EXHIBIT 10.3
XSTREAM BEVERAGE GROUP, INC. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Date: May 14, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Xstream Beverage Group, Inc., a Nevada corporation (the "Company"), each of the
other undersigned parties (other than Laurus Master Fund, Ltd, "Laurus")) and
each other entity that is required to enter into this Master Security Agreement
(each an "Assignor" and, collectively, the "Assignors") hereby assigns and
grants to Laurus a continuing security interest in all of the following property
now owned or at any time hereafter acquired by any Assignor, or in which any
Assignor now have or at any time in the future may acquire any right, title or
interest (the "Collateral"): all cash, cash equivalents, accounts, deposit
accounts (including, without limitation, the Restricted Account (the "Restricted
Account") maintained at North Fork Bank (Account Name: XStream Beverage Group,
Inc., Account Number: XXX XXX XXXX) referred to in the Restricted Account
Agreement), inventory, equipment, goods, documents, instruments (including,
without limitation, promissory notes), contract rights, general intangibles
(including, without limitation, payment intangibles and an absolute right to
license on terms no less favorable than those current in effect among our
affiliates), chattel paper, supporting obligations, investment property
(including, without limitation, all equity interests owned by any Assignor),
letter-of-credit rights, trademarks, trademark applications, patents, patent
applications, copyrights, copyright applications, tradestyles and any other
intellectual property, in each case, in which any Assignor now have or hereafter
may acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore. In the event any Assignor
wishes to finance the acquisition in the ordinary course of business of any
hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Laurus agrees to
release its security interest on such hereafter acquired equipment so financed
by such third party financing source. Except as otherwise defined herein, all
capitalized terms used herein shall have the meaning provided such terms in the
Securities Purchase Agreement referred to below.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by each Assignor to Laurus arising
under, out of, or in connection with: (i) that certain Securities Purchase
Agreement dated as of the date hereof by and between the Company and Laurus (the
"Securities Purchase Agreement") and (ii) the Related Agreements referred to in
the Securities Purchase Agreement (the Securities Purchase Agreement and each
Related Agreement, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the "Documents"), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of any Assignor to Laurus, whether now
existing or hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise, in each case,
irrespective of the genuineness, validity, regularity or enforceability of such
Obligations, or of any instrument evidencing any of the Obligations or of any
collateral therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all of the
Obligations in any case commenced by or against any Assignor under Xxxxx 00,
Xxxxxx Xxxxxx Code, including, without limitation, obligations or indebtedness
of each Assignor for post-petition interest, fees, costs and charges that would
have accrued or been added to the Obligations but for the commencement of such
case.
3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation, partnership or limited liability
company, as the case may be, validly existing, in good standing and
organized under the respective laws of its jurisdiction of organization
set forth on Schedule A, and each Assignor will provide Laurus thirty
(30) days' prior written notice of any change in any of its respective
jurisdiction of organization;
(b) its legal name is as set forth in its respective
Certificate of Incorporation or other organizational document (as
applicable) as amended through the date hereof and as set forth on
Schedule A, and it will provide Laurus thirty (30) days' prior written
notice of any change in its legal name;
(c) its organizational identification number (if applicable)
is as set forth on Schedule A hereto, and it will provide Laurus thirty
(30) days' prior written notice of any change in any of its
organizational identification number;
(d) it is the lawful owner of the respective Collateral and it
has the sole right to grant a security interest therein and will defend
the Collateral against all claims and demands of all persons and
entities;
(e) it will keep its respective Collateral free and clear of
all attachments, levies, taxes, liens, security interests and
encumbrances of every kind and nature ("Encumbrances"), except (i)
Encumbrances securing the Obligations, (ii) to the extent said
Encumbrance does not secure indebtedness in excess of $75,000 and such
Encumbrance is removed or otherwise released within ten (10) days of
the creation thereof, (iii) liens of warehousemen, mechanics,
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materialmen, workers, repairmen, common carriers, or landlords, liens
for taxes, assessments or other governmental charges, and other similar
liens arising by operation of law, in each case arising in the ordinary
course of business and for amounts that are not yet due and payable or
which are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and for which an adequate
reserve or other appropriate provision shall have been made to the
extent required by generally accepted accounting principals, and (iv)
pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation
(collectively, the "Permitted Encumbrances");
(f) it will, at its and the other Assignors joint and several
cost and expense, use commercially reasonably efforts to keep the
Collateral in good state of repair (ordinary wear and tear excepted)
and will not waste or destroy the same or any part thereof other than
ordinary course discarding of items no longer used or useful in its or
such other Assignors' business;
(g) it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by
sale, lease or otherwise, except for the sale of inventory in the
ordinary course of business and for the disposition or transfer in the
ordinary course of business during any fiscal year of obsolete and
worn-out equipment or equipment no longer necessary for its ongoing
needs, having an aggregate fair market value of not more than $25,000
and only to the extent that:
(i) the proceeds of any such disposition are used to
acquire replacement Collateral which is subject to Laurus'
first priority perfected security interest, or are used to
repay Obligations or to pay general corporate expenses; and
(ii) following the occurrence of an Event of Default
which continues to exist the proceeds of which are remitted to
Laurus to be held as cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured in
Laurus' name against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as in amounts which
are customary for similarly situated businesses, and under policies by
insurers acceptable to Laurus and all premiums thereon shall be paid by
such Assignor and the policies delivered to Laurus. If any such
Assignor fails to do so, Laurus may procure such insurance and the cost
thereof shall be promptly reimbursed by the Assignors, jointly and
severally, and shall constitute Obligations;
(i) it will at all reasonable times and upon reasonable
advance notice to such Assignor allow Laurus or Laurus' representatives
free access to and the right of inspection of the Collateral;
(j) such Assignor (jointly and severally with each other
Assignor) hereby indemnifies and saves Laurus harmless from all loss,
costs, damage, liability and/or expense, including reasonable
attorneys' fees, that Laurus may sustain or incur to enforce payment,
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performance or fulfillment of any of the Obligations and/or in the
enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Laurus or any
Assignor concerning any matter growing out of or in connection with
this Master Security Agreement, and/or any of the Obligations and/or
any of the Collateral except to the extent caused by Laurus' own gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and nonappealable decision).
4. The occurrence of any of the following events or conditions
shall constitute an "Event of Default" under this Master Security
Agreement:
(a) Breach of any covenant, warranty, representation or
statement made or furnished to Laurus by any Assignor or on any
Assignor's benefit was false or misleading in any material respect when
made or furnished, and if subject to cure, shall not be cured for a
period of fifteen (15) business days;
(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
(i) such loss is covered by insurance proceeds which
are used to replace the item or repayLaurus; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within
ten (10) days of the creation or the assertion thereof;
(b) any Assignor shall become insolvent, cease operations,
dissolve, terminate our business existence, make an assignment for the
benefit of creditors, suffer the appointment of a receiver, trustee,
liquidator or custodian of all or any part of Assignors' property;
(c) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against any Assignor and if commenced against
any Assignor shall not be dismissed within forty-five (45) days;
(d) the Company shall repudiate, purport to revoke or fail to
perform any or all of its obligations under any Note (after passage of
applicable cure period, if any); or
(e) an Event of Default shall have occurred under and as
defined in any Document, after giving effect to any applicable cure or
grace period.
5. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus may declare all Obligations immediately due and payable and
Laurus shall have the remedies of a secured party provided in the Uniform
Commercial Code as in effect in the State of New York, this Agreement and other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral and
to maintain such possession on our premises or to remove the Collateral or any
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part thereof to such other premises as Laurus may desire. Upon Laurus' request,
each of the Assignors shall assemble or cause the Collateral to be assembled and
make it available to Laurus at a place designated by Laurus. If any notification
of intended disposition of any Collateral is required by law, such notification,
if mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) days before such disposition, postage prepaid, addressed to any Assignor
either at such Assignor's address shown herein or at any address appearing on
Laurus' records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in the Restricted Account and
apply same to the repayment of the Obligations (in such order of application as
Laurus may elect).
6. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Laurus' option, debited by
Laurus from the Restricted Account referred to in the Restricted Account
Agreement.
7. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as our attorney, with power
to execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us covering
the Collateral (and, in connection with the filing of any such financing
statements, describe the Collateral as "all assets and all personal property,
whether now owned and/or hereafter acquired" (or any substantially similar
variation thereof)); to sign our name on public records; and to do all other
things Laurus deem necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves all acts of the attorney and neither
Laurus nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.
8. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other
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default or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.
9. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus' successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus',
any of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent, whether
now existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of and shall bind the representatives, successors and assigns of
each Assignor and each of the foregoing. Laurus and each Assignor hereby (a)
waive any and all right to trial by jury in litigation relating to this
Agreement and the transactions contemplated hereby and each Assignor agrees not
to assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection Laurus or each Assignor may
have as to the bringing or maintaining of such action with any such court.
10. All notices from Laurus to any Assignor shall be sufficiently given
if mailed or delivered to such Assignor's address set forth below.
11. This Master Security Agreement and the security interests granted
by the Assignors hereunder shall terminate upon the provision by Laurus of
written confirmation to the Company that (x) all indebtedness obligations owed
by any Assignor to Laurus have been repaid in full (including, without
limitation, all principal, interest and fees related to the Term Note and any
other indebtedness outstanding at such time and owed to Laurus) and (y) all
commitments by Laurus to fund any indebtedness have been terminated in their
entirety.
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Very truly yours,
XSTREAM BEVERAGE GROUP, INC.
By: ____________________
Name:
Title:
Address:
TOTAL BEVERAGE NETWORK, INC.
By: ____________________
Name:
Title:
Address:
BEVERAGE NETWORK OF CONNECTICUT, INC.
By: ____________________
Name:
Title:
Address:
BEVERAGE NETWORK OF MASSACHUSETTS, INC.
By: ____________________
Name:
Title:
Address:
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BEVERAGE NETWORK OF HAWAII, INC.
By: ____________________
Name:
Title:
Address:
XSTREAM BRANDS, INC.
By: ____________________
Name:
Title:
Address:
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:______________________
Name:
Title:
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SCHEDULE A
Organization
Jurisdiction of Identification
Entity Organization Number
XStream Beverage Group, Inc. Nevada
Beverage Network of Connecticut, Inc. Florida
Beverage Network of Massachusetts, Inc. Florida
Beverage Network of Hawaii, Inc. Florida
Xstream Brands, Inc. Florida
Total Beverage Network, Inc. Florida
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