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 101 Hudson Street, Ste. 3700, Jersey City, N.J. 07302 (“Cornell”).

 

 

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	Natural Nutrition, Inc.
	109 North Post Oak Lane, Suite 422
	Houston, TX
	Attn: Timothy J. Connolly, President & CEO
	FAX: (713) 586-6678
If to Cornell	Cornell Capital Partners, L.P.
	101 Hudson Street, Ste. 3700
	Jersey City, N.J. 07302
	Attn: Troy Rillo
	FAX: (201) 985-8266

 

with copies to:	Sonnenschein Nath & Rosenthal LLP
	101 JFK Parkway
	Short Hills, N.J. 07078
	Attn: John L. Cleary, Esq.
	FAX.: (973) 912-7199

 

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/ Timothy J. Connolly Name: Timothy J. Connolly Title: President & CEO   CORNELL:   CORNELL CAPITAL PARTNERS, L.P. By: Yorkville Advisors, L.P.,   Its Investment Manager   By:        /s/ Troy Rillo                                  Troy Rillo,   Senior Managing Director