MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: July 22, 2005
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter
defined), 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
such Assignor, or in which such Assignor now has or at any time
in the future may acquire any right, title or interest (the
"Collateral"): all cash, cash equivalents, accounts, accounts
receivable, deposit accounts, 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
such Assignor's affiliates), chattel paper, supporting
obligations, investment property (including, without limitation,
all equity interests owned by any Assignor), letter-of-credit
rights, trademarks, trademark applications, tradestyles, patents,
patent applications, copyrights, copyright applications and other
intellectual property in which such Assignor now has 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 therefor. In the event any Assignor wishes to finance
the acquisition in the ordinary course of business of any
hereafter acquired equipment and has obtained a written
commitment from an unrelated third party financing source to
finance such equipment, Laurus shall 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 meanings
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 (i) each Assignor
to Laurus arising under, out of, or in connection with that
certain Subsidiary Guaranty dated as of the date hereof made by
each Assignor in favor of Laurus (the "Additional Subsidiary
Guaranty"), (ii) American Water Star, Inc. (the "Company") to
Laurus arising under, out of, or in connection with that certain
Securities Purchase Agreement dated as of October 26, 2004 by and
between the Company and Laurus (the "Securities Purchase
Agreement") and the Related Agreements referred to in the
Securities Purchase Agreement, (iii) the Company to Laurus under
any and all promissory notes made by the Company in favor of
Laurus (the "Notes"), and (iv) All-Star Beverage, Inc. to Laurus
arising under, out of, or in connection with that certain
Subsidiary Guaranty dated as of October 26, 2004 made by All-Star
Beverage in favor of Laurus (the "All-Star Beverage Guaranty",
together with the Securities Purchase Agreement, each Related
Agreement, the Notes and the Additional Subsidiary Guaranty, as
each may be amended, modified, restated or supplemented from time
to time, collectively, 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 each
such Assignor, the Company and/or All-Star Beverage 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, including, without
limitation, obligations and indebtedness of each Assignor, the
Company and/or All-Star Beverage for post-petition interest,
fees, costs and charges that accrue after the commencement of any
case by or against such Assignor, the Company and/or All-Star
Beverage under any bankruptcy, insolvency, reorganization or like
proceeding (collectively, the "Debtor Relief Laws") 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 of Assignor, the Company and/or All-Star Beverage under any
Debtor Relief Law.
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 formed under the respective laws of its jurisdiction of
formation 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 formation;
(b) its legal name is as set forth in its 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 its
organizational identification number;
(d) it is the lawful owner of its 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 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 and (ii) Encumbrances
securing indebtedness of each such Assignor not to exceed $50,000
in the aggregate for all such Assignors so long as all such
Encumbrances are removed or otherwise released to Laurus'
satisfaction within ten (10) days of the creation thereof;
(f) it will, at its and the other Assignors' joint and several
cost and expense 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 any 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 each such disposition are used to acquire
replacement Collateral which is subject to Laurus' first priority
perfected security interest, or are used to repay the Obligations
or to pay general corporate expenses; or
(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 (as additional insured and loss payee) against loss
or damage by fire, theft, burglary, pilferage, loss in transit
and such other hazards as Laurus shall specify in amounts 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 allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral; and
(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, 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) any covenant or any other term or condition of this Master
Security Agreement is breached in any material respect and such
breach, if subject to cure, shall continues for a period of
fifteen (15) days after the occurrence thereof;
(b) any representation or warranty, or statement made or
furnished to Laurus under this Master Security Agreement by any
Assignor or on any Assignor's behalf should at any time be false
or misleading in any material respect;
(c) 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 repay Laurus; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 in the aggregate for all
Assignors and such levy, seizure or attachment has been removed
or otherwse released within ten (10) days of the creation or the
assertion thereof;
(d) an Event of Default shall have occurred under and as defined
in any Document.
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 any Assignor's premises or to
remove the Collateral or any part thereof to such other premises
as Laurus may desire. Upon Laurus' request, each Assignor 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 the
applicable 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 expenses 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.
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.
7. Each Assignor appoints Laurus, any of Laurus' officers,
employees or any other person or entity whom Laurus may designate
as such Assignor's attorney, with power to execute such documents
in each such Assignor's 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 such Assignor 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 such
Assignor's 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
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 such documents 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 and enforced in accordance with the laws of the State
of New York applicable to contracts made and performed in such
state 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 each of the foregoing, and shall bind the
representatives, successors and assigns of each Assignor.
10. Each Assignor hereby consents and agrees that the state of
federal courts located in the County of New York, State of New
York shall have exclusive jurisdiction to hear and determine any
claims or disputes between Assignor, on the one hand, and Laurus,
on the other hand, pertaining to this Master Security Agreement
or to any matter arising out of or related to this Master
Security Agreement, provided, that Laurus and each Assignor
acknowledges that any appeals from those courts may have to be
heard by a court located outside of the County of New York, State
of New York, and further provided, that nothing in this Master
Security Agreement shall be deemed or operate to preclude Laurus
from bringing suit or taking other legal action in any other
jurisdiction to collect, the Obligations, to realize on the
Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Laurus. Each
Assignor expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court,
and each Assignor hereby waives any objection which it may have
based upon lack of personal jurisdiction, improper venue or forum
non conveniens. Each Assignor hereby waives personal service of
the summons, complaint and other process issues in any such
action or suit and agrees that service of such summons, complaint
and other process may be made by registered or certified mail
addressed to such assignor at the address set forth on the
signature lines hereto and that service so made shall be deemed
completed upon the earlier of such Assignor's actual receipt
thereof or three (3) days after deposit in the U.S. mails, proper
postage prepaid.
The parties desire that their disputes be resolved by a
judge applying such applicable laws. Therefore, to achieve the
best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all rights to trial by jury
in any action, suite, or proceeding brought to resolve any
dispute, whether arising in contract, tort, or otherwise between
Laurus, and/or any Assignor arising out of, connected with,
related or incidental to the relationship established between
them in connection with this Master Security Agreement or the
transactions related hereto.
11. It is understood and agreed that any person or entity that
desires to become an Assignor hereunder, or is required to
execute a counterpart of this Master Security Agreement after the
date hereof pursuant to the requirements of any Document, shall
become an Assignor hereunder by (x) executing a Joinder Agreement
in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as
Laurus shall reasonably request and (z) taking all actions as
specified in this Master Security Agreement as would have been
taken by such Assignor had it been an original party to this
Master Security Agreement, in each case with all documents
required above to be delivered to Laurus and with all documents
and actions required above to be taken to the reasonable
satisfaction of Laurus.
12. All notices from Laurus to any Assignor shall be sufficiently
given if mailed or delivered to such Assignor's address set forth
below.
Very truly yours,
ALL STAR BEVERAGES, INC.
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
Telephone:________________
Facsimile:________________
State of Formation: Nevada
ALL STAR BEVERAGES ARIZONA,
INC.
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
Telephone:________________
Facsimile:________________
State of Formation: Nevada
ALL STAR BEVERAGES JAX, INC.
By:________________________
Name:______________________
Title:_____________________
Address:___________________
Telephone:_________________
Facsimile:_________________
State of Formation: Nevada
ALL STAR BEVERAGES
MISSISSIPPI, INC.
By:________________________
Name:______________________
Title:_____________________
Address:___________________
Telephone:_________________
Facsimile:_________________
State of Formation: Nevada
HAWAIIAN TROPICALS, INC.
By:________________________
Name:______________________
Title:_____________________
Address:___________________
Telephone:_________________
Facsimile:_________________
State of Formation: Nevada
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:________________________
Name:______________________
Title______________________
SCHEDULE A
Entity Jurisdiction of Organization
Formation Identification
Number
All Star Beverages, Inc. Nevada C20793-2002
All Star Beverages Nevada C5761-2004
Arizona, Inc.
All Star Beverages JAX, Inc. Nevada C114-2004
All Star Beverages Nevada C23013-2004
Mississippi, Inc.
Hawaiian Tropicals, Inc. Nevada C5759-2004
