as to confirm and perfect the Stockholders’ interest in
and to all of the Collateral.
Event
of Default; Rights and Remedies; Maintenance of Rights and Marks; Termination
of
Security Interest, etc.
8. If
an
Event of Default shall have occurred, the Stockholders shall have, in addition
to all other rights and remedies given to the Stockholders by this Agreement,
those allowed by law and the rights and remedies of a secured party under the
Uniform Commercial Code as enacted in any jurisdiction in which the Rights
may
be located and, without demand of performance and without other notice (except
as set forth below) or demand whatsoever to NewCo, all of which are hereby
expressly waived, and without advertisement (i) the right and entitlement to
regain ownership and title in and to any and all of the rights and interests
in
the Marks and Rights, including without limitation by becoming the assignees,
whether individually or through an entity formed and owned by the Stockholders,
of the Marks and Rights Of Record subsequent to the filing of an Assignment
of
Trademarks and Tradenames, substantially in the form attached hereto as
Exhibit
A
(“Assignment”),
with
the U.S. Patent and Trademark Office or with any other foreign patent and
trademark office or governmental agency, or the respective foreign equivalent
thereof in such foreign jurisdiction, such Assignment may be executed by the
Stockholders, whether individually or by an entity formed and owned by the
Stockholders, in their or its capacity as attorney-in-fact of NewCo pursuant
to
the rights and privileges granted thereto by NewCo in Paragraph 9
below or
otherwise by NewCo immediately upon the demand of the Stockholders, and (ii)
the
right and entitlement to sell at public or private sale or otherwise realize
upon the whole or from time to time any part of the Rights, or any interest
which NewCo may have therein, and after deducting from the proceeds of sale
or
other disposition of the Rights all expenses (including all reasonable expenses
for brokers’ fees and legal services), shall apply the residue of such proceeds
toward the payment of the Obligations in such order as the Stockholders may
determine in their sole and absolute discretion. Notice of any sale or other
disposition of the Rights shall be given to NewCo at least ten (10) days before
the time of any intended public or private sale or other disposition of the
Rights is to be made, which NewCo hereby agrees shall be reasonable notice
of
such sale or other disposition. At any such sale or other disposition, the
Stockholders may purchase the whole or any part of the Rights sold, free from
any right of redemption on the part of NewCo, which right is hereby waived
and
released.
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9. Notwithstanding
anything to the contrary herein or in any agreement between NewCo and the
Stockholders, if any Event of Default shall have occurred and be continuing,
in
addition to any and all other rights and remedies that the Stockholders may
have
under any other agreements or at law, NewCo hereby irrevocably constitutes
and
appoints Stockholders, or alternatively an entity formed and owned by the
Stockholders, with full power of substitution, as its true and lawful
attorney-in-fact, with full irrevocable power and authority in the place and
stead of NewCo and in the name of NewCo, all acts of said attorney being hereby
ratified and confirmed, except
to the
extent any of the same constitute gross negligence or willful misconduct, such
power being coupled with an interest is irrevocable, upon the occurrence of
an
Event of Default and the continuance thereof: (a) to convey to the Stockholders,
or to an entity formed and owned by the Stockholders, or any purchaser of any
or
all of the Marks or Rights, together with the goodwill in respect thereof,
and
to execute and file or cause to be filed any and all assignments, releases
and
other documents and instruments that may be necessary or desirable to accomplish
the purposes of such conveyance; (b) to collect proceeds from the Rights; (c)
to
convey in any bona fide transactions to a purchaser goods utilizing any of
the
Marks; and (d) to make payment or discharge taxes or liens levied or placed
upon
or threatened against any goods utilizing the Rights, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the
Stockholders, in their sole discretion, and such payments made by the
Stockholders to become the obligations of NewCo to the Stockholders, due and
payable immediately, without demand.
10. At
such
time as NewCo shall completely satisfy all the Obligations, the Stockholders
shall execute and deliver to NewCo all releases, assignments and other
instruments as may be necessary or proper to discharge the Stockholders’
security interest in and lien upon the Marks and Rights, subject to any
disposition thereof which may have been made by the Stockholders pursuant
hereto.
11. At
such
time as the Stockholders, whether individually or through an entity formed
and
owned by the Stockholders, become the owner of the Marks and/or the Rights,
as
provided in this Agreement, the Stockholders, or an entity formed and owned
thereby, shall have the right but shall in no way be obligated to bring suit
in
their own name to enforce the Marks and/or Rights and any license thereunder,
in
which event NewCo shall, at the request of the Stockholders and at their cost,
do any and all lawful acts, including to assign them the right to ▇▇▇ for past
infringements, , misappropriation, or dilution of the Trademarks, but other
than
to resort to litigation in NewCo’s name, and execute any and all proper
documents required by the Stockholders in aid of such enforcement, provided,
however,
that if
the Stockholders shall not bring suit hereunder, then NewCo, upon prior written
consent of the Stockholders, shall have the right, with counsel of its own
selection, to bring such suit, prosecute and settle the same, at its own cost
and expense.
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Miscellaneous
12. No
course
of dealing between NewCo and the Stockholders nor any failure to exercise,
nor
any delay in exercising, on the part of the Stockholders, any right, power
or
privilege hereunder shall operate as a waiver thereof; nor shall any single
or
partial exercise of any right, power or privilege hereunder or thereunder
preclude any other further exercise thereof or the exercise of any other right,
power or privilege.
13. All
of
the Stockholder’s rights and remedies with respect to the Rights whether
established hereby or by any other agreements or by law shall be cumulative
and
may be exercised singularly or concurrently.
14. The
provisions of this Agreement are severable, and if any clause or provision
shall
be held invalid and unenforceable in whole or in part in any jurisdiction,
then
such invalidity or unenforceability shall affect only such clause or provision,
or part thereof, in such jurisdiction, and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
of this Agreement in any jurisdiction.
15. The
headlines or captions contained herein are for purposes of convenience only
and
are not intended to define or limit the contents of said paragraph or
paragraphs.
16. This
Agreement is subject to modification only by a writing signed by the
parties.
17. The
benefits and burdens of this Agreement shall inure to the benefit of and be
binding upon the respective successors and permitted assigns of the
parties.
18. The
validity and interpretation of this Agreement and the rights and obligations
of
the parties shall be governed exclusively by the laws of the State of New York,
without regard to its rules regarding conflict of laws.
19. All
notices, communications and distributions hereunder shall be given or made
to
the parties at their respective addresses set forth on the first page hereof,
or
at such other address as the addressee may hereafter specify for this purpose
by
written notice to the other parties hereto in accordance with the requirements
of the Merger Agreement.
20. EACH
PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR
IN
CONNECTION WITH THIS AGREEMENT, THE SECURED PROMISSORY NOTE OR ANY OTHER
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE STOCKHOLDERS
TO ACCEPT THIS AGREEMENT.
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page]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their respective officers as of the date first above written.
| WITNESS: | N21 ACQUISITION I LLC | |||
| By: | ||||
| Title: | ||||
STATE
OF
NEW YORK )
)
COUNTY
OF
NEW YORK )
On
the
____ day of _______________, 2006, before me, the undersigned, personally
appeared ________________________, the _____________________ of N21 ACQUISITION
I LLC, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her capacity and
that by his/her signature on the instrument, the individual on behalf of N21
ACQUISITION I LLC, executed the instrument.
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_____________________________
Notary
Public
My
commission expires:
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| STOCKHOLDERS: | |||
| By: | |||
|
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|||
On
the
____ day of ____________, 2006, before me, the undersigned, personally appeared
▇▇▇▇
▇.
▇▇▇▇▇▇▇▇,
personally known to me or proved to me on the basis of satisfactory evidence
to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his personal capacity and that
by his signature on the instrument, the individual executed the
instrument.
|
_____________________________
Notary
Public
My
commission expires:
|
| By: | |||
|
▇▇▇▇▇▇ ▇▇▇▇▇
|
|||
6
On
the
____ day of ____________, 2006, before me, the undersigned, personally appeared
▇▇▇▇▇▇
▇▇▇▇▇,
personally known to me or proved to me on the basis of satisfactory evidence
to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his personal capacity and that
by his signature on the instrument, the individual executed the
instrument.
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_____________________________
Notary
Public
My
commission expires:
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7
SCHEDULE
A
List
of Trademark Applications, Trademarks, Servicemarks, and
Tradenames
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Trademark:
|
ICELANDHEALTH
|
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Jurisdiction:
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U.S.A.
|
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Application
Number:
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78/199,893
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Registration
Number:
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2,784,439
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Registration
Date:
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November
18, 2003
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Trademark:
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IMMUNITY
+
PLUS
|
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Jurisdiction:
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U.S.A.
|
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Application
Number:
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78/706,915
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Registration
Number:
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N/A
|
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Registration
Date/Status:
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Pending
|
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Trademark:
|
ICELANDHEALTH
|
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Jurisdiction:
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Canada
|
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Application
Number:
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1265447
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Filing
Date:
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July
19, 2005
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Approval
Date:
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May
10, 20061
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Trademark:
|
ICELANDHEALTH
|
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Jurisdiction:
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Japan
|
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Application
Number:
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2005-63629
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Application
Date:
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July
11, 2005
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Registration
Date:
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July
14, 2006
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Registration
Number:
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4970102
|
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Trademark:
|
ICELANDHEALTH
|
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Jurisdiction:
|
Europe
Union
|
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Application
Number:
|
▇▇▇▇▇▇▇▇▇▇
|
|
Registration
Number
|
Pending
|
| 1 |
This
is the date on which the application was accepted for publication
in the
Trademarks Journal. If the trademark is not opposed, it will
likely
proceed to registration within six to seven months as of this
date.
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2
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Please
note that there is an opposition proceeding B983645 filed by
Iceland Foods
Limited UK in opposition to Iceland Health’s trademark application applied
for the goods “dietary application”. According to applicable law, there is
a cooling-off period, during which both parties may negotiate
about
concluding a pre-rights-agreement in an effort to settle this
matter
amicably. Such period will expire on October 21, 2006, and if
no
settlement agreement is reached, Iceland Health must submit its
arguments
on or before February 21, 2007. According to Iceland Health’s European
Counsel, the outcome of the opposition proceeding is hard to
predict.
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Schedule
▇- ▇
EXHIBIT
A
ASSIGNMENT
OF TRADEMARKS AND TRADENAMES
This
Assignment (the “Assignment”)
is
made by and between NUTRITION 21 INC., a New York corporation having an office
at ▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (“N21”),
(the
“Assignor”)
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇▇”)
and
▇▇▇▇▇▇ ▇▇▇▇▇ (“▇▇▇▇▇”),
each
having an office at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (collectively, the “Assignees”).
WHEREAS,
pursuant to a Security Agreement dated August __, 2006, by and between the
Assignor and the Assignees (the “Security
Agreement”),
the
Assignor transferred, granted, assigned and conveyed to the Assignees a security
interest in and lien upon certain trademarks, trademark and servicemark
applications, servicemarks, and tradenames as listed in Schedule
A
hereto
(the “Trademarks”)
and
the goodwill in respect thereof, including without limitation the right to
▇▇▇
for past, present and future infringements, all rights corresponding thereto
throughout the world; and
WHEREAS,
an Event of Default, as such term is defined and referred to in the Security
Agreement, has occurred and is continuing in a manner which entitles the
Assignees to certain rights and remedies as set forth in Paragraphs 8 and 9
of
the Security Agreement, including without limitation the assignment of any
and
all right, title, interest and ownership in the Trademarks and the goodwill
in
respect thereof as held by the Assignor as of the date hereof to the Assignees,
or to such entity which was formed and is owned by the Assignees, including
but
not limited to the right to ▇▇▇ for past infringements, misappropriation, or
dilution of the Trademarks; and
WHEREAS,
the Assignor and the Assignees wish to confirm such transfer and assignment
for
purposes of recording the transfer in the United States Patent and Trademark
Office, or in any other foreign patent and trademark office or governmental
agency, or the respective foreign equivalent thereof in such foreign
jurisdiction, and to confirm Assignee’s ownership, whether individually or
through an entity which was formed and is owned by the Assignees, of the
Trademarks and the goodwill in respect thereof;
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the Assignor hereby and effective as of ________
__, 200_ assigns, conveys and transfers to the Assignees, or to such entity
which was formed and is owned by the Assignees, its successors and assigns
all
of its right, title, interest, ownership and subsidiary rights, if any, to
the
Trademarks, together with the goodwill of the business connected with the use
of
and symbolized by the Trademarks and the right to ▇▇▇, counterclaim, and recover
for past, present, and future infringement, misappropriation, or dilution of
the
rights assigned to the Assignee hereunder pursuant to and to the extent set
forth in the terms and conditions of the Security Agreement.
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page]
Exhibit
A-1
IN
WITNESS WHEREOF, the Assignor, by its duly authorized officer, has executed
this
assignment, as an instrument under seal,
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By:
__________________________
Name:
Title:
|
SUBSCRIBED
AND SWORN to before
me
this
__ day of ______, 200_
__________________________
Notary
Public
My
Commission Expires: _______________
Exhibit
A-2