EXHIBIT 10.24
SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services, Ltd.
P.O. Box 1234 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), we
hereby grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles (including, without limitation, payment intangibles), chattel paper,
supporting obligations, investment property, letter-of-credit rights, trademarks
and tradestyles in which we now have or hereafter may acquire any right, title
or interest, all proceeds and products thereof (including, without limitation,
proceeds of insurance) and all additions, accessions and substitutions thereto
or therefor.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by us to you and all loans, advances,
extensions of credit, endorsements, guaranties, benefits and/or financial
accommodations heretofore or hereafter made, granted or extended by you to us or
which you have or will become obligated to make, grant or extend to us or for
our account and any and all interest, charges and/or expenses heretofore or
hereafter owing by us to you and any and all renewals or extensions of any of
the foregoing, no matter how or when arising, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether under any present or future
agreement or instruments between or among us, you, or otherwise, including,
without limitation, all obligations owing by us to you under the Convertible
Note dated as of the date hereof made by us in favor of you in the original
principal amount of $1,100,000 (as amended, modified and supplemented from time
to time, the "Note").
3. We hereby represent, warrant and covenant to you that: (a) we are a
company validly existing, in good standing and formed under the laws of the
State of Washington and we will provide you thirty days prior written notice of
any change in our state of formation; (b) our legal name is "Briazz, Inc.", as
set forth in our Articles of Incorporation as amended through the date hereof;
(c) we are the lawful owner of the Collateral and have the sole right to grant a
security interest therein and will defend the Collateral against all claims and
demands of all persons and entities; (d) we will keep the Collateral free and
clear of all attachments, levies, taxes, liens, security interests and
encumbrances of every kind and nature ("Encumbrances") and such Encumbrance is
removed or otherwise released within 10 days of the creation thereof; (e) we
will at our own cost and expense keep the Collateral in good state of repair and
will not waste or destroy the same or any part thereof; (f) we will not without
your prior written consent, sell, exchange, lease or otherwise dispose of the
Collateral (except for sales of inventory in the ordinary course of business) or
any of our rights therein; (g) we will insure the Collateral in your name
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as you shall specify in amounts and under policies by
insurers acceptable to you and all premiums thereon shall be paid by us and the
policies delivered to you. If we fail to do so, you may procure such insurance
and the cost thereof shall constitute Obligations; (h) we will at all times
allow you or your representatives free access to and the right of inspection of
the Collateral upon reasonable prior notice; (i) we hereby indemnify and save
you harmless from all loss, costs, damage, liability and/or expense, including
reasonable attorneys' fees, that you may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the enforcement
of this Agreement or the Note or in the prosecution or defense of any action or
proceeding either against you or us concerning any matter growing out of or in
connection with this Agreement, the Note and/or any of the Obligations and/or
any of the Collateral.
4. We shall be in default under this Agreement upon the happening of any of
the following events or conditions, each such event or condition an "Event of
Default" (a) we shall fail to pay when due or punctually perform
any of the Obligations; (b) any covenant, warranty, representation or statement
made or furnished to you by us or on our behalf was false in any material
respect when made or furnished; (c) the loss, theft, substantial damage,
destruction, sale or encumbrance to or of any of the Collateral not otherwise
covered by insurance or the making of any levy, seizure or attachment thereof or
thereon except to the extent said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or attachment has not
been removed or otherwise released within 10 days of the creation or the
assertion thereof; (d) we shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of our property; (e) any proceedings under any
bankruptcy or insolvency law shall be commenced by or against us and if
commenced against us shall not be dismissed within 30 days.
5. Upon the occurrence of any Event of Default and at any time thereafter,
you may declare all Obligations immediately due and payable and you shall have
the remedies of a secured party provided in the Uniform Commercial Code as in
effect in the State of New York, this Agreement and other applicable law. Upon
the occurrence of any Event of Default and at any time thereafter, you will have
the right to take possession of the Collateral and to maintain such possession
on our premises or to remove the Collateral or any part thereof to such other
premises as you may desire, including, without limitation, the right to contact
account debtors liable in respect of the Accounts for the purpose of engaging in
collection activities with respect thereto. Upon your request, we shall assemble
the Collateral and make it available to you at a place designated by you. If any
notification of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if mailed
at least ten days before such disposition, postage prepaid, addressed to us
either at our address shown herein or at any address appearing on your records
for us. Any proceeds of any disposition of any of the Collateral shall be
applied by you to the payment of all expenses in connection with the sale of the
Collateral, including reasonable attorneys' fees and other legal expenses and
disbursements and the reasonable expense of retaking, holding, preparing for
sale, selling, and the like, and any balance of such proceeds may be applied by
you toward the payment of the Obligations in such order of application as you
may elect, and we shall be liable for any deficiency.
6. If we default in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on our part to be
performed or fulfilled under or pursuant to this Agreement, you may, at your
option without waiving your right to enforce this Agreement according to its
terms, immediately or at any time thereafter and without notice to us, perform
or fulfill the same or cause the performance or fulfillment of the same for our
account and at our sole cost and expense, and the cost and expense thereof
(including reasonable attorneys' fees) shall be added to the Obligations and
shall be payable on demand with interest thereon at the highest rate permitted
by law.
7. We appoint you, any of your officers, employees or any other person or
entity whom you may designate as our attorney, with power to execute such
documents in our behalf and to supply any omitted information and correct patent
errors in any documents executed by us or on our behalf; to file financing
statements against us covering the Collateral; to sign our name on public
records; and to do all other things you deem necessary to carry out this
Agreement. We hereby ratify and approve all acts of the attorney and neither you
nor the attorney will be liable for any acts of commission or omission, nor for
any error of judgment or mistake of fact or law. This power being coupled with
an interest, is irrevocable so long as any Obligations remains unpaid.
8. No delay or failure on your part in exercising any right, privilege or
option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations shall be admissible in evidence in any
action or proceeding, shall be binding upon us for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof. You
shall have the right to enforce any one or more of the remedies available to
you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by
the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the Collateral.
9. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to you hereunder shall
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enure to the benefit of your successors and assigns. The term "you" as herein
used shall include your company, any parent of your company, any of your
subsidiaries and any co-subsidiaries of your parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall enure to the
benefit of and shall bind the representatives, successors and assigns of each of
us and them. You and we hereby (a) waive any and all right to trial by jury in
litigation relating to this Agreement and the transactions contemplated hereby
and we agree not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive jurisdiction of any New York State court sitting in the borough
of Manhattan, the city of New York and (c) waive any objection you or we may
have as to the bringing or maintaining of such action with any such court.
10. To the extent required by any bank or lender providing a loan to the
Company (each a "Bank" and together the "Banks"), you agree to enter into a
subordination agreement with respect to the security interest herein as may
reasonably be requested by any such Bank or Banks.
[CONTINUED ON FOLLOWING PAGE]
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11. All notices from you to us shall be sufficiently given if mailed or
delivered to us at our address set forth below.
Very truly yours,
BRIAZZ, INC.
By: /s/ Victor D. Alhadeff
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Name:
Title:
Address: 3901 - 7th Avenue South, Suite 200
Seattle, Washington 98108
Dated as of: June 18, 2002
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By: /s/ David Grin
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Name:
Title:
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