EXHIBIT 10.37
PURCHASE AGREEMENT
This Purchase Agreement, dated as of April 10, 2003 (this "Agreement"), is
entered into by and between BRIAZZ, INC., a Washington corporation (the
"Company"), and SPINNAKER INVESTMENT PARTNERS, L.P., a Delaware limited
partnership (the "Lender"). The parties hereby agree as set forth below.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in that certain Amended and Restated Security Agreement, dated the
date hereof (the "Security Agreement"), among the Company, Lender and Briazz
Venture, L.L.C. ("Briazz Venture").
1. Issuance of Securities. The Company proposes to issue, sell and deliver to
Lender, and Lender proposes to purchase a Senior Secured Note issued by the
Company in an aggregate principal amount of Five Hundred Fifty Thousand Dollars
($550,000) (the "Note") and shares of the Company's no par value Series E
Preferred Stock (the "Preferred Stock"), convertible into shares of the
Company's no par value Common Stock (the "Common Stock") and a warrant to
purchase a number of shares of Common Stock equal to approximately 19.9% of the
outstanding Common Stock as of the date of this Agreement (the "Warrant"). The
Company's obligations under the Note will be secured pursuant to the Security
Agreement.
2. Agreements to Sell and Purchase.
(a) On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, the Company
shall issue and sell to Lender, and Lender shall purchase from the Company, from
time to time, in the Lender's sole discretion, the Note, the Preferred Stock and
the Warrant (collectively, the "Purchased Securities") for an aggregate purchase
price of Five Hundred Fifty Thousand Dollars ($550,000) (the "Purchase Price").
(b) Delivery to Lender of, and payment to the Company for, the Note, the
Preferred Stock and the Warrant shall be made by Lender to Company (the
"Closing") at 10:00 a.m. on the date mutually agreed upon by Lender and the
Company at the offices of Fulbright & Xxxxxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx.
(c) At the Closing, on the terms and subject to the conditions hereof, the
Company shall deliver to Lender against payment of the Purchase Price as
described below (i) the Note, in the form attached as Exhibit A hereto, (ii) a
certificate representing 25 shares of Preferred Stock; and (iii) the Warrant, in
the form attached as Exhibit B hereto. Lender shall deliver to the Company a
wire transfer of immediately available funds in an amount equal to the Purchase
Price.
3. Agreements of the Company. The Company hereby agrees:
(a) Certain Events. To advise Lender promptly after obtaining knowledge
(and, if requested by Lender, confirm such advice in writing) of the removal of
the Company's Common Stock from any interdealer quotation system of Nasdaq,
including the Nasdaq SmallCap Market.
(b) Costs and Expenses. To pay or reimburse Lender for its expenses
(including reasonable fees and expenses of one counsel to the Lender) incurred
by Lender in connection
with (i) the preparation, negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby regardless of whether the
Closing is effected and (ii) the consummation of the transactions contemplated
by that certain Amended and Restated Purchase Agreement, dated March 5, 2003,
between the Company and Briazz Venture (the "FFG Purchase Agreement").
(c) Use of Proceeds. To use the proceeds from the sale of the Note and the
sale of those certain Senior Secured Notes to Briazz Venture pursuant to the FFG
Purchase Agreement (the "FFG Notes") as set forth in the Use of Proceeds
Schedule attached hereto as Schedule 3(c), as such schedule may be amended from
time to time.
(d) Performance of Agreements. To comply with all of its agreements set
forth herein and the other agreements contemplated hereby to which it is a
party, and to use its reasonable best efforts to do and perform all things
required or necessary to be done and performed hereunder and thereunder and to
satisfy all conditions precedent to the delivery of the Notes.
(e) Security Interest. To grant Lender a continuing first priority security
interest (except as set forth in the Security Agreement) in the Collateral,
enforceable, except as provided in the Security Agreement, against all third
parties, and to execute and deliver all documents and to take all action
necessary or desirable to perfect and protect the security interest granted
thereby in favor of Lender, including taking all steps necessary to perfect the
Lien created thereby (including the filing of Uniform Commercial Code financing
statements, the giving of notices and obtaining the appropriate consents).
(f) Structural Changes in the Company. Not to change its name, identity or
corporate structure while any indebtedness represented by the Note remains
outstanding.
4. Representations and Warranties of the Company. As of the date hereof and at
each Closing, unless otherwise provided for herein, the Company represents and
warrants to Lender that:
(a) Due Organization; Good Standing. The Company (i) has been duly
organized and is validly existing under the laws of the State of Washington,
(ii) has all requisite power and authority to conduct and carry on its business,
and (iii) except as disclosed to the Lender, is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or the
ownership, leasing, use or operation of its properties and assets requires such
qualification or licensing.
(b) Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture or
partnership.
(c) Capitalization. Immediately prior to the Closing, the capitalization of
the Company will consist of total of (i) 100,000,000 authorized shares of Common
Stock, no par value, 5,990,916 shares of which are issued and outstanding; (ii)
33,000 shares of Series A Preferred Stock, of which no shares are issued and
outstanding; (iii) 34,450 shares of Series B Preferred Stock, of which no shares
are issued and outstanding; (iii) 30,000,000 shares of Series C Preferred Stock,
of which no shares are issued and outstanding; (iv) 100 shares of Series D
-2-
Preferred Stock, all of which shares are issued and outstanding and (v) 25
shares of Series E Preferred Stock, of which no shares are issued and
outstanding. The Company has filed the Articles of Amendment, a copy of which is
attached hereto as Exhibit C (the "Articles"), with the Secretary of State of
the State of Washington and the same has been accepted for filing. All of the
outstanding shares of capital stock have been duly authorized, are fully-paid
and nonassessable and were issued in compliance with all applicable federal and
state securities laws. Except as set forth on Schedule 4(c), there are no other
outstanding shares of capital stock or outstanding rights of first refusal,
preemptive rights or other rights, options, warrants, conversion rights,
subscriptions, obligations or other agreements either directly or indirectly for
the purchase or acquisition from the Company of any shares of its capital stock.
Except as set forth on Schedule 4(c), the Company is not a party or subject to
any agreement or understanding and, to the Company's knowledge, there is no
agreement or understanding between any persons, that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by a director of the Company. Schedule 4(c) attached hereto also includes a list
of the warrants, options and convertible debt outstanding as of the date hereof.
(d) No Other Registration Rights. Except as set forth on Schedule 4(d)
attached hereto or as contemplated by this Agreement or the Amended and Restated
Registration Rights Agreement to be entered into pursuant to this Agreement in
the form attached hereto as Exhibit D (the "Registration Rights Agreement"),
there are no contracts, commitments, agreements, arrangements, understandings or
undertakings of any kind to which the Company is a party, or by which the
Company is bound granting to any person the right to require the Company to (i)
file a registration statement under the Act with respect to any securities of
the Company or requiring the Company to include such securities with the Notes
registered pursuant to any registration statement, or (ii) to purchase or offer
to purchase any securities of the Company.
(e) Power and Authority. The Company has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement, the Note,
the Warrant, the Security Agreement, the Articles, the Registration Rights
Agreement, the Amended and Restated Agreement between Creditors in the form
attached hereto as Exhibit E (the "Agreement Between Creditors") to which it is
a party (collectively, the "Operative Documents") and to consummate the
transactions contemplated thereby.
(f) Authorization of the Operative Documents. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, and each of the
Operative Documents, the performance of all obligations of the Company hereunder
and thereunder at the Closing and the authorization, issuance (or reservation
for issuance), sale and delivery of the Purchased Securities and any and all
securities issuable upon conversion or exercise thereof (the "Conversion
Shares") have been taken or will be taken prior to the Closing, and this
Agreement, and each Operative Document, when executed and delivered, will
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except as such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditor's rights and general
principles of equity.
(g) No Violation. Except as set forth on Schedule 4(g), the Company is not
in violation of its articles of incorporation or bylaws (the "Charter
Documents"). The Company is
-3-
not (i) in violation of any federal, state, local or foreign statute, law or
ordinance, or any judgment, decree, rule, regulation or order applicable to the
Company (collectively, "Applicable Law") of any governmental or regulatory
agency or body, court, arbitrator or self-regulatory organization, domestic or
foreign, having jurisdiction over the Company (each, a "Governmental
Authority"), or (ii) in breach of or default under any bond, debenture, note or
other evidence of indebtedness, indenture, mortgage, deed of trust, lease or any
other similar agreement or instrument to which the Company is a party or by
which the Company is bound (collectively, "Applicable Agreements"), except where
the failure to be in compliance therewith would not have a material adverse
effect on the Company's business and financial condition ("Material Adverse
Effect"). There exists no condition that, with the passage of time or otherwise,
would (w) constitute a violation of the Charter Documents, or (x) constitute a
violation of Applicable Laws, or (y) constitute a material breach of or default
under any Applicable Agreement or (z) result in the imposition of any penalty or
acceleration of indebtedness, except where such event would not have a Material
Adverse Effect. All Applicable Agreements are in full force and effect and are
legal, valid and binding obligations of the Company, and no default has occurred
or is continuing thereunder, or where the failure to be in compliance therewith
would not have a Material Adverse Effect.
(h) No Conflict. Except as set forth on Schedule 4(h) attached hereto, none
of the execution, delivery or performance by the Company of any of the Operative
Documents to which it is a party, nor the compliance by the Company with the
terms and provisions thereof, nor the consummation of any of the transactions
contemplated hereby or thereby will conflict with, violate, constitute a breach
of or a default (with the passage of time or otherwise) under, result in the
imposition of a Lien (as defined in the Security Agreement) on any assets or
capital stock of or other ownership interests in the Company (other than the
Liens created by the Security Agreement), or result in an acceleration of
indebtedness under or pursuant to, (i) the Charter Documents, (ii) any
Applicable Agreement, or (iii) any Applicable Law. After giving effect to the
transactions contemplated hereby, no Event of Default (as defined in the Note)
will exist.
(i) Permits. Except as set forth on Schedule 4(i) attached hereto, no
permit, certificate, authorization, approval, consent, license or order of, or
filing, registration, declaration or qualification with, any Governmental
Authority or any other person (collectively, "Permits") is required in
connection with, or as a condition to, the execution, delivery or performance of
any of the Operative Documents to which the Company is a party, the compliance
with the terms and provisions thereof or the consummation of any of the
transactions contemplated hereby or thereby, in each case by the Company, other
than (i) such Permits as have been made or obtained on or prior to the Closing,
which Permits are in full force and effect on the Closing, and (ii) as may be
required under the securities or Blue Sky laws of the various states and, in
connection with the performance of the Registration Rights Agreement and the
Act.
(j) No Proceedings. There is no action, claim, suit, demand, hearing,
notice of violation or deficiency, or proceeding, domestic or foreign
(collectively, "Proceedings"), pending or to the knowledge of the Company,
threatened that seeks to restrain, enjoin, prevent the consummation of, or
otherwise challenge, any of the Operative Documents or the transactions
contemplated thereby. No injunction or order has been issued and no Proceeding
is pending or, to the knowledge of the Company, threatened that asserts that the
offer, sale and delivery of the Purchased Securities to Lender pursuant to this
Agreement is subject to the
-4-
registration requirements of the Act, or would prevent or suspend the issuance
or sale of the Purchased Securities in any jurisdiction.
(k) Regulated Persons. The Company, and its directors, officers and
employees (the Company and each such other person, a "Regulated Person" and,
collectively, the "Regulated Persons") have, and are in compliance with the
terms and conditions of, all Permits necessary or advisable to own, lease, use
and operate the properties and assets of the Company and to conduct and carry on
the business of the Company. None of the execution, delivery or performance by
the Company of any of the Operative Documents to which it is a party, nor the
compliance by the Company with the terms and provisions thereof, nor the
consummation by the Company of any of the transactions contemplated hereby to
thereby will allow or result in, and no event has occurred which allows, results
in, or after notice or lapse of time would allow or result in, the imposition of
any material penalty under, or the revocation or termination of, any such Permit
or any material impairment of the rights of the holder of any such Permit. The
Company has not received notice of any pending or threatened actions or
proceedings which seek to limit, suspend, modify, revoke or deny renewal of any
such Permit.
(l) Title to Assets. The Company has good and marketable title to the
Collateral, free and clear of all Liens, except as contemplated in the Security
Agreement.
(m) Sufficiency and Condition of Assets. The non-cash assets of the Company
include all of the non-cash assets and properties reasonably necessary or
required in, or otherwise material to, the conduct of its business, and
substantially all such assets are in working condition.
(n) Insurance. The Company maintains reasonably adequate insurance covering
its properties, operations, personnel and businesses against losses and risks in
accordance with customary industry practice. All such insurance is outstanding
and duly in force.
(o) Related Party Transactions. Except as set forth on Schedule 4(o)
attached hereto, no executive officer, director or shareholder owning, directly
or indirectly 10% or more of the Common Stock or any member of the person's
immediate family (individually, a "Related Party") is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them, other than for payment of salary for services rendered,
reimbursement for reasonable expenses incurred on behalf of the Company, and for
other standard employee benefits made generally available to all employees or
pursuant to standard or individual arrangements disclosed in the Company's
filings made under and as required by the Exchange Act (as defined below). Other
than as set forth on Schedule 4(o) attached hereto, no Related Party has any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company, except that any such
Related Party may own stock in publicly-traded companies that may compete with
the Company (but not exceeding 2% of the outstanding capital stock of any such
firm or corporation).
(p) Taxes. All tax returns required to be filed by the Company in any
jurisdiction (including foreign jurisdictions) that were required to be filed
prior to the Closing (taking into account all applicable extensions) have been
timely filed, or will be timely filed by the Closing, and, when filed, all such
returns were, or will be, accurate in all material respects, and all taxes,
-5-
assessments, fees and other charges (including, without limitation, withholding
taxes, penalties and interest) due or claimed to be due in respect of such
returns have been paid, or will be paid prior to the Closing other than those
being contested in good faith by appropriate proceedings, or those that are
currently payable without penalty or interest and, in each case, for which an
adequate reserve or accrual has been established on the books and records of the
Company in accordance with generally accepted accounting principles of the
United States, consistently applied ("GAAP"). The charges, accruals and reserves
on the books and records of the Company, in respect of federal, state or other
taxes for all fiscal periods (or portions thereof) ending on or before the
Closing, have been established in accordance with GAAP.
(q) Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i) material
transactions are executed in accordance with management's general or specific
authorization, (ii) material transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP, and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any material
differences.
(r) Financial Statements. The financial statements of the Company
(including the footnotes thereto) filed with and as part of the Company's
filings made pursuant to and under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as such filings have been
amended through the date hereof, present fairly (or will present fairly as to
future statements) the financial position of the Company as of the respective
dates thereof and the statements of income, statement of shareholders' equity
and statements of cash flow of the Company for the respective periods covered
thereby. The Company's financial statements are prepared in conformity with GAAP
(subject, in the case of interim financial statements, to the absence of
footnote disclosures and other presentation items and normal, recurring,
year-end adjustments).
(s) Good Faith. The Company is incurring its indebtedness under the Note in
good faith.
(t) No Integrated Offering. Neither the Company nor any person acting on
its behalf, has directly or indirectly made any offers or sales of any security
or solicited any offers to buy any security under circumstances that would cause
the offering of the Purchased Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the Act in a
manner which would prevent the Company from offering and selling the Purchased
Securities pursuant to Rule 506 under the Act. Neither the Company nor any of
its affiliates will take any action or steps that would cause the offering of
the Purchased Securities to be integrated with other offerings in a manner which
would prevent the Company from relying on Rule 506 under the Act with respect to
the offers and sales of the Purchased Securities hereunder.
(u) ERISA. Except as disclosed in the Company's public filings under the
Act or the Exchange Act, the Company does not maintain an employee benefit plan
that is intended to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended, or the rules, regulations and published interpretations
promulgated thereunder. Neither the Company nor any
-6-
trade or business under common control with the Company (for purposes of Section
414(c) of the Code or Section 4001 of ERISA (defined below)) maintains any
employee pension benefit plan that is subject to Title IV of the Employee
Retirement Income Act of 1974, as amended, or the rules and regulations
promulgated thereunder ("ERISA"). The terms "employee benefit plan" and
"employee pension benefit plan" shall have the meanings assigned to such terms
in Section 3 of ERISA.
(v) No Brokers. Except as set forth on Schedule 4(v) attached hereto, the
Company has not dealt with any broker, finder, commission agent or other person
entitled to receive a commission or other remuneration (other than Lender) in
connection with the transactions contemplated hereby and Company is not under
any obligation to pay any broker's fee or commission in connection with the
transactions contemplated hereby.
(w) No Labor Disputes. The Company is not engaged in any unfair labor
practice. There is (i) no unfair labor practice complaint or other proceeding
pending or, to the knowledge of the Company, threatened against the Company
before the National Labor Relations Board or any state, local or foreign labor
relations board or any industrial tribunal, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending or, to the knowledge of the Company, threatened, and (ii) no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
is threatened against the Company.
(x) Intellectual Property. The Company owns, possesses or licenses, or can
acquire on reasonable terms, adequate patents, patent licenses, trademarks,
service marks and trade names necessary to carry on its business as presently
conducted and has not received any notice of infringement of, or conflict with
asserted rights of others with respect to, any patents, patent licenses,
trademarks, service marks or trade names.
(y) Litigation. There is no action, suit, proceeding, or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, or Operative Document or the
right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any adverse change in the business,
properties, prospects, or financial condition of the Company, or in any change
in the current equity ownership of the Company. The foregoing includes, without
limitation, any action, suit, proceeding, or investigation pending or currently
threatened involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, their
obligations under any agreements with prior employers, or negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business. The Company is not a party to or, to its knowledge, named in or
subject to any order, writ, injunction, judgment, or decree of any court,
government agency, or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company currently
intends to initiate.
(z) Disclosure. Neither this Agreement nor any other information, statement
or certificate made or delivered by the Company in connection with this
Agreement and the
-7-
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary not to make the statements
therein untrue or misleading.
(aa) Security Interests. The Security Agreement creates, as security for
the Obligations, a valid and enforceable security interest in and Lien on all of
the Collateral in favor of and for the benefit of Lender. When this Agreement
and related financing statements and related documents delivered to Lender by
the Company are filed in the places designated by the Company with respect to
each such document, such security interest and Lien of Lender will be perfected
and superior to and prior to the rights of all third persons (except for
security interests evidenced by the Permitted Filings). Such security interest
is entitled to all the rights, priorities and benefits afforded by the UCC, or
other relevant law as enacted in any relevant jurisdiction, to perfected
security interests. The Company has good and marketable title to all Collateral
free and clear of all Liens except the Permitted Liens.
(bb) No Liens. The Company is, and as to Collateral it acquires from time
to time after the date hereof will be, the owner of all Collateral free from any
Lien, security interest, encumbrance or other right, title or interest of any
Person (other than the Permitted Liens), and the Company shall defend its
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to Lender.
(cc) Representations and Warranties. No statement, representation or
warranty made by the Company in any of the Operative Documents to which it is a
party or in any certificate, document or instrument required by any of such
Operative Documents to be delivered to Lender was or will be, when made,
inaccurate, untrue or incorrect in any material respect. Each certificate signed
by any officer of the Company and delivered to Lender or counsel for Lender in
connection with the Transactions shall be deemed to be a representation and
warranty by the Company to Lender as to the matters covered thereby.
5. Representations and Warranties of Lender. As of the date hereof, Lender
represents and warrants to the Company that:
(a) Investment Intent; Authority. This Agreement is made in reliance upon
Lender's representation to the Company that Lender is acquiring the Purchased
Securities for investment for its own account, not as nominee or agent, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act or any
state securities laws. Lender has the full right, power, authority and capacity
to enter into and perform the Operative Documents to which it is a party and
such Operative Documents will constitute valid and binding obligations upon
Lender, except as the same may be limited by bankruptcy, insolvency, moratorium,
and other laws of general application affecting the enforcement of creditors'
rights.
(b) Securities Not Registered. Lender understands and acknowledges that the
offering of the Purchased Securities will not be registered under the Act or
under any state securities laws on the grounds that the offering and sale of the
Purchased Securities contemplated by this Agreement are exempt from registration
under the Act and under any state securities laws, and that the Company's
reliance upon such exemptions is predicated, in part, upon Lender's
representations set forth in this Agreement. Lender acknowledges and understands
that
-8-
the Warrant may not be exercised for, and the Preferred Stock may not be
converted into, the Conversion Shares except in accordance with an exemption
from registration under the Act and under any state securities laws. Lender
acknowledges and understands that resale of the Purchased Securities and of the
Conversion Shares may be restricted indefinitely unless such securities are
subsequently registered under the Act or an exemption from such registration and
such qualification is available.
(c) Limitations on Transfer. Lender (i) acknowledges that the Purchased
Securities are non-transferable except that the Lender (and any permitted
transferee) shall be permitted to transfer any of the Purchased Securities or
the Shares, in the case of a holder that is an entity, to its partners or
members or to an entity affiliated with such person, or in the case of a holder
that is a natural person, for estate planning purposes, provided that each
transferee is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Act and the Company receives evidence satisfactory to it (which may
include an opinion of counsel reasonably satisfactory to the Company) that such
transfer will not result in a violation of the Act or any state securities laws,
and (ii) covenants that in no event will it dispose of any of the Purchased
Securities or the Shares, except in accordance with (i) above, other than (A) in
conjunction with an effective registration statement under the Act or pursuant
to a transaction not requiring the filing of such a registration statement and
(B) in compliance with the applicable securities regulations laws of any state.
Lender acknowledges and agrees that the Purchased Securities and the Shares will
contain a legend to the foregoing effect. Lender acknowledges and agrees that
and transfer of all or part of the Warrant will be completed only in conjunction
with a transfer to the transferee of the Warrants of an identical pro rata
portion of the Series E Preferred Stock.
(d) Accredited Investor. Lender and each of its partners (i) is an
"accredited investor," as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended; and (ii) has the ability to bear the
economic risks of the prospective investment, including a complete loss of
Lender's investment in the Purchased Securities. None of Lender's partners was
organized for the specific purpose of acquiring the Purchased Securities.
(e) Adequate Information. Lender represents that it has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Purchased Securities and the business,
properties, prospects and financial condition of the Company.
(f) No Brokers. Except as set forth on Schedule 5(f) attached hereto,
Lender has not dealt with any broker, finder, commission agent or other person
entitled to receive a commission or other remuneration (other than the Company)
in connection with the transactions contemplated hereby and Lender is not under
any obligation to pay any broker's fee or commission in connection with the
transactions contemplated hereby.
6. Conditions.
(a) Conditions to Obligations of Lender. The obligations of Lender to
purchase the Purchased Securities under this Agreement is subject to the
satisfaction or waiver of each of the following conditions:
-9-
(i) Representations and Warranties of the Company. All the
representations and warranties of the Company in this Agreement and in each of
the other Operative Documents to which it is a party shall be true and correct
in all material respects at and as of the Closing (except those representations
and warranties that, by their nature, will cease to be true and correct after
giving effect to the transactions contemplated hereby) with the same force and
effect as if made on and as of such date. On or prior to the Closing, the
Company shall have performed or complied in all material respects with all of
the agreements and satisfied in all material respects all conditions on their
respective parts required to be performed, complied with or satisfied by it
pursuant to the Operative Documents to which it is a party at or prior to the
Closing.
(ii) No Injunction. No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the Closing that
would prevent or interfere with the consummation of any of the transactions
contemplated hereby; and no stop order suspending the qualification or exemption
from qualification of any of the Purchased Securities in any jurisdiction shall
have been issued and no Proceeding for that purpose shall have been commenced or
be pending or contemplated.
(iii) No Proceedings. No action shall have been taken and no
Applicable Law shall have been enacted, adopted or issued that would, as of the
Closing, prevent the consummation of any of the Transactions. No Proceeding
shall be pending or, to the Company's knowledge, threatened, other than
Proceedings that if adversely determined would not, individually or in the
aggregate, have a Material Adverse Effect.
(iv) Officers' and Secretary's Certificates. Lender shall have
received certificates dated the Closing, signed by (1) the Chief Executive
Officer or President, and (2) the principal financial or accounting officer of
the Company on behalf of the Company confirming the matters set forth in
paragraphs (i), (ii) and (iii) of this Section 6(a).
(v) Opinion of Counsel. Lender shall have received, an opinion (in
form and substance satisfactory to Lender and counsel to Lender, dated as of the
Closing, of Xxxxxx & Xxxxxxx LLP, as counsel to the Company, containing opinions
substantially to the effect of the opinions set forth in Exhibit F hereto.
(vi) Execution and Delivery of Operative Documents. The Note, the
Warrant, the Security Agreement, the Registration Rights Agreement and the
Agreement Between Creditors shall have been executed and delivered by all
parties thereto other than the Lender and Lender shall have received a fully
executed original of each such Operative Document.
(vii) Other Documents. Other Information. The Company shall have
furnished to Lender such further information, certificates and documents, each
in form and content satisfactory to Lender's counsel, as Lender may reasonably
request.
(viii) Resolutions. Lender shall have received a copy of all of the
resolutions (in form and substance satisfactory to Lenders) adopted by the
Company's board of directors authorizing or relating to (i) the execution,
delivery and performance of the Operative Documents and the other documents and
instruments provided for herein and therein to which it
-10-
is a party or is bound thereby, and (ii) the granting of the Liens and security
interests, all certified by the secretary of the Company. Such certificates
shall be dated as of the date hereof.
(ix) Certain Legislation, etc. (i) No legislation, order, rule, ruling
or regulation shall have been enacted or made by or on behalf of any
governmental body, department or agency of the United States, nor shall any
decision of any court of competent jurisdiction within the United States have
been rendered, which, in the reasonable judgment of Lender, would materially and
adversely affect, restrain, prevent or change the transactions contemplated by
any Operative Document; and (ii) no action, suit or proceeding before any
arbitrator or any court or governmental authority or administrative body shall
be pending, and no investigation by any governmental authority, administrative
body shall be pending or to the knowledge of the Company threatened, relating to
the Company, which (x) seeks to restrain, enjoin, prevent the consummation of or
otherwise materially and adversely change the Note or any of the transactions
contemplated by any Operative Document, (y) questions the validity or legality
of the Note or any other transactions contemplated by any Operative Document or
seeks to recover damages or obtain other relief in connection herewith or
therewith, or (z) in the reasonable judgment of Lender would have a material
adverse effect on the condition (financial or otherwise), business, properties
or results of operations of the Company after the consummation of any
transaction contemplated by any Operative Document, or the Company's ability to
perform its Obligations under any Operative Document.
(x) Security Interests. The Operative Documents shall be in full force
and effect and be in form such that, once related financing statements and other
documents have been filed in the places designated by the Company, Lender shall
obtain a valid and enforceable perfected continuing first-priority security
interest in and Lien on all of the Collateral including any fixtures, such
security interest to be prior and superior to all rights of third parties other
than Permitted Filings and Permitted Liens. The Company shall promptly reimburse
Lender for all taxes, fees and other charges payable in connection with the
filing of the financing statements, and any related documents and instruments.
(xi) Lien Searches. A search, made no more than ten (10) days prior to
the date hereof, of the Uniform Commercial Code filing offices or other
registries in each jurisdiction in which Collateral is located shall have
revealed no filings or records, except the following (the "Permitted Filings"):
(1) filings made on behalf of CAPCO Financial Company ("Capco")
to perfect its interest in the Company's Receivables;
(2) filings made on behalf of any lessor of Equipment to the
Company to perfect the lessor's interest in any such Equipment;
(3) filings made on behalf of Briazz Venture in connection with
the issuance of the FFG Note; and
(4) filings made with respect to Permitted Liens (as defined in
the Security Agreement.
-11-
(xii) No Event of Default. No Event of Default shall have occurred and
be continuing.
(xiii) Approval of Management. Lender shall have approved the make-up
of the Company's executive management team; provided that for these purposes,
Xxxxxx Xxxxxxxx shall be approved to serve as the Company's chief executive
officer and chairman of the board of directors.
(xiv) Payment of Expenses. The Company shall have delivered checks or
initiated wire transfers to Fulbright & Xxxxxxxx L.L.P. pursuant to Section 3(b)
of this Agreement.
(xv) Consents. The Company shall have obtained consents from Capco,
Laurus and FFG to allow: (i) the execution and delivery by the Company of the
Operative Documents to which the Company is a party and (ii) the consummation by
the Company of the transactions contemplated hereby.
(b) Conditions to the Company's Obligation. The obligation of the Company
to sell the Purchased Securities and to consummate the transactions contemplated
by the Operative Documents is subject to the satisfaction or waiver of each of
the following conditions:
(i) Representations and Warranties. All of the representations and
warranties of Lender in the Operative Documents shall be true and correct in all
material respects at and as of the Closing, with the same force and effect as if
made on and as of such date.
(ii) No Injunctions. No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the Closing that
would prevent or interfere with the issuance and sale of the Purchased
Securities; and no stop order suspending the qualification or exemption from
qualification of any of the Purchased Securities in any jurisdiction shall have
been issued and no Proceeding for that purpose shall have been commenced or be
pending or contemplated as of the Closing.
(iii) Execution and Delivery of Operative Documents. The Operative
Documents shall have been executed and delivered by all parties thereto other
than the Company and the Company shall have received a fully executed original
of each of the Operative Documents (other than the Certificate of Designations).
(iv) Capco Subordination Agreement. Lender shall have entered into a
subordination agreement in form satisfactory to Capco providing for the
subordination of the interests granted to Lender under the Security Agreement to
the interests granted to Capco pursuant to the agreement between Capco and the
Company dated August 26, 2002.
(v) Consents. The Company shall have received all consents, waivers
and agreements that it deems necessary or appropriate in connection with the
Operative Documents and the transactions contemplated thereby, from Capco and
all other third parties as the Company may deem necessary or appropriate, in
order to authorize and avoid any breach, default or similar result under any
Operative Document or any agreement with any such third party in connection
therewith.
-12-
7. Miscellaneous.
(a) 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 following addresses or facsimile numbers as applicable:
If to the Company:
BRIAZZ, Inc.
0000 0xx Xxxxxx Xxxxx, #000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy (which shall not constitute notice) given in the manner
prescribed above to:
Xxxxxx & Xxxxxxx LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Lender:
Spinnaker Investment Partners, L.P.
00 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000-000-0000
With a copy (which shall not constitute notice) given in the manner
prescribed above to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
-00-
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Successors and Assigns. This Agreement has been and is made solely
for the benefit of and shall be binding upon the Company and Lender, and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
(d) Counterparts. This Agreement may be signed in various
counterparts, which together shall constitute one and the same instrument.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. When
a reference is made in this Agreement to a Section, paragraph, subparagraph,
Schedule or Exhibit, such reference shall mean a Section, paragraph,
subparagraph, Schedule or Exhibit to this Agreement unless otherwise indicated.
(f) Interpretation. The words "include," "includes," and "including"
when used in this Agreement shall be deemed in each case to be followed by the
words, "without limitation." The phrases "the date of this Agreement," "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to March 5, 2003. The words "hereof," "herein,"
"herewith," "hereby" and "hereunder" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement. The word "knowledge" means, when
applied to the Company, the actual knowledge, after due inquiry, of any of the
executive officers of the Company. Unless the context otherwise requires,
defined terms shall include the singular and plural and the conjunctive and
disjunctive forms of the terms defined.
(g) Severability. If any term, provision, covenant or restriction of
the Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(h) Amendment. This Agreement may be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may be given, provided that the same are in writing and signed by each of the
signatories hereto.
-14-
(i) Survival. The warranties, representations, and covenants of the
Company and the Investors contained in or made pursuant to this Agreement shall
survive until the termination of the applicable statute of limitations.
[signature page follows this page]
-15-
Please confirm that the foregoing correctly sets forth the agreement among
the Company and Lender.
COMPANY:
BRIAZZ, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------
Title: CEO
--------------------------------
LENDER:
SPINNAKER INVESTMENT
PARTNERS, L.P.
By: Spinnaker Capital Partners, LLC
its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
--------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
--------------------------------
Title: Manager
--------------------------------
-16-
SCHEDULE 3(c)
USE OF PROCEEDS
---------------
As contemplated by Schedule 4(v),the Company, intending to be bound, will pay
Spinnaker Capital Partners, LLC a management fee of $50,000 at the Closing by
check or wire transfer immediately upon the Company's receipt of the Purchase
Price from Lender.
The remaining proceeds of $500,000 will be used for Lender's expenses and
working capital.
SCHEDULE 4(c)
-------------
OUTSTANDING CONVERTIBLE SECURITIES
1. The Company has outstanding options to purchase 787,995 shares of Common
Stock as of April 3, 2003.
2. Attached is a list of the Company's outstanding warrants to purchase
shares of Common Stock as of December 23, 2002. Those warrants labeled "Series C
Convertible" were originally warrants to purchase Series C Preferred Stock. Such
warrants became warrants to purchase shares of Common Stock upon conversion of
the Company's outstanding Series C Preferred Stock in 2001. The number of shares
of Common Stock for which such warrants are currently convertible is listed
under the column titled "Anti-Dilution Adjustment". In connection with the
conversion of the Series C Preferred Stock and pre-IPO anti-dilution adjustments
to the Series C Preferred Stock, the exercise price for such warrants was
reduced from $6.00 per share to $5.74 per share. Except for the warrant to
purchase 1,193,546 shares of common stock at $0.50 per share issued to Briazz
Venture, L.L.C. on March 6, 2003 pursuant to the Amended and Restated Purchase
Agreement dated March 5, 2003 (the "FFG Purchase Agreement"), no new warrants
have been granted since the date of the attached list. See, however, paragraph 3
below.
3. On June 18, 2002, the Company issued a convertible promissory note to
Laurus in the principal amount of $1,250,000. The amount of the Laurus
convertible debt and the number of shares of Common Stock issuable upon
conversion thereof fluctuate in accordance with the terms thereof, as amended
through the date hereof. In January 2003, the Company and Laurus entered into an
arrangement pursuant to which certain amounts under the convertible note were
and will be converted into shares of Common Stock. As of April 2, 2003, the
Company had issued 50,200 shares of Common Stock to Laurus upon conversion of
portions of the convertible note pursuant to this arrangement, and the principal
amount of the Laurus note (exclusive of interest) was $926,214. On March 4,
2003, the Company and Laurus entered into amendments to the Laurus note and to
the warrant the Company issued to Laurus on June 18, 2002. These amendments have
been delivered to the Lender and provide, among other things, for the reduction
of the fixed conversion price of the note and the exercise price of the warrant
to $0.10 per share.
4. 200,000 shares of Common Stock are reserved for issuance pursuant to the
Company's employee stock purchase plan. Any shares of Common Stock issued
pursuant to the Company's employee stock purchase plan shall be deemed to be
issued "pursuant to outstanding options, warrants and convertible debt" for
purposes of Section 3(v) of the Note.
VOTING AGREEMENTS
1. Xxxxxx X. Xxxxxxxx entered into a Voting Agreement with Briazz Venture
dated March 6, 2003.
2. The Company has agreed, pursuant to the FFG Purchase Agreement, that
Briazz Venture will receive additional voting agreements from stockholders of
the Company.
2
[Summary of outstanding warrants as of December 23, 2002, showing
outstanding warrants to purchase a total of 1,330,404 shares of the
Company's common stock]
SCHEDULE 4(d)
-------------
REGISTRATION RIGHTS
The Company has granted registration rights pursuant to the following
agreements:
1. The Securities Purchase Agreement dated June 18, 2002 between the
Company and Laurus, as amended.
2. The Registration Rights Agreement dated August 15, 1997 between the
Company and the investors named therein, as amended.
3. The Registration Rights Agreement dated March 6, 2003 between the
Company and Briazz Venture.
3
SCHEDULE 4(g)
-------------
VIOLATIONS OF ARTICLES OF INCORPORATION AND BYLAWS
None.
4
SCHEDULE 4(h)
-------------
CONFLICTS
None, provided that the approvals listed under Schedule 4(i) are obtained.
5
SCHEDULE 4(i)
-------------
PERMITS AND CONSENTS
The following approvals will be required prior to closing:
1. The approval of Capco.
2. The approval of FFG and Briazz Venture.
3. The approval of Nasdaq.
4. The approval of the Company's Board of Directors.
In addition, the articles of amendment containing the terms and
conditions of the Series E Preferred Stock must be filed with the Secretary of
State of the State of Washington.
6
SCHEDULE 4(o)
RELATED-PARTY TRANSACTIONS
--------------------------
1. Xxxxxx Xxxxxxxx is a limited partner in Maveron, a Seattle-based venture
capital firm, which holds investments in Potbelly Sandwich Works, a
Chicago-based chain of sandwich shops.
2. The Company is a party to a lease agreement dated November 6, 1998 with
Benaroya Capital Company, LLC, which is controlled by Xxxx Xxxxxxxx, one of the
Company's principal shareholders. The terms of the lease agreement are described
in the Company's public filings.
3. The Company is indebted to Briazz Venture, an affiliate of FFG, and has
a business relationship with FFG pursuant to the FFG Purchase Agreement, the
Food Production Agreement dated December 1, 2002 and the agreements and
transactions contemplated therein. In addition, FFG may compete with the
Company. FFG has the right to acquire more than 10% of the Company's common
stock.
7
SCHEDULE 4(v)
-------------
BROKER FEES
Delafield Xxxxxxxxx, Inc. is entitled to 5% of the proceeds of this offering,
which will be paid at a later date. The terms of the agreement between Delafield
Xxxxxxxxx, Inc. and the Company are more fully described in the engagement
letter between them.
Spinnaker Capital Partners, LLC will be receiving $50,000 from use of proceeds
as a management fee.
8
SCHEDULE 5(f)
-------------
BROKER FEES
Lender is not under any obligation to pay any broker's fee or commission in
connection with the transactions contemplated hereby.
The Company is obligated to pay a management fee of $50,000 to Spinnaker Capital
Partners, LLC at the Closing $50,000.
The Company is obligated to pay to Delafield Xxxxxxxxx, Inc. 5% of the proceeds
of this offering.
9
