Exhibit 10.33
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT AND ALL APPLICABLE STATE SECURITIES LAWS COVERING
SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE 1933 ACT
AND EXEMPTIONS FROM ALL APPLICABLE STATE SECURITIES LAWS, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT,
PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933.
SENIOR SECURED NOTE
$2,000,000 March 6, 2003
FOR VALUE RECEIVED, the undersigned, BRIAZZ, Inc., a Washington
corporation ("Borrower"), promises to pay to the order of Briazz Venture,
L.L.C., an Illinois limited liability company ("Lender"), at such place as may
be designated from time to time in writing by Lender, the principal sum of Two
Million Dollars ($2,000,000) in lawful money of the United States of America.
This Note is being issued in connection with, among other agreements,
the Amended and Restated Purchase Agreement by and between Borrower and Lender
dated as of March 5, 2003, and the Amended Security Agreement by and between
Borrower and Lender dated as of March 6, 2003 (the "Security Agreement").
Capitalized terms used herein without definition shall have the meanings given
such terms in the Security Agreement. This Note is one of a series of similar
Notes (singularly, the "Note" and collectively, the "Notes") issued pursuant to
the Purchase Agreement. The Notes shall rank equally without preference or
priority of any kind over one another and all cash payments on account of
principal and interest with respect to any of the Notes shall be applied ratably
and proportionately on all outstanding Notes on the basis of the principal
amount of outstanding indebtedness represented thereby.
1. PAYMENT TERMS.
(a) Principal. The unpaid principal balance and all
unpaid and accrued interest on the Note shall be due and payable on or
prior to the earlier of (i) the Maturity Date and (ii) when such
amounts are made due and payable upon or after the occurrence of an
Event of Default.
(b) Interest. Borrower promises to pay interest on the
outstanding principal amount of the Note at the Interest Rate. Borrower
shall pay interest monthly in arrears, in cash, on each Interest
Payment Date and on the Maturity Date and thereafter until the Note is
fully repaid, whether by acceleration or otherwise, on demand. If an
Event of Default occurs and while such Event of Default is continuing,
the interest rate shall be increased to
the Default Rate. Interest shall be computed on the basis of a 360-day
year of twelve (12) 30-day months, and shall be compounded
semi-annually.
(c) Principal Prepayment. Borrower may prepay all or a
portion of the principal amount of the Note outstanding without premium
or penalty.
(d) Recordation of Principal Repayments. The date and
amount of each payment of principal of the Notes received by Lender
shall be recorded by the Lender in its records. The failure to record
or any error in recording any such repayment shall not, however, affect
the Obligations of Borrower under the Note to repay the principal
amount of the Note outstanding, together with all interest accruing
thereon, nor shall such failure or error affect any rights of Borrower
hereunder or under applicable law. The records, if relevant, as
maintained by Lender, absent manifest error or omission, shall
constitute prima facie evidence of the amount outstanding under the
Note.
(e) Payments. All payments by Borrower to Lender
hereunder shall be made in lawful currency of the United States of
America and in immediately available funds no later than 1:00 p.m.,
Chicago time, on the Due Date at Lender's address. Lender shall apply
payments received from Borrower hereunder first to the payment of
interest due and then to the payment of principal under the Note. All
payments by Borrower to Lender hereunder shall be made without offset,
counterclaim, deduction or withholding of any nature. In the event the
date specified for any payment hereunder is not a Business Day, such
payment shall be made on the next following Business Day. Any amounts
paid after 1:00 p.m., Chicago time, on any Business Day shall be deemed
to be paid on the next succeeding Business Day.
(f) Funding Costs. Borrower shall pay to Lender as part
of Borrower's Obligations, on demand, any and all charges asserted by a
bank or similar institution against Lender for or with respect to
Lender's forwarding to Borrower of proceeds of the Note for or with
respect to Lender's depositing for collection any check or item of
payment received or delivered to Lender on account of the Obligations.
2. SECURITY INTEREST. Pursuant to the terms of the Security
Agreement, Borrower has granted Lender, subject to the Agreement Between
Creditors, a first-priority security interest in all of Borrower's assets of
every nature and type whatsoever (except as provided in the Security Agreement)
to secure the payment of all of Borrower's indebtedness hereunder.
3. COVENANTS. Borrower hereby covenants and agrees that on
and after the date hereof and until the Note, together with interest, is paid in
full, unless otherwise consented to by Lender in writing:
(a) Payment of Notes. Borrower shall pay the principal of
and interest on the Note on the dates and in the manner provided
herein. Borrower shall pay interest on overdue principal and on overdue
installments of interest at the Default Rate, compounded semi-annually,
to the extent lawful.
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(b) Limitations on Restricted Payments. Borrower shall
not make any Restricted Payments.
(c) Corporate Existence. Borrower shall do or cause to be
done all things necessary to preserve and keep in full force and effect
its corporate organizational existence in accordance with its
organizational documents and the material rights (charter and
statutory) and material corporate franchises of Borrower, provided that
Borrower shall not be required to preserve, with respect to itself, any
right or franchise if Borrower shall determine that the preservation
thereof is no longer desirable in the conduct of its business.
(d) Limitation on Transactions with Affiliates. Borrower
shall not, on or after the Closing Date, conduct any business or enter
into any transaction or series of transactions with or for the benefit
of any Affiliates. Notwithstanding the foregoing, the restrictions set
forth in this covenant shall not apply to (i) transactions between
Borrower and Lender or affiliates of Lender, (ii) transactions entered
into prior to the Closing Date, or (iii) reasonable or customary
business fees, compensation paid to, and indemnity provided on behalf
of, officers, directors or employees of Borrower as determined in good
faith by Borrower's board of directors.
(e) Limitation on Incurrence of Additional Indebtedness.
Borrower shall not directly or indirectly incur any Indebtedness other
than Permitted Indebtedness.
(f) Limitations on Layering Indebtedness. Borrower shall
not, directly or indirectly, incur any Indebtedness that is
contractually subordinate to any of Borrower's Indebtedness unless, by
its terms, such Indebtedness is made expressly subordinate to the
Obligations to the same extent and in the same manner as the
Indebtedness is subordinated pursuant to the subordination provisions
that are most favorable to the holders of any Indebtedness of the
Borrower.
(g) Waiver of Stay, Extension or Usury Laws. Borrower
covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any
usury law or other law which would prohibit or forgive Borrower from
paying all or any portion of the principal of, premium of, or interest
(or Liquidated Damages, if any) on the Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, and (to the
extent that it may lawfully do so) Borrower hereby expressly waives all
benefit or advantage of any such law and covenants that it shall not
hinder, delay or impede the execution of any remedy available to
Lender, but shall suffer and permit the execution of every such power
as though no such law had been enacted.
(h) Limitation on Liens Securing Indebtedness; Limitation
on Impairment of Lien; Additional Collateral.
(i) Borrower shall not, directly or indirectly,
create, incur, assume, affirm or suffer to
exist or become effective any Lien of any
kind on any asset (including, without
limitation, all real, tangible or
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intangible property) of Borrower, whether
now owned or hereafter acquired, or on any
income or profits therefrom, or assign or
convey any right to receive income
therefrom, except (1) Liens in favor of
Lender securing the Obligations under the
Security Agreement and the Notes and (2)
Permitted Liens.
(ii) Borrower shall not take or omit to take any
action which action or omission would have
the result of adversely affecting or
impairing the Lien in favor of Lender under
this Agreement or the priority thereof; and
Borrower shall not grant to any Person, or
suffer any Person (other than the Borrower)
to have any interest whatsoever in the
Collateral other than Permitted Liens.
Borrower shall not enter into any agreement
or instrument that by its terms requires the
proceeds received from any sale of
Collateral to be applied to repay, redeem,
defease or otherwise acquire or retire any
Indebtedness, other than as contemplated by
this Agreement, the Notes, the Agreement
Between Creditors, the CAPCO Subordination
Agreement and the Contract of Sale and
Security Agreement dated August 26, 2002,
between Capco and Borrower. Borrower shall,
at its sole cost and expense, execute and
deliver all such agreements and instruments
as Lender shall reasonably request to more
fully or accurately describe the property
intended to be Collateral or the obligations
intended to be secured by the Security
Agreement and the Note. Borrower shall, at
its sole cost and expense, file any such
notice filings or other agreements or
instruments as may be reasonably necessary
or desirable under applicable law to perfect
the Liens created by this Agreement and the
Notes at such times and at such places as
Lenders may reasonably request.
(iii) From and after the Closing Date, Borrower
shall grant to Lenders, subject only to
Permitted Liens, a first priority Lien on
all property, subject to the Agreement
Between Creditors.
(i) Taxes. Borrower shall pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it 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.
(j) Compliance with Statutes, Etc. Borrower shall comply
in all material respects with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business
and the ownership of its Property (including applicable statutes,
regulations, orders and restrictions relating to environmental
standards and controls).
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(k) Notice of Default or Litigation. Borrower shall
deliver to Lender promptly, and in any event within three (3) Business
Days after Borrower obtains knowledge thereof, notice of (i) the
occurrence of any event which constitutes an Event of Default, (ii) any
litigation or governmental proceeding pending against Borrower which is
likely materially and adversely to affect the financial condition or
operations of Borrower (including any matter where Borrower's maximum
potential exposure could equal or exceed $25,000), and (iii) any other
event which is likely materially and adversely to affect the financial
condition or operations of Borrower.
(l) Examinations. Borrower shall allow any representative
of Lender to visit and inspect any of its properties, to examine its
books of record and account and to discuss its affairs, finances and
accounts with its officers, all at such reasonable time and as often as
Lender may reasonably request.
(m) Condition of Equipment. Borrower shall 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.
(n) Future Disclosure. Borrower covenants that all
information hereafter furnished by Borrower or on its behalf in writing
to Lender will be true and accurate in all material respects on the
date as of which such information is dated or certified and not
incomplete by omitting to state any material fact necessary to make
such information not materially misleading at such time.
(o) EBITDA. Borrower shall generate positive EBITDA, as
reflected in the quarterly Financial Statements that Borrower shall
provide to Lender, either (i) in each fiscal quarter beginning with the
quarter ending June 30, 2003, or (ii) cumulatively from the fiscal
quarter ending June 30, 2003 to the date of measurement. Failure to
satisfy both (i) and (ii) above shall cause the outstanding principal
amount of the Note and accrued interest thereon to become due and
payable on the forty-fifth (45th) day following the measurement date at
which Borrower has not satisfied (i) and (ii) above.
(p) Board Meetings. Borrower shall provide Lender with a
final version of each set of board minutes no later than three (3)
Business Days of when the minutes are approved by Borrower's board of
directors.
(q) [Reserved]
(r) Shareholder Approval. Borrower shall hold a
shareholder meeting at which it seeks Shareholder Approval no later
than April 30, 2003.
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(s) Consolidation, Merger, Sale of Assets, Stock
Transactions, etc. Borrower shall not (i) wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree
to do any of the foregoing at any future time) all or any substantial
part of its Property or assets (other than sales and leases in the
ordinary course of business of inventory and of Equipment that is
obsolete or no longer used or useful and assignments for collection in
the ordinary course of business or as otherwise contemplated in the
Food Purchase Agreement dated as of December 1, 2002, between Borrower
and Flying Food Group, L.L.C.), or (ii) purchase, lease or otherwise
acquire (in one or a series of related transactions) any part of the
Property or assets (other than purchases, leases or other acquisitions
of inventory, materials and Equipment in the ordinary course of
business) of any Person, other than in the ordinary course of business
and consistent with Borrower's past practice.
(t) Type of Business. Borrower shall not make any
material change in the type of business it now conducts except as
contemplated by the parties hereto. The parties acknowledge that
licensing Borrower's intellectual property for use by potential
franchisees would not constitute a material change in the business of
Borrower.
(u) Amendment to Charter Documents. Borrower shall not
amend the Charter Documents, except to provide for the authorization
and issuance of the Preferred Stock or to eliminate any series of
preferred stock no shares of which are outstanding.
(v) Capital Stock. Borrower shall not (i) permit a split,
combination or reclassification of any shares of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of the Borrower's
capital stock; (ii) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of Borrower's capital stock
or any securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares (except pursuant to
outstanding options, warrants and convertible debt listed on Schedule
6(c) attached to the Purchase Agreement, or pursuant to the Warrants or
the Preferred Stock) or (iii) repurchase or redeem any shares of its
capital stock.
(w) Management. Borrower shall not (i) remove, replace or
otherwise change any member of Borrower's directors or officers (other
than as provided in the Loan Instruments) or (ii) increase the salary,
benefits or other compensation of Borrower's directors and officers,
including the grant of additional options to purchase shares of
Borrower's Common Stock.
(x) Bankruptcy, Receivers, Similar Matters.
(i) Voluntary Cases. Borrower shall not commence
a voluntary case under the Bankruptcy Code
or under any applicable bankruptcy,
insolvency or other similar law now or
hereafter in effect.
(ii) Involuntary Cases, Receivers, Etc. Borrower
shall not apply for, consent to, or aid,
solicit, support, or otherwise act,
cooperate or
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collude to cause the appointment of or
taking possession by, a receiver, trustee or
other custodian for all or a substantial
part of the assets of Borrower. As used
herein, an "Involuntary Borrower Bankruptcy"
shall mean any involuntary case under the
Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law
now or hereafter in effect, in which
Borrower is a debtor or any portion of the
Property is property of the estate therein
or subject to the automatic stay thereof.
Borrower shall not file a petition for,
consent to the filing of a petition for, or
aid, solicit, support, or otherwise act,
cooperate or collude to cause the filing of
a petition for an Involuntary Borrower
Bankruptcy. In any Involuntary Borrower
Bankruptcy, Borrower shall not, without the
prior written consent of Lenders, consent to
the entry of any order, file any motion, or
support any motion (irrespective of the
subject of the motion), and Borrower shall
not file or support any plan of
reorganization. Borrower shall do all things
reasonably requested by Lender to assist
Lender in obtaining such relief as Lender
shall seek, and shall in all events vote as
directed by Lender. Notwithstanding the
foregoing, Borrower shall do all things
reasonably requested by Lender to support
any motion for relief from stay or plan of
reorganization proposed or supported by
Lender. Nothing in this provision shall
obligate any Person to act contrary to any
order of any court, which order was not
sought or acquiesced in at the direction of
Lender or Borrower.
(y) Financial Reporting. Borrower shall provide the
following to Lender:
(i) Annual Reporting. As soon as available, and
in any event within ninety (90) days after
the end of each fiscal year commencing with
the current fiscal year, Borrower shall
provide to Lender true and complete copies
of its Financial Statements for that year
and a copy of all filings made for the year
end with the Securities and Exchange
Commission. All Financial Statements shall
be audited by an independent CPA acceptable
to Lender in their reasonable discretion,
and shall bear the unqualified (except for
customary qualifications) certification of
the accountants that the Financial
Statements present fairly in all material
respects the financial position of Borrower.
If Borrower is no longer required to file
under the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), the annual
Financial Statements shall include the
certification of Borrower's chief executive
officer and chief financial officer as if
Borrower was a reporting company under the
Exchange Act. Notwithstanding the foregoing,
the Financial Statements for the year ended
and ending December 31, 2002 and December
31, 2003, respectively, may contain a
qualification regarding Borrower's ability
to continue as a going concern.
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Borrower shall deliver to Lender together with such financial
statements a certificate, dated as of a date within five (5) days of delivery
and signed by the chief executive officer of Borrower, certifying that he is
familiar with the provisions of each Loan Instrument delivered to Lender in
connection herewith, and that he finds that no Event of Default has occurred and
is continuing, or if any Event of Default has occurred and is continuing,
setting forth details of same.
(ii) Quarterly Reporting. Within forty-five (45)
days after the end of the first three
calendar quarters of each fiscal year,
Borrower shall provide true and complete
unaudited copies of its Financial Statements
for such quarter to Lender and a copy of any
report for such quarter filed with the
Securities and Exchange Commission. If
Borrower is no longer required to file under
the Exchange Act, the quarterly Financial
Statements shall include the certification
of Borrower's chief executive officer and
chief financial officer as if Borrower was a
reporting company under the Exchange Act.
(iii) Monthly Reporting. Within thirty (30) days
after the end of each month during the term
of this Agreement, Borrower shall deliver to
Lenders an unaudited:
(1) statement of income;
(2) balance sheet; and
(3) statement of cash flows
in each case as of the end of such month, all in reasonable detail and certified
by Borrower's chief financial officer as having been prepared in accordance with
GAAP (subject, in each case, to the absence of footnote disclosures and other
presentation items and normal, recurring, quarter-end and year-end adjustments).
(z) Budget. As soon as available, but in no event later
than the end of Borrower's previous fiscal year, commencing with the
fiscal year ending December 31, 2003, Borrower shall provide to Lenders
for their approval a proposed budget for Borrower's upcoming calendar
year, including monthly projections of costs, expenses, revenues and
inventory requirements.
(aa) Laurus Principal Payments. Until all amounts
outstanding on the Notes have been repaid in full, Borrower shall not
make any principal payments on indebtedness owed to Laurus except for
principal payments made solely in the form of shares of Borrower's
Common Stock and not in the form of cash or other securities, all in
accordance with the terms and conditions of the documents governing the
loans made to Borrower by Laurus.
(bb) Board. Upon Borrower's receipt of shareholder
approval of the transactions contemplated by the Purchase Agreement in
the manner required by Nasdaq,
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and upon Lender's written demand and subject to the requirement of Rule
14f-1 under the Exchange Act, to the extent applicable, Borrower shall
cause a sufficient number of Borrower's directors to resign to permit
up to five (5) designees of Lender to be appointed to Borrower's board
of directors. If at the time Lender exercises its right to appoint
members to Borrower's board of directors, or at any time thereafter,
Borrower's shares of common stock are listed on an exchange or included
for quotation on an interdealer quotation system of Nasdaq, including
the Nasdaq National Market System, the appointment of Lender's
designees shall be in accordance with the rules and regulations of the
exchange or Nasdaq so long as the shares of Borrower's common stock
remain listed on the exchange or included for quotation. Further, if
Lender has exercised these rights prior to April 1, 2003, one of the
designees of Lender shall agree at the time of his or her appointment,
in form satisfactory to Borrower, to resign from Borrower's board of
directors if Borrower has completed an equity financing with gross
proceeds to Borrower of at least $4 million by April 1, 2003. If
Borrower completes the equity financing referred to in the prior
sentence, then Lender shall have the right to designate and appoint up
to four (4) persons to serve on Borrower's board of directors. If the
exercise of the rights granted Lender in this clause (bb) constitutes a
"change of control" under Borrowers then existing directors' and
officers' liability insurance policy, the Borrower may, immediately
prior to such change of control, maintain in effect, if available,
directors' and officers' liability insurance covering those persons
who, as of the date immediately prior to the "change of control" are
covered by the Borrower's directors' and officers' liability insurance
policy (the "INSURED PARTIES") on terms no less favorable to the
Insured Parties than those of the Borrower's present directors' and
officers' liability insurance policy provided that the board of
directors of Borrower can obtain such coverage at a cost it believes to
be on commercially reasonable terms and conditions. Borrower may not
incur additional indebtedness for borrowed money in order to pay for
such coverage other than in accordance with past practice. Prior to
Borrower's receipt of shareholder approval of the transactions
contemplated by the Purchase Agreement in the manner required by
Nasdaq, Lender shall have the right to designate one (1) person to be
appointed to Borrower's board of directors in the manner described in
this section and Borrower shall take whatever steps as are necessary to
insure that Borrower has at least four (4) other directors.
(cc) Additional Capital. Lender shall have received by
March 31, 2003, evidence satisfactory to Lender of Borrower's progress
in connection with an offering to raise additional capital of at least
$4,000,000.
(dd) Voting Agreements. Lender shall have received voting
agreements substantially in the form of Exhibit 8(xv) to the Purchase
Agreement from the beneficial holders of not less than thirty-five
percent (35%) of Borrower's outstanding common stock as of the date of
the Purchase Agreement no later than thirty (30) days after the Initial
Closing Date (as defined in the Purchase Agreement).
4. EVENTS OF DEFAULT.
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(a) Each or any of the following specified events shall
constitute an "Event of Default":
(i) Payments. Borrower shall fail to pay when
due, any principal of or any interest on the
Note, or shall default in the payment when
due of any fees or any other amounts owing
hereunder and such failure shall continue
for a period of seven (7) days following
written notice by Lender to Borrower.
(ii) Representations, Etc. Any representation,
warranty or statement made by Borrower to
Lender in any Loan Instrument or in any
certificate delivered pursuant hereto or
thereto shall prove to be untrue in any
material respect on the date as of which
made or deemed made.
(iii) Covenants. Borrower shall default in the due
performance or observance by it of any
covenant contained in any Loan Instrument in
any material respect and such breach shall
not be cured for a period of seven (7) days
after written notice thereof is received by
Borrower from Lender, except for any such
breach which does not have a material
adverse effect on Borrower or the business
and financial condition of Borrower;
provided, that failure to satisfy the
covenant in Section 3(o) hereof shall not
constitute an Event of Default unless
Borrower shall fail to pay an amount due on
the Note within the time period prescribed
in Section 3(o); provided, further, that
Lender shall not be obligated to send
Borrower notice of the failure to comply
with Section 3(o) or Section 3(dd) and the
cure period and materiality qualification
described above shall not apply to a breach
of Section 3(dd).
(iv) Default Under Other Agreements. (i) Borrower
shall default in the payment when due
(subject to any applicable grace period),
whether by acceleration or otherwise, of any
other Indebtedness of, or Indebtedness
directly or indirectly guaranteed by
Borrower; (ii) Borrower shall default in the
performance or observance of any obligation
or condition with respect to any such other
Indebtedness or any other event shall occur
if the effect of such default or event
(after giving effect to any applicable grace
period) is the acceleration of the maturity
of any such Indebtedness or to permit the
holder or holders thereof, or any trustee or
agent for such holders, to cause such
Indebtedness to become due and payable prior
to its expressed maturity; or (iii) any such
Indebtedness shall become due prior to its
stated maturity as a result of an Event of
Default.
(v) Bankruptcy, Receiver.
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(1) Borrower shall not pay its debts as
they become due, file, or consent, by answer
or otherwise, to the filing against it of a
petition for relief or reorganization or
arrangement or any other petition in
bankruptcy or insolvency under the laws of
any jurisdiction, make an assignment for the
benefit of creditors, consent to the
appointment of a custodian, receiver,
trustee or other officer with similar powers
for itself, or for any substantial part of
its Property, be adjudicated insolvent, or
take corporate action for the purpose of any
of the foregoing; or
(2) Any court of competent jurisdiction
shall enter an order appointing, without
consent of Borrower, a custodian, receiver,
trustee or other officer with similar powers
with respect to Borrower, or with respect to
any substantial part of the Property
belonging to Borrower, or if an order for
relief shall be entered in any case or
proceeding for liquidation or reorganization
or otherwise to take advantage of any
bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution,
winding-up or liquidation of Borrower, or if
any petition for any such relief shall be
filed against Borrower and such petition
shall not be dismissed within sixty (60)
days.
(vi) Effectiveness of Lender Liens. This
Agreement shall cease to be in full force
and effect or, upon filing of the financing
statements at the places designated by
Borrower with respect to each such document
or statement, Lenders shall not have, or
this Agreement shall thereafter cease to
give Lenders, Liens, rights, powers and
privileges purported to be created thereby,
superior to and prior to the rights of all
third Persons (other than Permitted Filings
and the Permitted Liens).
(vii) Food Production Agreement. Borrower shall
default in the due performance or observance
by it of any payment obligation contained in
the Food Production Agreement, and such
default shall be continuing for seven (7)
days following written notice thereof to
Borrower by Lender.
(b) Effect of Event of Default. Upon the occurrence
of an Event of Default described in Section 4, the amount due and owing
under the Notes shall be increased to One Hundred Thirty Percent (130%)
of the then outstanding aggregate principal amount of the Notes,
together with any accrued and unpaid interest and fees (the "Increased
Principal Amount") and, while such Event of Default is continuing,
Lenders may: (i) declare the principal of and any accrued interest in
respect of the Notes, including the Increased Principal Amount and all
Obligations owing hereunder, to be, whereupon the same shall become,
immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other notice
of any kind, all of which are
11
hereby waived by Borrower; and (ii) exercise any rights or remedies
under the Loan Instruments, including the remedies described in Section
5 below.
5. REMEDIES UPON DEFAULT.
(a) In addition to the rights granted to Lender pursuant
to Section 4(b) above, Borrower agrees that, if any Event of Default
shall have occurred and be continuing, Lender may:
(i) personally, or by agents or attorneys,
immediately retake possession of the
Collateral or any part thereof, from
Borrower or any other Person who then has
possession of any part thereof with or
without notice or process of law, and for
that purpose may enter upon Borrower's
premises where any of the Collateral is
located and remove the same and use in
connection with such removal any and all
services, supplies, aids and other
facilities of Borrower, or direct Borrower
to deliver the same to Lender at any place
or places designated by Lender, in which
event Borrower shall do so at its own
expense;
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation
constituting the Collateral to make any
payment required by the terms of such
instrument or agreement directly to Lender;
(iii) withdraw all monies, securities and
instruments on deposit with Lender for
application to the Obligations;
(iv) sell or otherwise liquidate, or direct
Borrower to sell or otherwise liquidate, any
or all investments made in whole or in part
with the Collateral or any part thereof, and
take possession of the proceeds of any such
sale or liquidation; and
(v) take possession of the Collateral or any
part thereof (subject to the Agreement
Between Creditors and the CAPCO
Subordination Agreement), by directing
Borrower in writing to deliver the same to
Lender at any place or places designated by
Lender, in which event Borrower shall at its
own expense:
(1) forthwith cause the same to be
moved to the place or places so designated
by Lender and there delivered to Lender,
(2) store and keep any Collateral so
delivered to Lender at such place or places
pending further action Lender, and
(3) while the Collateral shall be so
stored and kept, provide such guards and
maintenance services as shall be necessary
to
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protect the same and to preserve and
maintain them in good condition;
it being understood that Borrower's obligation to deliver the Collateral is of
the essence of this Agreement and that, accordingly, upon application to a court
of equity having jurisdiction, Lender shall be entitled to a decree requiring
specific performance by Borrower of said obligation.
(b) Power of Attorney. Subject to the Capco Subordination
Agreement and the Agreement Between Creditors, after the occurrence and
during the continuance of an Event of Default, Borrower hereby
constitutes and appoints Lender its true and lawful attorney,
irrevocably, with full power (in the name of Borrower or otherwise) to
act, require, demand, receive, compound and give acquittance for any
and all monies and claims for monies due or to become due to Borrower
under or arising out of the Collateral, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or
take any action or institute any proceedings which Lender may deem to
be necessary or advisable in the premises, which appointment as
attorney is coupled with an interest.
(c) Disposition of the Collateral. Subject to the
Capco Subordination Agreement and the Agreement Between Creditors, any
Collateral repossessed by Lender and any other Collateral whether or
not so repossessed by Lender, may be sold, leased or otherwise disposed
of under one or more contracts or as an entirety, and without the
necessity of gathering at the place of sale the Property to be sold,
and in such manner, at such time or times, at such place or places and
on such terms as Lender may, in compliance with any mandatory
requirements of applicable law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by
Lender or after any overhaul or repair which Lender shall determine to
be commercially reasonable. Any such disposition which shall be a
private sale or other private proceedings permitted by such
requirements shall be made upon not less than ten (10) days' written
notice to Borrower specifying the time at which such disposition is to
be made and the intended sale price or other consideration therefor.
Any such disposition which shall be a public sale permitted by such
requirements shall be made upon not less than ten (10) days' written
notice to Borrower specifying the time and place of such sale and, in
the absence of applicable requirements of law, shall be by public
auction (which may, at Lender's option, be subject to reserve), after
commercially reasonable public notice thereof. To the extent permitted
by any such requirement of law, Lender may bid for and become the
purchaser of the Collateral or any item without accountability to
Borrower. If, under mandatory requirements of applicable law, Lender
shall be required to make disposition of the Collateral within a period
of time which does not permit the giving of notice to Borrower as
hereinabove specified, Lender need give Borrower only such notice of
disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law.
(d) Waiver of Claims. Except as otherwise provided
herein, BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW,
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NOTICE AND JUDICIAL HEARING IN CONNECTION WITH LENDER'S TAKING
POSSESSION OR LENDERS' DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING
ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT WHICH BORROWER WOULD OTHERWISE HAVE UNDER
THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE,
and Borrower hereby further waives, for itself and for all who may
claim under it, to the extent permitted by applicable law:
(i) all damages occasioned by such taking of
possession of any Collateral except any
damages which are the direct result of
Lender's gross negligence or willful
misconduct;
(ii) all other requirements as to the time, place
and terms of sale or other requirements with
respect to the enforcement of Lender's
rights hereunder; and
(iii) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now
or hereafter in force under any applicable
law in order to prevent or delay the
enforcement of this Agreement or the
absolute sale of the Collateral or any
portion thereof, and Borrower, for itself
and all who may claim under it, insofar as
it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
To the extent provided by the UCC and other applicable law, any sale
of, or the grant of options to purchase, or any other realization upon, any
Collateral shall operate to divest all right, title, interest, claim and demand,
either at law or in equity, of Borrower therein and thereto, and shall be a
perpetual bar both at law and in equity against Borrower and against any and all
Persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under Borrower.
(e) Application of Proceeds. The proceeds of any
Collateral disposed of pursuant hereto shall be applied as follows:
(i) to the payment of any and all expenses and
fees (including reasonable attorneys' fees)
incurred by Lender in obtaining, taking
possession of, removing, insuring,
repairing, storing and disposing of
Collateral and any and all amounts incurred
by Lender in connection therewith;
(ii) next, any surplus then remaining to the
payment of Borrower's obligations to those
Persons with Liens that are senior to the
Liens granted to Lender hereunder, in
respect of the proceeds of the Collateral
against which such Persons have such senior
Liens, in accordance with their respective
priorities;
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(iii) next, any surplus then remaining to the
payment of the Obligations and any of
Borrower's obligations that are pari passu
with the Obligations, pro rata; and
(iv) next, any surplus then remaining shall be
paid to Borrower, subject, however, to the
rights of the holder of any then existing
lien of which Lender has actual notice
(without investigation).
Borrower shall remain liable to the Lender to the extent of any deficiency in
the amount of the sums received by the Lenders under clauses (i) and (iii) of
this Section 5(e).
(f) Discontinuance of Proceedings. In case Lender shall
have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to Lender, then and in every such
case Borrower and Lender shall be restored to their former positions
and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights,
remedies and powers of Lender shall continue as if no such proceeding
had been instituted.
6. SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer described in Sections 7 and 9 below, the rights and obligations of
Borrower and Lender shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
7. TRANSFER. This Note may not be transferred or assigned by
Lender except as permitted in the Purchase Agreement.
8. WAIVER AND AMENDMENT. Any provision of this Note may be
amended, waived or modified only by an instrument in writing signed by Borrower
and Lender.
9. ASSIGNMENT BY BORROWER. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation of law
or otherwise, in whole or in part, by Borrower without the prior written consent
of Lender.
10. NOTICES. Notices and communications hereunder shall be given
in accordance with the Purchase Agreement.
11. GOVERNING LAW. This Note 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 District of Illinois or any Illinois
state court located in Cook County, Illinois in the event any dispute arises out
of this Note; (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 Note in any
court other than the United States District Court for the Northern District of
Illinois or an Illinois state court located in Cook 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 Note.
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12. USURY. Notwithstanding any provision to the contrary contained
in this Note, or any and all other instruments or documents executed in
connection herewith, Lender and Borrower intend that the obligations evidenced
by this Note conform strictly to the applicable usury laws from time to time in
force. If, under any circumstances whatsoever, fulfillment of any provisions
thereof or any other document, at the time performance of such provisions shall
be due, shall involve transcending the limit of validity prescribed by law,
then, ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity.
13. MISCELLANEOUS.
(a) No delay or omission on the part of Lender in
exercising any right under this Note shall operate as a waiver of such
right or of any other right under this Note.
(b) Borrower hereby waives presentment for payment,
demand, notice of demand and of dishonor and non-payment of this Note,
protest and notice of protest, diligence in collecting, and the
bringing of suit against any other party. The pleading of any statute
of limitations as a defense to any demand against Borrower, any
endorsers, guarantors and sureties of this Note is expressly waived by
such parties to the extent permitted by law.
(c) Any payment hereunder shall be made in lawful tender
of the United States and shall first be applied to any collection
costs, then against accrued and unpaid interest hereunder and then
against the outstanding principal balance of this Note.
IN WITNESS WHEREOF, Borrower has caused this Note to be issued as of
the date first written above.
BORROWER:
BRIAZZ, INC., a Washington corporation
By: /s/ Victor D. Alhadeff
------------------------------------
Name: Victor D. Alhadeff
Title: CEO
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AGREED AND ACCEPTED
HOLDER:
Briazz Venture, L.L.C., an Illinois
limited liability company
By: /s/ David L. Cotton
------------------------
Name: David L. Cotton
Title: Chief Financial Officer
17