Exhibit 10.33
SECURITY AGREEMENT
Security Agreement, dated as of October 15, 2004 (the "Security
Agreement"), by and between NEXCOMM INTERNATIONAL BEVERAGE, LLC, a Connecticut
limited liability company having a principal place of business in Southport,
Connecticut, (hereinafter the "Secured Party"), and DRINKS AMERICAS, INC., a
Delaware corporation having a principal place of business in Wilton,
Connecticut (hereinafter the "Debtor").
RECITAL
Debtor is the former subsidiary of Maxmillian Partners, LLC,
("Maxmillian"), the original borrower of Secured Party under a certain Secured
Convertible Note and Agreement and a related Security Agreement dated April 8,
2003 (the "Original Debt"), the obligations pursuant to which were guarantied
by Debtor in accordance with a certain Guaranty, also dated April 8, 2003. As
of the date hereof, Maxmillian has entered into one or more agreements with
Gourmet Group, Inc., a public company trading under the symbol "XXXX.XX" (the
"Holding Company"), for the exchange in a private transaction (the "Exchange")
of substantially all of the outstanding equity securities of Debtor for shares
of the restricted common stock, $.001 par value, of the Holding Company (the
"Exchange Shares"). Maxmillian anticipates that immediately following the
Exchange it will complete a liquidating distribution of substantially all of
its assets to its members, which assets will be constituted either wholly or in
principal part of the Exchange Shares. As Maxmillian in such event will not
have available funds from which to satisfy the obligations under the Secured
Convertible Note and Agreement and the related Security Agreement dated April
8, 2003, each of the Holding Company, Maxmillian, the Debtor and Secured Party
have agreed that for the purpose of permitting the Exchange to be completed,
the Original Debt will be assumed by Debtor upon the terms and conditions
herein, it being the intention of all of such parties, that as of the
completion of such assumption, Maxmillian's obligations relating to the
Original Debt, including without limitation, the security interests granted
pursuant to the Security Agreement, shall be released in full by Secured Party,
and all of such obligations, as modified by the terms and conditions set forth
herein, shall be assumed by Debtor (the "Obligations").
1. Grant of Security Interest. Debtor, for value received, hereby
grants to Secured Party, a continuing security interest in the following
property now or hereafter owned by Debtor (the "Collateral") to secure the
Obligations of the Debtor.
(a) the property described in Schedule "A" annexed hereto and made
a part hereof;
(b) all property, goods and chattels of the same classes as those
set forth in Schedule "A" acquired by the Debtor subsequent to the
execution of this Agreement and prior to its termination;
(c) proceeds of the Collateral; and
(d) all increases, substitutions, replacements, additions and
accessions to the Collateral, other than with respect to any motor
vehicles or replacements which are subject to a purchase money
security interest of any other party at the time such same are
acquired; and (ii) from which products and proceeds shall not serve as
Collateral hereunder to the extent utilized to acquire other motor
vehicles to be used by Debtor.
2. Ownership of Collateral. Debtor represents that it has good title to
all property described in Schedule "A", subject only to the prior secured
interest of Debtor's institutional lender in respect of indebtedness relating
to the acquisition by Debtor of the Assets from Seller, or any amendments
modifications, renewals, or refinancing of such indebtedness (the "Lender");
that it has the right to convey a security interest in such Collateral to the
Secured Party; and that except for the Lender, no other person has or purports
to have any right, title, lien, encumbrance, adverse claim, or interest in such
property except as disclosed in writing to, and accepted in writing by, the
Secured Party. Debtor further represents and warrants that (i) all action
necessary to enable Debtor to execute this Security Agreement and the Note and
to perform same in accordance with their respective terms, including the grant
of the security interest herein, has been taken, (ii) that no consent of any
party is required for the execution, delivery and performance by Debtor of this
Security Agreement and the Note, (iii) that this Security Agreement and the
Note constitute the valid binding and enforceable obligation of Debtor; (iv)
that the execution and performance of this Security Agreement and the Note by
the Debtor will not result in any violation of any material agreement,
indenture or other instrument to which Debtor is a party or any judgment
decree, order, law or regulation applicable to Debtor; and (v) that the
security interest granted pursuant to this Security Agreement, upon due filing
of the appropriate financing statement will constitute a valid and perfected
security interest.
3.Use of Collateral.
Debtor represents that the Collateral has been acquired and is used by
the Debtor, or will be acquired and will be used by Debtor, for the purpose of
operating the business of the Debtor (the "Use").
4.Acts to Be Performed by Debtor.
Debtor agrees as follows:
(a) Payment and Performance. Debtor shall pay and perform all of
the Obligations secured by this Security Agreement according to their terms.
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(b) Further Assurances. Debtor shall defend the title to the
Collateral against all persons and against all claims and demands whatsoever,
and shall indemnify Secured Party for all costs, fees, and expenses incurred in
connection with such claims and demands. On demand by Secured Party, Debtor
shall (i) furnish further assurance of title, (ii) execute any written
instrument or do any other acts necessary to make effective the purposes and
provisions of this Security Agreement, and (iii) execute any financing
statement instrument or statement required by the Secured Party or by law or
otherwise in order to perfect or continue the security interest of the Secured
Party in the Collateral free of all other liens, claims and rights of any third
parties whatsoever except as provided herein.
(c) Possession and Removal. Debtor may remain in possession of the
Collateral until and unless Debtor shall be in default under this Security
Agreement, provided Debtor shall not permit the Collateral to be removed from
its present location(s) without consent of the Secured Party.
(d) Sale and Exchange. Debtor shall not, without the written
consent of the Secured Party, sell, exchange, contract to sell, lease, encumber
or transfer the Collateral, and whether or not such consent has been obtained,
the proceeds of such sale, exchange, or transfer shall be applied to the
obligations secured by this Security Agreement, or become subject to the
security interest of this Security Agreement, provided, however that nothing
herein shall be construed to prohibit the sale of Collateral in the ordinary
course of the Business; or
(i) Simultaneously with or prior to such removal any such
Collateral (to the extent the Collateral may be susceptible of removal) such
Collateral shall be replaced with other property of a value at least equal to
that of the replaced Collateral and shall be free from any security interest or
other encumbrance and from any reservation of title, and by such removal and
replacement Debtor shall be deemed to have subjected such replacement property
to this Agreement, or
(ii) Any net cash proceeds received from such disposition
(other than from the collection of accounts receivable in the ordinary course
of business) shall at the election of the Secured Party, be paid over promptly
to the Secured Party to be held as security for the performance and payment of
all obligations secured by this Agreement according to their terms or applied
to the payment thereof.
(e) Certain Acts Required.
(i) Proper Care and Inspection. Debtor shall maintain the
Collateral in good and saleable condition and repair, and shall clean, shelter,
and otherwise deal with the Collateral in all such ways as are considered good
practice by owners of like property. Debtor shall use the Collateral lawfully
and only as permitted by the policies of insurance required in accordance with
Paragraph 4(e)(ii), below.
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(ii) Insurance.
(A) Debtor shall keep the Collateral insured for the benefit
of Secured Party against loss by fire and other casualties or risks in such form
and amount, and with such companies, as may be required by Secured Party. Such
insurance policies shall name the Secured Party as an additional insured under
such policies. Debtor agrees to deliver the insurance policies to Secured Party
upon request therefor, and Debtor hereby appoints the Secured Party the attorney
for the Debtor in obtaining, adjusting and canceling any such insurance with
respect to the Collateral and in endorsing settlement drafts, and hereby assigns
to the Secured Party all sums which may become payable under such insurance,
including return premiums and dividends, which sums shall serve as additional
security for the indebtedness, provided, however, that in the absence of any
default hereunder or under the Note, Debtor shall have the right to expend such
sums paid by any insurer as a result of any casualty or loss to the Collateral
for any like Collateral, which such like Collateral shall be secured hereunder.
Debtor shall give immediate written notice to the Secured Party and to insurers
of loss or damage to the Collateral and shall promptly file proofs of loss with
insurers.
(B) Debtor shall maintain comprehensive general liability
insurance in respect of the Use for at least One Million ($1,000,000.00) Dollars
combined single limit for bodily injury and property damage, naming the Secured
Party as an additional insured. All policies of insurance shall provide for at
least thirty (30) days written cancellation notice to the Secured Party. The
Secured Party shall be named as a loss payee, as its interest may appear, and at
the request of the Secured Party shall be delivered to the Secured Party to be
held by it.
(iii) Encumbrances and Taxes. Debtor shall keep the
Collateral free from all prior security interests, liens, claims, charges, and
encumbrances, and shall pay when due all taxes and assessments relating to the
Collateral.
(iv) Information. Debtor will keep at its address set forth
in the first paragraph of the Security Agreement, its records concerning the
Collateral and promptly make such records available for inspection by the
Secured Party upon request. Debtor shall furnish promptly to Secured Party any
other information which the Secured Party may reasonably require, and Debtor
hereby represents and warrants that its records concerning the Collateral and
any such information at any time supplied to Secured Party (including, but not
limited to, the value and condition of the Collateral, and the accuracy of any
financial statements) is (or will be) true and accurate in all material
respects.
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(v) Notification of Change. Debtor shall notify Secured Party
promptly of any change in the location of the Collateral, Debtor's place or
places of business, or Debtor's mailing address.
(vi) Debtor shall use the Collateral solely for the Use
described in Paragraph 3.
(vii) Debtor shall not use or maintain the Collateral in any
manner prohibited by any terms of any insurance policies covering such
Collateral, any state, federal or local law or ordinance or in any manner which
may give rise to any claims or rights of third parties against the Collateral.
(viii) Debtor shall indemnify and hold Secured Party harmless
from and against any loss, liability, damage, cost and expense whatsoever
arising from Debtor's use, operation, ownership or possession of the
Collateral, except for such loss, cost or expense resulting from the Secured
Party's gross negligence or willful misconduct.
(ix) Debtor shall promptly notify the Secured Party of any
event causing material loss, theft, damage, destruction or depreciation of the
Collateral, and the amount thereof, as well as any other matters affecting the
value, enforceability or collectability of any of the Collateral, which notice
shall be delivered immediately upon Debtor's knowledge of any such event.
(xi) Debtor shall pay all costs, including but not limited
to, reasonable attorneys fees, incurred by the Secured Party in connection with
the perfection, continued perfection, and preservation of its interests in the
Collateral, and shall reimburse the Secured Party, on demand, for all of the
Secured Party's expenses and costs, including reasonable fees and expenses of
its counsel, in connection with the enforcement of this Security Agreement or
any proceeding brought or threatened to enforce payment of any of the
obligations arising hereunder, or in prosecuting or defending against any
actions or proceedings commenced under the United States Bankruptcy Code, as
amended, or under any similar state law or regulation.
(f) Failure to Perform Acts.
(i) Performance by Secured Party. Upon failure by the Debtor
to perform any of the acts to be performed by Debtor in accordance with
Paragraph 4(e) above, the Secured Party shall be authorized and shall have the
option to perform any and all of said acts in any manner deemed proper by the
Secured Party, without waiving any rights with respect to the enforcement of
this Agreement.
(ii) Advances Secured. Any and all reasonable expenses
(including, without limitation, counsels' fees, the cost of insurance, and
payment of taxes or other charges) paid by the Secured Party in respect of the
Collateral shall be deemed advanced to the Debtor by the Secured Party as part
of the Obligations, and shall be secured by the security interest granted in
this Security Agreement.
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5.Default. At the option of the Secured Party, the Obligations secured
under this Agreement shall become immediately due and payable in full upon the
happening of one or more of the following events ("Events of Default"):
(a) If there shall occur an event of default in the Obligations;
(b) There shall occur any failure to make payment of any amount
due and payable pursuant to this Security Agreement when due, and such failure
shall continue for a period in excess of ten (10) days after written notice, or
if there shall occur any other breach, or the failure to perform, any covenant,
condition or provision of the this Security Agreement and such breach or
failure continues for a period in excess of thirty (30) days following the date
of written notice of such breach or failure; provided, however, that in the
event such breach or notice is not susceptible of cure within said thirty (30)
day period, then within such additional reasonable period as may be required to
cure such breach or failure; further provided, such cure shall have been
diligent commenced during said initial thirty (30) day period.
(c) In the event any representation set forth in this Security
Agreement shall be false, or if any warranty herein shall be breached.
(d) If the Debtor shall fail to comply with any statute,
requirement, rule, regulation, order or decree, of any federal, state,
municipal or other governmental authority relating to the Collateral which
impairs the security interest granted hereunder.
(e) If the Collateral or any portion thereof, or any interest of
the Debtor therein, shall be levied upon or attached by virtue of an execution
issued upon any judgment or a writ of attachment or any other process, and not
released within sixty (60) days.
(f) If there shall be filed by the Debtor, or any other party
against the Debtor, in any court pursuant to statute, either of the United
States or any state, a petition in bankruptcy or insolvency or for
reorganization, or for the appointment of a receiver or trustee of all or any
portion of the Debtor's property, or in the event there shall be any assignment
by the Debtor for the benefit of creditors; provided, however, that in the
event such a petition shall be involuntary, no default shall be deemed to have
occurred hereunder unless such petition is not dismissed within sixty (60) days
following the commencement of any such proceedings against Debtor.
6. Remedies Upon Default.
(a) General. In the event there shall occur any default under this
Security Agreement which is not cured within ten (10) days following written
notice thereof from Secured Party to Debtor, the Secured Party shall have in
addition to those provided in this Security Agreement, all rights and remedies
available to a secured party upon default as provided in the Uniform Commercial
Code.
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(b) Notice to Accounts. Upon the occurrence of an Event of Default
hereunder, Debtor shall, at the request of the Secured Party, notify and direct
its current and future account debtors to remit all amounts then owed or
thereafter owing to the Debtor to a post office box established and rented by
the Secured Party, and in which the Secured Party shall have exclusive and
unrestricted access thereto, all of the express purpose of instituting and
maintaining a lock box arrangement in respect of Debtor's accounts. The Debtor
hereby constitutes the Secured Party or its designee as Debtor's
attorney-in-fact with power to endorse Debtor's name upon any notes,
acceptances, checks, drafts, money orders or other instruments or forms of
payment that may come into the Secured Party's possession; to sign Debtor's
name on any invoice or xxxx of lading relating to any of its accounts, drafts
against the Debtor's account debtors, assignments and verifications of its
accounts and notices to the Debtor's account debtors; to notify the Post Office
authorities to change the address for delivery of mail addressed to the Debtor
to such address as the Secured Party may designate; and to do all other acts
and things necessary to carry out a lock box facility. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts or omission or commission, nor for
any error of judgment or mistake of act of law; this power being coupled with
an interest is irrevocable while any obligations of the Debtor arising
hereunder remain unsatisfied. In addition, upon the occurrence of any Event of
Default hereunder, or if the Secured Party shall have any reason to believe
that not all of Debtor's accounts are being paid into such lock boxes, Secured
Party may itself so notify the account debtors of the Debtor, without notice to
the Debtor, and direct any and all such accounts to remit such amounts owing
under the accounts directly to the Secured Party. At its option and in its sole
business judgment, the Secured Party may collect, bring suit, extend the time
for payment of, compromise or settle for cash, credit or otherwise upon any
terms, any of Debtor's accounts or any securities, instruments or insurance
applicable thereto and/or release the obligor thereon. The Secured Party is
authorized and empowered to undertake each and every of the foregoing acts
without notice to or consent of the Debtor, all without discharging or in any
way affecting Debtor's liability hereunder. Nothing herein contained shall be
construed to constitute the Debtor as an agent of the Secured Party for any
purpose whatsoever, and the Secured Party shall not be responsible or liable
for any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause
whereof, except to the extent same may result from the Secured Party's own
gross negligence or willful misconduct. The Secured Party shall not under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in a settlement, collection or payment
of any of Debtor's accounts or any instrument received in payment thereof or
for any damage resulting therefrom. The Secured Party does not by anything
herein or in any assignment or otherwise, assume any of Debtor's obligations
under any contract or agreement, and the Secured Party shall not be responsible
in any way for the performance by Debtor of any of the terms and conditions
contained herein. At any time subsequent to the occurrence of any Event of
Default hereunder, the Secured Party shall have the right to instruct the
Debtor's accountants at Debtor's expense, to verify the balances outstanding on
any and all of the accounts. Any checks, drafts, money orders, cash, items or
other instruments processed in the accordance with the foregoing shall be
applied as of the date received by the Secured Party to any unpaid balance of
any of the obligations of the Debtor, including but not limited to the
outstanding balance under the Note, subject to the Secured Party's right to
debit any such unpaid balance for any dishonored checks, drafts, money orders,
cash items, or instruments returned by the payor thereof.
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(c) Assembly of Collateral. In the event of default which is not
cured as provided in Paragraph 6(a), above, the Debtor shall, upon request of
the Secured Party, assemble the Collateral and make it available to the Secured
Party at a place reasonably convenient to both parties designated by the
Secured Party.
(d) Notice of Disposition. If an event of default (as defined in
Paragraph 6) has occurred under this Agreement, the Secured Party may sell the
Collateral at a public or private sale for cash or otherwise. The Secured Party
shall give the Debtor notice of the time and place of any public sale of any of
the Collateral or of the time after which any private sale or any other
intended disposition thereof is to be made by sending notice by first-class
mail, postage prepaid and addressed to the Debtor at the latest address of
Debtor appearing on the records of the Secured Party at least five (5) days
before the time of the sale or other disposition, which provisions for notice
the Debtor and Secured Party agree are reasonable.
(e) Application of Proceeds. Any proceeds of any disposition of
the Collateral, either in whole or in part, shall be applied by the Secured
Party first to the payment of expenses in connection with the Collateral and
the disposition thereof, including without limitation, reasonable counsels'
fees and legal expenses, and any balance of such proceeds may be applied by the
Secured Party to the payment of such of the Obligations secured by this
Agreement, and in such order of application, as the Secured Party may from time
to time elect.
(f) Debtor hereby appoints the Secured Party as its agent and
attorney in fact for the administration of this Agreement, including the sale
of the Collateral upon default. Such appointment as attorney in fact shall be
coupled with an interest and shall be irrevocable.
7. Covenant to Pay Deficiency.
In the event the sale or other disposition of the Collateral shall be
insufficient to satisfy the obligations secured by this Agreement and the
reasonable expenses of retaking, holding, preparing for sale, selling and the
like, including without limitation, reasonable attorneys' fees and legal
expenses incurred by the Secured Party in connection with this Agreement or the
Obligations secured hereby, the Debtor shall be and remain liable for any and
all of such deficiency.
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8. Miscellaneous.
(a) Waiver of Certain Matters. The Debtor expressly waives all
requirements of presentment, protest, notice of protest, notice of non-payment
or dishonor.
(b) Non-Waiver of Certain Matters. Any failure by the Secured
Party to exercise any right set forth in this Agreement shall not constitute a
waiver thereof. Nothing in this Agreement or in the Obligations secured hereby
shall preclude any other remedy by action or otherwise for the enforcement of
this Agreement or for the payment in full of the Obligations hereby secured.
(c) No Discharge. No party to this Agreement shall be discharged
by any extension of time, additional advances, notice, renewals and extensions
of the Note, the taking of further security, the extinguishment or release of
the security interest as to all or any part of the Collateral, or any other act
or omission, except by release or discharge of the security interest upon the
full payment of the Obligations secured hereby.
(d) Succession. This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the Debtor and the
Secured Party. Debtor may not assign its rights or obligations under this
Agreement without the written consent of the Secured Party.
(e) Notices. All notices, requests, demands and other
communications made in connection with this Agreement shall be in writing and
shall be deemed to have been duly given (a) on the date of delivery, if
delivered to the persons identified below, (b) seven calendar days after
mailing if mailed, with proper postage, by certified or registered mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Secured Party
00 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxxxx X. Close
If to the Debtor:
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attn: J.Xxxxxxx Xxxxx
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With copy to:
Xxxxxx Febbraio, Jr., Esq.
Xxxxxxxxx, Xxxxxx & Xxxxxx, LLC
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX. 00000
or (c) on the date of receipt if sent by telecopy, and confirmed in writing in
the manner set forth in (b) on or before the next day after the sending of the
telex or telecopy. Such addresses and numbers may be changed, from time to
time, by means of a notice given in the manner provided in this Section.
(f) Governing Law. The rights and duties of the parties under this
Agreement shall be governed by the laws of the State of Connecticut applicable
to contracts executed and to be wholly performed within such State, and Debtor
hereby irrevocably consents to the jurisdiction and venue of all state and
federal courts in the City of Bridgeport in any action based upon this
Agreement.
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IN WITNESS WHEREOF, the undersigned have duly executed this Security
Agreement as of the date set forth above.
DEBTOR
DRINKS AMERICAS, INC.
By: /s/________________________
duly authorized
SECURED PARTY
NEXCOMM INTERNATIONAL BEVERAGE, LLC
By: /s/________________________
Xxxxxxx X. Close, Member
duly authorized
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SCHEDULE A
(1) All accounts, contract rights, instruments, documents, chattel
paper, general intangibles (including, but not limited to choses in action, tax
refunds, and insurance proceeds); any other obligations or indebtedness owed to
Debtor from whatever source arising; all rights of Debtor to receive any
payments in money or kind; all guaranties of the foregoing and security
therefor; all of the right, title, and interest of Debtor in and with respect
to the goods, services, or other property that gave rise to or that secures any
of the foregoing and insurance policies and proceeds relating thereto, and all
rights of Debtor as an unpaid seller or lessor of goods and services,
including, but not limited to, the rights to stoppage in transit, replevin,
reclamation, and resale; and all of the foregoing, whether now owned or
existing or hereafter created or acquired.
(2) All goods, merchandise, and other personal property now owned or
hereafter acquired by Debtor that are held for sale or lease, or are furnished
or to be furnished under any contract of service or lease or are raw materials,
work-in-process, supplies, or materials used or consumed in Debtor's business,
and all products thereof, and all substitutions, replacements, additions, or
accessions therefor and thereto.
(3) All inventory, machinery, equipment, furniture and fixtures, now
owned or hereafter acquired by Debtor, and used or acquired for use in the
business of Debtor, together with all accessions thereto and all substitutions
and replacements thereof and parts therefore.
(4) All cash or noncash proceeds of any of the foregoing, including
insurance proceeds.
(5) All ledger sheets, files, records, documents, and instruments
(including, but not limited to, computer program, tapes, and related electronic
data processing software) evidencing an interest in or relating to the above.
(6) All instruments, documents, securities, property, and the proceeds
of any of the foregoing, owned by Debtor or in which Debtor has an interest,
which now or hereafter are at any time in the possession or control of Secured
Party or in transit by mail or carrier to or in the possession of any third
party acting on behalf of Secured Party, without regard to whether Secured
Party received the same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Secured Party had conditionally released
the same.
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