Exhibit 10.26
SECURED CONVERTIBLE NOTE AND AGREEMENT
$200,000.00
MAXMILLIAN PARTNERS LLC
July 28, 2003
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT.
INVESTMENT IN THE NOTE HEREIN IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. THE COMPANY IS IN ITS DEVELOPMENT STAGE, HAS NO HISTORY OF REVENUES,
EARNINGS OR SIGNIFICANT OPERATIONS, AND IS SUBJECT TO ALL THE RISKS INHERENT IN
A NEW BUSINESS ENTERPRISE. NO INVESTMENT IN THE NOTES SHOULD BE MADE BY ANY
PERSON WHO IS NOT IN A POSITION TO LOSE THE ENTIRE AMOUNT OF SUCH INVESTMENT.
RECITALS
WHEREAS, Maxmillian Partners LLC (the "Borrower"), a Delaware limited
liability company, operating pursuant to a certain Amended and Restated Limited
Liability Company Agreement, dated as of September 24, 2002 (the "Operating
Agreement"); and
WHEREAS, Borrower requires short-term working capital in connection with
current operations, and Xxxxxxx X. Close, an individual having a place of
business in Southport, Connecticut ("Holder"), has agreed to lend to Borrower
$200,000, upon the terms stated herein, including without limitation Holders'
right, but not the obligation, prior to repayment, to convert all, or such part
as Holder shall elect, of the principal amount due hereunder, together with the
interest then accrued thereon, into additional units of the Company issued in
connection with any subsequent capital financing of the Company (a
"Financing"), or such other equity securities, as shall be sold by Borrower in
connection with the completion of the Financing, if any, upon the same terms as
are offered to investors generally. Holder shall be issued warrants for units
in the Borrower ("Principal Warrants"), together with certain contingent
warrants to be issued in the event of a default hereunder ("Default Warrants",
and together with the Principal Warrants, referred to herein and therein as the
"Warrants"), all in accordance with the terms of the Convertible Note Warrant
Agreement ("Warrant Agreement"), of even date herein
FOR VALUE RECEIVED, MAXMILLIAN PARTNERS LLC, a Delaware limited
liability company, having a principal place of business at 000 Xxxxxxx Xxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxxx (the "Borrower"), promises to pay to XXXXXXX X.
CLOSE (the "Holder") at the offices of the Holder located in Southport,
Connecticut, or at such other place as Holder shall designate, the principal sum
of Two Hundred Thousand and 00/100 Dollars ($200,000.00) or, if then prepaid in
part, the outstanding principal amount, on January 25, 2004 ("Expiration Date"),
together with interest accrued upon the outstanding principal amount advanced
hereunder from time to time, calculated on the basis of a 360-day year for the
actual number of days elapsed, at the rate of eight (8%) percent (Interest"),
from the date of this Secured Convertible Note and Agreement (the "Note"), until
the Expiration Date. In no event shall the Interest hereunder exceed the maximum
rate permitted by applicable law. Any payment in excess of the maximum rate
shall be deemed a prepayment of principal. Each payment shall be applied first
to the payment of Interest and then to the payment of principal. In addition to
the other remedies available to Holder herein, and the Default Adjustment set
forth in the Warrant Agreement issued by Borrower to Holder in connection
herewith, in the event of default, the Interest applicable to this Note shall be
3% above that rate herein, before as well as after judgment, order or other
determination. The principal amount of this Note shall be advanced upon the
request of the Borrower, and at the sole discretion of the Holder in accordance
with the conditions herein. The proceeds of this Note shall be used for normal
short-term working capital needs of the Borrower.
ARTICLE ONE
PREPAYMENT
This Note shall not without the prior written consent of the Holder, be
subject to prepayment in whole or in part by Borrower, at any time prior to the
earlier of (i) the date on which the Holder waives, releases or terminates its
option to convert this Note into the equity securities of the Company as set
forth hereinbelow, and (ii) the Expiration Date, it being the intention of the
parties that this Note shall either be (A) paid in full with Interest thereon
at the Expiration Date, or (B) subject to Holder's prior demand on account of
default, converted to units of the Company upon the date of the closing of any
Financing, , upon the terms more fully set forth in ARTICLE TWO below
("Conversion Units").
ARTICLE TWO
CONVERSION RIGHTS
2.1 Conversion. At any time prior to the Expiration Date, in the event
Borrower shall propose to complete a Financing, Holder shall have the right,
exercisable upon written notice to Borrower, to convert in whole or in part,
any outstanding principal amount hereunder together with any and all unpaid
Interest accrued thereon (the "Obligation") into the Units offered by Borrower
in such Financing, upon such terms as are offered to the investors in the
Financing generally.
2.2 Conversion Mechanics. In the event Borrower shall intend to complete
a Financing prior to the Expiration Date, and shall prepare any term sheet for
such purpose at any time prior to the Expiration Date, Borrower shall provide
Holder with written notice of the terms and other particulars pertaining to such
Financing, whereupon at any time on or prior to the closing date of such
Financing (after all applicable extensions provided in the Term Sheet), Holder
shall have the right, exercisable by Borrower upon notice to Borrower at any
time prior to repayment of this Note and the date of closing of such Financing,
to convert, in whole or in part, the amount then representing the Obligation,
into such equity securities as are sold or issued by Borrower in connection with
the Financing, and otherwise upon the terms made part of the offering thereof.
ARTICLE THREE
EVENTS OF DEFAULT/SECURITY
3.1 Default. In the event Borrower shall: (a) fail to pay any amount of
the principal or accrued Interest hereupon as same shall become due and
payable; (b) breach any of the material covenants or any representation or
warranty of Borrower as set forth herein or in the Warrant Agreement issued in
connection herewith; or (c) any default by Maxmillians Mixers LLC or Drinks
Americas, Inc. (the "Guarantors") pursuant to the terms of the Guaranties or
the Security Agreements delivered by them as security for the Obligations
hereunder, then at the option of the Holder hereof, and in addition to all
other remedies at law or in equity, including without limitation, Holder's
right to exercise its security interest in accordance with the provisions of
the Article 9 of the Uniform Commercial Code of the State of Connecticut, all
amounts of principal and interest then accrued hereon, shall be immediately due
and payable, provided Holder shall deliver written notice of such default at
the offices of Borrower, and provide Borrower an opportunity to cure such
default, which in the event of any default in payment shall endure for a period
of ten (10 ) days following the receipt by Borrower of said notice. Borrower
shall pay all collection and legal expenses incurred by the Holder, including,
without limitation, reasonable attorneys' fees incurred in the collection
hereof or in the enforcement or protection of Holder's interests herein.
3.2 Offsets. Any deposits or other sums at any time credited by or due
from Holder to Borrower, and any securities or other property of Borrower at
any time in the possession of Holder, may at all times be held and treated as
collateral for the payment of this Note and any and all other liabilities
(direct or indirect, absolute or contingent, sole, joint, or several, secured
or unsecured, due or to become due, now existing or hereafter arising) of
Borrower to Holder. Regardless of the adequacy of collateral, Holder may apply
or set off such deposits or other sums against such liabilities at any time.
3.3 Security Interest. In order to secure the payment of the
Obligation, Borrower grants Holder a continuing security interest in all assets
of the Borrower, including, without limitation, all personal property, accounts,
deposit accounts, chattel paper, money, documents, licenses, leases, goods,
contract rights, equipment, machinery, fixtures, general intangibles,
instruments, inventory, work-in-process, trade names and all such other personal
property, if any, specifically listed on the UCC-1 Financing Statements
delivered and filed by the Borrower in connection with the security interests
granted herein, whether now owed or hereafter acquired, and any and all
increases, substitutions, replacements, accessions and additions thereto, and
any and all replacements and all cash and non-cash proceeds and products thereof
(including proceeds of insurance policies payable by reason of loss or damage to
any of the foregoing) (the "Collateral"), all in accordance with the terms
herein and the terms of a Security Agreement delivered by Borrower this date.
Borrower authorizes Holder to file financing statements or any other similar
instruments in any jurisdiction, with or without the signature of Borrower, in
order to perfect Holder's security interest in the Collateral. If Borrower fails
to make any payment of the Obligation when due, or to comply with any conversion
obligation herein as provided, then Holder may exercise any rights it may have
under applicable law arising out of such failure. Borrower will at all times
provide Holder with the names and addresses of Borrower's existing and future
secured creditors, and their representatives to whom Holder may provide notice
in order to perfect its secured interest herein.
ARTICLE FOUR
MATTERS REGARDING SECURITIES
Holder acknowledges that: it has had access upon request to any
and all documents, instruments and records in the control of Borrower regarding
Borrower's business; this Note and the Units into which this Note is
convertible constitute "Restricted Securities" in accordance with the
provisions of certain federal and state securities laws and the rules and
regulations promulgated thereunder, and may not be eligible for resale in the
absence of the filing of an effective registration statement with the
Securities and Exchange Commission and the securities divisions of the several
states, or absent an available exemption from such registration; Holder is
loaning funds to Borrower and shall acquire the equity securities upon
conversion of the Obligation herein, if at all, for Holder's own account (and
not for the account of others) solely for investment and not with a view to the
distribution or resale thereof;
ARTICLE FIVE
COVENANTS AND REPRESENTATIONS
5.1 Advances. Borrower acknowledges that the proceeds hereunder are to
be used solely to finance short-term working capital requirements of Borrower
to finance either order fullfilment or inventory purchases. Use of the proceeds
of this Note for such purposes shall in each case be communicated to, and
approved, by Holder prior to the time Borrower shall make any commitment for
either such use. Borrrower acknowledges that Holder's approval rights shall
endure until such time as the Obligations shall be either repaid or Converted
hereunder, and such approval rights shall be exercised by Holder as Holder
shall determine in its discretion.
5.2 Information. Borrower shall provide to Holder any and all
information regarding Borrower and its operations as Holder may reasonably
request for the purpose of assisting Holder in exercising its approval rights
pursuant to Section 5.1 above; provided, however, that the completion of such
disclosure shall not of itself be construed to affect Holder's discretion as
described in Section 5.1 above.
5.3 Representations. Borrower, and the undersigned Manager in his individual
capacity, warrant and represent to Holder that (i) that Borrower has taken all
necessary action and has obtained all approvals and consents necessary to
deliver this Note and the other agreements and instruments delivered herewith,
including the Warrant Agreement; (ii) the Guarantors have taken all necessary
action and have obtained all approvals and consents necessary to deliver the
Guaranties and Security Agreements and any other agreements and instruments
delivered therewith; (iii) there are no pending or threatened claims against
either Borrower or Guarantors which is successfully prosecuted may have a
material adverse effect upon the operations or assets of any of them; (iv) there
is no outstanding order, decree, judgement or provision of any agreement, or any
violation or default of any of same, the effect of which would prevent or
prohibit Borrower or Guarantors from performing each of their respective
obligations pursuant to this Note, the Warrant Agreement, the Guaranties and the
Security Agreements, in accordance with their respective terms; (iv) the
delivery of the Note and the Warrant Agreement and the issuance of the
securities thereunder, comply with all applicable federal and state securities
laws, and the respective regulations promulgated thereunder.
ARTICLE SIX
MISCELLANEOUS
6.1 Expenses. All attorney's fees and expenses incurred by Borrower
and Holder in connection with this Note will be borne by Borrower.
6.2 Parties in Interest. This Note will be binding upon, inure to the
benefit of and be enforceable by, the respective successors and assigns of the
parties hereto.
6.3 Entire Agreement; Amendments. This Note, and the agreements,
instruments, schedules, and other writings referred to in this Note, contain
the entire understanding of the parties with respect to the subject matter of
this Note. There are no restrictions, agreements, promises, warranties,
covenants, or undertakings other than those expressly set forth herein or
therein. This Note supersedes all prior agreements and understandings between
the parties with respect to its subject matter. This Note may be amended only
by a written instrument duly executed by both of the parties.
6.4 Headings. The Article and section headings contained in this Note
are for reference purposes only and will not affect in any way the meaning or
interpretation of this Note.
6.5 Notices. All notices, claims, certificates, requests, demands and
other communications under this Note ("notices") will be in writing and notices
will be deemed to have been duly given on the date personally delivered or the
delivery date as reflected on the return receipt if mailed by registered or
certified mail, postage prepaid, return receipt requested at the above
addresses or to such other address as the party to whom notice is to be given
previously may have furnished to the other in writing in the manner set forth
in this Section 6.5.
6.6 No Waiver. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
6.7 Severability. If any term, condition or provision of this Note shall
be declared invalid or unenforceable, the remainder of the Note, other than
such term, condition or provision, shall not be affected thereby and shall
remain in full force and effect and shall be valid and be enforceable to the
fullest extent permitted by law.
6.8 Law Governing. This Note will be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut applicable to
agreements made and to be performed in the State of Connecticut.
ARTICLE SIX
REGARDING PRIOR DOCUMENTS
Borrower acknowledges that this Note replaces and supercedes any
instrument or promissory note issued by Borrower to Holder prior hereto with
respect to the specific proceeds of the loan herein, and shall not be construed
as a novation or repayment and reissue of a new indebtedness for any existing
indebtedness.
ARTICLE SEVEN
STATUTORY WAIVERS
7.1 Waiver Of Constitutional Rights To Notice And Hearing On
Prejudgment Remedy
BORROWER HEREBY ACKNOWLEDGES THAT THE TRANSACTIONS TO WHICH THIS AGREEMENT
RELATE ARE COMMERCIAL TRANSACTIONS. BORROWER HEREBY VOLUNTARELY AND KNOWINGLY
WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903A OF THE CONNECTICUT
GENERAL STATUTES, AS AMENDED AND IN EFFECT ON THE DATE HEREOF, OR AS OTHERWISE
ALLOWED BY ANY STATE OR FEDERAL LAW OR PROCEDURAL RULE WITH RESPECT TO ANY
PREJUDGMENT REMEDY OR OTHER RIGHT OR REMEDY THAT HOLDER MAY ELECT TO USE OR OF
WHICH IT-MAY AVAEL ITSELF.
7.2 Waiver Of Constitutional Right To Jury Trial
BORROWER HEREBY KNOWINGLY AND VOLUNTARELY WAIVES ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE AND IN
ANY ACTION DIRECTLY OR INDIRECTLY RELATED TO OR CONNECTED WITH THIS NOTE, OR ANY
CONDUCT RELATING TO THE ADMINISTRATION OR ENFORCEMENT OF THISNOTE, THE
DISPOSITION OF COLLATERAL, OR OTHERWISE ARISING FROM THE DEBTOR/CREDITOR
RELATIONSHIP OF THE BORROWER AND HOLDER. BORROWER ACKNOWLEDGES THAT THIS WAIVER
MAY DEPRIVE IT OF AN DOORTANT RIGHT AND THAT SUCH WAIVER HAS KNOWINGLY AND
VOLUNTARI]LY BEEN AGREED TO BY BORROWER.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the date first above written.
BORROWER
MAXMILLIAN PARTNERS LLC
By: /s/
---------------------------------
J.Xxxxxxx Xxxxx, Manager, duly
authorized
HOLDER
/s/
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Xxxxxxx X. Close
