SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made this 5th day of January
1998, by Vermont Pure Holdings, Ltd., a Delaware corporation with its principal
place of business at Xxxxx 00, Xxxxxxxx, Xxxxxxx 00000 (the "Debtor") in favor
of Vermont Coffee Time, Inc.,a Vermont corporation with its principal place of
business at X.X. Xxx 000, 00 Xxxxxxxx Xxxx, Xxxxxxxxx, XX 00000 (the "Secured
Party").
To secure the repayment of that certain Promissory Note from Debtor to
Secured Party, dated January 5, 1998, in the principal amount of $250,000 (the
"Note"), the Debtor hereby agrees as follows:
Section 1. Definitions. All capitalized terms used herein or in any
schedule, exhibit, certificate, report or other document delivered pursuant
hereto shall have the meanings assigned to them below (unless otherwise
defined). Except as otherwise defined, terms defined in the Uniform Commercial
Code shall have the meanings set forth therein.
Collateral. See Section 2.
Encumbrance. Any mortgage, pledge, security interest, lien or other
charge or encumbrance of any kind or nature upon or with respect to any
property.
Event of Default. See Section 7.
Uniform Commercial Code. The Uniform Commercial Code as in effect in
the State of Vermont.
Section 2. Grant. To secure the payment and performance of the Note,
the Debtor hereby assigns and pledges to the Secured Party all of its rights,
title and interest in, and grants to the Secured Party a continuing security
interest in, the property described in Schedule A attached hereto, whether now
owned or existing or hereafter arising or acquired, any and all substitutions,
replacements and accessions thereto, and all proceeds and products of any of the
foregoing (collectively, the "Collateral")
Section 3. Representations, Warranties and Covenants. The Debtor makes
the following representations and warranties, and agrees to the following
covenants, each of which representations, warranties and covenants shall be
continuing and in force so long as this Agreement is in effect:
3.1 Name, Debtor/Collateral Location, Changes.
(a) The name of the Debtor set forth on the first page hereof is the
true and correct legal name of the Debtor, and the Debtor has not done business
as or used any other name.
(b) The address of the Debtor set forth on the first page hereof is the
Debtor's chief executive office and the place where its business records are
kept.
(C) The Debtor will not change its name, identity or organizational
structure or chief executive office or place where its business records are
kept, or merge into or consolidate with any other entity, unless the Debtor
shall have given the Secured Party at least 30 days' prior written notice
thereof and shall have delivered to the Secured Party such new Uniform
Commercial Code financing statements or other documentation as may be necessary
or required by the Secured Party to ensure the continued perfection and priority
of the security interests granted by this Agreement.
3.2 Organization; Good Standing. The Debtor is duly organized, validly
existing and in good standing under the laws of the state of its organization
and duly qualified and in good standing in every other state in which the nature
of its business or properties requires such qualification.
3.3 Authorization of Agreement, No Consents; No Conflicts. The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary action, corporate or otherwise, and does not and will not (I)
require any consent or approval of the stockholders of the Debtor, if any; (ii)
contravene the terms of the charter, by-laws or other organizational papers of
the Debtor; (iii) violate any applicable law, rule or regulation of any
governmental a-ency; (iv) contravene any provision of any agreement, instrument,
order or undertaking binding on the Debtor or by which any of its properties are
bound or affected; (v) other than as contemplated hereby, result in or require
the imposition of any Encumbrance on any of the properties of the Debtor; or
(vi) other than filings required by the Uniform Commercial Code, require the
approval or consent of, or filing or registration with, any governmental or
other agency or authority, or any other party.
3.4 O,ownership of Collateral; Absence of Liens and Restrictions. The
Debtor is, and in the case of property acquired after the date hereof, will be,
the sole legal and equitable owner of the Collateral, holding good and
marketable title to the same free and clear of all Encumbrances except for the
security interests granted hereunder or permitted hereby, and has good right and
legal authority to assign, deliver, and create a security interest in the
Collateral in the manner herein contemplated. The Collateral is genuine and is
what it is purported to be. The Collateral is not subject to any restriction
that would prohibit or restrict the assignment, delivery or creation of the
security interests contemplated hereunder.
3.5 Priority of Security Interest. This Agreement, together with the filing of
Uniform Commercial Code financing statements in the appropriate offices of the
Vermont Secretary of State, creates a valid and continuing lien on and perfected
security interest in the Collateral
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(except for property located in the United States in which a security interest
may not be perfected by filing under the Uniform Commercial Code), prior to all
other Encumbrances, except a security interest in favor Xxxxxxxxxx Bank, and is
enforceable as such against creditors of the Debtor, any owner of the real
property where any of the Collateral is located, any purchaser of such real
property and any present or future creditor obtaining a lien on such real
property.
3.6 Further Assurances. Upon the written request of the Secured Party,
and at the sole expense of the Debtor, the Debtor will promptly execute and
deliver such further instruments and documents and take such further actions as
the Secured Party may deem desirable to obtain the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, filing of any financing statement under the Uniform Commercial Code.
Section 4. Defaults. An event of default ("Event of Default") shall
exist hereunder if any of the following events or conditions occur:
(a) failure to pay the Note when due or perform any covenant,
agreement or obligation contained herein or in any agreement,
instrument or other document evidencing, securing or otherwise
delivered in connection with the Note (hereinafter, the "Loan
Documents");
(b) failure of any representation or warranty, statement or information
herein or in any documents or financial statements delivered or disclosed to the
Secured Party in connection with this Agreement or the Note to be true and
correct;
(C) loss, theft or substantial damage of or to the Collateral, or the
issuance of an injunction against the Debtor affecting any of the Collateral,
which impairment of Collateral remains uncured for more than 90 days;
(d) default under any instrument constituting, or under any
agreement (including without limitation any insurance policy) relating to, any
Collateral;
(e) dissolution, termination of existence, insolvency or business
failure of, appointment of a receiver or any other custodian for any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against, the Debtor
or any indorser, guarantor or surety of or for any Obligation.
Section 5. Secured Party's Rights and Remedies.
(a) So long as any Event of Default shall have occurred
and is continuing:
the Secured Party may, at its option, without notice or demand, cause
all the Note to become immediately due and payable and take immediate
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possession of the Collateral, and for that purpose the Secured Party
may, so far as the Debtor can give authority therefor, enter upon any
premises on which any of the, Collateral is situated and remove the
same therefrom or remain on such premises and in possession of such
Collateral for purposes of conducting a sale or enforcing the rights of
the Secured Party;
(ii) the Debtor will, upon demand, assemble the Collateral and
make it available to the Secured Party at a place and time designated
by the Secured Party that is reasonably convenient to both parties;
(iii) the Secured Party may collect and receive all income and
proceeds in respect of the Collateral and exercise all rights of the
Debtor with respect thereto, all without liability except to account
for property actually received (but the Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and
shall not be responsible for any failure to do so or delay in so
doing);
(iv) the Secured Party may sell, lease or otherwise dispose of
the Collateral at a public or private sale, with or without having the
Collateral at the place of sale, and upon such terms and in such manner
as the Secured Party may determine, and the Secured Party may purchase
any Collateral at any such sale. Unless the Collateral threatens to
decline rapidly in value or is of the type customarily sold on a
recognized market, the Secured Party shall send to the Debtor prior
written notice (which, is given within five days of any sale, shall be
deemed to be reasonable) of the time and place of any public sale of
the Collateral or of the time after which any private sale or other
disposition thereof is to be made. The Debtor agrees that upon any such
sale the Collateral shall be held by the purchaser free from all claims
or rights of every kind and nature, including any equity of redemption
or similar rights, and all such equity of redemption and similar rights
are hereby expressly waived and released by the Debtor. In the event
any consent, approval or authorization of any governmental agency is
necessary to effectuate any such sale, the Debtor shall execute all
applications or other instruments as may be required; and
(v) in any jurisdiction where the enforcement of its
rights hereunder is sought, the Secured Party shall have, in addition
to all other rights and remedies, (a) the rights and remedies of a
secured party under the Uniform Commercial Code and (b) all of the
rights and remedies described in the Loan Documents.
(b) Prior to any disposition of Collateral pursuant to this Agreement,
the Secured Party may, at its option, cause any of the Collateral to be repaired
or reconditioned (but not upgraded unless mutually agreed) in such manner and to
such extent as to make it saleable.
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(C) The Secured Party shall be entitled to retain and to apply the
proceeds of any disposition of the Collateral, first, to its reasonable expenses
of retaking, holding, protecting and maintaining, and preparing for disposition
and disposing of, the Collateral, including attorneys' fees and other legal
expenses incurred by it in connection therewith; and second, to the payment of
the Note in such order of priority as the Secured Party shall determine. Any
surplus remaining after such application shall be paid to the Debtor or to
whomever may be legally entitled thereto, provided that in no event shall the
Debtor be credited with any part of the proceeds of the disposition of the
Collateral until such proceeds have been received in cash by the Secured Party.
The Debtor shall remain liable for any deficiency.
Section 6. Waivers. The Debtor waives presentment, demand, notice,
protest, notice of acceptance of this Agreement, notice of any loans made,
credit or other extensions granted, collateral received or delivered or any
other action taken in reliance hereon and all other demands and notices of any
description, except for such demands and notices as are expressly required to be
provided to the Debtor under this Agreement or any other document evidencing the
Note. With respect to both the Note and the Collateral, the Debtor assents to
any extension or postponement of the time of payment or any other forgiveness or
indulgence, to any substitution, exchange or release of Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromise or
adjustment of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable. The Secured Party may exercise its rights with
respect to the Collateral without resorting, or regard, to other collateral or
sources of reimbursement for Note. The Secured Party shall not be deemed to have
waived any of its rights with respect to the Note or the Collateral unless such
waiver is in writing and signed by the Secured Party. No delay or omission on
the part of the Secured Party in exercising any right shall operate as a waiver
of such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of, any right on any future occasion. All rights
and remedies of the Secured Party in the Note or the Collateral, whether
evidenced hereby or by any other instrument or papers, are cumulative and not
exclusive of any remedies provided by law or any other agreement, and may be
exercised separately or concurrently.
Section 7. Expenses. The Debtor shall, on demand, pay or reimburse the Secured
Party for all reasonable expenses (including attorneys' fees) incurred or paid
by the Secured Party in connection with the enforcement of this Agreement, and
any other amounts permitted to, be expended by the Secured Party hereunder,
including without limitation such expenses as are incurred to preserve
the value of the Collateral and the validity, perfection, priority and
value of any security interest created hereby, the collection, sale or
other disposition of any of the Collateral or the exercise by the Secured
Party of any of the rights conferred upon it hereunder.
Section 8. Notices. Any demand upon or notice to the Debtor that the Secured
Party may give shall be effective when delivered by hand, properly deposited in
the mails postage prepaid, or sent by telex, answer back received, or electronic
facsimile transmission, receipt
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acknowledged, or delivered to a telegraph company or overnight courier, in each
case addressed to the Debtor at the address shown at the beginning of this
Agreement. Demands or notices addressed to any other address at which the
Secured Party customarily communicates with the Debtor also shall be effective.
Any notice by the Debtor to the Secured Party shall be given as aforesaid,
addressed to the Secured Party at the address shown at the beginning of this
Agreement or such other address as the Secured Party may advise the Debtor in
writing.
Section 9. Successors and Assigns. This Agreement shall be binding upon
the Debtor, and its successors and assigns, and shall inure to the benefit of
and be enforceable by the Secured Party and its successors and assigns.
Section 10. General. This Agreement may not be amended or modified
except by a writing signed by the Debtor and the Secured Party, nor may the
Debtor assign any of its rights hereunder. This Agreement and the terms,
covenants and conditions hereof shall be construed in accordance with, and
governed by, the laws of the State of Vermont (without giving effect to any
conflicts of law provisions contained therein).
Section 11. Section Headings. Section headings are for convenience of
reference only and are not a part of this Agreement.
Section 12. Partial Invalidity. The invalidity . or unenforceability
of any one or more phrases, clauses or sections of this Agreement shall not
affect the validity or enforceability of the remaining portions of it.
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IN WITNESS WHEREOF, the Debtor has caused this Agreement to be
duly executed as an instrument under seal as of the date first written
above.
IN THE PRESENCE OF: VERMONT COFFEE TIME, INC.
Witness: Xxx Xxxxxx, President
STATE OF VERMONT
XXXXXXXXXX COUNTY, SS.
At Burlington in said County, this 5th day of January, 1998,
personally appeared Xxx Xxxxxx, the President and duly authorized agent
of Vermont Coffee Time, Inc. and she acknowledged this instrument, by
her subscribed, to be her free act and deed and the free act and deed of
Vermont Coffee Time, Inc.
At Burlington in said County, this 5th day of
January, 1998, personally appeared duly
authorized agent of Vermont Pure
Holdings, Ltd., and he
acknowledged this instrument, by him subscribed, to be his free act and
deed and the free act and deed of said Vermont Pure Holdings, Ltd.
Before me:\S\
Notary Public
My commission expires: 2/1/99
In the Presence of: Vermont Pure Holdings, Ltd.
\S\Xxxxx XxxXxxxxx By:\S\Xxxxxxx Xxxxxx
Witness Xxxxxxx X. Xxxxxx, President
State of Vermont
Chitterden County, SS.
At Burlington, in said County, this 5th day of January, 1998, personally
appeared ___________, duly authorized agent of Vermont Pure Holdings, Ltd., and
he acknowledged this instrument, by him subscribed, to be his free act and deed
and the free act and deed of said Vermont Pure Holdings, Ltd.
Before me:
Notary Public
My commission expires: 2/1/99
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SCHEDULE A
to
SECURITY AGREEMENT
dated January 5, 1998
of VERMONT PURE HOLDINGS, LTD.
The items listed below constitute "Collateral" under the Security Agreement:
All tangible and intangible personal property, including, without limitation,
all Inventory, General Intangibles, Equipment, Machinery, Accounts, Furniture,
Furnishings, Fixtures and Vehicles now owned or hereafter
acquired by Secured Party in connection with the business of selling and
distributing coffee, water and related products, and renting cooler and
dispenser equipment for home and office customers, including all assets acquired
by Secured Party from Debtor under the Asset Purchase Agreement, dated as of
December 19, 1997 and all products and proceeds thereof and accessions thereto.
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