EXHIBIT 10.40
AMENDED AND RESTATED SECURITY AGREEMENT
by and among
BRIAZZ, Inc.,
Briazz Venture, L.L.C.
and
Spinnaker Investment Partners, L.P.
Dated as of April 10, 2003
AMENDED AND RESTATED SECURITY AGREEMENT
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This Amended and Restated Security Agreement ("Agreement") is entered into
and dated as of April 10, 2003, by and between BRIAZZ, Inc., a Washington
corporation ("Borrower"), Briazz Venture, L.L.C., an Illinois limited liability
company ("Briazz Venture"), and Spinnaker Investment Partners, L.P., a Delaware
limited partnership ("Spinnaker" and, together with Briazz Venture, the
"Lenders").
RECITALS
WHEREAS, Borrower and Briazz Venture are parties to that certain Amended
Security Agreement, dated March 6, 2003 (the "FFG Prior Security Agreement");
WHEREAS, Briazz Venture is the holder of one or more Senior Secured Notes
(the "FFG Notes"), issued pursuant to that certain Amended and Restated Purchase
Agreement, dated March 5, 2003, between Briazz Venture and Borrower (the "FFG
Purchase Agreement");
WHEREAS, Borrower and Lenders desire to amend and restated the FFG Prior
Security Agreement as set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lenders hereby agree
as follows:
ARTICLE I
DEFINITIONS
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The following terms shall have the meanings set forth below (such meanings
to be applicable equally both to the singular and plural terms defined) when
used in this Agreement:
"Accounts" means all present and future accounts, contracts and contract
rights, representations, warranties, including Borrower's rights (including
rights to payment) under all agreements, together with all claims, rights,
powers or privileges and remedies of Borrower relating thereto or arising in
connection therewith including all rights of Borrower to make determinations, to
exercise any election (including election of remedies) or option or to give or
receive any notice, consent, waiver or approval, together with full power and
authority to demand, receive, enforce, collection or receipt for any of the
foregoing or any Property which is the subject of any agreements, to enforce or
execute any checks, or other instruments or orders, to file any claims and to
take any action which (in either Lender's opinion) may be necessary or advisable
in connection with any of the foregoing.
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means any Person controlling, controlled by, under common
control with, or owning at least ten percent (10%) of the voting shares of, an
enterprise, whether such control is direct or indirect.
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"Agreement" shall have the meaning ascribed to such term in the Preamble of
this Agreement.
"Agreement Between Creditors" means the agreement, dated as of December 2,
2002 and amended and restated as of the date hereof, by and between FFG (and its
Affiliates), Spinnaker, Laurus, and Borrower, and any amendments thereto.
"Applicable Law" means any federal, state, local or foreign statute, law or
ordinance, or any judgment, decree, rule, regulation or order applicable to the
Person or subject matter being described, as the context indicates.
"Bankruptcy Code" means Title 11 of the United States Code, as amended, and
all rules, regulations and published interpretations promulgated thereunder.
"Borrower" shall have the meaning ascribed to such term in the Preamble of
this Agreement.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions are authorized or required by law to close in
Chicago, Illinois.
"CAPCO" means CAPCO Financial Company, a division of Cupertino National
Bank.
"CAPCO Subordination Agreements" means the subordination agreement dated
November 26, 2002, by and between CAPCO and Briazz Venture, and any amendments
thereto and the subordination agreement dated April 10, 2003 by and between
CAPCO and Spinnaker, and any amendments thereto.
"Capital Stock", with respect to any Person, means any capital stock of
such Person, whatever class or designation, and all warrants, options, purchase
rights, conversion or exchange rights, voting rights, calls or claims of any
character with respect thereto.
"Capitalized Equipment Lease Obligation" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a lease for
equipment used in the Person's business and which is required to be classified
and accounted for as capital lease obligations under GAAP and, for purposes of
this definition, the amount of such obligations at any date shall be the
capitalized amount of the obligations at such date, determined in accordance
with GAAP.
"Certificates of Designations" means those certain Articles of Amendment
designating Series D Preferred Stock of Borrower and the Series E Preferred
Stock of Borrower, in both cases as currently on file or to be filed with the
Washington Secretary of State prior to the Closing Date.
"Charter Documents" means Borrower's articles of incorporation and bylaws,
as in effect on the date of this Agreement.
"Closing Date" shall have the meaning ascribed to such term in the
Spinnaker Purchase Agreement.
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"CPA" means a certified public accountant.
"Code" means the Internal Revenue Code of 1986, as amended, including the
rules, regulations and published interpretations promulgated thereunder.
"Collateral" means all of the Property and interests in Property described
in Article II of this Agreement, and all other Property or interests in Property
that now or hereafter secure the payment and performance of any of the Secured
Obligations.
"Default Rate" means fourteen percent (14%) per annum.
"Due Date" means the date on which any payment is due under any Note.
"EBITDA" means, for any measuring period, Net Income before extraordinary
items, income taxes, interest expense, investment income, non-recurring
expenses, depreciation and amortization, plus any losses incurred by Borrower
because of FFG's failure to comply with Section 1 of the Food Production
Agreement.
"Equipment" means all of Borrower's right, title and interest whether now
owned or hereafter acquired, in and to all equipment, within the meaning of the
UCC and, in any event, including all machinery, equipment, furnishings, fixtures
and vehicles now or hereafter owned by Borrower and any additions, substitutions
and replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"ERISA" means the Employee Retirement Income Act of 1974, as amended, or
the rules, regulations and published interpretations promulgated thereunder
"Event of Default" means any "Event of Default" as defined in the Notes.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Existing Indebtedness" means the Indebtedness of Borrower in existence on
the Initial Closing Date, reduced to the extent such amounts are repaid,
refinanced or retired.
"FFG" means Flying Food Group, L.L.C., a Delaware limited liability
company.
"FFG Notes" has the meaning set forth in the recitals to this Agreement.
"FFG Purchase Agreement" has the meaning set forth in the recitals to this
Agreement.
"FFG Prior Security Agreement" has the meaning set forth in the recitals to
this Agreement.
"Financial Statements" mean (i) statements of operations and retained
earnings, statements of cash flow, and balance sheets, (ii) such other financial
reports as the subject entity shall routinely and regularly prepare and (iii)
such other financial reports as either Lender may
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from time to time reasonably require. Financial Statements may be unaudited
unless otherwise specified herein.
"Food Production Agreement" means the agreement dated as of December 1,
2002, between FFG and Borrower.
"GAAP" means generally accepted accounting principles consistently applied.
"General Intangibles" means any "general intangibles," as such term is
defined for purposes of the UCC, now or hereafter owned by Borrower and, in any
event, shall include all rights, interests, causes of actions, claims and all
other intangible property of Borrower of every kind and nature, in each instance
whether now owned or hereafter acquired by Borrower and however and whenever
arising, including all corporate and other business records; all loans,
royalties and other obligations receivable; customer lists, credit files,
correspondence, and advertising materials; firm sale orders, other contracts and
contract rights; all interests in partnerships and joint ventures; all tax
refunds and tax refund claims; all right, title and interest under leases,
subleases, licenses and concessions and other agreements relating to real or
personal property; all payments due or made to Borrower in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any Property
by any Person or Governmental Authority; all deposit accounts (general or
special) with any bank or other financial institution, including any deposits or
other sums credited by or due to Borrower from either Lender or any of their
respective Affiliates with the same rights therein as if the deposits or other
sums were credited by or due from either Lender; all credits with and other
claims against carriers and shippers; all rights to indemnification; all patents
and patent applications (including all reissues, divisions, continuations and
extensions); all trade secrets and inventions; all copyrights (including all
computer software and related documentation); all rights and interests in and to
trademarks, trademark registrations and applications therefor, trade names,
corporate names, brand names, slogans, all goodwill associated with the
foregoing; all license agreements and franchise agreements, all reversionary
interests in pension and profit sharing plans and reversionary, beneficial and
residual interests in trusts; all proceeds of insurance of which Borrower is
beneficiary; and all letters of credit, guaranties, liens, security interests
and other security held by or granted to Borrower; and all other intangible
property, whether or not similar to the foregoing.
"Governmental Authority" means any government, governmental or regulatory
agency or body, court, arbitrator or self-regulatory organization, domestic or
foreign.
"Holder" means any holder of any of the Notes or any of the Secured
Obligations.
"Increased Principal Amount" shall have the meaning ascribed to such term
in the Notes.
"Indebtedness" of any Person means (i) all obligations, debts, or
liabilities of such Person which in accordance with GAAP would be shown on a
balance sheet of such Person as a liability; (ii) all obligations, debts, or
liabilities of such Person for borrowed money or for the deferred purchase price
of Property or services, (iii) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all drafts drawn
thereunder, except to
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the extent it is an obligation, debt or liability described in clauses (i) and
(ii) above; (iv) all obligations, debts or liabilities for borrowed money or for
the deferred purchase price of Property or services secured by any Lien on any
Property owned by such Person, whether or not such obligation has been assumed;
and (v) all rental obligations under leases required to be capitalized under
GAAP and all guarantees and other contingent obligations of such Person in
respect of, or obligations to purchase or otherwise acquire, or to provide
payment of, obligations, debts or liabilities of other Persons.
"Initial Closing Date" shall have the same meaning ascribed to such term in
the FFG Purchase Agreement.
"Interest Payment Date" means the first Business Day of each month
occurring after the Initial Closing Date, beginning April 1, 2003, and
continuing until the Maturity Date of the Notes, whether by acceleration or
otherwise.
"Interest Period" means any one of consecutive one-month periods, the first
of which shall begin on the Initial Closing Date and end on the last day of the
month in which the Initial Closing Date occurs and the rest of which shall each
begin on the first day of each full month thereafter and end on the last day of
that month.
"Interest Rate" means (i) before the occurrence of or after the
discontinuance of an Event of Default, ten percent (10%) per annum; and (ii)
after the occurrence and during the continuance of an Event of Default, the
Default Rate.
"Inventory" means all of Borrower's right, title and interest, whether now
owned or hereafter acquired in and to all inventory, within the meaning of the
UCC, now or hereafter owned by Borrower, including raw materials,
work-in-process and finished goods and material or equipment useable in
processing such inventory, and all documents of title covering such inventory.
"Investment" by any Person means any direct or indirect (1) loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise) (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of business), (2) purchase
or acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidences of Indebtedness issued by any other Person, (3) guarantee or
assumption of any Indebtedness or any other obligation of any other Person
(except for an assumption of Indebtedness for which the assuming Person receives
consideration at the time of such assumption in the form of property or assets
with a fair market value at least equal to the principal amount of the
Indebtedness assumed, extensions of trade credit or other advances to customers
on commercially reasonable terms in accordance with normal trade practices or
otherwise in the ordinary course of business, workers' compensation, utility,
lease and similar deposits and prepaid expenses made in the ordinary course of
business, and endorsements of negotiable instruments and documents in the
ordinary course of business), and (4) all other items that would be classified
as investments on a balance sheet of such Person prepared in accordance
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with GAAP. The amount of any Investment shall not be adjusted for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Involuntary Borrower Bankruptcy" shall have the meaning ascribed to such
term in the Notes.
"Laurus" means Laurus Master Fund, Ltd.
"Lenders" shall have the meaning ascribed to such term in the Preamble of
this Agreement.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing, and any filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Liquidated Damages" means damages then owing pursuant to the Registration
Rights Agreement.
"Loan Instruments" means this Agreement, the Notes, the FFG Purchase
Agreement, the Spinnaker Purchase Agreement, the Registration Rights Agreement,
the Warrants, the Certificate of Designations, the Food Production Agreement,
the Voting Agreement, the Agreement Between Creditors and any other documents or
instruments executed or delivered in connection therewith whether on, prior to
or following the date of this Agreement.
"Maturity Date" means March 6, 2004; provided, that if the promissory note
dated September 30, 2002, between Borrower and U.S. Bank, as it may be amended
from time to time, becomes due prior to the Maturity Date, then the Maturity
Date shall be one (1) Business Day prior to the date such indebtedness becomes
due.
"Nasdaq" means the NASD OTC Bulletin Board, Nasdaq SmallCap Market and
Nasdaq National Market System.
"Net Income" shall mean the consolidated after-tax income of Borrower for
federal income tax purposes, computed in accordance with GAAP for the period in
question.
"Notes" means the Senior Secured Notes issued pursuant to the FFG Purchase
Agreement and the Spinnaker Purchase Agreement.
"Notice Addresses" mean:
If to Borrower:
BRIAZZ, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Briazz Venture:
Briazz Venture, L.L.C.
c/o New Management, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Spinnaker:
Spinnaker Investment Partners, L.P.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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"Other Personal Property" means all personal Property of Borrower of any
nature whatsoever, including cash, cash equivalents, bank accounts, deposits,
credit balances, notes, drafts, letters of credit, stocks, bonds, and debt and
equity securities, whether or not certificated, and warrants, options, puts and
calls and other rights to acquire or otherwise relating to the same, insurance
proceeds and books and records relating to any of the Property covered by this
Agreement, contract rights, goods, equipment, instruments, documents, chattel
paper, machinery, furniture, furnishings, fixtures, tools, supplies, appliances,
plans and drawings, together with all customer and supplier lists and records of
the business; and all accounting information pertaining to operations in, or
about any of Borrower's plants, and all media in which or on which any of the
information or knowledge or data is stored or contained, and all computer
programs used for the compilation or printout of such information (to the extent
Borrower is permitted to grant a security interest under any applicable license
agreement), knowledge, records or data; and all Property from time to time
described in any financing statement (UCC-1) signed by Borrower naming Lenders
as secured parties, together, in each instance, with all accessions and
additions thereto, substitutions therefor, and replacements, proceeds and
products thereof.
"Permits" mean any permit, certificate, authorization, approval, consent,
license or order of, or filing, registration, declaration or qualification with,
any Governmental Authority or any other person.
"Permitted Filings" shall have the meaning set forth in the FFG Purchase
Agreement and the Spinnaker Purchase Agreement.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes;
(ii) Existing Indebtedness;
(iii) Indebtedness in respect of bid, performance or surety bonds or
letters of credit issued for the account of Borrower in the ordinary course of
business, including guarantees or obligations of Borrower with respect to
letters of credit supporting such bid, performance or surety obligations (in
each case other than for an obligation for money borrowed) or to provide
security for worker's compensation claims, payment obligations in connection
with self-insurance or similar requirements in the ordinary course of business;
and
(iv) Indebtedness for accounts payable not to exceed an aggregate
principal amount of $2.0 million at any one time outstanding and any guarantee
thereof, including Existing Indebtedness for accounts payable.
"Permitted Liens" means:
(i) Liens for taxes, assessments and governmental charges or claims
either (a) not yet due or not delinquent or (b) contested in good faith by
appropriate Proceedings and as to which Borrower shall have set aside on its
books such reserves as may be required pursuant to GAAP;
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(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent for more
than 30 days or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security;
(iv) Any interest or title of a lessor under any Capital Equipment
Lease Obligation or operating lease;
(v) Liens securing Purchase Money Indebtedness in compliance with this
Agreement; provided that the related Purchase Money Indebtedness shall not be
secured by any property or assets of Borrower other than the property or assets
so acquired and any proceeds therefrom;
(vi) Liens on Borrower's Receivables granted in favor of CAPCO in
connection with Indebtedness incurred by Borrower to CAPCO pursuant to that
certain contract for sale security agreement dated August 28, 2002 between CAPCO
and Borrower;
(vii) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property or
assets relating to such letters of credit and products and proceeds thereof;
(viii) Liens granted in favor of Laurus in connection with Existing
Indebtedness incurred by Borrower to Laurus to the extent consistent with the
Agreement Between Creditors;
(ix) Liens securing obligations in respect of the Notes;
(x) [Reserved]; and
(xi) any extension, renewal, refinancing or replacement, in whole or
in part, of any Lien described in clauses (i)-(x) of this definition, so long as
no additional collateral is granted as security therefor.
"Person" means and includes any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or agency, department or instrumentality thereof.
"Preferred Stock" means Borrower's Series D Preferred Stock, no par value,
and the Borrower's Series E Preferred Stock, no par value.
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"Proceeding" means any action, claim, suit, demand, hearing, notice of
violation or deficiency, or proceeding (including any investigation or partial
proceeding, such as a deposition), whether domestic or foreign.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Purchase Money Indebtedness" means Indebtedness, or that portion of
Indebtedness, of any Person incurred in connection with the acquisition by the
Person, subsequent to the date hereof, of any property or assets, including
Capital Equipment Lease Obligations.
"Receivables" means all of Borrower's right, title and interest whether now
owned or hereafter acquired, in and to all right to payment for goods (including
freight and taxes) sold or leased or services performed by Borrower, whether now
in existence or arising from time to time hereafter, including rights evidenced
by an account, note, contract, security agreement, chattel paper, or other
evidence of Indebtedness or security, together with (a) all security pledged,
assigned, hypothecated or granted to or held by Borrower to secure the
foregoing, (b) all of Borrower's right, title and interest in and to any goods,
the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of Indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.
"Registration Rights Agreement" means that certain Amended and Restated
Registration Rights Agreement, dated of even date herewith, between Borrower and
Lenders.
"Related Party" means any executive officer, director or shareholder
owning, directly or indirectly, 10% or more of Borrower's Capital Stock or any
member of any such person's immediate family.
"Restricted Payment" means:
(i) declare or pay any dividend or make any distribution on account of
any Capital Stock of Borrower;
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of Borrower;
(iii) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Indebtedness of Borrower; or
(iv) make any Investment in any Person;
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"Secured Obligations" means all obligations and liabilities of Borrower to
Lenders under this Agreement, the Notes and the Food Production Agreement
(including all debts, claims, and Indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now or from time to time
hereafter owing, due or payable however evidenced, created, incurred, acquired
or owing and however arising, whether under this Agreement or otherwise, or by
oral agreement or operation of law or otherwise.
"Shareholder Approval" means the approval from the holders of a majority of
Borrower's common stock of the issuance of shares of Borrower's common stock
upon the conversion of the Preferred Stock as provided in the Certificates of
Designations.
"Spinnaker Note" means that certain Senior Secured Note, dated the date
hereof, issued pursuant to the Spinnaker Purchase Agreement.
"Spinnaker Purchase Agreement" means that certain Purchase Agreement, dated
as of the date hereof, between Borrower and Spinnaker.
"Subordinated Indebtedness" means any Indebtedness of Borrower that is
subordinated in right of payment by its terms or the terms of any document or
instrument relating thereto to the Notes in any respect.
"Total Debt" means all liabilities, obligations and reserves (in each case
excluding the amount of any and all indebtedness which is subordinated to
Lenders), contingent or otherwise, which, in accordance with GAAP, would be
reflected on a balance sheet or would be required to be disclosed in a financial
statement including, without duplication: (i) all Indebtedness for borrowed
money, (ii) all obligations under conditional sales or title retention
agreements, and (iii) all obligations secured by any Lien upon any of Borrower's
Property.
"UCC" means the Uniform Commercial Code, as the same may, from time to
time, be effect in the State of Washington; provided, however, in the event that
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Lenders' security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Washington, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"Voting Agreement" means the agreement dated March 5, 2003 among Briazz
Venture and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and the agreements among Briazz Venture and other
shareholders of Borrower delivered in accordance with Section 3(dd) of the FFG
Notes.
"Warrants" means the Warrants issued by Borrower to the Lenders pursuant to
the FFG Purchase Agreement and the Spinnaker Purchase Agreement.
References to "Articles," "Sections," "Subsections," "Exhibits" and
"Schedules" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Agreement unless otherwise specifically provided. In this
Agreement, the words "including", "includes" and "include" shall be deemed to be
followed by the words "without limitation;" references to agreements and other
contractual instruments shall be deemed to include subsequent
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amendments, assignments, and other modifications thereto, but only to the extent
such amendments, assignments and other modifications are not prohibited by the
terms of this Agreement or any other Loan Instruments; and all references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. The word "knowledge" means, when applied to
Borrower, the actual knowledge, after due inquiry, of any of the executive
officers of Borrower. Unless the context otherwise requires, defined terms shall
include the singular and plural and the conjunctive and disjunctive forms of the
terms defined.
ARTICLE II
PLEDGE AND SECURITY INTEREST
----------------------------
Section 2.1 Pledge and Grant of Security Interest. As collateral security
for the prompt and complete payment and performance when due of all of the
Secured Obligations, Borrower does hereby grant to Lenders, subject to Permitted
Liens, a continuing first-priority security interest in, to and under (with
respect to everything described below) all of Borrower's assets (as set forth
below, the "Collateral"), whether now owned or existing or hereafter created,
acquired or arising and wherever located, including (i) Receivables; (ii)
Inventory; (iii) Equipment; (iv) General Intangibles; (v) all books and records
of Borrower; (vi) all Accounts of Borrower; (vii) all liens, security,
guaranties, endorsements, warranties and indemnities, and all insurance and
claims for insurance relating thereto or arising in connection therewith; (viii)
all rights to Property forming the subject matter of the Accounts; (ix) all
notes, contracts, security agreements, guaranties, chattel paper and other
evidence of indebtedness or security, all powers-of-attorney, all books,
records, ledger cards and invoices, all credit information, reports, or
memorandums and all evidence of filings or registrations relating thereto; (x)
all Other Personal Property; (xii) all additions, accessions, replacements,
substitutions or improvements and all products and proceeds including proceeds
of insurance, of any and all of the collateral described in clauses (i) through
(x) and proceeds (including all insurance and claims for insurance effected or
held for the benefit of Borrower) and products of any and all of the foregoing.
Section 2.2 Application to After-Acquired Property. Lenders' security
interest under this Agreement extends to all Collateral of the kind which is the
subject of this Agreement which Borrower may acquire at any time during the
continuation of this Agreement.
Section 2.3 Security for Secured Obligations; Limitation of Liability. This
Agreement secures the payment of all obligations of Borrower now or hereafter
existing under this Agreement, the Notes and the Food Production Agreement,
whether for principal, premium, interest, fees, expenses or otherwise. Without
limiting the generality of the foregoing, this Agreement secures the payment of
all amounts that constitute part of the Secured Obligations and would be owed by
Borrower under or with respect to this Agreement, the Notes and the Food
Production Agreement, but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
Proceeding involving Borrower.
Section 2.4 Borrower Remains Liable. Anything herein to the contrary
notwithstanding, (a) Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of Borrower's duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by
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either Lender of any of the rights hereunder shall not release Borrower from any
of its duties or obligations under the contracts and agreements included in the
Collateral and (c) neither Lender shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall either Lender be obligated to perform any of the
obligations or duties of Borrower thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
Section 2.5 Related Security Agreements. This Agreement amends and restates
the FFG Prior Security Agreement. The terms and conditions of this Agreement are
subject to the terms and conditions of the CAPCO Subordination Agreement and the
Agreement Between Creditors.
ARTICLE III
COLLATERAL ADMINISTRATION
-------------------------
Section 3.1 Additional Covenants. Borrower covenants and agrees that, so
long as this Agreement is in effect and until all of its Secured Obligations
have been satisfied and are paid in full, it will:
(i) pay and discharge all taxes, assessments and governmental charges or
levies imposed upon Borrower or its Property or assets, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid,
might become a Lien or charge upon the Collateral, except to the extent
that the imposition of any such tax, assessment, charge or levy or the
validity of any such claim is being contested in good faith by appropriate
Proceedings and Borrower has set aside adequate reserves with respect to
any such tax, assessment, charge, levy or claim so contested;
(ii) maintain insurance in the amounts and against the risks as shall be
consistent with prudent business practices in Borrower's industry, which in
no event shall be less than the insurance coverage as Lenders shall
reasonably require from time-to-time;
(iii) allow any representative of Lenders to examine Borrower's books of
record and account and to discuss Borrower's affairs, finances and accounts
with Borrower's officers, all at such reasonable time and as often as
Lenders may reasonably request; and
(iv) ensure that its Property and equipment used or useful in its business
are kept in good repair (except for items that are not repairable), working
order and condition, ordinary wear and tear excepted, and that from time to
time there are made in such properties and equipment all necessary and
proper repairs, renewals, replacements, extensions, additions, betterments,
and improvements thereto, to the extent and in the manner customary for
companies in similar lines of business under similar circumstances.
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Section 3.2 Provisions Concerning Collateral.
3.2.1 Further Actions. Borrower will, at its own expense, make,
execute, endorse, acknowledge, file or deliver to Lenders from time to time such
lists, descriptions and designations of its Collateral, documents of title,
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurance on instruments and take such further steps relating to the
Collateral and other Property or rights covered by the security interest hereby
granted, which Lenders deem reasonably appropriate or advisable to perfect,
preserve or protect its security interest in the Collateral.
3.2.2 Financing Statements. Borrower agrees to sign and deliver to
Lenders such financing statements, in form acceptable to Lenders, as Lenders may
from time to time reasonably request or as are necessary or desirable in the
opinion of Lenders to establish and maintain, except as provided herein, a
valid, enforceable, continuing first-priority security interest in the
Collateral and the other rights and security contemplated hereby all in
accordance with the UCC or any other relevant law. Borrower will pay any
applicable filing fees and related expenses. Borrower authorizes Lenders to file
any such financing statements without the signature of Borrower.
ARTICLE IV
EVENTS OF DEFAULT
-----------------
Section 4.1 Events of Default Defined. An Event of Default shall be as
defined in the Notes.
ARTICLE V
REMEDIES
--------
Section 5.1 Remedies Upon Default. Upon an Event of Default, each Lender
shall have any and all of the remedies to which it is entitled under the Notes
issued to it.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1 Right of Setoff. In addition to any rights now or hereafter
granted under Applicable Law or otherwise and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, Lenders are hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other indebtedness at any time
held or owing by either Lender to or for the credit or the account of Borrower
against and on account of the Secured Obligations and liabilities of Borrower to
Lenders under any Loan Instrument and all other claims of any nature or
description arising out of or connected with any Loan Instrument,
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irrespective of whether or not Lenders shall have made any demand hereunder and
although said Secured Obligations, liabilities or claims, or any of them, shall
be contingent or unmatured.
Section 6.2 Notices. All notices, demands, consents, requests, instructions
and other communications to be given or delivered or permitted under or by
reason of the provisions of this Agreement, or in connection with the
transactions contemplated hereby and thereby, shall be in writing and shall be
deemed to be delivered and received by the intended recipient as follows: (a) if
personally delivered, on the Business Day of such delivery (as evidence by the
receipt of the personal delivery service); (b) if mailed by certified or
registered mail, return receipt requested, four (4) Business Days after the
aforesaid mailing; (c) if delivered by overnight courier (with all charges
having been prepaid), on the second Business Day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing); or (d)
if delivered by facsimile transmission, on the Business Day of such delivery if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time,
on the next succeeding Business Day (as evidenced by the printed confirmation of
delivery generated by the sending party's telecopier machine). All such notices,
demands, consents, requests, instructions and other communications will be sent
to the applicable Notice Addresses.
Section 6.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto; provided, however, Borrower may not
assign or transfer any of its interests hereunder without the prior written
consent of each of the Lenders. All agreements, statements, representations and
warranties made by Borrower herein or in any certificate or other instrument
delivered by Borrower or on Borrower's behalf under any Loan Instrument shall be
considered to have been relied upon by Lenders and shall survive the execution
and delivery of the Loan Instruments regardless of any investigation made by
Lenders or on their behalf. Lenders may at any time grant or sell participations
in, or assign or otherwise dispose of all or any part of its interests hereunder
or under any of the Notes to any Person at its own expense, provided that such
transfer is permitted under the terms of the FFG Purchase Agreement or Spinnaker
Purchase Agreement, as may be relevant.
Section 6.4 No Waiver; Remedies Cumulative. No failure or delay on the part
of any Lender or any Holder in exercising any right, power or privilege under
any Loan Instrument, no renewal or extension of any of the Secured Obligations,
and no course of dealing between Borrower and any of the Lenders or such Holder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege under any Loan Instrument preclude any other or
further exercise of any right, power or privilege hereunder or thereunder. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which any Lender or any Holder would otherwise have
under any Loan Instrument or now or hereafter existing at law or in equity, or
by statute. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of any Lender or any Holder
to any other or further action in any circumstances without notice or demand.
Section 6.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Illinois. Each of
the parties hereto (i) consents to submit itself to the personal jurisdiction of
the United States District Court for the Northern
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District of Illinois or any Illinois state court located in ▇▇▇▇ County,
Illinois in the event any dispute arises out of this Agreement; (ii) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court; (iii) agrees that it will not bring
any action relating to this Agreement in any court other than the United States
District Court for the Northern District of Illinois or an Illinois state court
located in ▇▇▇▇ County, Illinois and (iv) waives any right to trial by jury with
respect to any claim or Proceeding related to or arising out of this Agreement.
Section 6.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute the same instrument.
Section 6.7 Effectiveness. This Agreement shall become effective on the
date on which all of the parties hereto shall have signed a copy hereof (whether
the same or different copies) and shall have delivered the same to each of the
Lenders.
Section 6.8 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
Section 6.9 Amendment or Waiver. This Agreement may not be amended,
changed, waived, discharged or terminated without the written consent of Briazz
Venture, Spinnaker and Borrower.
Section 6.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 6.11 Obligations Absolute. The obligations of Borrower hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Borrower (except to the
extent required by law); (b) any exercise or non-exercise, or any waiver of, any
right, remedy, power or privilege under or in respect of any Loan Instrument; or
(c) any amendment to or modification of any document evidencing or securing
Borrower's Secured Obligations to Lenders or any security for any of the Secured
Obligations; whether or not Borrower shall have notice or knowledge of any of
the foregoing; except, under (b) and (c), as otherwise provided in the
applicable Loan Instruments.
Section 6.12 Borrower's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that Borrower shall remain liable to
perform all of the obligations, if any, assumed by it with respect to the
Collateral and neither Lender shall have any obligations or liabilities with
respect to any Collateral by reason of or arising out of this Agreement, nor
shall either Lender be required or obligated in any manner to perform or fulfill
any of the obligations of Borrower under or with respect to any Collateral.
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
BORROWER:
BRIAZZ, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Title: CEO
----------------------------
LENDERS:
BRIAZZ VENTURE, L.L.C.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: Chief Financial Officer
----------------------------
SPINNAKER INVESTMENT PARTNERS, L.P.
By: Spinnaker Capital Partners, LLC,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------
Title: Manager
----------------------------
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