SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of the 15th day of March 2005, by and
between Nano Chemical Systems Holdings, Inc., a Nevada corporation whose address
is ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter "Debtor") and Green Tree
Spray Technologies, LLC, a Delaware Limited Liability Company, whose mailing
address is whose mailing address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter "Secured Party").
1. Security Interest. Subject to the terms and provisions of this
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Security Agreement (the "Security Agreement"), Debtor grants to Secured Parties
a continuing lien on and Security Interest (the "Security Interest") in and to
the Collateral (as defined herein) to secure the payment and performance of the
Obligation (as defined herein).
2. Obligation. This Security Agreement and the Security Interest
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granted herein secures the following described obligations (collectively, the
"Obligation"):
(a) The performance by Debtors of all of their
obligations to Secured Party pursuant to a the
Promissory Note of even date in the amount of One
Million DOLLARS ($1,000,000.00) of even date herewith
executed by Debtors and payable to the order of
Secured Party.
(b) All costs incurred by Secured Parties to obtain,
preserve, and enforce this Security Agreement,
collect the Obligation, and maintain and preserve the
Collateral, including specifically, but without
limitation, all taxes, assessments, reasonable
attorney's fees and legal expenses and expenses of
sale.
(c) Unless otherwise provided in any instrument
evidencing the Obligation, the Obligation shall bear
interest at the rate or rates per annum set forth in
the Promissory Note but not in excess of the highest
rate permitted by applicable law, if any, from date
of accrual of the Obligation until paid.
3. The Security Interest granted hereby covers the following
collateral (the "Collateral"): (i) all items described on Exhibit "A" attached
hereto, (ii) all insurance policies relating in whole or in part to any of the
foregoing, (iii) all Proceeds (as defined herein) of any of the foregoing, (iv)
all substitutions for and replacements of and all additions and accessions to
any of the foregoing, (v) all guaranties and security for any of the foregoing,
and (vi) all the rights, title and interest of Debtors in and to all books and
records relating in whole or in part to any of the foregoing.
As used herein, the term "Proceeds" shall include, but not be limited
to, (i) any and all proceeds of any insurance, causes and rights of action,
settlements thereof, judicial and arbitration judgments and awards, and
indemnity, warranty or guaranty payments payable to Debtor from time to time
with respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to Debtor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental department, commission, board,
bureau, authority, agency or body (domestic or foreign), (iii) all claims of the
Debtor for losses or damages arising out of or related to or for any breach of
any agreements, covenants, representations or warranties or any default under
any of the foregoing Collateral (without limiting any direct or independent
rights of Secured Parties with respect to the Collateral), and (iv) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral.
Portions of the Collateral may constitute accounts, general intangibles
or contract rights, and all records concerning such Collateral are and will be
located at the offices of Debtor specified above.
4. Debtor's Warranties.
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(a) Ownership Free of Encumbrances. Except for the
Security Interest granted hereby, Debtor now owns the
Collateral free from any lien, security interest, claim or
encumbrance.
(b) Place of Business. The principal place of business is
at the address set forth in the first paragraph of this
Security Agreement. Debtor will notify Secured Parties of any
change in its principal place of business in the future.
(c) Books and Records. All books, records and documents
relating to the Collateral are and will be genuine and in all
respects what they purport to be.
(d) Lien on Collateral. The Security Interest granted to
the Secured Parties pursuant to this Security Agreement
constitutes and creates a valid and continuing lien on and
security interest in the Collateral in favor of the Secured
Parties, subject to all prior liens, encumbrances, security
interests, chattel mortgages, privileges, statements of
assignment and rights of others existing as of the date
hereof. The Security Agreement is enforceable as such as
against any third parties, including, without limitation, any
owner of real property in any state where any of the
Collateral is or may hereafter be located and as against any
purchaser of such real property and any present or future
creditor obtaining a lien on such real property. All action
necessary or desirable to perfect the Security Interest in
each item of the Collateral in each state in which any item of
Collateral is or will be located has been or will forthwith be
duly taken.
(e) Power and Authority. The Debtor shall have full
power, authority and legal right to pledge all of the
Collateral pursuant to this Security Agreement.
(f) Due Authorization, Execution and Delivery. This
Security Agreement has been duly authorized, executed and
delivered by Debtor and constitutes the legal, valid and
binding obligation of Debtor enforceable in accordance with
its terms.
(g) Consents. No consent of any other Parties (including,
without limitation, creditors of Debtor) and no consent,
license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration
with, any governmental authority, domestic or foreign, is
required to be obtained by the Debtor in connection with the
execution, delivery or performance of this Security Agreement.
(h) No Conflict. The execution, delivery and performance
of this Security Agreement will not violate any provision of
any applicable law or regulation or of any order, judgment,
writ, award or decree of any court, arbitrator or governmental
authority, domestic or foreign, or of the certificate of
incorporation or by-laws of the Debtor or of any securities
issued by the Debtor, or of any mortgage, indenture, lease,
contract, or other agreement, instrument or undertaking to
which Debtor is a Parties or which purports to be binding upon
Debtor or upon any of its assets, and will not result in the
creation or imposition of any lien, charge or encumbrance on
or security interest in any of the assets of Debtor except as
contemplated by this Security Agreement.
(i) Condition of Collateral. All machinery and equipment
constituting part of the Collateral are in all respects in
good and serviceable condition, repair and working order
(ordinary wear and tear excepted), adequate for the
contemplated uses and purposes thereof in connection with
Debtor' business as it is presently being conducted. Secured
Parties agrees that its security interest in the Collateral
shall be inferior and subordinate to any security interest now
or hereafter granted by Debtor to any individual or entity
that has provided cash or equipment to the Debtor for a bona
fide purpose. Debtor must provide written proof of funding to
Secured Parties prior to Secured Parties subordinating its
lien rights.
5. Debtor' Covenants.
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(a) Ownership of Collateral. At the time Debtor pledge,
sell, assign, transfer to Secured Parties or grant to Secured
Parties a Security Interest in any Collateral or any interest
therein, Debtor shall be the absolute owner thereof and shall
have the absolute right to pledge, sell, assign or transfer
the same. Debtor shall defend the Collateral against all
claims and demands of all persons at any time claiming the
same or any interest therein adverse to Secured Parties.
(b) Maintenance. Debtor shall keep the Collateral free
from subsequent liens and security interests, and shall not
create or suffer to exist any lien or security interest in
Collateral hereafter acquired except for the Security Interest
hereby granted and those in existence as of the date hereof.
Debtor shall pay all costs necessary to obtain, preserve,
defend and enforce the Security Interest, collect the
Obligation, and preserve, defend, enforce and collect the
Collateral, including specifically, but without limitation,
the payment of taxes, assessments, reasonable attorney's fees
and legal expenses, and expenses of sales. Whether the
Collateral is or is not in Secured Parties' possession, and
without any obligation to do so, Secured Parties may, at its
option, pay any such costs and expenses, discharge
encumbrances on the Collateral, and pay for insuring the
Collateral. Debtor agrees to reimburse Secured Parties on
demand for any payments so made and until such reimbursement,
the amount of any such payment shall be a part of the
Obligation. Debtor shall, at its sole expense, maintain the
Collateral in first class condition and shall comply with
industry standards, applicable laws and regulations, and
requirements for enforcing warranty claims.
(b) Information and Inspection. Debtor shall furnish to
Secured Parties any reports and other information with respect
to the Collateral reasonably requested by Secured Parties,
will allow Secured Parties to inspect the Collateral at
wherever located on reasonable notice, and will allow Secured
Parties to inspect and copy, or will furnish Secured Parties
with copies of, all records relating to the Collateral and the
Obligation. Debtor shall furnish to Secured Parties such
information as Secured Parties may request to identify notes
receivable, accounts receivable, chattel paper, general
intangibles and contract rights assigned hereunder at the
times and in the form and substance requested by Secured
Parties.
(c) Additional Documents. Debtor shall furnish Secured
Parties with financing statements upon request and Debtor
shall sign any other documents or instruments furnished by
Secured Parties which are necessary in the judgment of Secured
Parties to obtain, maintain and perfect the Security Interest
in any applicable jurisdiction and to assist Secured Parties
in complying with the Federal Assignment of Claims Act, where
necessary to enable Secured Parties to become an assignee
under such Act, and any expense of Secured Parties so incurred
shall be a part of the Obligation. In this regard, Debtor
agrees to execute all such collateral chattel and/or other
mortgages, assignments of accounts receivable and any and all
other financing statements and security devices as Secured
Parties may request to perfect or continue perfection of the
Security Interest under the laws of any state in which the
Collateral is located.
(d) Parties Liable on Collateral. Debtor will take all
necessary steps to preserve the liability of account Debtor,
obligors and secondary parties to any obligations which are
part of the Collateral. Secured Parties shall have no duty to
preserve such liability but it may do so, and any expense of
Secured Parties so incurred shall be a part of the Obligation.
(e) Modification of Accounts or Contract Rights. Debtor
will not agree to any material modification of any of the
terms of any notes or accounts receivable, contract rights,
chattel paper or other instruments evidencing or pertaining to
Collateral assigned hereunder other than in the ordinary
course of business, without the prior written consent of
Secured Parties.
(f) Right of Secured Parties to Notify Account and
Contract Debtor. Upon the occurrence of an Event of Default
(hereinafter defined) which shall be continuing, Secured
Parties shall have the right to notify persons obligated on
any instruments, accounts, or contracts which are part of the
Collateral to make payment thereof directly to Secured Parties
and to take control of all proceeds of any of the Collateral.
Until such time as Secured Parties elects to exercise such
rights, Debtor, as the agent of Secured Parties, shall collect
and enforce all such contracts and accounts. The cost of such
collection and enforcement, including attorney's fees and
expenses, shall be borne by Debtor, whether the same is
incurred by Secured Parties or Debtor. If paid by Secured
Parties, such payment shall become a part of the Obligation.
(g) Books of Account. Debtor will, at all times, maintain
accurate books and records with respect to the Collateral.
Secured Parties is hereby given the right to audit the books
and records of Debtor relating to said Collateral upon
reasonable notice, and from time to time, as Secured Parties
deems proper. At Secured Parties' request, Debtor shall cause
to be marked conspicuously all documents constituting the
Collateral with a legend in form and substance satisfactory to
Secured Parties.
(h) Notice of Changes. Debtor will notify Secured Parties
of any material change occurring in or to the Collateral, of a
change in Debtor' mailing address, or in any material change
in any fact or circumstance warranted or represented by Debtor
in this Security Agreement or furnished to Secured Parties, or
if any Event of Default occurs, prior to or immediately
following the occurrence thereof.
(i) Use and Disposition of Collateral. Debtor will not
use the Collateral illegally or encumber the same without the
prior written consent of Secured Parties. Without the prior
written consent of Secured Parties, Debtor will not sell,
lease, otherwise transfer, hypothecate or anticipate the
Collateral.
(j) Removal of Collateral. Except in the ordinary course
of Debtor' business, Debtor will not remove any material
portion of the Collateral from its present location to another
State or local jurisdiction in which Secured Parties
determines that the Security Interest granted hereby may not
be perfected, unless and until Debtor: (i) gives the Secured
Parties prior written notice of such intended move and
receives the written consent of the Secured Parties, and (ii)
provides the Secured Parties with an opinion of counsel for
Debtor that the security interest in favor of the Secured
Parties created by this Security Agreement constitutes a valid
and perfected lien on, and a perfected security interest in,
such machinery and equipment in the county, jurisdiction and
State in which such machinery and equipment is to be moved.
Notwithstanding the foregoing, it is understood and agreed
that if for any reason any of Debtor' machinery or equipment
at any time is kept or located at locations other than those
above listed or contained in any aforementioned notice given
to Secured Parties, Secured Parties shall nevertheless have
and retain a security interest therein. All tangible personal
property included in the Collateral will be maintained and
preserved in first class repair, condition and appearance, and
Debtor shall forthwith, or in the case of any loss or damage
to any of the tangible personal property as quickly or
practicable after the occurrence thereof, make or cause to be
made all replacements and other improvements in connection
therewith that are necessary or desirable to such end. Debtor
shall furnish to Secured Parties a statement respecting any
loss or material damage to any of the tangible personal
property. Debtor shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor,
materials and supplies) against the tangible personal property
except to the extent that the validity thereof is being
contested in good faith.
6. Rights and Powers of Secured Parties. Secured Parties may, in
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its discretion, upon the occurrence of an Event of Default, do any one or more
of the following: Require Debtor to give possession or control of the Collateral
to Secured Parties; take physical possession of the Collateral and maintain it
on Debtor' premises, in a public warehouse or at such other place as to which
Secured Parties may remove the Collateral or any part thereof; contact account
Debtor directly to verify information furnished by Debtor; take control of
proceeds and use cash proceeds to reduce any part of the Obligation; take any
action Debtor are required to take or any other necessary action to obtain,
preserve, and enforce this Security Agreement, and maintain and preserve the
Collateral, without notice to Debtor, and add costs of same to the Obligation
(but Secured Parties is under no duty to take any such action); release
Collateral in its possession to Debtor, temporarily or otherwise; take control
of funds generated by the Collateral such as cash dividends and interest, and
use same to reduce any part of the Obligation; vote any stock which is part of
the Collateral; use cash collateral to reduce any part of the Obligation; and
exercise all other rights which an owner of such stock may exercise and exercise
all rights which account holders or obligees may exercise with respect to any of
the Collateral. Secured Parties may at any time in its discretion transfer any
of the Collateral or evidence thereof into its own name or that of its nominee
and receive the proceeds there from and hold the same as security for the
Obligation, or, following the occurrence and continuance of an Event of Default,
apply the same thereon. Secured Parties may, following the occurrence and
continuance of an Event of Default, but shall be under no duty to, demand,
collect, receipt for, settle, compromise, adjust, ▇▇▇ for, foreclose, or realize
upon Collateral, in its own name or in the name of Debtor, as the Secured
Parties may determine. Secured Parties shall not be liable for any act or
omission on the part of the Secured Parties, its officers, agents, or employees,
except willful misconduct and gross negligence. The foregoing rights and powers
of Secured Parties shall be in addition to, and not a limitation upon, any
rights and powers of Secured Parties given by law, custom, elsewhere by this
Security Agreement, the Note or otherwise.
7. Default.
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(a) Events of Default. Debtor shall be in default under
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this Security Agreement upon the happening of any of the
following events or conditions ("Events of Default"):
i) Failure to timely pay any installment under
the Promissory Note within five (5) days after receipt of
written notice from Secured Party of such default or failure
to cure any non monitory default, breach of any covenant or
liability contained herein or secured hereby; within ten (10)
days after receipt of written notice from Secured Party.
ii) Any representation or warranty contained
herein shall be false or misleading in any material respect
when made.
(b) Remedies of Secured Parties Upon Default. When an
Event of Default occurs, and at any time thereafter, Secured
Parties may declare the Obligation or any part thereof
immediately due and payable and may proceed to enforce payment
of the same and to exercise any and all of the rights and
remedies provided by law as well as all other rights and
remedies possessed by Secured Parties under this Security
Agreement or otherwise. Secured Parties may require Debtor to
assemble the Collateral and make it available to Secured
Parties at any place to be designated by the Secured Parties,
which is reasonably convenient to all parties. Unless the
Collateral threatens to decline rapidly in value or is of a
type customarily sold on a recognized market, Secured Parties
will give Debtor reasonable notice of the time after which any
private sale or any other intended disposition thereof is to
be made. Expenses of retaking, holding, preparing for sale,
selling, leasing and the like shall include Secured Parties'
reasonable attorney's fees and legal expenses. Secured Parties
shall be entitled to immediate possession of the Collateral
and shall have authority to enter upon any premises upon which
the same may be situated and remove the same there from. If
Secured Parties disposes of the Collateral, or any portion
thereof, following default, the proceeds of such disposition
available to satisfy the Obligation shall be applied by
Secured Parties to the Obligation in such order and in such
manner, as Secured Parties in its discretion shall decide.
8. General.
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(a) Assignment of Collateral by Secured Parties. The
Secured Parties may assign all or any part of the Obligation,
and may assign, transfer, or deliver to any transferee any or
all of the Collateral, and thereafter Secured Parties shall be
fully discharged from all responsibility with respect to the
Collateral so assigned, transferred or delivered. Such
transferee shall be vested with all the powers and rights of
the Secured Parties hereunder with respect to such Collateral,
but the Secured Parties shall retain all rights and powers
hereby given with respect to any of the Collateral not so
assigned or transferred.
(b) Waiver. No delay on the part of the Secured Parties
in exercising any power or right shall operate as a waiver
thereof; nor shall any single or partial exercise of any power
or right preclude other or further exercise thereof or the
exercise of any other power or right. No waiver by Secured
Parties of any right hereunder or of any Event of Default by
Debtor shall be binding upon Secured Parties unless in
writing, and no failure by Secured Parties to exercise any
right hereunder or waiver of any Event of Default of Debtor
shall operate as a waiver of any other or further exercise of
such right or of any further Event of Default.
(c) Parties Bound. The rights of Secured Parties
hereunder shall inure to the benefit of its successors and
assigns. The terms of this Security Agreement shall be binding
upon the successors and assigns of the parties hereto. All
representations, warranties and agreements of Debtor shall
bind Debtor' successors and assigns. This Security Agreement
shall constitute a continuing agreement, applying to all
future transactions of a character contemplated at the date of
this Security Agreement.
(d) Notice. Any notices or other communications required
or permitted hereunder shall be sufficiently given if
delivered personally or sent by overnight express service, or
by registered or certified mail, charges prepaid, to the
applicable Parties at its address above given or at such other
address as shall be furnished in writing by such Parties to
the other, and shall be deemed to have been given as of the
date so delivered or deposited in the United States Mail.
Notice mailed in accordance with this section at least five
(5) days prior to the related action (or if the Code elsewhere
requires a longer period, such longer period) shall be deemed
reasonable.
(e) Modifications. No provision hereof shall be modified
or limited except by a written agreement expressly referring
hereto and to the provision so modified or limited and signed
by all parties to this Security Agreement, and without
limiting the foregoing, no course of conduct, usage of trade
or law merchant shall modify or limit any provision hereof.
(f) Severability. Any provision of this Security
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
(g) Financing Statement. Secured Parties is authorized on
behalf of Debtor as Debtor' agent and attorney in fact, for
such purpose, to complete and sign one or more financing
statements with respect to any and all Collateral covered by
this Security Agreement and to file the same in an appropriate
office or place. A carbon, photographic or other reproduction
of this Security Agreement or of any financing statement
prepared in conjunction herewith is sufficient as a financing
statement.
(h) APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OF THE SECURITY INTEREST, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS
OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE.
9. Limitation on Agreements. All agreements between Debtor and
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Secured Parties, whether now existing or hereafter arising and whether written
or oral, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of the maturity of the Obligation
or otherwise, shall the amount paid, or agreed to be paid, to Secured Parties
for the use, forbearance, or detention of the money to be loaned under the Note
or otherwise or for the payment or performance of any covenant or obligation
contained herein, or in any other document evidencing, securing or pertaining to
the Obligation or the Collateral, exceed the maximum amount, if any, permissible
under applicable law. If from any circumstances whatsoever interest would
otherwise be payable to Secured Parties in excess of the maximum lawful amount,
the interest payable to Secured Parties shall be reduced to the maximum amount
permitted under applicable law, and if from any such circumstance the Secured
Parties shall ever receive as interest or otherwise an amount which would exceed
the highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of the principal amount owing on account of the
Obligation or on account of any other principal indebtedness of the Debtor to
the Secured Parties, and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal of the Obligation and such
other indebtedness, such excess shall be refunded to the Debtor. All sums paid
or agreed to be paid to the Secured Parties for the use, forbearance or
detention of the indebtedness of the Debtor to the Secured Parties shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full of the
principal (including the period of any renewal or extension thereof) so that the
interest on account of such indebtedness shall not exceed the maximum amount
permitted by applicable law. The term "applicable law" as used in this Section 9
shall mean the laws of the State of Delaware or the laws of the United States,
whichever laws allow the greater rate of interest, as such laws now exist or may
be changed or amended or come into effect in the future. The terms and
provisions of this Section shall control and supersede every other provision of
all agreements between the Debtor and the Secured Parties.
EXECUTED as of the date and year first above written.
DEBTOR
NANO CHEMICAL SYSTEMS HOLDINGS, INC.,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
SECURED PARTY
GREENTREE SPRAY TECHNOLOGIES, LLC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
Managing Member
SCHEDULE A
ASSETS
▇▇▇▇▇ LINE $177,395.03
TANK FARM $196,097.53
INV.RAW MAT $416,473.68
INV.F/G AT RETAIL $23,033.76
MACOLA SYSTEM $45,000.00
FORMULATIONS $142,000.00
TOTAL $1,000,000.00
CUSTOMERS
PIONEER
FINISH LINE
MOLD MEDIC
PENETONE
DURO DYNE
SAINT GOBAIN