SECURITY AGREEMENT
THIS
SECURITY AGREEMENT ("Security
Agreement")
is
entered into as of May 14, 2008, between FPO, INC., a Washington corporation
doing business as “MEL’S MARKET,” “MEL’S DELIVERY,” “JOELLE’S,” “SOUPS DU JOUR”
AND “SIMON’S” ("Secured
Party")
and
ORGANIC TO GO, INC., a Delaware corporation (“Grantor”).
In
consideration of the premises and mutual covenants herein contained, the parties
hereto agree as follows:
1. Grants
of Security.
To
secure the payment and performance of all the Obligations (as defined below),
Grantor hereby assigns and pledges to Secured Party, and hereby grants to
Secured Party a continuing security interest in, and a right of set-off against,
all of Grantor's right, title and interest in and to all of the assets acquired
(the "Collateral")
under
the Agreement of Purchase and Sale of Assets dated as of May 14, 2008 by and
among Secured Party, Xxxxx X. Xxxxxx, Grantor and Organic To Go Food
Corporation, a Delaware corporation (the “Asset
Purchase Agreement”).
2. Security
for Obligations.
This
Security Agreement secures the payment of the obligations of Grantor to Secured
Party under Section 1.2(b) of the Asset Purchase Agreement and all of the
obligations of Grantor under this Agreement (collectively, the "Obligations").
3. Representations
and Warranties.
Grantor
represents and warrants to Secured Party as follows and shall be deemed to
continually do so as long as this Security Agreement shall remain in
effect:
a. Grantor
owns the Collateral free and clear of any lien, security interest, charge or
encumbrance, except for the security interests created by this Security
Agreement.
b. Grantor
has exclusive possession and control of the Collateral.
4. Further
Assurances.
a. From
time
to time, at the expense of Grantor, it will promptly execute and deliver all
further instruments and documents (including financing or continuation
statements, or amendments thereto), and take all further actions that may be
necessary or desirable, or that Secured Party may request, to perfect and
protect any security interest granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Grantor also hereby authorizes Secured Party to execute on Grantor’s
behalf and/or file all financing or continuation statutes and amendments thereto
that Secured Party determines are necessary or desirable to perfect or protect
any security interest granted hereby.
b. Grantor
will furnish to Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may reasonably request.
5. Additional
Covenants. Grantor shall:
a. Keep
the
Collateral (other than inventory sold in the ordinary course of business) at
one
or more of the locations listed on Schedule
2.8
to the
Asset Purchase Agreement.
b. Pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims against (including claims for
labor, materials and supplies), the Collateral, except to the extent the
validity thereof is being contested in good faith.
6. Insurance.
Grantor
shall, at its own expense, maintain insurance with respect to the Collateral
in
such amounts, against such risks, in such form and with such insurers, as shall
be satisfactory to Secured Party from time to time.
7. Transfers
and Other Liens.
Grantor
shall not:
a. Sell,
assign (by operation of law or otherwise) or otherwise dispose of any of the
Collateral, except inventory in the ordinary course of business; or
b. Create
or
suffer to exist any lien upon or with respect to any of the Collateral, except
for the security interest created by this Security Agreement.
8. Secured
Party May Perform.
If
Grantor fails to perform any agreement contained herein, Secured Party may
itself perform, or cause performance of, such agreement.
9. Secured
Party's Duties.
The
powers conferred on Secured Party hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps
to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
10. Events
of Default.
The
occurrence of any of the following events (each an "Event
of Default")
shall
constitute a material default and breach of this Security Agreement by
Grantor:
a. Any
failure by Grantor to make any deposit or payment when due under the Asset
Purchase Agreement, if such default continues for ten (10) days
after receipt of written notice of default;
b. Grantor
shall commence a voluntary case or other proceeding under the laws of any
jurisdiction seeking liquidation, reorganization, or other relief with respect
to itself or its debts under any bankruptcy, insolvency, or other similar law,
or seeking the appointment of a trustee, self trusteeship, receiver, custodian,
or other similar official of it or any substantial part of its property; or
shall consent to any such relief or to the appointment of, or taking possession
by, any such official in an involuntary case or other proceeding commenced
against it; or shall make an assignment for the benefit of creditors; or shall
generally not pay its debts as they become due or not be able to pay its debts
as they become due; or admit in writing its inability to pay its debts as they
become due; or shall take any corporate action to authorize any of the
foregoing; or
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c. An
involuntary case or other proceeding shall be commenced under the laws of any
jurisdiction against Grantor seeking liquidation, reorganization, or other
relief with respect to it or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect, or seeking the appointment of
a
trustee, receiver, custodian, or other similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of thirty days or a trustee, receiver,
custodian or other official shall be appointed in such involuntary
case;
11. Remedies.
If any
Event of Default shall have occurred and be continuing:
a. Secured
Party may exercise in respect of the Collateral, in addition to other rights
and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Washington Uniform Commercial
Code (the "Code")
(whether or not the Code applies to the affected Collateral) and also may (i)
require Grantor to, and Grantor hereby agrees that it will at its expense and
upon request of Secured Party immediately, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient
to
the parties, and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale,
for cash, on credit or for future delivery. Grantor agrees that, to the extent
notice of sale shall be required by law, at least twenty (20) days’ notice to
Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. Secured
Party shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any public or private
sale
from time to time by announcement at the time and place fixed therefor, and
such
sale may, without further notice, be made at the time and place to which it
was
so adjourned.
b. All
cash
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral may, in the
discretion of Secured Party, be held by Secured Party as collateral for, and
then or at any time thereafter applied (after payment of any amounts payable
to
Secured Party pursuant to Section 12) in whole or in part by Secured Party
against, all or any part of the Obligations in such order as Secured Party
shall
elect. Any surplus of such cash or cash proceeds held by Secured Party and
remaining after payment in full of all the Obligations to Secured Party shall
be
paid over to Grantor or to the person lawfully entitled to receive such surplus.
c. Secured
Party may, without notice to or demand upon Grantor, appoint a keeper or
keepers, who may be officers, directors or employees of Secured Party, who
shall
have the power to enter upon all business premises of Grantor existing at the
time of such default and shall have the power to collect on behalf of Secured
Party all revenues from the operation of Grantor's businesses including, without
limitation, all cash receipts, checks and other income in any form whatsoever.
Such revenues shall be applied in the manner provided by the Code governing
the
application of proceeds from the sale of collateral in the event of
default.
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12. Indemnity
and Expenses.
a. Grantor
agrees to indemnify Secured Party from and against any and all claims, losses
and liabilities growing out of or resulting from this Security Agreement
(including, without limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from Secured Party's gross negligence
or
willful misconduct.
b. Grantor
will upon demand pay to Secured Party any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any experts and
agents, which Secured Party may incur in connection with (i) the administration
of this Security Agreement, (ii) the custody, preservation, use or operation
of,
or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of Secured
Party hereunder, or (iv) the failure by Grantor to perform or observe any of
the
provisions hereof.
13. Amendments.
No
amendment or waiver of any provision of this Security Agreement shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
14. Addresses
for Notices.
Except
as provided herein, all notices, requests, demands or other communications
to or
upon the respective parties hereto shall be deemed to have been given or made
when deposited in the mail in accordance with the notice provisions contained
in
the Asset Purchase Agreement.
15. Continuing
Security Interest.
This
Security Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until payment in full and
performance of all the Obligations to Secured Party; provided, however, that
if
thereafter Secured Party may pay such sums over to any other person for any
reason whatsoever including bankruptcy, the security interest shall
automatically be reinstated, and (ii) be binding upon Grantor, its successors
and assigns. Upon the payment in full of the Obligations, except as provided
above, the security interest granted hereby shall terminate and all rights
to
the Collateral shall revert to Grantor. Upon any such termination, Secured
Party
will, at Grantor's expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
16. Jurisdiction
and Venue.
If a
dispute arises under this Security Agreement, jurisdiction and venue shall
rest
exclusively in the state courts located in Seattle, Washington, or the federal
courts for the Western District of Washington. The parties to this Security
Agreement waive any right either may have to a jury trial. Any party to this
Security Agreement may file a copy of this Security Agreement with the clerk
or
judge of any court having jurisdiction as evidence of the parties’ waiver of the
right to a jury trial.
17. Terms.
This
Security Agreement shall be governed by and construed in accordance with the
laws of the State of Washington, except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in respect
of any particular Collateral are governed by the laws of a jurisdiction other
than the State of Washington. Unless otherwise defined herein, terms used in
Article 9 of the Uniform Commercial Code in the State of Washington are used
herein as therein defined.
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18. Headings.
Section
headings in this Security Agreement are included for the convenience of
reference only and shall not constitute a part of this Security Agreement for
any other purpose.
19. Severability
of Provisions.
Any
provision of this Security Agreement which is prohibited or unenforceable in
any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be
duly executed and delivered by its officer thereunto duly authorized as of
the
date first above written.
FPO,
INC.a Washington corporationdoing business as “MEL’S MARKET,” “MEL’S
DELIVERY,” “JOELLE’S,” “SOUPS DU JOUR” AND “SIMON’S”
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ORGANIC
TO GO, INC.
a
Delaware corporation
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By:
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/s/
Xxxxx X. Xxxxxx
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By:
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/s/
Xxxxx Xxxxx
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Xxxxx
X. Xxxxxx
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Xxxxx
Xxxxx
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President
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Chief
Executive Officer
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“Secured
Party”
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“Grantor
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