EXHIBIT 10.3
SECURITY AGREEMENT
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AGREEMENT, dated as of April 22, 2005, by CONTINENTAL BEVERAGE AND
NUTRITION, INC., a Delaware corporation (the "Company"), in favor of Cornell
Capital Partners, L.P., the holder (the "Holder") of a certain 8% Senior Secured
Convertible Promissory Note, dated April 1, 2005 (the "Note"), issued by the
Company to the Holder.
W I T N E S S E T H
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WHEREAS, the Holder has agreed to purchase up to Four Hundred Thousand
Dollars ($400,000) of Notes from the Company pursuant to the terms of that
certain Note Purchase Agreement as of even date herewith (the "Note Purchase
Agreement");
WHEREAS, to induce the Holder to purchase the Note, the Company has
agreed to secure its Obligations by granting to the Holder a security interest
in the Company's assets described in Section 2 below; and
WHEREAS, the Company and the Holder desire to enter into an agreement
setting forth the terms and conditions for the security interest on the secured
assets, as set forth below:
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
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1.1 Defined Terms. In addition to the other terms defined in this
Agreement, whenever the following capitalized terms are used they shall be
defined as follows:
"Collateral" shall have the meaning ascribed to such term in Section
2.1 and described in Section 2.2.
"Event of Default" shall have the meaning ascribed to such term under
the Note.
"Financing Agreements" shall mean, collectively, this Agreement, the
Note and all other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by the Company or the Holder in connection
with the grant of the security interest herein, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
"Liens" shall mean mortgages, liens, pledges, charges, security
interest, encumbrances or other third party interests of any nature whatsoever.
"NYUCC" shall mean the Uniform Commercial Code as in effect in the
State of New York from time to time.
"Obligations" shall mean any and all obligations of every kind, nature
and description owing by the Company to the Holder, including principal,
interest, costs and expenses, however evidenced, as arising under the Note or
this Agreement.
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or
department, agency or political subdivision thereof).
1.2 Other Definitional Provisions, Construction. All terms used
herein and defined in the NY UCC shall have the same definitions as specified
therein. Unless otherwise specified, "hereunder," "herein," hereto," "this
Agreement" words of similar import refer to this entire document; "including" is
used by way of illustration and not by way of limitation, unless the context
clearly indicates the contrary; the singular includes the plural, and
conversely.
2. GRANT OF SECURITY INTEREST
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2.1 Grant. Subject to the terms and conditions of this Agreement,
as collateral security for the punctual payment and performance of the
Obligations by the Company, the Company hereby grants to the Holder a continuing
first lien and security interest in the following property and interests in
property, whether presently owned or hereafter acquired or existing, and
wherever located described in Section 2.2 (collectively the "Collateral").
2.2 Collateral. For purposes of this Agreement, the Collateral
shall consist of:
(a) Accounts. All rights outstanding as of the date
hereof and future rights to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance.
(b) Contract Rights. All contract rights, general
intangibles (including, but not limited to, tax and duty refunds), and, chattel
paper, documents, instruments, letters of credit, bankers' acceptances and
guaranties outstanding as of the date hereof and thereafter obtained.
(c) Inventory. All of the Company's owned, as of the date
hereof and thereafter existing or acquired, raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature, wherever
located.
(d) Equipment. All of the Company's owned, as of the date
hereof and thereafter acquired, equipment, machinery, computers and computer
hardware and software (whether owned or licensed), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located, except any leased property.
(e) Intellectual Property. All patents, trademarks, and
copyrights owned by the Company, including all goodwill associated therewith,
all license and other rights in any third party product, and all other tangible
or intangible proprietary information and materials owned by the Company that
are currently used or being developed for use in the business of the Company.
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(f) Records. All of the Company's books as of the date
hereof and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored.
(g) Cash. All of the Company's cash, including drafts,
acceptances, bank deposits, deposit accounts, checking accounts, and cash now or
hereafter owned by the Company, or in which the Company may now have or may
hereafter acquire any interest
(h) All Other Assets. All products and proceeds of the
foregoing, in any form, including, without limitation, insurance proceeds and
any claims against third parties for loss or damage to or destruction of any or
all of the foregoing.
3. PERFECTION
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3.1 Financing Statements. The Company shall execute and file such
financing or continuation statements or amendments thereto as the Holder may
reasonably request in order to perfect and preserve the security interests
granted herein in the Collateral. Upon the execution of this Agreement, the
Company shall deliver to the Holder executed Forms UCC-1 in form for filing in
the State of Delaware.
4. USE OF COLLATERAL. Prior to the occurrence of an Event of
Default which has not otherwise been waived, the Company shall have the right to
receive and retain any cash distributions declared and paid with respect to the
Collateral, the right to use, sell, lease or replace the Collateral. After the
occurrence and during the continuation of an Event of Default, the Company shall
not be entitled to exercise any rights with respect to the Collateral, and the
Holder shall be entitled to exercise any such rights. If any distributions,
payments or proceeds shall be received by the Company after the occurrence of an
Event of Default which has not been otherwise waived in writing, the Company
shall immediately deliver the same to the Holder, accompanied, if appropriate,
by proper instruments of assignment and/or powers executed by the Company in
accordance with the Holder's instructions, to be held subject to the terms of
this Agreement.
5. REPRESENTATIONS AND WARRANTIES. To induce the Holder to enter
into this Agreement and the Note, the Company makes the following
representations and warranties to the Holder:
5.1 Authority. The Company has the authority to enter into this
Agreement and to grant the security interests provided herein, and has obtained
all necessary corporate approvals to execute, deliver and perform its
obligations under this Agreement.
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5.2 Ownership. The Company owns the Collateral free and clear of
any Lien, except for the security interest created by this Agreement, and no
adverse claims have been filed with respect to any of the Collateral.
5.3 Priority. The filing of financing statements with respect to
the Collateral shall create a valid and perfected first priority security
interest in the Collateral securing the payment of the Obligations.
5.4 Third Party. No authorization, approval or other action by,
and no notice to or filing with any governmental authority is required either
for the delivery by the Company of the Collateral pursuant to this Agreement or
for the execution, delivery or performance of this Agreement by the Company
except for (i) filings of Forms UCC with the State of Delaware, or (ii) the
remedies in respect of the Collateral pursuant to this Agreement.
5.5 No Violation. The execution, delivery and performance of this
Agreement will not violate any provision of any applicable law or regulation or
of any writ or decree of any court or governmental instrumentality or of any
indenture, contract, agreement or other undertaking to which the Company is a
party or which purports to be binding upon the Company or upon any of its assets
and will not result in the creation or imposition of any Lien in any of the
assets of the Company except as contemplated by this Agreement.
5.6 Binding Obligation. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company enforceable against it in accordance with its terms, subject,
however, to bankruptcy, and other law, decisional or statutory, of general
application affecting the enforcement of creditors' rights and to the general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
6. AFFIRMATIVE AND NEGATIVE COVENANTS
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6.1 Verification. The Holder, upon reasonable prior notice to the
Company, shall have the right at any time or times to verify the validity,
amount or any other matter relating to any of the Collateral.
6.2 Power of Attorney. If at any time an Event of Default exists
or has occurred and is then continuing, at the request of the Holder, the
Company hereby irrevocably designates and appoints the Holder as the Company's
true and lawful attorney-in-fact, and authorizes the Holder, in the Company's or
the Holder name, to do all acts and things which are necessary, in the Holder's
determination, to fulfill the Company's Obligations under this Agreement and the
Note. The Company hereby releases the Holder from any liabilities arising from
any act or acts under this power of attorney and in furtherance thereof, whether
of omission or commission, except as a result of the Holder's own gross
negligence or misconduct as determined pursuant to a final non-appealable order
of a court of competent jurisdiction.
6.3 Further Assurances. The Company shall, at its expense and from
time to time, promptly execute and deliver all further instruments, documents
and agreements, and take all further action that may be necessary or desirable,
or that the Holder may request, in order to (i) continue, perfect and protect
the security interest, pledge and Lien granted or purported to be granted hereby
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or (ii) enable the Holder to exercise and enforce its rights and remedies
hereunder with respect to the Collateral. Without prejudice to the generality of
the foregoing, each such instrument or document shall be in such form as the
Holder shall stipulate and may contain provisions such as are herein contained
or provisions to the like effect or such other provisions of whatsoever kind as
the Holder shall reasonably consider requisite for the improvement (on and
subject to the terms herein), perfection or enforcement of the security
constituted by, or pursuant to, this Agreement.
6.4 No Other Liens. The Company covenants and agrees that it will
not create, incur or permit to exist any Lien with respect to any of the
Collateral, or any interest therein, or any proceeds thereof.
7. REMEDIES UPON AN EVENT OF DEFAULT
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7.1 Process following Event of Default. At any time an Event of
Default exists or has occurred and is continuing, the Holder shall have all
rights and remedies provided in this Agreement and the Note, the NYUCC and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by the Company, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to the Holder hereunder, under any of the other Financing
Agreements, the NYUCC or other applicable law, are cumulative, not exclusive and
enforceable, in the Holder's discretion, alternatively, successively, or
concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by the Company of this Agreement or any
of the other Financing Agreements to which it is a party.
7.2 Actions. Without limiting the foregoing, at any time an Event
of Default exists or has occurred and is continuing, the Holder may, in its
discretion and without limitation, (i) require the Company, at its own expense,
to make available to the Holder any part or all of the Collateral, (ii) collect,
foreclose, receive, appropriate, setoff and realize upon any and all of the
Collateral, or (iii) sell, transfer, assign, deliver or otherwise dispose of any
and all of the Collateral (including, without limitation, entering into
contracts with respect thereto).
7.3 Application of Proceeds. The Holder may apply the cash
proceeds of Collateral actually received by the Holder from any collection,
sale, foreclosure or other disposition of the Collateral to the payment of the
Obligations, in whole or in part and in such order as the Holder may elect.
8. NOTICE Except as otherwise specifically set forth herein, all
notices, instructions, requests, demands or other communications hereunder shall
be deemed to have been duly and effectively given only if delivered in writing
by hand, by express delivery service or by registered mail, return receipt
requested, or by recognized overnight courier, addressed as follows:
If to the Holder:
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Cornell Capital Partners, L.P.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxx, Esq.
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With a copy to:
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Xxxxx Securities Corp.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxx, Managing Director
If to the Company:
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Continental Beverage and Nutrition, Inc.
000 Xxxxxxx Xxxxxxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx, CEO & President
Any party may, by written notice to the other parties, substitute such other
address as it deems advisable. No notice, instruction, request, demand or other
communication hereunder shall be deemed to have been received prior to actual
receipt by recipient.
9. GENERAL
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9.1 Effectiveness and Termination. This Agreement creates a
continuing security interest and Lien on the Collateral and will remain in full
force and effect until the full final payment by the Company in satisfaction of
all the Obligations. Upon termination, the Holder's rights, title and interest
in and to the Collateral shall be automatically terminated and released to the
Company, this Agreement shall terminate, and the Company shall be permitted to
file UCC termination statements as to the balance of the Collateral.
9.2 Entire Agreement; Amendments, Counterparts. This Agreement,
the Note and all other Financing Agreements set forth the entire agreement of
the parties with respect to subject matter of this Agreement and supersede all
previous understandings, written or oral, in respect thereof. In the event of a
conflict between the terms of this Agreement and those of any other agreement
(other than the Note), the terms herein shall govern. The terms of this
Agreement may be amended, waived or modified only by an instrument in writing
duly executed by all the parties hereto. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
9.3 Assignment. The Company may not assign, transfer or otherwise
dispose of any of its rights or obligations hereunder, by operation of law or
otherwise, and any such assignment, transfer or other disposition without the
written consent of the Holder.
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9.4 Binding. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, assigns,
administrators and successors. No Persons other than the Company and the Holder
are intended to be benefited in this Agreement or to have rights hereunder as
third-party beneficiaries or otherwise.
9.5 Headings. Section headings in this Agreement are included for
convenience of reference only and shall not relate to the interpretation or
construction of this Agreement.
9.6 Governing Law. This Agreement shall be deemed to be a contract
made under, and to be construed in accordance with, the laws of the State of New
York, without giving effect to conflicts of law.
9.7 Validity. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not invalidate this Agreement as a whole, but this
Agreement shall be construed as though it did not contain the particular
provision held to be invalid, illegal or unenforceable and the rights and
obligations of the parties hereto shall be construed and enforced only to such
extent as may be permitted by applicable law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
CONTINENTAL BEVERAGE AND NUTRITION, INC.
By: /s/ XXXXX XXXXXXX
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Xxxxx Xxxxxxx, CEO & President
AGREED TO:
CORNELL CAPITAL PARTNERS, L.P.
By: ____________________________
Authorized Person
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