LOAN AND SECURITY AGREEMENT
This
LOAN
AND SECURITY AGREEMENT is entered into as of June ___, 2006 between BUSINESS
ALLIANCE CAPITAL COMPANY, a division of Sovereign Bank, a federal savings
bank
(BACC), with its chief executive office located at 000 Xxxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxx, Xxx Xxxxxx 00000 and DRINKS AMERICAS INC., a Delaware
corporation (“DAI”), DRINKS GLOBAL IMPORTS, LLC, a New York limited liability
company (DGI”), and D.T. DRINKS, LLC, a New York limited liability company
(“DTD”, and together with DAI and DGI individually and collectively Borrower),
each with its chief executive office located at 000 Xxxxxxx Xxxx, Xxxxxx,
XX
00000.
The
parties agree as follows
Agreement
means collectively this Loan and Security Agreement, any concurrent or
subsequent rider to this Loan and Security Agreement, and any extensions,
supplements, amendments, addenda or modifications to or in connection with
this
Loan and Security Agreement or any such rider.
Authorized
Officer means any officer or other representative of Borrower authorized
in a
writing delivered to BACC to transact business with BACC.
BACC
means Business Alliance Capital Company, a division of Sovereign Bank, its
successors and assigns.
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Business
Day means any day which is not a Saturday, Sunday, or other day on which
banks
in the State of New Jersey are authorized or required to close.
Chattel
Paper shall have the same meaning ascribed to such term in the
Code.
Collateral
means all assets of the Borrower, whether now owned or existing, or hereafter
acquired or arising, and wherever located, including, without limitation,
all of
the following assets, properties and interests in property of Borrower,:
all
Accounts; all Equipment; all Commercial Tort Claims, all General Intangibles;
all Chattel Paper; all Inventory; all Negotiable Collateral; all Investment
Property, all Financial Assets, all Letter of Credit Rights, all Supporting
Obligations, all Deposit Accounts, all money or any assets of Borrower which
hereafter come into the possession, custody, or control of BACC; all proceeds
and products, whether tangible or intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the foregoing, and any and all
tangible or intangible property resulting from the sale, lease, license or
other
disposition of the foregoing, or any portion thereof or interest therein,
and
all proceeds thereof, and any other assets of Borrower or any Guarantor which
may be subject to a lien in favor of BACC as security for the
Obligations.
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ERISA
Affiliate means each trade or business (whether or not incorporated and whether
or not foreign) which is or may hereafter become a member of a group of which
Borrower is a member and which is treated as a single employer under XXXXX
Xxxxxxx 0000(x)( 0), xx XXX Section 414.
Event
of
Default means the events specified in Section 8, below.
Financial
Assets shall have the meaning ascribed to such term in the Code.
General
Intangibles means in addition to the definition of general intangibles in
the
Code, all of Borrower’s present and future general intangibles and other
personal property (including choses or things in action, goodwill, patents,
trade names; trademarks, service marks, copyrights, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, infringement claims, computer programs, computer discs, computer
tapes, Borrower’s Books, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims) other than
goods
and Accounts.
Guarantor
means each person or entity which guarantees the Obligations, or issues a
validity guaranty relating to the Collateral, or pledges any assets to BACC
as
additional security for the Obligations.
Insolvency
Proceeding means any proceeding commenced by or against any person or entity
under any provision of the federal Bankruptcy Code, as amended, or under
any
other state or federal insolvency law, including assignments for the benefit
of
creditors, formal or informal moratoria, compositions, or extensions generally
with its creditors.
Letter
of
Credit Rights shall have the meaning ascribed to such term in the
Code.
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Loan
Documents means, collectively, this Agreement, any Note or Notes, any security
agreements, pledge agreements, mortgages, deeds of trust or other encumbrances
or agreements which secure the Obligations, and any other agreement entered
into
between Borrower and BACC or by Borrower or a Guarantor in favor of BACC
relating to or in connection with this Agreement or the Obligations, as each
of
same may be amended, modified, renewed, extended or substituted from time
to
time.
Multiemployer
Plan means a multiemployer plan as defined in ERISA Sections 3(37) or 4001(a)(3)
or IRC Section 414(f).
Obligations
means all loans, Advances, debts, liabilities (including all interest and
amounts charged to the Obligations pursuant to any agreement authorizing
BACC to
charge the Obligations), obligations, lease payments, guaranties, covenants,
and
duties owing by Borrower to BACC of any kind and description (whether pursuant
to or evidenced by the Loan Documents or by any other agreement between BACC
and
Borrower, and irrespective of whether for the payment of money), whether
made or
incurred prior to, on, or after the Termination Date, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
including any debt, liability or obligation owing from Borrower to others
which
BACC may obtain by assignment or otherwise, and all interest thereon and
all
BACC Expenses.
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Purchase
Order Assistance Facility means a facility to be provided to a PO Financed
Borrower by a Purchase Order Assistance Provider under which, inter alia,
such
Purchase Order Assistance Provider shall provide assistance to the PO Financed
Borrower to acquire specific Inventory approved by BACC, by such Purchase
Order
Assistance Provider against specific purchase orders to Borrower, and will
acquire title to the goods to be acquired to fulfill said purchase
order.
Purchase
Order Financed Account means any Account arising from the sale of Purchase
Order
Financed Inventory or other Account of a PO Financed Borrower subject to
a lien
in favor of a Purchase Order Assistance Provider, provided such Account shall
cease to be a Purchase Order Financed Account if (a) BACC and the Purchase
Order
Assistance Provider providing the subject Purchase Order Assistance Facility
to
a PO Financed Borrower have entered into an Intercreditor Agreement satisfactory
in form and substance to BACC, and (b) upon BACC’s forwarding to said Purchase
Order Assistance Provider the amount requested by said Purchase Order Assistance
Provider (which may be set forth in the intercreditor agreement between BACC
and
such Purchase Order Assistance Provider), all right, title and interest in
said
Account shall be owned by the subject PO Financed Borrower and the security
interest or other lien or interest of said Purchase Order Assistance Provider
in
said Account shall be subordinate to the security interest in favor of BACC
in
accordance with the terms of the subject Intercreditor Agreement.
Term
means the period from the date of the execution and delivery by BACC of this
Agreement through and including the later of (a) the Termination Date and
(b)
the payment and performance in full of the Obligations.
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(A)
Upon
the request of Borrower, made at any time from and after the date hereof
until
the Termination Date, and so long as no Event of Default has occurred, BACC
may,
in its good faith discretion, make Advances in an amount up to eighty five
percent (85%) of the aggregate outstanding amount of Eligible Accounts,
provided, however, that in no event shall the aggregate amount of the
outstanding Advances under the Revolving Credit Facility be greater than,
at any
time, the amount of Ten Million Dollars ($10,000,000.00) (said dollar limit
the
Advance Limit). BACC may create reserves against, or reduce its advance
percentages based on Eligible Accounts without declaring an Event of Default
if
it determines, in its good faith discretion, that such reserves or reduction
is
necessary, including, without limitation, to protect its interest in the
Collateral and/or against diminution in the value of any Collateral, and/or
to
insure the prospect of payment or performance by Borrower of its Obligations
to
BACC are not impaired.
(B)
Borrower has advised BACC that D.T. Drinks, LLC has obtained, or intends
to
obtain, a Purchase Order Assistance Facility from PFI. Borrower represents
it
has furnished to BACC a true, accurate and complete copy of the Agreement
to be
entered into by Borrower and PFI pursuant to which a Purchase Order Assistance
Facility will be established, and all other documents and agreements related
thereto. Borrower confirms it requested that BACC enter into an Intercreditor
Agreement with PFI in the form annexed hereto as Exhibit A, and to which
Borrower shall be a party to. Borrower hereby reaffirms said Intercreditor
Agreement and the authorization set forth in said Intercreditor Agreement
that,
inter alia, BACC forward directly to PFI the proceeds of all Advance against
an
Account that is a Purchased Order Financed Account arising from the Purchase
Order Assistance Facility between the PO Financed Borrower and PFI. Borrower
will act in accordance with the procedures set forth in said Intercreditor
Agreement relative to seeking Advances from BACC. Borrower hereby authorizes
BACC to, from time to time, communicate directly with PFI and any other future
Purchase Order Assistance Provider, so as to exchange any and all information
relative to the Revolving Credit Facility between BACC and Borrower provided
for
herein and the Purchase Order Assistance Facility provided by said Purchase
Order Assistance Provider. If hereafter Borrower obtains a Purchase Order
Assistance Facility from a Purchase Order Assistance Provider which replaces
the
subject facility from PFI, all references in this Section 2.1(B) to PFI shall
be
deemed to be the replacement Purchase Order Assistance Provider.
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2.11
Monthly Statements. BACC may render monthly statements to Borrower of all
Obligations, including statements of all principal, interest and BACC Expenses,
and Borrower shall have fully and irrevocably waived all objections to such
statements and the contents thereof unless, within thirty (30) days after
receipt, Borrower shall deliver to BACC, by registered, certified or overnight
mail as set forth in Section 12 hereof, written objection to such statement
specifying the error or errors, if any, contained therein.
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Borrower
represents and warrants to BACC, and covenants, the following and
acknowledges:
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5.14
Accuracy of Information and No Material Adverse Change in Financial Statements.
All information furnished by Borrower to BACC, and all statements made by
Borrower to BACC, including, without limitation, information set forth in any
loan application, client profile, and in the annexed perfection certificate,
are
true, accurate and complete in all respects and do not contain any misstatement
of fact or omit to state any facts necessary to make the statements or
information contained therein not misleading. All financial statements relating
to Borrower which have been or may hereafter be delivered to BACC (i) have
been
prepared in accordance with GAAP; (ii) fairly present Borrower's financial
condition as of the date thereof and Borrower's results of operations for the
period then ended; and (iii) disclose all contingent obligations of Borrower.
In
addition no material adverse change in the financial condition of Borrower
has
occurred since the date of the most recent of such financial
statements.
5.15
[this section intentionally left blank].
5.16
ERISA. Neither Borrower or any ERISA Affiliate, nor any Plan is or has been
in
violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a), or any of the published interpretations
thereof. No lien upon the assets of Borrower has arisen with respect to any
Plan. No prohibited transaction within the meaning of ERISA Section 406 or
IRC
Section 4975(c) has occurred with respect to any Plan. Neither Borrower nor
any
ERISA Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Affiliate have made all
contributions required to be made by them to any Plan or Multiemployer Plan
when
due. There is no accumulated funding deficiency in any Plan, whether or not
waived.
5.17
Environmental Laws and Hazardous Materials. Borrower has complied, and at all
times through the Term will comply, with all Environmental Laws. Borrower has
not and will not cause or permit any Hazardous Materials to be located,
incorporated, generated, stored, manufactured, transported to or from, released,
disposed of, or used at, upon, under, or within any premises at which Borrower
conducts its business, or in connection with Borrower's business. To the best
of
Borrower's knowledge, no prior owner or operator of any premises at which
Borrower conducts its business has caused or permitted any of the above to
occur
at, upon, under, or within any of the premises. Borrower will not permit any
lien to be filed against the Collateral or any part thereof under any
Environmental Law, and will promptly notify BACC of any proceeding, inquiry
or
claim relating to any alleged violation of any Environmental Law, or any alleged
loss, damage or injury resulting from any Hazardous Material. BACC shall have
the right to join and participate in, as a party if it so elects, any legal
or
administrative proceeding initiated with respect to any Hazardous Material
or in
connection with any Environmental Law. "Hazardous Material" includes without
limitation any substance, material, emission, or waste which is or hereafter
becomes regulated or classified as a hazardous substance, hazardous material,
toxic substance or solid waste under any Environmental Law, asbestos, petroleum
products, urea formaldehyde, polychlorinated biphenyls (PCBs), radon, and any
other hazardous or toxic substance, material, emission or waste. Environmental
Law means the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976,
the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
regulations pertaining to such statutes, and any other safety, health or
environmental statutes, laws, regulations or ordinances of the United States
or
of any state, county or municipality in which Borrower conducts its business
or
the Collateral is located.
5.18
Tax
Compliance. Borrower has filed all tax returns required to be filed by it and
has paid all taxes due and payable on said returns and on any assessment made
against it or its assets.
5.19
Reliance by BACC; Cumulative. Each warranty, representation and agreement
contained in this Agreement shall be automatically deemed repeated by Borrower
with each request for an Advance and shall be conclusively presumed to have
been
relied on by BACC regardless of any investigation made or information possessed
by BACC. The warranties, representations and agreements set forth herein shall
be cumulative and in addition to any and all other warranties, representations
and agreements which Borrower shall now or hereafter give, or cause to be given,
to BACC.
5.20
Use
of Proceeds. The proceeds of the initial Advance will be used by Borrower for
the purposes set forth on Schedule 5.20 annexed hereto. Absent BACC's written
consent to the contrary the proceeds of Advances after the initial Advance
will
be used by Borrower solely for working capital purposes.
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5.21
Motor Vehicles and Intellectual Property. The perfection certificate annexed
hereto identifies all motor vehicles, patents, patent applications, copyrights,
trademarks, trade-names and other intellectual property, registered or
unregistered, owned by Borrower. Borrower will promptly notify BACC of all
motor
vehicles or intellectual property hereafter owned by Borrower, and the status
of
all patent applications and the issuance of patents, and all copyrights
registrations, and in accordance with Section 4.3 hereof, will cooperate with
BACC in taking all actions required by BACC to have a perfected security
interest or lien on such motor vehicles and intellectual property.
5.22
Commercial Tort Claims. Borrower does not, as of the date hereof, have any
Commercial Tort Claims against any third parties. If Borrower does hereafter
have any such Commercial Tort Claims Borrower shall furnish BACC with prompt
written notice thereof, and in accordance with Article 4 hereof, execute and
deliver such supplemental documents and cooperate with BACC in taking all action
required by BACC to have a perfected security interest or lien on such
Commercial Tort Claims.
5.24
License Agreements. Schedule 3.9 to the annexed perfection certificate
identifies all license agreements, distribution agreements, and the like, to
which Borrower is a party, and true, accurate and complete copies of same have
been delivered by Borrower to BACC. If Borrower hereafter enters into a license
agreement, distribution agreement, or the like, with any third party, Borrower
will promptly give BACC written notice thereof, and furnish to BACC a true,
accurate, and complete copy of same.
Borrower
covenants and acknowledges that during the Term Borrower shall comply with
all
of the following:
6.1
Collateral and Other Reports. Borrower shall at least once a week and each
time
it requests an Advance under the Revolving Credit Facility, furnish to BACC
a
borrowing base report satisfactory in form and substance to BACC, and report
to
BACC all sales and Accounts arising since its most recent report to BACC and
shall execute and deliver to BACC, no later than the fifteenth (15th) day of
each month during the Term, a detailed aging of the Accounts, a reconciliation
statement and a summary aging, by vendor, of all accounts payable of Borrower
and any book overdraft. Borrower shall deliver to BACC, as BACC may from time
to
time require, collection reports, sales journals, invoices, original delivery
receipts, customers' purchase orders, shipping instructions, bills of lading
and
other documentation respecting shipment arrangements, and other matters
requested by BACC. Absent such a request by BACC, copies of all such
documentation shall be held by Borrower as custodian for BACC. Borrower shall
at
all times provide BACC with all current "passwords" or similar access
requirements relative to all computer systems available to Borrower with its
Account debtors so as to enable BACC to have access to said computer systems
so
as to verify the status of Accounts owing to Borrower from said Account debtors.
Any and all borrowing base reports, agings, etc. shall specify if any Inventory
reported therein is Purchase Order Financed Inventory, or any Account report
therein is a Purchaser Order Financed Account. Borrower will immediately report,
in writing, all allowances programs or terms, discounts, and the like, provided
to any customers of Borrower.
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6.2
Returns. Returns and allowances, if any, as between Borrower and any Account
debtors, shall be permitted on the same basis and in accordance with the usual
customary practices of Borrower as they exist at the date of the execution
and
delivery of this Agreement. If at any time prior to the occurrence of an Event
of Default any Account debtor returns any Inventory to Borrower, Borrower shall
promptly determine the reason for such return and, if Borrower accepts such
return, issue a credit memorandum (with a copy to be sent to BACC) in the
appropriate amount to such Account debtor. Borrower shall promptly notify BACC
of all returns and recoveries and of all disputes and claims.
6.3
Designation of Inventory. Borrower shall contemporaneous with the execution
hereof and from time to time hereafter, but not less frequently than once every
week, execute and deliver to BACC a designation of Inventory specifying the
cost
and the wholesale market value of Borrower's raw materials, work in process
and
finished goods, and further specifying such other information as BACC may
reasonably request. Borrower shall promptly, in writing, notify BACC if any
of
Borrower's Inventory contains any labels, trademarks, trade-names or other
identifying characteristics which are the properties of third
parties.
6.4
Financial Statements, Reports, Certificates. Borrower shall deliver to BACC:
(a)
as soon as available, but in any event within thirty (30) days after the end
of
each month during the Term, a balance sheet and profit and loss statement
prepared by Borrower covering Borrower's operations during such period; and
(b)
as soon as available, but in any event within ninety (90) days after the end
of
each of Borrower's fiscal years, financial statements of Borrower for each
such
fiscal period, audited on an unqualified basis (other than a "going concern
qualification"), by independent certified public accountants acceptable to
BACC.
Such financial statements shall include a balance sheet and profit and loss
statement, and the accountants' management letter, if any, and shall be prepared
in accordance with GAAP, and shall include consolidating schedules. Together
with the above, Borrower shall also deliver Borrower's Form 10-Qs, 10-Ks or
8-Ks, if any, as soon as the same become available, and any other report
reasonably requested by BACC relating to the Collateral and the financial
condition of Borrower and a certificate signed by its chief financial officer
to
the effect that all reports, statements or computer prepared information of
any
kind or nature delivered or caused to be delivered to BACC under this Section
6.4 fairly present its financial condition and that there exists on the date
of
delivery of such certificate to BACC no condition or event which constitutes
an
Event of Default.
6.5
Tax
Returns, Receipts. Borrower shall deliver to BACC copies of each of its future
federal income tax returns, and any amendments thereto, within thirty (30)
days
of the filing thereof. Borrower further shall promptly deliver to BACC, upon
request, satisfactory evidence of Borrower's payment of all withholding and
other taxes required to be paid by it.
6.6
Guarantor Reports. Borrower agrees to cause each Guarantor to deliver to BACC
(a) its annual financial statements as soon as available and in any event within
ninety (90) days of each fiscal year end, and (b) copies of all federal and
state income tax returns as soon as the same are available and in any event
no
later than thirty (30) days after the same are required to be filed by
law.
6.8
Maintenance of Equipment. Borrower shall keep and maintain the Equipment in
good
operating condition and repair, and shall make all necessary replacements
thereto so that its value and operating efficiency shall at all times be
maintained and preserved. Borrower shall not permit any item of Equipment to
become a fixture to real estate or an accession to other property, and the
Equipment is now and shall at all times remain Borrower's personal
property.
6.9
Taxes. All Federal, state and local assessments and taxes, whether real,
personal or otherwise, including, without limitation, excise taxes, due or
payable by, or imposed, levied or assessed against Borrower or any of its assets
or in connection with Borrower's business shall hereafter be paid in full,
before they become delinquent or before the expiration of any extension period.
Borrower shall make due and timely payment or deposit of all federal, state
and
local taxes, assessments or contributions required of it by law, and will
execute and deliver to BACC, on demand, appropriate certificates attesting
to
the payment or deposit thereof.
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Business
Alliance Capital Company
000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxx Xxxxxx 00000
Attn:
Operations Department
Borrower,
at its expense, shall keep and maintain Commercial General Liability Coverage
insuring against all risks relating to or arising from Borrower's ownership
and
use of the Collateral and its other assets, its products, and its operations.
BACC, its directors, officers and employees shall be named as additional
insureds for Commercial General Liability on Borrower's policy. Borrower shall
cause to be delivered to BACC a properly executed Certificate of Insurance,
containing the required additional insured wording, before the loan closing
and
thereafter at least thirty (30) days prior the expiration date of the policy.
Along with the Certificate of Insurance, Borrower shall also deliver a copy
of
the General Liability endorsement whereby BACC, et. al., are added to the policy
as additional insureds.
All
required policies shall be in such form, with such companies and in such amounts
as may be satisfactory to BACC. All policies shall contain a 30 day notice
for
cancellation or non-renewal. BACC reserves the right to change insurance
specifications at any time.
6.11
BACC
Expenses. Borrower shall immediately and without demand reimburse BACC for
all
BACC Expenses and Borrower hereby authorizes the payment of such BACC
Expenses.
6.12
Compliance With Law. Borrower shall comply, in all material respects, with
the
requirements of all applicable laws, rules, regulations and orders of
governmental authorities relating to Borrower and the conduct of its
business.
6.13
Accounting System. Borrower at all times hereafter shall maintain a standard
and
modern system of accounting in accordance with GAAP with ledger and account
cards or computer tapes, disks, printouts and records pertaining to the
Collateral containing such information as may from time to time be requested
by
BACC.
7.
NEGATIVE COVENANTS
Borrower
covenants and acknowledges that during the Term Borrower shall not undertake
any
of the following:
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7.1
Extraordinary Transactions and Disposal of Assets. (A) Enter into any
transaction not in the ordinary and usual course of its business as conducted
on
the date hereof, including but not limited to the sale, lease, disposal,
movement, relocation or transfer, whether by sale or otherwise, of any its
assets other than sales of Inventory in the ordinary and usual course of its
business as presently conducted; (B) incur (i) any indebtedness for borrowed
money or purchase money indebtedness except for (a) the existing indebtedness
identified on Schedule 7.1 annexed hereto and (b) Permitted Indebtedness, or
(ii) any other indebtedness outside the ordinary and usual course of its
business as conducted on the date hereof, except for renewals or extensions
of
existing debts identified of schedule 7.1 annexed hereto;(C) make any advance
or
loan to any third party; or (D) xxxxx x xxxx on any of its assets except (i)
in
favor of BACC, or (ii) the continuing security interests, if any, set forth
on
Schedule 5.1, or (iii) the liens in favor of a Purchase Order Assistance
Provider under a Permitted Purchase Order Assistance Facility.
7.2
Change Name, etc. Change its name, business structure, jurisdiction of
incorporation or formation as applicable, or identity, or add any new fictitious
name.
7.3
Merge, Acquire. Merge, acquire, or consolidate with or into any other business
organization.
7.4
Guaranty. Guaranty or otherwise become in any way liable with respect to the
obligations of any third party, except by endorsement of instruments or items
of
payment for deposit to the account of Borrower for negotiation and delivery
to
BACC.
7.5
Restructure. Make any change in its financial structure or business
operations.
7.6
Prepayments. Prepay any existing indebtedness owing to any third party other
than trade payables.
7.7
Change of Ownership. (A) Cause, permit or suffer any change, direct or indirect,
in the ownership of the capital stock or other equity interests of any Borrower
or (B) cause, permit or suffer any change, direct or indirect, in the ownership
of the capital stock or other equity interest of any entity that directly or
indirectly owns the capital stock or equity interests in Borrower or its parent
entities, including, without limitation, Holdings, such that there is a change
of ownership of a controlling interest of such parent entities or Xxxxxx Xxxxxxx
Xxxxx ceases to be the chief executive officer of Borrower, or (B) enter into
any agreement with any person or entity that provides for a payment to such
person or entity based upon the income of Borrower.
7.8
Compensation. Pay total compensation, including salaries, withdrawals, fees,
bonuses, commissions, drawing accounts, management fees, consulting fees, or
other payments, whether direct or indirect, in money or otherwise, during any
fiscal year to its executives, officers, shareholders, affiliates, and directors
(or any relatives of the foregoing) in an aggregate amount in excess of One
Million Three Hundred Fifty Thousand Dollars ($1,350,000.00), except for the
payment, when due, (without acceleration) of the consulting fees owing under
the
consulting agreement identified on Schedule 7.8 annexed hereto.
7.10
Capital Expenditures. Make any plant or fixed capital expenditure, or any
commitment therefor, or purchase or lease any real or personal assets or
replacement Equipment in excess of One Hundred Thousand Dollars ($100,000.00)
for any individual transaction or where the aggregate amount of such
transactions in any fiscal year exceeds Three Hundred Thousand Dollars
($300,000.00).
7.11
Consignments of Inventory. Consign any Inventory to any third party or obtain
any Inventory on a consignment basis from any third party.
7.12
Distributions. Make any distribution or declare or pay any dividends (in cash
or
in stock) on, or purchase, acquire, redeem or retire any of its capital stock
or
member interest, of any class, whether now or hereafter
outstanding.
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7.13
Accounting Methods. Modify or change its method of accounting or enter into,
modify or terminate any agreement presently existing or at any time hereafter
entered into with any third party for the preparation or storage of Borrower's
records of Accounts and financial condition without said party agreeing to
provide BACC with information regarding the Collateral or Borrower's financial
condition. Borrower waives the right to assert a confidential relationship,
if
any, it may have with any such third party in connection with any information
requested by BACC hereunder, and agrees that BACC may contact any such party
directly in order to obtain such information.
7.14
Business Suspension. Suspend or go out of business.
7.15
Transactions with Affiliates. Borrower will not become a party to any
transaction with any affiliates of Borrower unless the terms and conditions
relating to such transaction are as favorable to Borrower as would be obtainable
at the time in a comparable arms-length transaction with a person other than
an
affiliate.
7.16
Purchase Order Assistance Facility. Obtain a Purchase Order Assistance Facility
other than a Permitted Purchase Order Assistance Facility.
8.
EVENTS
OF DEFAULT
The
occurrence of any one or more of the following events shall constitute an Event
of Default by Borrower hereunder:
8.1
Failure to Pay. Borrower's failure to pay when due and payable, or when declared
due and payable, any portion of the Obligations (whether principal, interest,
taxes, BACC Expenses, or otherwise);
8.2
Failure to Perform. Borrower's or a Guarantor's failure to perform, keep or
observe any term, provision, condition, representation, warranty, covenant
or
agreement contained in this Agreement, in any of the Loan Documents or in any
other present or future agreement between Borrower, and/or a Guarantor and
BACC;
8.3
Misrepresentation. Any misstatement or misrepresentation now or hereafter exists
in any warranty, representation, statement, aging or report made to BACC by,
Borrower and/or a Guarantor or any officer, employee, agent or director thereof,
or if any such warranty, representation, statement, aging or report is withdrawn
by such person;
8.7
Insolvency by Borrower or Guarantor. An Insolvency Proceeding is commenced
by
Borrower or by a Guarantor;
8.8
Insolvency Against Borrower or Guarantor. An Insolvency Proceeding is commenced
against Borrower or a Guarantor;
8.9
Injunction Against Borrower. Borrower is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any material part
of
its business;
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8.11
Judgment. A judgment is entered against Borrower or a Guarantor;
8.12
Default to Third Party. There is a default in any material agreement to which
Borrower or a Guarantor is a party or by which binds Borrower or a Guarantor
or
any of their assets, including, without limitation, a default by a PO Financed
Borrower under a Purchase Order Assistance Facility;
8.13
Subordinated Debt Payments. Borrower makes any payment on account of
indebtedness which has now or hereafter been subordinated to the Obligations,
except to the extent such payment is allowed under any subordination agreement
entered into with BACC;
8.14
Termination of Guarantor. A Guarantor dies or terminates its
guaranty;
8.15
Change in Management. If Xxxxxx Xxxxxxx Xxxxx ceases to be actively engaged
as
the chief executive officer of Borrower;
8.16
ERISA Violation. A prohibited transaction within the meaning of ERISA Section
406 or IRC Section 1975(c) shall occur with respect to a Plan which could have
a
material adverse effect on the financial condition of Borrower; any lien upon
the assets of Borrower in connection with any Plan shall arise; Borrower or
any
ERISA Affiliate shall completely or partially withdraw from a Multiemployer
Plan
and such withdrawal could, in the opinion of BACC, have a material adverse
effect on the financial condition of Borrower. Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any Plan
or
any Multiemployer Plan as one or more contributions thereto; Borrower or any
of
its ERISA Affiliates creates or permits the creation of any accumulated funding
deficiency, whether or not waived; the voluntary or involuntary termination
of
any Plan which termination could, in the opinion of BACC, have a material
adverse effect on the financial condition of Borrower or Borrower shall fail
to
notify BACC promptly and in any event within ten (l0) days of the occurrence
of
an event which constitutes an Event of Default under this clause or would
constitute an Event of Default upon the exercise of BACC's judgment;
or
Notwithstanding
anything contained in this Agreement to the contrary, BACC shall refrain from
exercising its rights and remedies and an Event of Default shall not be deemed
to have occurred by reason of the occurrence of any of the events set forth
in
Sections 8.6, 8.8, 8.10 or 8.11 hereof if, within ten (10) days from the date
thereof, the same is released, discharged, dismissed, bonded against or
satisfied; provided, however, BACC shall not be obligated to make Advances
to
Borrower during such periods.
9.
BACC'S
RIGHTS AND REMEDIES
9.1
Rights and Remedies. Upon the occurrence of an Event of Default, BACC may,
at
its election, without notice of such election and without demand, do any one
or
more of the following:
(a)
Declare all Obligations, whether evidenced by the Loan Documents or otherwise,
immediately due and payable in full:
87
(b)
Cease
advancing money or extending credit to or for the benefit of Borrower under
the
Loan Documents or under any other agreement between Borrower and
BACC;
(c)
Terminate this Agreement as to any future liability or obligation of BACC,
but
without affecting BACC's rights and security interest in the Collateral and
without affecting the Obligations;
(d)
Settle or adjust disputes and claims directly with Account debtors for amounts
and upon terms which BACC considers advisable and, in such cases, BACC will
credit the Obligations with the net amounts received by BACC in payment of
such
disputed Accounts, after deducting all BACC Expenses;
(e)
Cause
Borrower to hold all returned Inventory in trust for BACC, segregate all
returned Inventory from all other property of Borrower or in Borrower's
possession and conspicuously label said returned Inventory as the property
of
BACC;
(f)
Without notice to or demand upon Borrower or a Guarantor, make such payments
and
do such acts as BACC considers necessary or reasonable to protect its security
interest in the Collateral. Borrower shall assemble the Collateral if BACC
so
requires and deliver or make the Collateral available to BACC at a place
designated by BACC. Borrower authorizes BACC to enter any premises where the
Collateral is located, to take and maintain possession of the Collateral, or
any
part of it, and to pay, purchase, contest or compromise any encumbrance, charge
or lien on the Collateral which in BACC's determination appears to be prior
or
superior to its security interest or lien, and to pay all expenses incurred
in
connection therewith;
(g)
Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, lease,
license or other disposition, advertise for sale, lease, license or other
disposition, and sell, lease, license or otherwise dispose (in the manner
provided for herein or in the Code) the Collateral. BACC is hereby granted
a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any asset of a similar nature,
pertaining to the Collateral, in completing the production of, advertising
for
sale, lease, license or other disposition, and sale, lease, license or other
disposition of the Collateral. Borrower's rights under all licenses and all
franchise agreements shall inure to BACC's benefit;
(h)
Sell,
lease, license or otherwise dispose of the Collateral at either a public or
private proceeding, or both, by way of one or more contracts or transactions,
for cash or on terms, in such manner and at such places (including Borrower's
premises) as BACC determines is commercially reasonable. It is not necessary
that the Collateral be present at any such sale;
(i)
BACC
shall give notice of the disposition of the Collateral as follows:
(1)
To
Borrower and each holder of a security interest in the Collateral who has filed
with BACC a written request for notice, a notice in writing of the time and
place of public sale or other disposition or, if the sale or other disposition
is a private sale or some other disposition other than a public sale is to
be
made, then the time on or after which the private sale or other disposition
is
to be made;
(2)
The
notice hereunder shall be personally delivered or mailed, postage prepaid,
to
Borrower as provided in Section 12 hereof, at least ten (10) calendar days
before the date fixed for the sale or other disposition, or at least ten (10)
calendar days before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is perishable or threatens
to
decline speedily in value. Notice to persons other than Borrower claiming an
interest in the Collateral shall be sent to such addresses as they have
furnished to BACC;
(j)
BACC
may credit bid and purchase at any public sale:
(k)
Any
deficiency that exists after disposition of the Collateral, as provided herein,
shall be immediately paid by Borrower. Any excess will be remitted without
interest by BACC to the party or parties legally entitled to such excess;
and
88
(l)
In
addition to the foregoing, BACC shall have all rights and remedies provided
by
law (including those set forth in the Code) and any rights and remedies
contained in any Loan Documents and all such rights and remedies shall be
cumulative.
9.2
No
Waiver. No delay on the part of BACC in exercising any right, power or privilege
under any Loan Document shall operate as a waiver, nor shall any single or
partial exercise of any right, power or privilege under such Loan Documents
or
otherwise, preclude other or further exercise of any such right, power or
privilege.
10.
TAXES
AND EXPENSES REGARDING THE COLLATERAL.
If
Borrower fails to pay any monies (whether taxes, assessments, insurance premiums
or otherwise) due to third persons or entities, or fails to make any deposits
or
furnish any required proof of payment or deposit, or fails to perform any of
Borrower's other covenants under any of the Loan Documents, then in its
discretion and without prior notice to Borrower, BACC may do any or all of
the
following: (a) make any payment which Borrower has failed to pay or any part
thereof; (b) set up such reserves in Borrower's loan account as BACC deems
necessary to protect BACC from the exposure created by such failure; (c) obtain
and maintain insurance policies of the type described in Section 6.10 hereof
and
take any action with respect to such policies as BACC deems prudent; or (d)
take
any other action deemed necessary to preserve and protect its interests and
rights under the Loan Documents. Any payments made by BACC shall not constitute:
(a) an agreement by BACC to make similar payments in the future or (b) a waiver
by BACC of any Event of Default. BACC need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance or lien
and
the receipt of notice for the payment thereof shall be conclusive evidence
that
the same was validly due and owing.
11.
WAIVERS
11.2
No
Marshaling. Borrower, on its own behalf and on behalf of its successors and
assigns hereby expressly waives all rights, if any, to require a marshaling
of
assets by BACC or to require that BACC first resort to some portion(s) of the
Collateral before foreclosing upon, selling or otherwise realizing on any other
portion thereof.
11.3
BACC's Non-Liability for Inventory or Equipment or for Protection of Rights.
So
long as BACC complies with its obligations, if any, under Section 9-207 of
the
Code, BACC shall not in any way or manner be liable or responsible for: (a)
the
safekeeping of the Inventory or Equipment; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency or other person whomsoever. All risk of loss, damage
or destruction of the Inventory or Equipment shall be borne by Borrower. BACC
shall have no obligation to protect any rights of Borrower against any person
obligated on any Collateral
11.4
Limitation of Damages. In any action or other proceeding against BACC under
this
Agreement or relating to the transactions between BACC and Borrower, Borrower
waives the right to seek any consequential or punitive damages.
89
12.
NOTICES
Unless
otherwise provided herein, all consents, waivers, notices or demands by any
party relating to the Loan Documents 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 telecopied (followed up by a
mailing), personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by receipted overnight delivery service
to
Borrower or to BACC, as the case may be, at their addresses set forth
below
If
to
Borrower: Drinks Americas Inc.
000
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxx Xxxxx, CEO
Fax
#:
(000) 000-0000
If
to
BACC: Business Alliance Capital
Company
000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxx Xxxxxx 00000
Attn:
General Counsel
Fax
#:
(000) 000-0000
Any
party
may change the address at which it is to receive notices hereunder by notice
in
writing in the foregoing manner given to the other. All notices or demands
sent
in accordance with this Section 12 shall be deemed received on the earlier
of
the date of actual receipt or five (5) calendar days after the deposit thereof
in the mail or on the date telecommunicated if telecopied.
All
documents, schedules, invoices, agings or other papers delivered to BACC may
be
destroyed or otherwise disposed of by BACC four (4) months after they are
delivered to or received by BACC, unless Borrower requests, in writing, the
return of the said documents, schedules. invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
90
91
15.
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
THE
VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF
NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS
SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY
OF
XXXXXX, STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES THE STATE
OF NEW JERSEY, OR AT THE SOLE OPTION OF BACC, IN ANY OTHER COURT IN WHICH BACC
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER AND BACC EACH WAIVES,
TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN
ANY
PROCEEDING UNDER THE LOAN DOCUMENTS OR RELATING TO THE DEALINGS OF BORROWER
AND
BACC AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 15.
92
Borrower
and BACC have executed and delivered this Agreement at BACC's place of business
in Princeton, New Jersey as of the date first above written.
DRINKS
AMERICAS INC.
a
Delaware corporation
|
|
|
|
Signed by: | |
Print
Name: J. Xxxxxxx Xxxxx
Title/Capacity:
President and CEO
|
|
DRINKS
GLOBAL IMPORTS, LLC
a
New York limited liability company
|
|
|
|
Signed
by:
|
|
Print
Name: J. Xxxxxxx Xxxxx
Title/Capacity:
President and CEO
|
|
D.T.
DRINKS, LLC a New York limited
liability
company
|
|
|
|
Signed
by:
|
|
Print
Name: J. Xxxxxxx Xxxxx
Title/Capacity:
President and CEO
|
|
BUSINESS
ALLIANCE CAPITAL COMPANY
Division
of Sovereign Bank, a federal
savings
bank
|
|
|
|
Signed
by:
|
|
Print
Name:
|
|
Title/Capacity:
|
93
Schedule
2.3
Deposit
Account of Borrower for Advances
Account
#
______________________
Bank
Name, address, and Wire Transfer Instructions:
_________________________________
_________________________________
_________________________________
ABA
#
________________________________
94
Schedule
5.1
EXISTING
LIENS WHICH ARE TO CONTINUE
Liens
on
substantially all assets of Borrower in favor of Nexcomm International Beverage,
LLC, and Xxxxxxx X. Close, which liens are to be subordinate to the liens in
favor of BACC pursuant to an intercreditor agreement, satisfactory in form
and
substance, to BACC.
Liens
on
assets of DAI and DTD in favor of Production Finance International, LLC provided
the liens on the assets of DAI are subordinate to the liens in favor of BACC,
and on the assets of DTD will be released on conditions satisfactory to BACC,
all pursuant to an intercreditor agreement satisfactory in form and substance
to
BACC.
95
Schedule
5.10
Licenses
and permits
See
schedule annexed
Schedule
5.20
USE
OF
PROCEEDS OF INITIAL ADVANCE
Satisfaction
in full of all obligations of Borrower to Platinum Funding Corp. Payment
of the Closing Fee due to BACC and other closing costs.
96