EXHIBIT 3
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is made as of _________,
2003, between BRIAZZ, Inc., a Washington corporation ("Debtor"), Deutsche Bank
London Ag, acting through DB Advisors LLC, a limited liability company, as
administrative agent under the Purchase Agreement and this Agreement (in such
capacity, together with its successors in such capacity, the "Administrative
Agent") and Flying Food Group, L.L.C., a Delaware limited liability company.
The Debtor, certain purchasers and the Administrative Agent are parties
to a Securities Purchase Agreement, dated as of May 28, 2003, as amended on
________, 2003 (the Securities Purchase Agreement, as so amended, and as it may
be supplemented, amended, restated or otherwise modified from time to time,
being the "Purchase Agreement"), providing for the purchase of secured notes in
the aggregate principal amount of $6.0 million. The Debtor and Flying Food Group
LLC ("FFG") are parties to a Food Production Agreement dated as of December 1,
2002 (the "Food Production Agreement") providing for food preparation for Debtor
by FFG in each of the markets in which the Debtor conducts its business. To
induce the purchasers to enter into the Purchase Agreement and to extend credit
thereunder, and to induce FFG to continue to extend credit under the Food
Production Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Debtor has agreed to grant a
security interest to the purchasers under the Purchase Agreement and FFG (the
"Secured Parties") in the Collateral (as defined below) as security for the
obligations under the Notes (as defined below) and the Food Production
Agreement.
Debtor and Secured Parties agree as follows:
1. Certain Definitions and Rules of Construction.
(a) Certain Terms Defined in the UCC-Secured Transactions. As
used in this Agreement, unless otherwise defined in this Agreement, the
singular and plural forms of the terms "accession," "account," "account
debtor," "chattel paper," "collateral," "deposit account," "document,"
"equipment," "fixtures," "general intangible," "goods,"
"health-care-insurance receivable," "instrument," "inventory,"
"investment property," "letter-of-credit right," "payment intangible,"
"proceeds," "promissory note," "software" and "supporting obligation"
have the respective meanings assigned to those terms in the UCC-Secured
Transactions.
(b) Certain Other Defined Terms. As used in this Agreement, the
following terms have the following meanings, which are equally
applicable to both the singular and plural forms of those terms:
"Collateral" has the meaning assigned to that term in Section
2.
"Debtor" has the meaning assigned to that term in the initial
paragraph in this Agreement.
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"Event of Default" means (i) any event listed or otherwise
described in Section 6 of the Purchase Agreement or (ii) a breach
of the Company's obligations in Section 6 of the Food Production
Agreement.
"Notes" means non-convertible secured promissory notes issued
in accordance with the terms of the Purchase Agreement.
"Obligations" means, with respect to each Secured Party, all
indebtedness, obligations and liabilities of Debtor under the
Notes, the Purchase Agreement, the Food Production Agreement and
this Agreement, including, but not limited to, the payment of all
obligations to such Secured Party now or hereafter existing under
the Notes or the Food Production Agreement, whether direct, or
indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, fees, premiums, penalties,
indemnifications, contract causes of action, costs, and expenses.
"Person" means an individual, a corporation, a business
trust, an estate, a trust, a partnership, a limited liability
company, an association, a joint venture, a government, a
governmental subdivision, agency or instrumentality, a public
corporation, or any other legal or commercial entity.
"Purchase Agreement" has the meaning assigned to that term in
the initial paragraphs in this Agreement.
"Secured Parties" means Flying Food Group, LLC, Deutsche Bank
London AG acting through DB Advisors, LLC, Briazz Venture LLC and
Spinnaker Investment Partners, L.P. and any transferee of a Note
as permitted under the Note or the Purchase Agreement.
"UCC-Secured Transactions" means the Uniform Commercial
Code-Secured Transactions in effect in the state of Washington, as
amended from time to time.
(c) Certain Rules of Construction. The headings of the Sections,
subsections, paragraphs and other divisions of this Agreement are
included for convenience of reference only, and are not to limit or
affect in any way the construction or interpretation of any terms,
conditions or other provisions of this Agreement. References in this
Agreement to Sections are references to the Sections of this Agreement
unless otherwise specified.
2. Creation of Security Interest. As security for the payment and
performance of the Obligations, Debtor grants to the Secured Parties, and
creates in favor of Administrative Agent, for the benefit of the Secured
Parties, a security interest in all of Debtor's right, title and interest in, to
and under the following personal property and fixtures (collectively, the
"Collateral"), wherever located and whether now or in the future owned,
existing, arising or acquired:
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(a) accounts;
(b) chattel paper;
(c) deposit accounts;
(d) documents;
(e) equipment;
(f) fixtures;
(g) general intangibles, including payment intangibles, software
and things in action;
(h) goods;
(i) instruments, including promissory notes;
(j) inventory;
(k) investment property;
(l) letter-of-credit rights;
(m) supporting obligations;
(n) other personal property; and
(o) proceeds of the collateral described in this Section 2.
3. Authorization to File Financing Statements. Debtor authorizes
Administrative Agent to file initial financing statements, and amendments of
financing statements, covering the Collateral and any property that becomes
collateral as identifiable proceeds of the Collateral.
4. Inspection. Secured Parties may inspect any of the Collateral at
any time upon reasonable notice to Debtor.
5. Risk of Loss. Debtor has the risk of loss of the Collateral.
6. No Collection Obligation. Administrative Agent and Secured Parties
have no duty to collect any income that accrues on any of the Collateral or to
preserve any rights relating to any of the Collateral.
7. No Disposition of Collateral. Except for the creation and grant of
the security interest under this Agreement or Permitted Liens as defined in the
Purchase Agreement or sales
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of items of inventory in the ordinary course of business, Debtor will not, and
Administrative Agent does not authorize Debtor to, exchange, sell, lease,
license or otherwise dispose of, or create or grant any lien on or security
interest in, any of the Collateral.
8. Representations and Warranties. Debtor represents and warrants to
Secured Parties that:
(a) Rights in Collateral. Debtor has rights in, and the power to
transfer, the Collateral. Debtor's right, title and interest in and to
the Collateral is free of all adverse claims, liens, security interests
and restrictions on transfer or pledge, other than the security
interests and restrictions created under, or set forth in, this
Agreement, the Purchase Agreement and its schedules and the other
Transaction Documents referred to in the Purchase Agreement.
(b) Location of Collateral. All of the Collateral comprising
equipment and goods is located the states of Washington, California and
Illinois.
(c) Jurisdiction of Organization of Debtor. Debtor's jurisdiction
of organization is the state of Washington. Debtor is a corporation
incorporated under the laws of the state of Washington. Debtor's
organizational identification number assigned by the state of
Washington is 601 609 953.
(d) Name of Debtor. The name of Debtor indicated on the public
record of the state of Washington that shows Debtor to have been
organized is BRIAZZ, INC.
(e) Mailing Address for Debtor. A mailing address for Debtor is
0000 0xx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000.
(f) No Conditions. There are no conditions precedent to the
effectiveness of this Agreement that have not been satisfied or waived.
9. Certain Covenants. Until all of the Obligations are paid in full,
Debtor:
(a) will not change its jurisdiction of organization from the
state of Washington;
(b) will preserve its existence as a corporation under the laws of
the state of Washington;
(c) will not, whether in one transaction or a series of related
transactions, merge or consolidate, or combine in any other way, with
or into, or sell or otherwise transfer all or substantially all of
Debtor's assets to, any other person, or enter into any
recapitalization, reorganization or any other extraordinary transaction
involving or otherwise related to the Company;
(d) will not change its name without giving at least thirty days
prior notice of
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the proposed change to Administrative Agent;
(e) will take all actions necessary to prevent , and will take no
actions to cause, directly or indirectly, the breach of any
representation, warranty, covenant or agreement contained in the
Purchase Agreement; and
(e) will maintain insurance with creditworthy insurance companies
covering the replacement cost of the Collateral, such replacement cost
being deemed to be the amount required to replace such Collateral with
equipment of like kind and quality, equivalent to the actual cash
value, minus physical depreciation (fair wear and tear) and
obsolescence of such Collateral.
10. Administrative Agent's Duties. If Debtor fails to perform any of
its obligations under this Agreement, then Administrative Agent may (but is not
obligated to) perform or cause performance of such obligations and, pursuant to
Xxxxxxx 00, Xxxxxx will pay the expenses incurred by Administrative Agent in
connection with such performance. The powers conferred on Administrative Agent
under this Agreement are solely to protect Secured Parties' interest in the
Collateral and do not impose any duty upon Secured Parties to exercise any such
powers. Except for the safe custody of any of the Collateral in Administrative
Agent's possession and the accounting for moneys actually received by
Administrative Agent under this Agreement, Administrative Agent has no duty as
to any of the Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any of the
Collateral. Administrative Agent will be deemed to have exercised reasonable
care in the custody and preservation of any of the Collateral in the possession
of Administrative Agent if such Collateral is accorded treatment substantially
equal to that which Administrative Agent accords its own property.
11. Administrative Agent Appointed Attorney-in-Fact. Debtor irrevocably
appoints Administrative Agent as Debtor's attorney-in-fact, with full authority
in the place and stead of Debtor and in the name of Debtor, Administrative Agent
or otherwise, from time to time in Administrative Agent's discretion after the
occurrence and during the continuance of an Event of Default, to take any action
and to authenticate any document, instrument or other writing or record that
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Agreement, including, but not limited to, the filing of any claims, the
taking of any actions or the commencement of any proceedings that Administrative
Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights and remedies of Administrative
Agent with respect to any of the Collateral.
12. Events of Default. An Event of Default shall be as defined in
Section 1 hereof, and Article 6 of the Purchase Agreement is incorporated herein
by reference and Section 6 of the Food Production Agreement is incorporated
herein by reference.
13. Certain Remedies. Upon, and at any time after, the occurrence or
existence of any Event of Default, in addition to other rights and remedies
provided for in this Agreement and the Purchase Agreement or otherwise available
to Administrative Agent by agreement, at law, in equity or otherwise,
Administrative Agent may (a) take possession of the Collateral, (b) render
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equipment unusable, (c) require Debtor to, and Debtor will at its own cost and
expense and immediately upon request of Administrative Agent, assemble all or
any part of the Collateral as directed by Administrative Agent and make such
Collateral available to Administrative Agent at a place designated by
Administrative Agent which is reasonably convenient to both Debtor and
Administrative Agent, (d) sell, lease, license or otherwise dispose of any or
all of the Collateral in its present condition or following any commercially
reasonable preparation or processing, by public or private proceedings, by one
or more contracts, as a unit or in parcels, at any time and place, for cash, on
credit or for future delivery, and on any other commercially reasonable terms,
and (e) exercise in respect of the Collateral all other rights and remedies of a
secured party on default under the Uniform Commercial Code in effect in the
state of Washington, whether or not such Uniform Commercial Code applies to the
affected Collateral. Debtor agrees that, to the extent notification of
disposition of any of the Collateral is at any time required by law, a
notification of disposition is sent within a reasonable time before the
disposition if the notification is sent to Debtor after the occurrence or
existence of any Event of Default and ten days or more before the earliest time
of disposition set forth in the notification. Administrative Agent will not be
obligated to make any sale, lease, license or other disposition of any or all of
the Collateral regardless of notification of disposition having been given.
Administrative Agent may adjourn any public or private sale, lease or other
disposition from time to time by announcement at the time and place fixed for
such sale, lease or other disposition, and such sale, lease or other
disposition, without further notice, may be made at the time and place to which
it was so adjourned. Administrative Agent has no obligation to prepare or
process any of the Collateral for sale, lease, license or other disposition.
14. Priority; Amendments; Waivers. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Debtor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that any amendment or waiver that is not equally
applicable to all Secured Parties or is in any way discriminatory to any Secured
Party shall require the agreement of such Secured Party. No failure on the part
of the Administrative Agent, or any Secured Party, to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver of such right, nor
shall any single or partial exercise of such right preclude any other or further
exercise of such right or the exercise of any other right.
15. Indemnity. Debtor will indemnify, defend and hold harmless
Administrative Agent from and against any and all claims, losses and liabilities
(including, but not limited to, reasonable fees, costs, expenses and
disbursements of attorneys) arising from or by reason of this Agreement
(including, but not limited to, enforcement of this Agreement), except claims,
losses or liabilities resulting from the gross negligence or willful misconduct
of Administrative Agent.
16. Costs and Expenses. Debtor will pay to Administrative Agent on
demand the reasonable costs and expenses (including, but not limited to,
reasonable fees, costs, expenses and disbursements of accountants, attorneys and
other professional advisors) incurred by Administrative Agent in connection with
any of (a) retaking the Collateral, holding the Collateral, preparing for
disposition of the Collateral, processing the Collateral, and disposing of the
Collateral, (b) the exercise or enforcement of any of the rights and remedies of
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Administrative Agent under this Agreement and (c) any Event of Default.
17. Administrative Agent. FFG hereby irrevocably appoints, designates
and authorizes the Administrative Agent to take such action on its behalf under
the provisions of this Agreement and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or
Article 5 of the Purchase Agreement which is incorporated herein by reference.
Notwithstanding the foregoing, the Administrative Agent may take no action or
series of actions pursuant to the terms of the Purchase Agreement or this
Agreement with respect to Collateral with a fair market value of $100,000 or
greater without the express written permission of FFG, provided however, upon
repayment of the Notes, the Administrative Agent may release the lien of the
Collateral with respect to, and only with respect to, the Notes, and the
security interest in the Collateral securing the Obligations under the Food
Production Agreement will remain unaffected. The Debtor, the Administrative
Agent and FFG agree upon full repayment of the Notes to amend and restate this
Agreement to reflect such repayment and release of such security interest by the
holders of the Notes in the Collateral and amend such financing statements, as
appropriate, to reflect the continuing security interest by FFG.
18. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which counterparts when so executed will be deemed to be
an original and all of which counterparts taken together will constitute one and
the same agreement. Delivery of an executed counterpart of a signature page to
this Agreement via telephone facsimile transmission will be effective as
delivery of a manually executed counterpart of this Agreement.
19. Severability. Any term, condition or other provision of this
Agreement that is prohibited or unenforceable in any jurisdiction will be
ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of such term,
condition or provision in any other jurisdiction and without invalidating the
remaining terms, conditions and other provisions of this Agreement.
20. Continuing Interest; Binding Effect. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the payment in full of the Obligations, (b) be binding
upon the Debtor, its successors and assigns, and (c) inure, together with the
rights and remedies of the Administrative Agent under this Agreement, to the
benefit of, and is enforceable by, the Administrative Agent and its successors,
transferees and assigns.
21. Governing Law. This Agreement is governed by, and is to be
construed in all respects in accordance with, the laws of the state of New York,
without reference to conflict-of-laws or choice-of-law rules that would direct
the general application of the laws of another jurisdiction, except to the
extent that the validity or perfection of the security interest under this
Agreement, or remedies under this Agreement, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the state of
New York. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in any New York state or
federal court sitting in the Borough of Manhattan of The City of New York. The
parties hereto hereby (a) submit to the exclusive jurisdiction of any state
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or federal court sitting in the Borough of Manhattan of The City of New York for
the purpose of any action arising out of or relating to this Agreement brought
by any party hereto, and (b) irrevocably waive, and agree not to assert by way
of motion, defense, or otherwise, in any such action, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the action is
brought in an inconvenient forum, that the venue of the action is improper, or
that this Agreement or the transactions contemplated by this Agreement may not
be enforced in or by any of the above-named courts.
22. Waiver of Jury Trial. Each of the parties hereto hereby waives to
the fullest extent permitted by applicable law any right it may have to a trial
by jury with respect to any litigation directly or indirectly arising out of,
under or in connection with this Agreement or the transactions contemplated by
this Agreement. Each of the parties hereto (a) certifies that no representative,
agent or attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce
that foregoing waiver and (b) acknowledges that it and the other party hereto
have been induced to enter into this Agreement and the transactions contemplated
by this Agreement, as applicable, by, among other things, the mutual waivers and
certifications in this Section 22.
IN WITNESS WHEREOF, Debtor, Administrative Agent and FFG have caused
this Agreement to be executed by their respective authorized officers or
representatives, as of the date first above written.
BRIAZZ, INC. Deutsche Bank London AG, acting through
DB Advisors, LLC, as Administrative Agent
By________________________________
Title: _________________________ By_______________________________________
Title: ________________________________
Flying Food Group, L.L.C.
By________________________________
Title: _________________________
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