Security Agreement between Nano Chemical Systems Holdings, Inc. and Green Tree Spray Technologies, LLC (March 15, 2005)

Summary

This agreement is between Nano Chemical Systems Holdings, Inc. (the Debtor) and Green Tree Spray Technologies, LLC (the Secured Party). The Debtor grants a security interest in certain collateral to the Secured Party to secure a $1,000,000 promissory note and related obligations. The agreement outlines the collateral, the Debtor’s warranties about ownership and condition, and the Secured Party’s rights if the Debtor defaults. The Debtor must maintain the collateral and notify the Secured Party of any changes. The agreement is legally binding and enforceable according to its terms.

EX-2.3 4 f8k031505ex23_nano.txt SECURITY AGREEMENT 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 P.O. Box 10591, Portland, Oregon 97296 (hereinafter "Debtor") and Green Tree Spray Technologies, LLC, a Delaware Limited Liability Company, whose mailing address is whose mailing address is 105 Park Avenue, Seaford, Delaware 19971 (hereinafter "Secured Party"). 1. Security Interest. Subject to the terms and provisions of this ----------------- 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 ---------- 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. -------------------- (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. ----------------- (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 ------------------------------------ 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, sue 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. ------- (a) Events of Default. Debtor shall be in default under ----------------- 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. -------- (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 ------------------------ 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/ Katrina Cleburn ----------------------------------- Katrina Cleburn President SECURED PARTY GREENTREE SPRAY TECHNOLOGIES, LLC. By: /s/ Marc Mathys ------------------------------------ Marc Mathys Managing Member SCHEDULE A ASSETS ERNIE 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