NOTE PURCHASE
AGREEMENT
This Note Purchase Agreement, dated as of
November 18, 2008, (this “ Agreement
”) is entered into by and among Organic To Go Food
Corporation, a Delaware corporation (the “
Company ”), and W.Health L.P., a limited
partnership organized under the laws of the Bahamas (the “
Investor ”).
RECITALS
WHEREAS, on the
terms and subject to the conditions set forth herein, the Investor
is willing to purchase from the Company, and the Company is willing
to sell to the Investor, a secured promissory note in the principal
amount of $3,000,000 in substantially the form attached hereto as
Exhibit A hereto (the “
Note ”); and
WHEREAS, in
connection with the sale of the Note the Company shall enter into a
security agreement granting a security interest in all of the
Company’s tangible and intangible assets, including, but not
limited to, the Company’s intellectual property rights, to
the Investor, in substantially the form attached hereto as
Exhibit B (the “ Security
Agreement ”, and together with this Agreement and
the Note, the “ Transaction Documents
”); and the Security Agreement shall also secure the
repayment of that certain loan (principal and interest) made by the
Investor to the Company pursuant to a Note and Warrant Purchase
Agreement, dated as of June 1, 2008, by and between the Company and
the Investor (the “ Note and Warrant Purchase
Agreement ”).
AGREEMENT
NOW THEREFORE, in consideration of the
foregoing, and the representations, warranties, and conditions set
forth below, the parties hereto, intending to be legally bound,
hereby agree as follows:
1.
The Note
.
(a) Issuance of the Note . At the Closing (as defined below), the Company
agrees to issue and sell to the Investor, and, subject to all of
the terms and conditions hereof, the Investor agrees to purchase
the Note
2.
Procedure
.
(a) Delivery . The Closing (the “
Closing ”) shall occur within nine (9)
Business Days (as defined below) following the date of this
Agreement (the “Closing Date” ). At
the Closing, the Company will deliver to the Investor the Note
against receipt by the Company of $3,000,000 (the
“Purchase Price” ), in United States
dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Company. The Note will be
registered in the Investor’s name in the Company’s
records. “Business Day” means any day
except Saturday, Sunday and any day which is a federal legal
holiday in the United States or in Switzerland, or a day on which
banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
(b) Use of Proceeds . The proceeds of the sale and issuance of the
Note shall be used solely for general working capital approved by
the Company’s Board of Directors.
3. Representations and Warranties of the
Company . The Company hereby makes the following
representations and warranties to the Investor:
(a) Subsidiaries . The Company has no direct or indirect
Subsidiaries (as defined below) other than as specified in all
reports required to be filed by it under the Securities Act of
1933, as amended (the “Securities Act”
), and the Securities Exchange Act of 1934, as amended (the
“Exchange Act” ), including pursuant
to Section 13(a) or 15(d) thereof, for the twelve months preceding
the date hereof (or such shorter period as the Company was required
by law to file such reports) (the foregoing materials being
collectively referred to herein as the “SEC
Reports” ). Except as disclosed in Schedule
2(a) , the Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any and all
Liens (as defined below), and all the issued and outstanding shares
of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar
rights. “Lien” means any lien, charge,
encumbrance, security interest, right of first refusal or other
restrictions of any kind. “Subsidiary”
means any “significant subsidiary” as defined in Rule
1-02(w) of the Regulation S-X promulgated by the Commission under
the Exchange Act.
(b) Organization and Qualification
. The Company and each Subsidiary
are duly incorporated or otherwise organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. The Company and each
Subsidiary are duly qualified to conduct its respective businesses
and are in good standing as a foreign corporation or other entity
in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
“Material Adverse Effect” means any of
(i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (iii) an adverse impairment
to the Company’s ability to perform on a timely basis its
obligations under any Transaction Document (as defined
below).
(c) Authorization; Enforcement
. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution
and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of
the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(d) No Conflicts . The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will
not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals
. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other
governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required by state
securities laws, (ii) filings required in accordance with Section
5(e), (iii) filings required pursuant to the Security Agreement and
(iv) those that have been made or obtained prior to the date of
this Agreement.
(f) Omitted
(g) Capitalization . The number of shares and type of all
authorized, issued and outstanding capital stock of the Company,
and all shares of the Company’s common stock, par value
$0.001 per share (the “ Common Stock
”), reserved for issuance under the Company’s various
option and incentive plans, is specified in the SEC Reports. Except
as specified in the SEC Reports and as disclosed in Schedule
2(g) , no securities of the Company are entitled to preemptive
or similar rights, and no Person (as defined below) has any right
of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by
the Transaction Documents. Except as specified in the SEC Reports
and except as set forth on Schedule 2(g) , there are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. The issue and sale of the Note will
not, immediately or with the passage of time, obligate the Company
or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Investor) and will not
result in a right of any holder of Company or Subsidiary securities
to adjust the exercise, conversion, exchange or reset price under
such securities. “Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
(h) SEC Reports; Financial Statements
. Except as set forth on Schedule
2(h) , the Company has filed all SEC Reports required to be
filed by it on a timely basis or has timely filed a valid extension
of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. As of their respective dates,
the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the SEC promulgated thereunder, and none
of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Since January 1, 2008, the Company has not received
any material correspondence from the SEC or any Trading Market (as
defined below) concerning the SEC Reports. The financial statements
of the Company and any Subsidiary included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with U.S. generally
accepted accounting principles (
“GAAP” ) applied on a consistent basis
during the periods involved, except as may be otherwise specified
in such financial statements or the notes thereto, and fairly
present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments.
“Trading Market” means whichever of
the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
Capital Market or OTC Bulletin Board on which the Common Stock is
listed or quoted for trading on the date in question.
(i) Press Releases . The press releases disseminated by the Company
since January 1, 2008, taken as a whole do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made and when made, not misleading.
(j) Material Changes . Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports and except as disclosed
on Schedule 2(j) , (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) neither the Company nor
any Subsidiary has entered into any material contract, agreement or
other transaction that is not in the ordinary course of business,
(iii) neither the Company nor any Subsidiary has incurred any
liabilities or obligations (contingent or otherwise) other than (A)
trade payables, accrued expenses and other liabilities incurred in
the ordinary course of business consistent with past practice, (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed
in filings made with the SEC, and (C) liabilities not exceeding in
the aggregate $200,000; (iv) neither the Company nor any Subsidiary
has altered its method of accounting or the identity of its
auditors, (v) neither the Company nor any Subsidiary has declared
or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (vi)
neither the Company nor any Subsidiary has issued any equity
securities to any officer, director or Affiliate (as defined
below), except pursuant to existing stock option plans. The Company
does not have pending before the Commission any request for
confidential treatment of information.
“Affiliate” means any Person that,
directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 144.
(k) Litigation . Except as set forth on Schedule 2(k) ,
there is no Action (as defined below) which (i) adversely affects
or challenges the legality, validity or enforceability of any of
the Transaction Documents or (ii) except as specifically disclosed
in the SEC Reports, could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof (in his or her
capacity as such), is or has been the subject of any Action
involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty,
except as specifically disclosed in the SEC Reports. There has not
been, and to the knowledge of the Company, there is not pending any
investigation by the SEC involving the Company, any Subsidiary or
any current or former director or officer of the Company (in his or
her capacity as such). The SEC has not issued any stop order or
other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act. “Action”
means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting
the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading
facility.
(l) Labor Relations . Except as set forth on Schedule 2(l) ,
no material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the
Company or any Subsidiary.
(m) Compliance . Except as set forth on Schedule 2(m) ,
neither the Company nor any Subsidiary (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental
body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect.
The Company is in compliance with all effective requirements of the
Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where
such noncompliance could not have or reasonably be expected to
result in a Material Adverse Effect.
(n) Regulatory Permits . The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could
not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such
permits.
(o) Title to Assets . Except as set forth on Schedule 2(o) ,
the Company and the Subsidiaries have good and marketable title in
fee simple to all real property owned by them that is material to
their respective businesses and good and marketable title in all
personal property owned by them that is material to their
respective businesses, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually
or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(p) Patents and Trademarks . The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material
for use in connection with their respective businesses as described
in the SEC Reports and which the failure to so have could,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect (collectively, the
“Intellectual Property Rights” ).
Except as set forth on Schedule 2(p) , neither the Company
nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. Except as set
forth in the SEC Reports, to the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights.
(q) Insurance . The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are
engaged. The Company is the named beneficiary of a key-man life
insurance policy with respect to its Chief Executive Officer for a
coverage amount of no less than $1,000,000. The Company has a
directors and officers liability insurance policy with respect to
the Company’s Board of Directors for a coverage amount of no
less than $5,000,000. The Company has no reason to believe that it
will not be able to renew its and the Subsidiaries’ existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business on terms consistent with market for the
Company’s and such Subsidiaries’ respective lines of
business.
(r) Transactions With Affiliates and
Employees . Except as set
forth in or otherwise not required to be disclosed in the SEC
Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
(s) Internal Accounting Controls
. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific
authorizations, (ii) 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 differences.
The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to
ensure that material information relating to the Company, including
its Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in
which the Company’s Form 10-K or 10-Q, as the case may be, is
being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and
procedures in accordance with Item 307 of Regulation S-K under the
Exchange Act for the Company’s most recently ended fiscal
quarter or fiscal year-end (such date, the
“Evaluation Date” ). The Company
presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of
the disclosure controls and procedures based on their evaluations
as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company’s internal
controls (as such term is defined in Item 308T of Regulation S-K
under the Exchange Act) or, to the Company’s knowledge, in
other factors that could significantly affect the Company’s
internal controls.
(t) Continuing Operations . Based on the financial condition of the
Company and each Subsidiary as of the Closing Date (and assuming
that the Closing shall have occurred), the Company and each
Subsidiary shall have sufficient capital to carry on its business
through the Maturity Date (as defined in the Note) as now conducted
and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business
conducted by the Company and each Subsidiary, and projected capital
requirements and capital availability thereof.
(u) Certain Fees . Except as described in Schedule 2(u) ,
no brokerage or finder’s fees or commissions are or will be
payable by the Company or any Subsidiary to any broker, financial
advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated
by this Agreement. The Investor shall have no obligation with
respect to any fees or with respect to any claims (other than such
fees or commissions owed by the Investor pursuant to written
agreements executed by the Investor which fees or commissions shall
be the sole responsibility of the Investor) made by or on behalf of
other Person for fees of a type contemplated in this Section 3(u)
that may be due in connection with the transactions contemplated by
this Agreement.
(v) Certain Registration Matters
. Assuming the accuracy of the
Investor’s representations and warranties set forth in
Section 4, no registration under the Securities Act is required for
the offer and sale of the Note by the Company to the Investor under
the Transaction Documents. The Company is eligible to register its
Common Stock for resale by the Investor under Form S-1 promulgated
under the Securities Act. Except as specified in the SEC Reports
and except as set forth on Schedule 2(v) , neither the
Company nor any Subsidiary has granted or agreed to grant to any
Person any rights (including “piggy-back” registration
rights) to have any securities of the Company registered with the
SEC or any other governmental authority that have not been
satisfied.
(w) Listing and Maintenance Requirements
. Except as specified in the SEC
Reports, the Company has not, since January 1, 2008, received
notice from any Trading Market to the effect that the Company is
not in compliance with the listing, quoting or maintenance
requirements thereof. The Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in
compliance with the listing, quoting or maintenance requirements
for continued listing or quoting of the Common Stock on the Trading
Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Note under the Transaction Documents does
not contravene the rules and regulations of the Trading Market on
which the Common Stock is currently listed or quoted, and no
approval of the stockholders of the Company thereunder is required
for the Company to issue and deliver to the Investor the Note
contemplated by Transaction Documents.
(x) Investment Company . The Company and each Subsidiary is not, and
is not an Affiliate of, and immediately following the Closing will
not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as
amended.
(y) Application of Takeover Protections
. The Company has taken all
necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Investor as a result of the Investor and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation the
Company’s issuance of the Note and the Investor’s
ownership of the Note.
(z) No Additional Agreements . The Company does not have any agreement or
understanding with the Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified
in the Transaction Documents.
(aa) Consultation with Auditors
. The Company and each Subsidiary
has consulted its independent auditors concerning the accounting
treatment of the transactions contemplated by the Transaction
Documents, and in connection therewith has furnished such auditors
complete copies of the Transaction Documents.
(bb) Foreign Corrupt Practices Act
. Neither the Company nor any
Subsidiary, nor to the knowledge of the Company, any agent or other
person acting on behalf of any of the Company or any Subsidiary,
has, directly or indirectly, (i) used any funds, or will use any
proceeds from the sale of the Note, for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign
or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political
